Correction or Meltdown?

This topic contains 21 replies, has 6 voices, and was last updated by  Anne 3 years, 4 months ago.

Viewing 22 posts - 1 through 22 (of 22 total)
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  • #17875

    Anne
    Participant

    I reduced my stock position in C, S & I funds to 66% until markets settle down a bit. I increased my position in I Fund a little hoping or gambling that the Oil & China issues will resolve somewhat. It really seems like a bargain at under $23/share and I figure with all the panic overseas…most people will be trying to sell rather than buy.

    #17896

    dave
    Participant

    I don’t see a fast recovery from this. I’m sitting in 100% g fund looking to jump back to 100% C fund this year. It might take this summer or fall, but I’ll wait it out. Wish you the best.

    #17898

    Anne
    Participant

    Dave,
    With everything I have been reading, G or F funds may be the best place to be. I may be moving that direction sooner rather than later. For those in the financial business, forecasts are not optimistic and focus is on more selectivity based on fundamentals and value; even my broker is looking for defensive options.

    Surprising for mainstream news:
    Don’t blame China for the market sell-off
    Jan 5, 2016
    http://www.cnbc.com/2016/01/06/dont-blame-china-for-the-market-sell-off-commentary.html “The Fed paid it forward to juice the economy and the market. It may be payback time for stocks, says former Dallas Fed President Richard Fisher.”
    Longer version of interview on youtube: https://www.youtube.com/watch?v=7nuzT3rchPU

    BBC (UK’s current view):
    George Osborne warns of ‘dangerous cocktail’ of economic risks
    http://www.bbc.com/news/business-35248628
    UK economy: George Osborne’s warnings explained
    http://www.bbc.com/news/business-35251692

    Non-Mainstream:
    Black Coffee: It’s Time to Batten Down the Hatches

    Black Coffee: It’s Time to Batten Down the Hatches

    #17909

    Bruin

    I’m not going to move any at all, would occur too much of a loss if I did, I’m just going to ride it out and hopefully the markets goes back up, I have at least 8 years left before I retire and keep my fingers crossed it goes up, I have 80 in C and 20 in S, keeping my fingers crossed.

    #17945

    Rolfeskj

    I am in a poor position myself, 50%-S, 35%-C and 15%-I. I am hoping for a bump 3-5% , so I can get my money out of S without a huge loss. I want to move quickly to a more defencive Position, 50%-C, 40%-F and 10%-I.

    We had 10% correction a few months back that the S fund never recovered from. This is more than a correction but I do think for political reasons they will do their best to hold off a wide sphere ad turn down before the elections. Not that it helped in 2008. It’s be 7 years since the last recession, we are due. I am guessing 6-18 months. Even according to TS Paul, the C fund has done better than the S fund for the past two years. Nits a sign.

    #17946

    Anne
    Participant

    Hopefully market has bottomed out for now…but I am treading carefully as I’m getting ready to retire. All TSP funds share prices are up slightly today. I don’t feel that our economy is on solid ground at the moment, even with the higher job growth last month.

    See TS’ reTweet… https://t.co/tPPIfutNoI …sounds like Chinese are following our lead from our financial crisis. Non-performing loans (NPL) sounds similar to our housing bubble/mortgage crises. “Chinese banks are often accused of under reporting their non-performing loans by using methods such as re-financing unprofitable state-owned enterprises and under recognizing overdue debt to muddy the numbers.” Hope they don’t go down the road of derivatives.

    #17964

    Jesse

    Perhaps you’ll be able to explain something to me concerning the expression “lock in your losses.” I read about many subscribers discussing for example; “i have 400K in my C fund which recent market dropped it by 10% meaning I now have 360K.” If i take that example and I move the balance to G fund, does that mean I effectively lost 40K versus leaving it in C until the market goes back up, thus not losing any money. Im soo confused on this issue. Any light you may shed will be helpful. Thanks..

    #17978

    Kilbane
    Participant

    @Jesse

    I think when people use the expression “lock in your losses” basically means when you move from a higher risk fund, or any fund you’ve lost money in, and choose to move it to a stable “no loss no gain” fund like the G fund you have basically accepted your losses. Kind of like walking away from the Poker table immediatly after losing a big hand.

