Monthly Archives: October 2013

Good Evening

As is customary on a Sunday evening, I check the E-Mini SP 500 Index futures, which trade electronically on the CME Globex Platform, as this tends to give me a “heads up” as to how Monday trading on the regular stock exchanges (NASDAQ, NYSE, etc) will play out.  This also tends to affect my ability to sleep, as I will either be worried and awake, or relaxed and sleeping soundly on Sunday night.   As you may know, the E-Mini SP 500 Index futures are a “carbon copy” of the SP 500 Index, and in almost all situations, both will perform almost identically.

With that said, I am happy to report that (as of now) the E-Mini SP 500 futures have penetrated the ever important 1760 psychological level (discussed in a previous post) and have hit 1762.   This represents a new All Time High, and hopefully my prior posts about buying strength, not weakness, and new highs, versus new lows, has helped my readers understand my position that when a stock or index makes a new high, that is a good thing.   Thus, I am very optimistic that Monday Oct-28 trading will be bullish/positive, and since Mondays tend to “set the tone” for the week, hopefully the rest of the week is positive.   See charts below

As an additional, we have four (4) more days left for October trading, which will then conclude the three worst performing trading months of the year, per Jeffrey Hirsh, the author of the Almanac Investor.   Most folks know I prefer to make decisions based on data and hard information, versus emotion and crystal balls, and thus I refer to Hirsh’s data which is basically data going back 50+ years regarding the market’s behavior.   He has discovered that August, September, and October, tend to be the worst months out of the year for stock performance.   In four days, October is over.

One noteworthy event which may move markets this week, is the Oct 29-30 Federal Open Market Committee (FOMC) meeting.   A press release/briefing regarding this meeting is expected at 2PM Eastern Time on Oct 30.   However no major economic policy decisions are expected at this meeting, and I don’t foresee any earth-shattering news to come out.    However, I have been wrong before.   The FOMC folks have expressed concern about past “leakage” of statements or at least of their “posture” and phraseology of press releases, as the slightest sneeze has sent markets reeling lately.   So I would anticipate a closely guarded meeting and zero news or rumors until the official statement is released.

I conducted another analysis of the C/S/I Funds and I intend to remain in S-Fund for now.  C-Fund and I-Fund are also performing well, however October will probably finish out with S-Fund as top performer.  

Thanks for reading…

– Bill Pritchard

The first full market week, post-Govt shutdown / post-debt ceiling crisis, is behind us, and the indexes closed out the week with gains.   The SP 500 is at All Time Highs, which is a good thing, as highs indicate strength, and good health, for the underlying index or stock.   The 1760 level on the SP 500 is psychologically the next important level, which represents the next 52-week high.

While we have had some naysayers in the press, it is my opinion that the indexes will continue to go up, and opinion or not, I simply react to what the market is doing.   With that said, please take a look at this May 24 2013 article which appeared in CNN Money, regarding some money mangers who believe a pending “market crash” of 20% or more will happen.  It should be noted that on May 24, the SP 500 index closed at 1649.60.

On today’s date, October 25, the SP 500 index closed at 1759.77, representing a 6.5% positive increase since that article.   Time to turn off the “professional” money manager opinions and news media, and listen to the market itself.

With that said, I got some great subscriber emails this week and I appreciate the positive feedback, thank you.  I had a few emails regarding “buying on dips” versus immediately returning to S-Fund, because that means we are “buying at a higher price” if we buy when the trend resumes upward.  These are legit questions and indicate that many are taking the time to actively manage their TSP.   Before I go further, let me pause and say that there are over 14,000 mutual funds in the United States with combined assets of $13 trillion, according to the Investment Company Institute (ICI), a trade association of investment companies in the United States, per Wikipedia (if you believe Wikipedia…).   So obviously there is more than one way to slice bread, if $13 trillion is out there invested in so many funds, some with poor returns, some with great returns.  Additionally, we have a few TSP trading websites out there, all with their own strategies.   That being said, folks should do what they are most comfortable with, and use a strategy that fits them, provided by a source that they feel at ease with.    Now, on to my example as to why “buying on dips” is not a strategy I recommend.  I will use Enron stock as an example.   Enron is somewhat of an extreme example but it will help illustrate why buying on dips is not a sound strategy (not to mention that “dips” are only visible after they happen, nobody can predict a “dip”).     Lets take a look at the Enron stock chart.   Disregard the blue horizontal lines on the left, as I pulled this chart from another site, and then modified it for my own use.  I am not bright enough to figure out how to edit those blue lines so I just left them.   My comments are on the right side of the chart.   Read the comments next to the red circles that I have placed on the chart.   Our imaginary investor has observed Enron make a heck of a run-up and wants to wait for a “dip” before he buys it.   Follow my comments on the right side of the chart.

