As Previously Discussed – No Rate Hike

 

Hello Everybody

As I predicted previously on this site, no rate hike happened at the Sept 20-21 FOMC Meeting.  Inflation targets of 2%, have not been achieved (this too, has been discussed on this site, numerous times…), and thus this appears to have been the primary factor for the lack of a rate hike.  At the 35:40 time mark in the video, 2% inflation is pretty strongly mentioned, if you are a Yellen watcher like I am.  Full video is below:

The indexes responded very positively to this, with the often watch Dow Jones Index closing up 163 points for the day.   The tech-heavy NASDAQ attained a new All-Time-High (ATH) of 5299.40.   See chart:

nasdaq-9-21-16

International Stocks (I-Fund) responded best to today’s news, next was Small Cap stocks (S-Fund), then large cap stocks (C-Fund).   I personally am not participating in the I-Fund, but it indeed offers greater rewards (and risk) than the other funds right now.

Lets take a look at the FOMC Statement, issued after the meeting.  This is not the same as Ms. Yellen’s transcript, it is more of a summary of the FOMC overall sentiment:

Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid, on average. Household spending has been growing strongly but business fixed investment has remained soft. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Jerome H. Powell; and Daniel K. Tarullo. Voting against the action were: Esther L. George, Loretta J. Mester, and Eric Rosengren, each of whom preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

It is evident that the FOMC is pretty set on achieving 2% Inflation, and without this achievement, I do not see rates being raised.   The next meeting with a possible rate hike is December 13-14.

On Friday Sept-23 12PM Eastern Time, Federal Reserve Bank of Philadelphia President Patrick Harker, Cleveland Fed President Loretta Mester and Atlanta Fed President Dennis Lockhart participate in “Presidents’ Perspectives: The Fed’s Role in Our Communities in Philadelphia.   It is possible that interest rate discussions (but no action can be taken, this is merely a forum) will occur at this meeting.

Interesting is that the same talking heads on the cable business shows, to include major fund managers, all who erroneously “predicted” a rate hike to occur this September meeting, are now backpedaling and now claim that triple cross your heart, that a rate hike will occur in December “for sure.”  I suppose even a broken clock is correct twice a day.

Thanks for reading and talk to you soon.   Thanks for being a supporter.   I think I have analyzed these FOMC meetings for 2 years now and each time I “called it” with 100% accuracy.  Just saying…

I remain 50% S-Fund and 50% C-Fund.

-Bill Pritchard

 

 

 

 

September maintains volatile Reputation

 

Hello Folks

I typically don’t put out updates over the weekend, however I wanted this past week to “close out” before I did any analysis or assessment of things.   We are two weeks away from exiting the historical stock market storm system, with associated turbulence and foul weather, called “September.”   As discussed in prior posts, September is a month of poor performance and high volatility (huge price swings), and it apparently has chosen to keep its reputation this year.

This year’s September turbulence has two additional fuel sources, known as: 1) Presidential Election and 2) Interest Rates.   As most realize, this is a very tight Presidential race, charged with emotion and with both candidates touting their own economic plans for the country.

Regarding Interest Rates, it is my opinion that the rates will not be raised at the September 20-21 Federal Reserve Open Market Committee (FOMC) meeting.   You can read (if you are having trouble going to sleep) some of my theories and opinions on this matter via the search box on this site, however bottom line up front, the Jobs data and Core PCE Inflation data, is not where it needs to be, if the FOMC adheres to past policy statements made before Congress and at official press releases.  Now, I suppose they could wake up one morning and deviate from those previously stated positions, but I am not sure how that would work out, even more so if you consider the tight campaign polls and other “backdrop” issues.

News did come out on Sept-16 regarding the Consumer Price Index (CPI), it rose 0.2% in August.   This prompted some to speculate that this would be fodder for the FOMC to raise rates in September, but I get very frustrated by these sentiments, I wish those folks would review the public policy statements by the FOMC and adopt my conclusions.  In addition, I would hope the FOMC would not take data received in September (the August CPI data) and take action on it less than 30 days later, an action with global implications.  As I sit here typing this, I feel that the belief that August CPI will cause rates to rise in September is an absurd idea.