    In your scenario, if you pull out of the C fund to the G fund you have accepted losing 40k. You will not make back that 40k at the tiny gains in the safer G fund. You will stop your losses, but your losses are permanant or “locked in”. If instead you stay in the C fund you may make some or maybe even all of 40k back if the market turns up again, or you may continue to lose money. That’s the gamble.

    #17983

    Anne
    Participant

    Moving it to the G Fund stops you from losing more money in a declining market. Yes, the money is gone, but there is also an opportunity to buy back shares in the stock fund at lower price/share after the market settles.

    If I had moved all of my stock funds to G & F on December 1st last year, I would have $50K more right now. Unfortunately, I was thinking that the market would increase & didn’t want to miss the gains or lock in any losses.

    TSP Share values on the different dates:

    12/1/15 1/13/16 Variance
    G $14.8892 14.9272 0.0380
    F $17.0617 17.1164 0.0547
    C $28.3031 25.5099 -2.7932 5/2014
    S $36.9242 31.5979 -5.3263 9/2013
    I $24.7760 22.4580 -2.3180 11/2012

    Had I moved all to G & F, I could now buy back $50K of C/S/I this month at $2.79 to $5.33 lower price per share (or more if it keeps falling), increasing my number of shares at a reduce average cost per share.

    The biggest risk in TSP is if you make 2 inter-fund transfers (IFTs) at the beginning of the month, you can only move from the other funds into G. So if the market bottoms out next week, I cannot increase my stock funds through an IFT until 1 Feb, since I have already made 2 transfers. I don’t think that is going to be an issue given the current market. Currently I’m at 58% in C/S/I, mostly C & I as S fund has lost approximately twice as much as either C & I in the last 1.5 months. The paltry returns of G & F look really good right now in comparison to the losses in C/S/I funds. It is always possible to ride it out, it is a matter of your risk tolerance and how much you are willing to lose in the mean time. The market could rally tomorrow or it can continue going south. If I had a crystal ball, I would have moved everything to safety the beginning of last December. Although I hope the market will rebound quickly and this is a normal correction, I have some serious doubts.

    #17990

    12squared
    Participant

    Taking money out and hoping to buy back before it goes up too much is also a gamble. However, you generally need to pull back well before the downward slope is apparent.

    Statistics can be a crystal ball. For example, in August 2015 S Fund moving averages indicated a downturn on 8/4. However, C Fund moving averages did not indicate a downturn until 8/19. If you pulled back from C the next day you would be in good shape – assuming you got back in before 9/17 when C was only down 2% from 8/20. However, it would have been very difficult to recover your losses if you pulled out on 8/21/15, as prices bounced back up quickly.

    The big question for those who have moved from S or C to G recently:
    How will you know when the market has bottomed?

    #17995

    Anne
    Participant

    Good question….if I had a good answer I would probably not be working for the government and would be extremely rich!

    #18001

    12squared
    Participant
    #18002

    Anne
    Participant

    I wish I had shifted a bit more in my TSP yesterday. I’m 43% in G/F. Hope that bear is docile;)

    Stocks set to tumble as oil plunges below $30, Chinese stocks sink

    http://www.usatoday.com/story/money/markets/2016/01/15/chinese-stocks-enter-bear-market/78835704/

    #18003

    Rolfeskj

    Wish I had shifted to g and f myself. I am all c and s per TS Pauls recommendations. But as the market dropped so fast I did not want to lock in losses. 19 years until retirement but it still hurts.

    #18004

    Bruin79

    I’m all in C and S fund, hope there is a end to this downward spiral soon 400 to 500 points drop in the DOW so far today, not going to lock in losses by moving to G Fund, just going to hold steady and hope this hemorrhage stop and goes back up.

    #18005

    Anne
    Participant

    DWCPF got less of a hit today (-1.84%), but it is down over 20% since high in June; S&P 500 (-2.16%) today, down around 11% since July; MSCI EAFE took worse hit (-3.69%), down around 22% since highs in May 2015. Only good thought for today is that my contribution should hit TSP today so I should get more shares of C, S & I at a lower price!