As you digest the above chart, lets go back in time (like watching video tape of a train wreck) and take a look at the Enron forum over at Motley Fool, dated 2001.   The link is here, and the screen capture is below.   Look at the remarks by username TBIRDMC

Again, Enron is an extreme example, but it serves to drive my point home that (in my opinion anyway…) buying on dips is not a sound strategy.   Now, should a stock or index fall to the 50-day moving average line, and start to go flat, this is a common area where people purchase shares or accumulate additional shares, however this is part of a larger overall strategy versus waiting for “dips” because the stock is “cheaper” to buy.   Stocks are cheap for a reason.   GOOG (Google) is $1000 for a reason.   AAPL (Apple) is $500 for a reason.   In contrast, DELL is $13 (anybody enjoyed the Dell customer experience, with their spam ware/adware bloated laptops?).  Vonage VOIP stock is $3 (with Skype, Facetime, local cable internet bundled VOIP packages, and other services now in the marketplace), for a reason.

Stocks and Indexes (well, any investment vehicle, be it baseball cards, antique cars, real estate, etc.) go up and go down for a reason.   It is my goal to not identify the reason (contrary to popular belief, the reason does not make us money and I could care less “why” something goes up or down, just that it does), it is to identify the movement or trend, as early as possible, and get in sync with that trend.   Note that entire departments of Ivy League schools, units of federal agencies, and private research groups, spend their entire waking hours trying to find out reasons, when they would be much wealthier if they  instead sought out trends.  I can take 10 years worth of  weather data regarding August weather in Florida, hard, existing, documented data, and make the assessment that it will probably rain most of the month and thus require that I carry an umbrella in the car.   By using data, I have identified a trend of behavior (regarding August Florida rain).   Now, how successful would I be if I sampled the air each day, beginning August 1, and carefully analyzed it, and then researched it, sent it out to committee, then voted, on whether I should have an umbrella that month.  Heck, by the time all my research came back I would have been rained on already and missed the trend.   Do I care why it is raining ?   All I care is “Do I need to keep an umbrella in the car”.   Nothing more.   What strategy makes more sense  to reach this decision ?

Of the stocks discussed above, if you were given the instructions, “Vonage or Apple, make one investment and if your choice outperforms the other stock , you will win a prize” which one are you buying ?  Vonage because it is “cheap”,  or Apple ?   Remember, Apple is 500 bucks a share.   Kind of “expensive”.

Which one do you think will outperform the other ?  

That folks, is the question we must ask everyday as part of a successful investment strategy, and buying “cheap” or “on dips” is not (my opinion) not part of that.  Additional commentary on my March 31 2013 post.

With that said, it is my opinion that the market should continue its uptrend, as I see no red flags indicating otherwise.  I am still 100% S-Fund and cannot quite put my finger on the next best performer, as I-Fund and C-Fund are basically doing equally as well, however, not as well as the S-Fund, based on my analysis going back multiple weeks.   As we get more clarity on things, I will remain 100% S-Fund for the time being.

Thank you for reading and if the site/email updates are informative or useful, please share them with your friends and colleagues.

Take care…

– Bill Pritchard

As most are aware by now, both the Senate and the House have agreed to raising the debt limit and opening the federal government.   This shutdown was the second longest (I believe) in history, with the longest one being three full weeks, under Bill Clinton.

Thankfully, the Tea Party / Ted Cruz et al. did not throw any wrenches into this, and it was passed, and before the Oct 17 deadline.  No last minute hiccups, and the power did not go out in DC tonight prompting the House to cancel the vote. 

The Asian markets responded well to this, with the Japan Nikkei 225 Index going up 160 points.  SP 500 Futures are somewhat flat, which is surprising, but they are not down, so I am happy about that.  The last couple of days the markets have closed higher each day (as many of you have reminded me…) albeit on reduced volume, indicating that folks were not jumping into the pool head first but sticking one foot into the water at a time to test things out.