The SP-500 Index has had quite a few large swings, starting with the huge drop downward on September 9 on heavy volume.  Note:  No doubt, we have seen selling/distribution, on above average volume, with down-trending action, this month.  None of which is desirable.   Lets take a look at the SP-500 Chart:

sp500-09-17-2016

sp500-09-17-2016-comments

The 2120 level is the new support level for the index, as apparent in the chart (red horizontal line), the index has found support there and closed above that level (thankfully) during last week’s trading.   Any penetration down thru this level will be worrisome.

Yet again, the market action is “all about the Fed” (FOMC) and in an apparent cycle of lily pond jumping, the market’s big moves are all jumps from one FOMC lily pad meeting to the next one, with relatively flat action in between.  We need a larger, more powerful force to sustain these trends, a force which apparently is non-existent right now.  The next interest-rate events are the Sept 20-21 FOMC meeting (press conference will occur on Sept 21) and a panel/forum of Federal Reserve presidents will occur in Philadelphia on Sept 23, called the Presidents Perspectives Forum.   I am quite certain that interest rates will be discussed directly, or at least alluded to, at that forum.

I remain 50% S-Fund and 50% C-Fund.

Please continue to share this site with your friends and colleagues, I appreciate the great email feedback, thank you very much.  Thank you for reading and talk to you soon !

-Bill Pritchard

 

Trendless Markets since July

 

Hello Folks

As expected (predicted?) the markets have remained in a mostly side-ways trend, or lack there of, since July.  I spoke earlier regarding the fact that August and September are historically weak months-  the markets are living up to that reputation.   Lets take a look at the SP 500 index, as can be seen, the index is basically flat, bound by 2194 as overhead resistance, and 2147 as a support level.   Any break/penetration of those areas would give reason to believe the subsequent action will continue in that direction.

SP-500-09-01-16

SP-500-09-01-16-comments

Observe that volume has been fairly quiet since mid-July, however we indeed have had some minor selling on above average volume, as indicated by the black circles above.  Chalk this up to “summer doldrums” as I see no signs of heavy, institutional selling which we did see back in the BREXIT Panic of June.  Note that even in light of that, me personally, back in June I saw no reason to bail out of stock funds and was confident that things would return to the upside (which they did).

Now that we have talked about the recent action in the markets, lets move forward to what is in store for the near future.  On Sept-2, at 8:30 AM Eastern Time, the most recent “Jobs Report” will be released, many in the financial world believe this will set the stage up for a possible interest rate hike at the September 20-21 FOMC meeting, or possibly at the December 13-14 meeting.   Most economists are forecasting that 180,000 jobs will have been added.  With that said, the consensus is that unless the jobs report is “out of the park”, meaning 225,000+ jobs added (reflected a 25% improvement on the expectation of 180,000), then there will be no fodder for a rate hike.   Observe that we are still in the “bad news = good news” market climate.   If we get “bad news” such as 175,000 jobs added, below the expectation, the markets will rally, due to no rate hike, if we get “good news” such as 250,000 added, the markets will likely tank, due to a looming rate hike.  Ideally we get a jobs report of 175-185,000 and an unemployment rate no less than 4.9%.  I say 4.9% because that was what last month’s rate was.   Any rate less than that, aka 4.7%, would reflect an improving economy and give the FOMC additional horsepower to raise rates.  A rate higher, aka 5.1%, would reflect a worsening economy, which is not a good sign either, long-term. 