    #18007

    TS Paul
    Keymaster

    I know I sound like a Pollyanna during each correction when I talk about how I ignore them or use them as opportunities to buy stocks on sale. If I could predict these or call the bottoms on them, I certainly would, but despite my best efforts when I was a younger investor that was not a code I could crack.

    So I pull back a bit from looking at the financial media during these events and take the long view. Absent a recession (which we do not have right now), the market is going to go up. But it’s not going to go up every day – there are going to be a lot of down weeks and months along the way. I get some comfort from taking a look at all the dips and stumbles over the past few years in the attached chart, but also looking at how much higher we are than where we started.

    Attachments:
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    The TSP Allocation Guide www.TSPallocation.com

    #18010

    Anne
    Participant

    TS, I really do love your calm throughout the storm!

    Although I hope I’m wrong, my concern is that we may be going into a bear market and a full economic recession.

    –12Squared’s second link above states “most economic statistics that most economists rely on for making forecasts are lagging indicators. This means these numbers won’t reveal a weakening domestic economy until it’s too late to take preventive measures.”

    This seems to be true when I looked back at the last recessionary cycles http://www.nber.org/cycles/ as it relates to the stock market & unemployment http://data.bls.gov/pdq/SurveyOutputServlet. The stock market bottoms before the trough and the increase in unemployment seems to increase more significantly after the contraction.

    –Since the Fed intentionally stimulated the stock market through QE to bring us out of the economic crisis, I’m not sure that the typical indicators will provide any warning in the current situation. Former Dallas Fed, Richard Fisher, in regard to last recession stated “We frontloaded a tremendous market rally to create a wealth effect “ in an interview recently.

    –I’ve been trying to look at all the economic indicators, but I am not sure how reliable they are in predictive value given the government involvement in the economy.

    I am thoroughly confused.

    #18033

    12squared
    Participant

    I believe that the bottom is near, and that this is one of cases where the market has predicted 12 out the last 8 recessions. Here’s why:

    In the past week, the price of the S fund has been down more than 3 Standard Deviations from the 50, 100 & 200 day moving averages.  Historically (since TSP data has been available), it has never stayed in this range more than a few days.  1/13/16 was a 3x -3 sigma day (50, 100 & 200 day periods) – something which also occurred in Aug 2015 & Aug 2011.  The only week worse since 2003 was in Oct 2008 (6 3x -3-5 sigma days). Therefore, I suspect S has hit a “near-term bottom “.

    Based on positive movement of 3 of 4 Std Devs on 1/12, I moved 6% into S from G the next day for a total of 95% S.  Even with Friday’s new low (a 2x -3 sigma day), I don’t regret this move. In fact, I plan to go all in to S next week. With 15-20 years until retirement, I’ll be hurting only if I sold my shares and price went up.  If I had 43% in G or F when retiring, I’d expect to be able to weather a 5 year market downturn.

    #18059

    Steven Roderick

    Interesting time to be in the market…I am fairly new to the government (been in 5 years now) and have my allocations as following:

    C – 45%
    S – 45%
    I – 10%

    Debating on changing my contribution allocations to 100% G fund for the next few months. But I am curious of something – If I leave my allocations as is, I am buying shares at the current (cheap) share price, correct?

    Any thoughts on making interfund transfers?

    #18060

    12squared
    Participant

    Steven,
    If you buy into G fund now, you will be selling C, S & I shares at prices down 10%, 20% & 17% from all-time highs. The best move might be from I to S, as the S/I price ratio is down about 10 percentage points from a few months ago, i.e. S is cheap compared to I.

    #18062

    Anne
    Participant

    Steven,

    Yes, you are in effect buying at the end of day price on the day TSP deposits your contribution to your account or the IFT takes place. You have to enter the transaction prior to 12:00 EST for it to take effect that day. You can change your allocations any time, however, you only have 2 unrestricted IFT’s per month (after 2 transactions, you can only move funds to G or rebalance to last allocation)

    I cannot see page 2 of this thread; I can see that there is another post but cannot go to it unless I go to 12Square’s profile and view his posts. Anybody have same issue or know how to correct??

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