The CR will fund the federal government until Jan 15 2014, getting agencies (and their employees) thru the major holidays.   The debt ceiling is raised until February 7 2014. 

Based on the overwhelming positive news regarding the Debt Ceiling agreement, which was really the only thing lingering in the skies over the markets, and the impossibility (now) that a last minute problem would trip things up, I am returning to 100% S-Fund.   My review of past market days and analysis reflects that S-Fund has a high probability of strong returns for the time being.  Asian market’s positive response to this reflects they are obviously pleased that some stability is back, as Asia owns a lot of US debt and they have a lot on the line regarding the Debt Ceiling.  I also plan to adjust my personal stock portfolio to reflect long/buy holdings which would benefit from a new uptrend.

Six trading days have passed since my October 8 posting regarding my move to G-Fund.   Now that the markets are apparently on the path upward, I would not nickel and dime yourselves over six days of not being in the stock funds.  Let’s conduct an honest self-reflection:  a lack of agreement on this debt ceiling would have been a bloodbath, and by being in G-Fund, we were safely tucked into bed under our blankets, with no risk exposure.  If you can minimize your losses, the gains will take care of themselves. And if you have subscribed to this site, you likely have been in the one fund out of ten that was the top performer.  This does not happen by magic or lucky guesses.  Please note that the YTD best performing fund, per the TSP site, has been the S-Fund, and this site (and to my knowledge, no other site, to include the paid subscription sites) has kept people in the S-Fund almost the entire time, with a few short-lived jumps to G-Fund along the way.  Thank you for the interest, and you can count on the accurate and unmatched market analysis to continue.

Thanks everybody

– Bill Pritchard

No, that headline is not a typo or some sort of computer error resulting in a reprint of yesterday’s headline.   It is, well, now, 24 hours later, October 15, at 11:30 PM EDT, and shockingly (or not so…?) we have no Debt Ceiling Deal.  I might add that the discussion to re-open the government apparently is no longer the hot topic, it is the Debt Ceiling, which has received all the attention in the last 24-48 hours.

That’s right folks, tomorrow is October 16 and 1)  No debt agreement has been reached and 2) Any such agreement must pass both the House and Senate, 3) Both of which must occur ideally before 00:01 HRS on Oct 17. 

As noted earlier, some say Oct 17 is symbolic and not a “hard” date, others say Oct 17 but no set time (COB?), others have said Oct 17 is just hocus pocus make believe.   By the way some of the hocus-pocus group are grown adults and elected politicians (Yes, I am scared too).  I am taking the conservative approach and calling it one minute into Oct 17 as the deadline.   Various TV commentators (CNN, FOX, etc.) are now stating that having things resolved by Oct 17 is basically impossible and to expect a “weekend resolution.”  I am sure the ratings agencies and the world leaders, some who own some of our debt, will like that….

I wonder what would happen if my supervisor or the prosecutor told me “have this ready for trial by Date ABC”, as serious and grave consequences could occur if I did not comply.   Then I made excuses and pointed fingers at others when my inability to make this deadline became apparent.   I wonder what would happen if I told these folks “well, the date you gave me [Treasury Secretary Lew stated Oct 17 was a critical deadline] is just something you made up, I am not going to abide by it.”  Or maybe I told them “I am working hard on the deadline, but will get back to you, by the way, I am happy with my own progress”.   Or “I have determined that something else is more important, not your deadline.”  

I wonder what my eval that year would look like ?   My career potential after that ?  My reputation ?  I wonder how many cool TDY’s I would get in the future ?   Maybe a PCS move to Eagle Pass Texas ? Etc.

So then, the question is, What is the USA’s reputation looking like, on the global scale ?

Enough soapboxing….

Some news shows have just now started to talk about “damage to 401ks” (the TSP is our version of the 401k) and how this will get voter’s attention, resulting in some politicians losing future elections.   Fitch Ratings agency has come out and basically stated that the bickering back and forth between parties, and subsequent uncertainty, has caused Fitch to have their trigger finger ready to downgrade USA’s credit rating.