Further note that (discussed on this site previously) the FOMC is mostly using two criteria to determine rate hikes:

1.  Jobs/Unemployment Rates – Mostly flat in 2016, minimal improvement.  Graphic:

unemployment-rate

2.  12-Month Core PCE Inflation target of 2% – No improvement. Graphic:

PCE-headline-core-since-2000

So in my opinion, we will see no rate hike at the September 20-21 FOMC meeting, especially if you include the fact that we are voting for a new President in November, and it is unlikely the FOMC will receive any green-light, tacit, implied, or otherwise conveyed, to raise rates, until the new President is in-place.   Indeed we could see a minor rate hike in December, due to this very reason.   Did I say this was all my opinion ?

In other news, the FEGLI Life Insurance Open Season has officially begun, Sept-1 to Sept 30, information at this link:  https://www.opm.gov/healthcare-insurance/life-insurance/open-season/

Just as an FYI, but if you fall into the below categories, double check that your non-FEGLI life insurance will cover you (aka pay money if you get killed), as many will not.   This is a common statement many have told me, they don’t have FEGLI because they have “cheaper insurance” via another company, which may not pay if your death is:

  • Ops in War or Combat Zones, etc.
  • Flights on non-commercial/non-airline flights or on any non-FAA registered aircraft
  • Outside of USA
  • Death for any reason, to include suicide.  In other words, insurer cuts a check “no questions asked”

As a reminder, consult with your own HR department, financial advisor, etc. in regards to life insurance planning, but this question comes up quite frequently and I wanted to put it out for general awareness.  You may be shocked at the situations non-FEGLI insurance will not pay.

That is all I have for now, I apologize for the length of time between updates, but as the above charts show, nothing of mention is happening in the markets.   Once we get past September, hopefully things resume to the upside.

I remain 50% S-Fund and 50% C-Fund.  

Thanks for reading and talk to you soon !

-Bill Pritchard

 

August and September historically weak Months

 

Hello Folks

Excuse the slight delay in updates, but I took some vacation time and was out visiting the Silicon Valley area in July (San Jose, CA area) on a vacation-and-research trip.  While out there, I was fortunate to have dinner with some folks who are employed in the tech sector; I am quite impressed by that sector (Semiconductors – General Computer/IT – Networking/Communications/Internet).  I feel that the way we live and operate today, in 2016, will be largely improved, and made easier, in the next 5 years because of this sector.  In support of this trip, I flew Virgin America (VRD), to evaluate their product, and honestly to “try something new.”  It should be noted that Alaska Airlines recently announced that they will merge with Virgin America, however they are unsure on whether they will merge the actual brands (paint the VRD planes in Alaska colors, etc) or not merge the brands.   My opinion is (Hello, Alaska?) do not merge, as the VRD product is very unique, and high quality, at a price point (out of Dallas Love Field anyway) competitive with the major airlines.  The brand carries a cult-like following of customers and fans.  If it is not broken, don’t fix it.

With that said (the above demonstrates that I was out “working” for my subscribers, not just goofing off and sight-seeing), small cap stocks (S-Fund) continue to be my favorite area.  Preliminary TSP data reflects that the S-Fund was the top July performer, with a 5.4% return, with the next best performers being I-Fund/5.07%, and C-Fund/3.69%.  Me personally, I-Fund is not worth the risk, so for me, I will remove that from consideration, with that said, my opinion is the 50/50 S and C-Fund allocation represents the ideal allocation mix for my TSP Account.

August begins a historical “worst 2-month pattern” for the stock markets, as August and September are indeed poor performing months, over the last 30 years or so.   I have had some readers reach out and share some concern that “the market is selling off” – this is normal for August.  Expect a listless August, and worse September, if history is any guide.  See graphic:

DowJones%740x397

Place a down August in the “Ops Normal” column, and don’t lose too much sweat, unless volumes drastically go thru the roof and more aggressive selling occurs.  Let’s look at some charts, first the SP-500 Index itself, then the SPY Exchange Traded Fund, which is helpful for volume analysis:

SP-500-08-02-16

SPY-08-02-16

As is evident in the charts, the period of July 18 to August 1 was basically flat, with minimal volume action.  Apparently Wall Street goes on vacation in the summer (like everyone else), as volumes were very quiet.  Then on Aug-2, we had a sell-off, but again, this is historically not abnormal for August.   In fact, the first nine days of August typically are sell-off days.  Note that the sell-off volume observed so far was only slightly on above average volume.  Do we move to G-Fund, if we already know that August and Sept are poor performers ?  Negative Ghost Rider.  G-Fund is the 911, Hurricane Shelter, safe haven, used for protection, when a bear market is probable or severe decline is pending.   I plan to remain fully invested in stock funds during Aug/Sept.  Recall I remained in stock funds during the entire BREXIT debacle.  Stocks recovered just as, dare I say, it, I expected.  However, others felt differently:  Federal News Radio is reporting that $2.1 Billion in TSP funds were shifted to G-Fund after the BREXIT vote.   Humorous note:  These were not likely my subscribers……  

Hopefully I have pacified some nervous folks; let me wrap this up with the observation that the SP-500 made an All Time High on Aug-1, reaching 2178.09.  This is great behavior, and strength begets strength.   I did have some folks ask the very legit question “Isn’t it too high now, I am worried things will crash” but remember you want to invest on the strongest performers, not the weakest.  You wouldn’t invest in real estate in a neighborhood with crashing home values would you (well, I wouldn’t….) ?   And being “too high” is very subjective, as we simply want to ride the wave until it goes the other direction.   And a “rest” is normal, even NFL superstar running back Walter Payton had to sit down and take a break at times.   Nobody worried that his proven, demonstrated, historical, track record would suddenly stop when he sat down and took a break.

Observation:  Pro-athletes, and markets, reach the end of their cycles at some point, (athletes typically retire, markets retreat) but I am very optimistic for the rest of this year.  I feel that the elections in November will give the markets some horsepower to go higher, as it represents a change of the old-guard, over to a fresh, new team.   We all know it will happen (a change) but the energy of the election, a new President sitting in the Oval Office, and a new team, should serve as combustion for a new uptrend.  New, new, new.

That is all I have for now, unless something hot and urgent comes across my radar, I will likely be in quiet-mode for the next week or two or three.   Again, Aug-Sept are historically down months, with things clearing up after that.  My personal TSP Allocation remains 50% S-Fund and 50% C-Fund.

Thanks for reading and talk to you soon…

-Bill Pritchard

 

Markets continue positive Behavior

 

Hello Folks

Hope everybody had a good July 4th weekend and post holiday week.  I am quite pleased to report that my decision to remain 50% S-Fund and 50% C-Fund, in light of BREXIT sell-offs and panic, has apparently (so far) been the correct decision, as the markets have performed very strongly since my June 29 post.   As a matter of fact, the SP 500 Index hit an intraday high of 2131.71 on Friday July 8, 2016.  This is very close to a historical All-Time-High (ATH), with the benchmark being 2134.72, which was set on May 20, 2015.  Once it breaks this level (we can call it “2135“), the index will be at a record ATH.   Let’s take a look at some charts:

SP-500-2year-07-08-16SP-500-2year-07-08-16-comments

Note that on Friday July 8, the often watched (by the financial press) Dow Jones Index gained 250 points.  Anytime you have such a performance on a Friday, which is the last trading day before the weekend, it is a very positive sign.  To be fair, all indexes gained, and this was largely fueled by the June Non-farm Payrolls report, which revealed a gain of 287,000 jobs, which was much more than an expected gain of 170-175,000 jobs.

It would appear that BREXIT has turned into a non-event, (FORGET-IT?) with the US markets rising strongly in past sessions, on above average volume.  The day after the affirmative BREXIT vote, the markets crashed hard, and on June 24 I posted the following comments:

“…I personally am not leaving stock funds, most reactions to this are panic selling and I anticipate things will stabilize in one to two weeks….”

In a not uncommon event on this (free) website, my analysis was spot-on, 100% accurate, as the markets indeed stabilized (and recovered), and two weeks later (July 8 is 14 calendar days, or two weeks, after June 24), the markets are closing at new highs, having recovered all BREXIT losses. 