Today, the Dow Jones closed down 133 points.   However I do not track the Dow, I prefer the SP 500.   The Dow is only 30 companies.   If one or two of them cough wrong, it affects the entire index.   But news outlets and the general public watch the Dow (more so than they should, but…) and thus anytime the “Dow down 133” flashes across the screen, it is never healthy for sentiment.    As I discussed in yesterdays post, yes, the Dow closed UP the last few days but as a pretty bright guy in my office told me today (as he shook his head…), he said there was no way he would chase a 5% gain if he might loose 50% during the chase.   Pretty well said.   As stated previously, depending on when you logged into the TSP site and processed your request, many folks got some gains on the way out, anyway.

On another note, I am 100% G-Fund until the market itself tells me that it is time to return to the stock funds, which by the way, will almost for sure not happen until this debt ceiling stuff is resolved.   Yesterday’s post may have miscommunicated that I am 100% G-Fund, and that once the debt ceiling issue is resolved, I am then immediately returning to the stock funds.   This is not what I intended to communicate and I apologize for any confusion.   Legit question by the way, a few folks emailed me that question.

That is all for now folks, to recap, there is no debt ceiling agreement yet, and I am 100% G-Fund until further advised.   Thanks everybody.

– Bill Pritchard

Hello everybody

Well, to say that I had an “uptick” in email activity from my now extensive (and very loyal) subscriber base would be an understatement.   I have been cranking out email replies since my Oct 8 post regarding my move to G-Fund.   The underlying theme of most of these emails is “I wonder if we should go back to the S-Fund, we missed some gains”.     Which is a valid question.   Allow me to discuss this and some other topics further.   Also, let me state that I enjoy these emails and they indicate that my postings are being closely followed, which is the best affirmation this site and I could ever get.  

As I have stated in prior posts, G-Fund is not for gains, but for safety and protection.  In times of “storm clouds”, G-Fund is the storm shelter.  And right now, in my opinion, we have storm clouds, with both the government being shut down, and the looming Oct-17 debt ceiling deadline.  Trying to grab the last rays of sunshine while storms approach is a dangerous strategy and something I do not support.  Observe that it is 11:30 PM in Washington DC, and nothing has been agreed on yet.

On October 8, I discussed my TSP Allocation which would be 100% G-Fund.  My TSP request did not take affect until October 10.   This means that my account likely obtained some gains on October 9, and possibly some on October 10, which were “up days” in the markets.   Others who elected to move to G-Fund, assuming the allocation change was initiated on October 9, likely obtained some gains while awaiting the change, as every day since October 8 were positive days.    Now, Oct 14, many are likely G-Fund.    My point is this, as we headed for the exits, we likely obtained some gains on the way out.  

Lets take a look at the SP 500 Index over the last few days.   See chart below, with comments.

As can be seen, the pre-weekend trading days were mostly average to slightly above average volume, indicating optimism that a deal would be reached.  Post-weekend, volume was lighter.  Yes the indexes physically went up, but the volume is the story behind the move.   Like most of my subscribers, I have hoped for a deal (yes, my paycheck is affected also…), and over the entire weekend, have seen the following terms used:

“We are having a discussion”

“Progress is being made”

“We are at the table”

“We are close”

One thing I have yet to see is

“We have a deal/agreement”

Based on public news media reporting, any Senate agreement must clear the House also.  Some media outlets have expressed concern that Senator Ted Cruz and the Tea Party may try to derail any Senate agreements.  Some news organizations, Bloomberg News in particular, have now come out and said that we are at the point that even if agreement occurs now, it may not be possible to have everything rubber stamped and signed off by Oct 17.  Mind you, tomorrow is Oct 15.   Some say midnight on Oct 17, some say not, some say Oct 17 is merely symbolic and even others say the debt ceiling is a concept invented by Obama’s team and is all make-believe, like Santa’s helpers and the Easter Bunny.  Even others say the US “can’t” default.  “Can’t ?”   Be careful.   Anything can happen.  Long story short, my ability to sleep soundly has improved greatly since moving to G-Fund.   Did I miss some gains ?  Probably yes.   Did I miss the chance for the markets to dangerously crash and hurt my TSP balance while this process is worked out ?  Yes, absolutely.

Guys, my balance is 100% G-Fund for the reasons outlined above.   I think trying to “grab some gains” is playing with fire.    Now, if the market triples this week while yours truly sits in G-Fund, well I owe you an adult beverage.  