This price behavior, and the above average volume,  is easily seen via analysis of the SPY Exchange Traded Fund, which is a proxy for the SP 500 Index.  Charts below:

SPY-close-07.10.16SPY-close-07.10.16-comments

Of all the TSP stock funds, I anticipate strong monthly July performance out of the S-Fund and C-Fund, assuming the market’s behavior continues.  As of present, the S-Fund is tracking as best monthly performer, C-Fund is next, and I-Fund is last.

That is all I have for now, my personal TSP contributions and allocations remain 50% S-Fund and 50% C-Fund.  

Thanks for reading, talk to you soon…

-Bill Pritchard

 

 

Commentary: BREXIT Drama

 

Hello Folks

As Robert Herjavec from CNBC’s Shark Tank program would say…“wow” – That is my reaction to this BREXIT stuff.

SP-500-6-29-16-15days

Let me be clear:  I, and most of the world, would have preferred a “Stay” vote, and indeed, the recent carnage (drama?) would have been avoided (or could it have been?).  Lets do a quick walk-thru of the house that recently caught fire.  However by the end of this post, you [hopefully] will feel a little more comfortable that things will be OK.  Note that the BREXIT vote falls under the category of Political change/economic policy catalyst, discussed in FAQ #9 on this site (this FAQ has been posted for years and is nothing new or revolutionary.)   Also note that for what seems like years, I have shared my concerns on this site with investing in the I-Fund.  It seems that volatile crude oil prices, financial scandals in Emerging Market countries, terrorist concerns, and political unrest are not enough reasons to keep some folks (this is not a criticism, but…) from the tempting potential returns in the I-Fund, but maybe the BREXIT scenario will serve as a wake-up call.  I am disappointed at the financial media and “experts” who push diversification and exposure to Europe as being helpful for your portfolio.  In fact, recent studies have revealed that diversification does not necessarily work in a stock portfolio, and may not be effective even if using multiple funds/ETFs as a diversification method.

The way I see it, you are either “with them” or “with us”, and not a flip-flopper or wishy-washy.  Stocks ?  Or Not ?  That is just me, but it is important to understand my view on the topic of stocks.

As most of us who own a TV or have some sort of internet dial-up or faster connection, we know that the BREXIT vote was official on Friday June 24.   It appears the “Leave/Yes” vote was chosen by the demographic of the blue-collar worker, lower class income (versus upper), and with no college education.  The sub-argument that blue-collar workers indeed would have an income lower than the wealthy is another topic for another day.   The observation made (by me) is that the Pro-BREXIT camp possibly did not understand what potential negative consequences, nor had any broader concept in mind, what their vote would do for the UK.  Note also that the UK is technically four countries, England, Scotland, Wales, and Northern Ireland, with the capital being London (the largest financial center outside of NYC), and the Prime Minster (since resigned) being a guy who was born in London.   As such, Britain was awarded the first two letters in BREXIT, and carries the most horsepower of all the UK members, for a variety of reasons.

Further note that the “Stay/No” vote demographic was determined to be the wealthy, upper class, college educated, and white-collar workers.   Warren Buffett, Richard Branson (Virgin Atlantic fame), Prime Minister Cameron, and others, all expressed concern (rightfully so, as we saw…) about a vote to leave.   However the leave camp won the vote.   This led to a huge sell off, at least initially, on Friday, and again on Monday.  The fact that the weekend was sandwiched between both sell off days should not go unnoticed as it carries large psychological importance in this situation.  Friday was a big sell off because folks panicked and unloaded positions, wishing to be “out” over the weekend, a period when the markets are closed, and then on Monday, whoever could not get out on Friday, having spent the entire weekend sulking and scared to death,  dumped their positions as soon as possible on Monday, fearing calamity and disaster just around the corner.

Soon after markets recovered, and in my opinion, will continue to recover.   Here is why:

-This wrench tossed into the global market place will almost certainly quash any US interest rate hike this year.

-Money previously invested in European markets may be re-directed to reliable and safe USA, which for all of its issues, remains one of the safest places for equities/stock market investment.   This may gain additional momentum once the current President is changed out.

-BREXIT itself has not happened yet.  This factoid has been missed by many.   The vote indeed happened, but the physical divorce has not happened yet.  This requires an “Article 50” action, which is a formal legal process to begin the divorce, an event which is allowed to take up to two years.   The most recent Prime Minister has refused to begin the Article 50 process, and instead said he will leave it for the next Prime Minister, who report on Sept 2, 2016.  Also, nobody has a clear yes/no answer on whether a new election can be pursued regarding BREXIT, and this could be an option.

-Gold, a safe haven currency, came off recent BREXIT panic highs, simultaneously as the US markets recovered up.   This is classic safe-haven money flow behavior, and reflects that the recent upticks in US markets are not merely a mirage in the desert.    See Gold Chart:

GOLD-06-29-16

-For all the damage done on Friday and on Monday, the indexes are closing near mid-June (pre-BREXIT) levels.  “Close Price” meaning the price they traded at when the exchange closed or stopped trading, for the day.   These are depicted as “Dots” on a chart, known as a “Dot Chart”, see below:

SP-500-6-29-16-close

SP-500-6-29-16-close-comments

-Recent uptick action on Tuesday and Wednesday was on above average volume.  I don’t think we will see upticks on any volume greater than the sell-off volume on Friday (which was a panic sell off), as re-entry to markets is usually done cautiously and slowly.  But above average volume merely days after the vote is a positive sign.

The major damage done was that done to the Dow Jones Index, and this happened because JPM (JP Morgan), AXP (American Express), and BA (Boeing) are all companies with large financial exposure to European markets.   Those stocks got creamed Friday, thus taking the Dow Jones down with them.

In my opinion, the market response to BREXIT was an overreaction, and we will see a return to normalcy in the coming weeks.  Did I say this was my opinion ?

That is all I have for now….I remain 50% S-Fund and 50% C-Fund in my TSP.

If you enjoyed this post, and prior posts, please share my site and emails with others who may benefit.   My recent polling information (some advised they could not use the embedded links due to restrictions on their work computers) indicate that 72% of my followers use this site as their only or as their primary TSP and market analysis site.  92% stated that this site has expanded their knowledge of the TSP and the stock market.  My huge subscriber growth is not by accident or magic, and I thank you guys for being part of this success.  Please continue to share my site with your colleagues and friends.  Thank you !

-Bill Pritchard

 

BREXIT Vote is “Yes”

 

Good Morning

As many know, the BREXIT vote is now official, and it is “Yes”, UK will be leaving the EU.   Overnight futures CRASHED in response to this, and today’s (and into next week) markets will react very badly to this news.   This event is a reminder of the delicate nature of the I-Fund, which will suffer from this.   I have discussed this regarding the I-Fund numerous times on this site….big returns, however big risks (at times).

This will serve as fodder to keep US interest rates low, as we cannot have a BREXIT and a fragile US climate financially, which raising interest rates would contribute to.

I personally am not leaving stock funds, most reactions to this are panic selling and I anticipate things will stabilize in one to two weeks.   The fact that it is Friday, with major money managers not wishing to “see what happens” over the weekend, and instead prefer to unload positions, is not helping.

I remain 50% S-Fund and 50% C-Fund.

Thank You

-Bill Pritchard

BREXIT Watch – Probable “No” vote

 

Hello Folks

The most important thing facing TSP Participants this week is the BREXIT vote which will begin in approximately 2.5 hours from time of this post.   If British Pound Futures are any indication of what the vote will be, it (for now) is reflective of a “No” vote or “Do not Exit”, as indicated by their recent uptrending behavior.  Polls are great, but market behavior is better.  Please see evening charts below:

BRITISH-POUND-06-22-16BRITISH-POUND-06-22-16-comments

By Friday June 24 “sunrise” in USA, all voting results across the ocean in UK should be official and we will know the final and official BREXIT vote status.  Lets continue to monitor things between now and then, however as of now, we are on track for a “No vote” on BREXIT, which is positive for TSP Participants.