However, until the budget/debt ceiling deal is signed, sealed, and delivered, and double-confirmed, I am 100% G-Fund. 

Remember, in investing (and life), the greater the risk, the greater the reward.   Less risk, less reward.   Money stashed under your mattress ?   Zero risk, zero reward.   Trying to “play” the debt ceiling ?   Potential huge reward, also huge risk.   The question to ask yourself:  Is your TSP balance worth it ?   I know some fresh air would be nice, but do we really want to roll the windows down on our armored car right now ?     

Hope everyone is doing well and lets keep our fingers crossed that this is resolved soon.  

– Bill Pritchard

I promised to advise you if the market “hiccupped” wrong and today it did.   All the indexes sold off and closed lower, on above average volume.   This fact, coupled with the ongoing news (the markets action itself is enough justification to make me go to G-Fund) between both parties prompts this decision.   I am concerned that any “agreements” formed prior to Oct 17, may fall apart at the last hour.  As discussed in yesterday’s post, as this drags on, our overall reputation is at risk and this may be enough to send the markets further lower, even if we do get a last minute debt ceiling agreement.  I wonder if Obama’s speech writer read my post last night…

It should be noted that on Thursday Oct 10, Treasury Secretary Jack Lew will testify before Congress regarding the debt ceiling.   This may go well, it may go bad.

With that said, as of this evening October 8, 2013, I will be 100% G-Fund in my TSP Account, reflected via Contribution Allocation and Interfund Transfer.

The TSP site posts the S-Fund’s return YTD as being 27%.   The S-Fund is the top performer on a YTD basis, and this site has advocated S-Fund almost the entire time.  While we were not in the S-Fund the entire year, have taken some protective moves into G-Fund earlier in the year, my point is that let’s take some of our gains and keep what we have. 

Again, I am now 100% G-Fund in my personal account and my opinion is that this is the prudent move, in light of the market’s behavior and overall political climate which exists.   You may see some “uptick” days over the next week or two but my opinion is that the safety of G-Fund is best for now.

Thank you for reading…

– Bill Pritchard

Good Evening everybody

Well, it is October 7 and we are in shutdown mode with no budget agreement in place, and face a rapidly approaching Oct 17 debt ceiling deadline.   If you read the news reports (and lets admit, some fear mongering by both parties is going on…) , one would believe that the world is going to end if the debt ceiling is not raised.  

In the end, what the market does is what matters most, not opinion, emotion, or crystal-balling the future.  Or TV interviews of politicians from either party.   In the end, the market is going to do what it is going to do, so lets just go straight to the market and take a look.  Lets take a look at the SP 500 charts since Oct 1, a key milestone reflecting the new Fiscal Year, a term most of us are familiar with.   

The chart above, with my comments, shows the SP 500 Index over the last few weeks, and it is fairly obvious that the index has been mostly flat, on average to below average volume, since Oct 1.   It should be noted that on Oct 1, the index went up, not down, and then entered a listless sideways mode on average to below average volume.  I discussed the prior government shutdowns on this site, and received some emails (and good for my subscribers for being engaged) on what would happen on Oct 1 2013, versus what happened before.  In the end, history tends to repeat itself and this shutdown was no different.  

Which brings me to a more serious concern.  It can be argued (and I am entering the realm of speculation which I promised myself I would avoid) that this shutdown is “different” than prior shutdowns, because this shutdown, coupled with a debt ceiling violation (we have no debt ceiling modification prior to the ceiling being hit, expected to occur Oct 17), is a dangerous cocktail for the markets and the economy.  Our reputation on a global scale is in question (“look at those clowns over there” etc. etc.), and a failure to make payments on our obligations would most likely result in a downgrade by ratings agencies.  This could be an additional reputational problem on the global scale for our country.  Again, I am speculating and I promised not to do that.  But you probably can see where I am coming from. 

Lets take a look at a slightly longer term chart of the SP 500, below, in which I have placed channel lines to show the recent downtrend since mid Sept.  See comments on chart.

In summary, I am still 100% S-Fund, however I am watching things extremely closely.   I am not waiting until Oct 17 to make any TSP Allocation changes, and trust me, if the markets merely hiccup wrong, I will advise everyone.   However, with that said, there have been no sell offs or major down days, and my opinion is that there is no evidence to push me out of S-Fund at the present time.  

Thank you for reading….

– Bill Pritchard