Thank you for reading…

-Bill Pritchard

 

(As predicted) No rate hike by FOMC

 

Hello Everyone

Well, “as predicted” on this site, on May 18, 2016 and June 8, 2016, in which I spoke about the “expected” (by major financial press reporting) June interest rate hikes, and explained why I felt it would not happen, as I pat myself on the back, my contrary stance has yet again been correct:  The Federal Open Market Committee (FOMC) did not raise interest rates on June 15.   Their reasons echoed many of the same opinions expressed by me in my prior posts.   With that speed bump behind us, lets move forward and try to explain away the recent market doldrums

Note that the indexes were doing fine until June 8, at which point they started to go down, however this was on low volume, and hence I am not worrying (too much) about the recent hiccups in the market’s step.   The “2100 level” on the SP-500 Index continues to act as an important area.   Lets look at some charts:

SP500-06-16-2016-far

SP500-06-16-2016-comments

This downtrending action stopped, albeit possibly temporarily, on June 16, with the markets closing in positive territory.

The next challenge for the markets is the BREXIT Situation in Europe.    The date of this vote is June 23.  What the heck is BREXIT ?   This is the term for the BRitain EXIT vote from the European Union (EU).   Actually the United Kingdom (UK) but nobody can pronounce UKEXIT so it is BREXIT.  Similar to GREXIT which was GReece EXIT.

Without going into a 25 page dissertation on UK politics and EU relations, the supporters of staying IN the EU is the UK Prime Minister himself, also our US President is supportive, also Germany, and China, are supportive of UK’s continued relationship with the EU.   Others are not supportive, their argument being that (among other things) the EU is “dragging down” (due to various weaker member countries and spill-over contamination) the UK and thus exiting will solve immigration issues, promote UK financial health, and free the UK from general EU headaches.

In sum, most BREXIT watchers believe an exit would be negative for the US markets and negative for UK overall.   This bears watching by TSP participants since, as we know, US markets do not like uncertainty and in today’s era, our markets are very sensitive to activity overseas.

Changing gears, I would like to say “Thank You” to everyone who has participated in the various polls.   If you have not participated, please do so.  Some have brought to my attention some browser/computer issues when they open the polls, what I recommend, is go to the below links, right-click on the link, choose “Open Link in New Tab” then vote in the poll in that new tab.  

Return to this page and repeat the process until you are done with all Polls.

http://www.poll-maker.com/poll715808x03964090-29

http://www.poll-maker.com/poll715812x388f14f4-29

http://www.poll-maker.com/poll715816x1Ceb4E8d-29

http://www.poll-maker.com/poll715821xd304c19E-29

http://www.poll-maker.com/poll715825xDEa84F39-29

I appreciate your participation as it allows me to stay in tune with the audience.

Nothing else to report, No Further Information (NFI) for the many of us that have used that terminology in reports….talk to you soon and thank you for reading.   Have a great weekend.

-Bill Pritchard

Indexes make new All Time Highs

 

Hello Everyone

I am happy to report that my decision back on March 30, 2016, to return to the S/C Funds appears to have been the correct one.  I am a little surprised that the I-Fund has performed as well as it has lately, but as I have said before, the I-Fund, with all of its potential for positive returns, comes with it an increased risk factor due to the international nature of the fund.   With that said, lets take a look at the recent market action.

In my May 5, 2016 post, I discussed the “Sell in May” strategy and the historical returns (monthly) of the markets.  As a short mini-review, the Sell in May crowd believes (admittedly they have the historic data to prove it) that since the markets typically go down in May, and typically don’t return positive until September, they “Sell in May” and take the summer off.  I, however, being a trend follower, using my own self-developed proprietary methods, tend to just listen to what the market is telling me.  This at times can be boring, and even seem lazy, with large periods of inactivity as we “wait for the market” to tell us what to do.  In short, the market gave me no indication to sell in May, and I am glad I didn’t because the SP-500 and Dow Jones Index both had positive May performances, somewhat contrary to past history.  This, in and of itself, is a positive sign.

Wall Street employs a lot of financial whiz kids who are busy analyzing earnings, fundamental value, balance sheets, and other stuff that I have no desire to research.   At the end of the day, price and volume, are the only things that matter, period, the end.    With that said, our “price” on the SP-500 has recently reached a 11-month (almost a year) All-Time-High, having hit 2120.55.   See chart:

SP-500-07-08-16-comments

The last time the index was at these levels was July 2015.  This behavior is bullish (good) and reflective of a continued uptrend.  This action is in the face of recent concerns about interest rate hikes, however I have discussed on this site Ad nauseam that I don’t believe rates will be raised anytime soon (please take a look at prior posts).   To add fuel to my argument is the recent news out of the Department of Labor that the US job market notched its weakest monthly gain in more than five years.  It appears that Wall Street is starting to reach the same conclusion and feel that our economy is not quite ready for a rate hike.  If companies are not hiring now, what will they be doing if rates go higher and the cost of capital and loans becomes more expensive ?   Etc ?

The TSP Funds have done quite well since March 30, 2016, as demonstrated by this graphic:

TSP-RETURNS

My preliminary analysis reflects that the S-Fund remains the top performer (data as of June 8, 2016) on both a one-week, one-month, and 90-day look-back period.   The I-Fund, interestingly, is starting to gain ground and is in second place behind the S-Fund.   NOTE:  At some point, I may decide to move a portion of my TSP into the I-Fund.   However remember that the I-Fund carries additional risks.  One overseas terrorist event, a Crude Oil panic, or a currency/debt crisis, could all erase those gains in the I-Fund.

For now, my TSP Allocation is 50% S-Fund and 50% C-Fund.

With that, lets talk about subscriber polls.  I ask that you participate (participate once, using the honor system…) so that I can stay in tune with my readers and get a glimpse into their tastes/preferences regarding this site.

http://goo.gl/PZzD3x

06-08-16 POLL: Choose the answer which best reflects your opinion of the strategies discussed on this website.

The moves to G-Fund are too conservative, I feel like we miss gains.
The moves to (and out of…) G-Fund are too risky.
The system in use is fine, it is hard to please everyone all the time.
Above choices do not reflect my feelings on this topic at all.

create quizzes

http://goo.gl/35fqxL

06-08-16 POLL: Regarding TSP information/strategy sites or newsletters on the Internet:

I am not aware of any other sites.
I am aware of other sites, but The Fed Trader is the ONLY site I follow/read.
I do read a variety of sites, but The Fed Trader is my PRIMARY site.
I do read a variety of sites, with The Fed Trader NOT being the Primary site
Above choices do not reflect my feelings on this topic at all.

myiq

http://goo.gl/A38Dz0

The Fed Trader website has:

Expanded my knowledge of my own TSP and increased my awareness/understanding of the stock markets.
Not expanded my knowledge or understanding at all.
Above choices do not reflect my feelings on this topic at all.

make a quiz

http://goo.gl/J5mjG3

Regarding The Fed Trader website posts/emails:

They need to be written/made simpler, at times it seems too complicated.
They are too simple and too basic.
They are fine, while some posts occasionally may be too simple or too complicated, overall the posts are written fine and I have no issue with them.
Above choices do not reflect my feelings on this topic at all.

Survey Maker

http://goo.gl/MkQsi8

The audience represents a unique demographic, and I plan to vote for:

Donald Trump
Hillary Clinton
Will not vote at all

myiq

That’s all for now folks……Thank You for reading and talk to you soon….!

-Bill Pritchard