Thursday, August 5, 2010

General TSP Discussion.

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SgtWs

Thursday, August 5, 2010

Post by SgtWs »

On August 5, 1962, movie actress Marilyn Monroe is found dead in her home in Los Angeles. She was discovered lying nude on her bed, face down, with a telephone in one hand. Empty bottles of pills, prescribed to treat her depression, were littered around the room. After a brief investigation, Los Angeles police concluded that her death was "caused by a self-administered overdose of sedative drugs and that the mode of death is probable suicide."

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Not much overall movement in the market as the last two days was a wash. Everything has been on hold, waiting for tomorrow’s employment report, which is baffling, because even if the report is better than expected, does it really mean the economy has gotten better? It just seems to be one hurdle after another full of negative optimism.

I did notice that one of the Top 5 on TSP Center’s Fantasy board went to 100% S Fund. I’m still sitting at 25% S Fund, 75% G Fund.

Yesterday the VIX was down to 22, indicating that there has been a sense of calm settling in, that the fear has somewhat subsided. But then I saw this article…………
The VIX is low, but market fear isn't gone

It's also worth noting that any stock market moves in the lazy hazy days of early August have to be taken with a billion grains of salt. Most major companies have already reported earnings, trading volume is light and Congress is soon set to go on summer recess. Krosby points out that September is historically a tough month for stocks. So it would not be a major surprise to see volatility return once traders are back from the beach and the news cycle picks up. Others agree.

But how do you feel? Not everyone is seeing doom and gloom………Forget Doom, Old-Fashioned Rally Coming: Fund Manager

So not everyone is so dim on the outlook. But what about volume? Volume has been really low on the exchanges lately………………. Anyone Want to Trade? Hello? Anyone?

My Take: The market seems to want to go higher. It is definitely hanging in there, but it just doesn’t seem to be able to break that overhead resistance. The overall price action is positive, but because of the tight pattern starting to form and extremely light volume I do think we are going to get a pretty good move one way or the other, but I honestly do not have a clue which way that will be. I hope we get a resolution Friday morning with the jobs report. I am hoping we break out to the upside. It is time. I am hopefully optimistic because many of the markets leaders are having nice runs out some powerful breakouts (CTSH, BIDU). Apple (AAPL) might offer some clues. It too is trading in a pretty tight range, indicating it might go hard either up or down. Hopefully it will give us some clues ahead of time. Keep an eye on the market leaders.

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Zack’s wrote an in-depth look at the GDP report that I found very interesting:
In-Depth: 2nd Quarter GDP Growth

This is a really boring article to read unless you are a geek that likes economics and stuff (Me?). To make it a little easier I took out the parts I thought were interesting and important to shorten it down quite a bit so you can glance over it and be better informed. I even threw in my 2 cents, because I know you wanted to know what I am thinking.

Overall GDPIn the 2Q GDP grew at a rate of 2.4%, which was slightly less than the 2.5% consensus expectation, although the expectations had been moving down over the last week or so. However, the first quarter was revised sharply higher to an increase of 3.7% from 2.7%. My Take: Not really bad news, but not really good either.

Quality of Growth - Without a doubt, growth has been slowing from the 5.0% rate in the fourth quarter to 3.7% in the first quarter to the current estimate of 2.4% in the second quarter. However, the quality of the growth has been improving. My Take: Good news.

Consumers - The biggest part of the economy by far is consumption, accounting for 70.4% of total GDP in the 2Q. In the 2Q, Personal Consumption Expenditures (PCE added 1.15 points of growth down from 1.33 points in the 1Q but up from the 0.69 point addition in the 4Q. My Take: Bad news. This is the #1 thing to watch as it is a leading indicator. There no denying that Americans are spending less these days, and given that consumer spending accounts for some 70% of the nation's GDP, such reluctance to commit funds could ultimately threaten the recovery. The Economic Cycle Research Institute's (ECRI) leading U.S. index fell 0.7 point in the week ended July 2 to 121.5, the lowest since July 2009. The gauge's annualized growth rate fell to -8.3% from -7.6%, suggesting the U.S. expansion will decrease sharply or even stall. ECRI was among the first to foresee the timing and strength of last year's recovery. The ECRI, among the first to identify the recovery that began last year, now sees the expansion slowing but not enough to warrant fears of a second slump.

Investment in Equipment and Software - Equipment and software spending increased by 21.9%. This is a very encouraging development, suggesting that businesses are starting to deploy some of the massive cash hoard they have amassed. Despite all the whining you hear on CNBC about uncertainty regarding taxes and regulation, the animal spirits are starting to rise. If businesses are investing even when they have factories sitting idle, it means that they must be getting more confident about the future. My Take: Encouraging.

Real Estate - There is a huge overhang of existing homes for sale, especially when one counts the shadow inventory of homes where the owners are far behind on their mortgages and are likely to go into foreclosure (or which are already in the foreclosure process). My Take: Don’t expect much from real estate for a long time.

Government Spending - In total, government spending was 20.51% of the economy in the 2Q, and of that only 8.26% is Federal Government spending. State and local governments are generally not allowed to run deficits for operations (they can float bonds for capital improvements like roads and sewage systems). Since most are facing very large deficits due to falling tax revenues, they will have to cut spending sharply in the coming quarters, and will once again be a significant drag on the economy. If instead of cutting spending they raise taxes to balance their budgets, they are likely to reduce either Consumption or Investment spending (or both). State and local government spending was 12.24% of the whole economy in the 2Q. My Take: Not good, but there is a ton of wasteful spending out there.

Imports/Exports - The problem is on the import side, and increasing imports are a subtraction from GDP growth. After all, imports are things that we consume here, but which we don’t make here. Imports surged 28.8% in the 2Q. This is a reason for serious concern. It is the trade deficit that drives our indebtedness to foreign countries, not the budget deficit. After all, the budget deficits during WWII were far larger than the current budget deficits as a share of GDP, but when the war was over, we were by far the world's largest creditor, rather than being the biggest debtor as we are now. My Take: Not good.

Oil / Energy - About half of our trade deficit is due to our oil addiction. We need to reduce our oil imports and have to do it soon -- they are a cancer eating away at the economy. To do so, we need to both use energy more efficiently and to move to other sources of energy. We simply no longer have the oil reserves (2.1% of the world’s total in 2009) for “drill baby drill to be a reasonable answer -- not when we are already the third largest oil producer on the planet, accounting for 9.0% of total production already (that’s more than Iran and Iraq, combined). The problem is that we consume 21.7% of the world’s oil. My take: Not good. Natural gas baby!

Taxes - Higher taxes are not a good thing in a recession or a weak and anemic recovery. However, if the revenues generated were used to lower taxes that are even more regressive or bigger drags on the economy, such as the payroll tax, they would end up being a net positive for economic growth in both the short term and the long term. My Take: No Comment

Summary - Overall, the report was a bit lighter than expected for the second quarter, but that was more than made up for by the big upward revision to the first quarter numbers. However, the economy is still slowing and is likely to slow more in the third quarter. Thus, while it doesn’t seem likely that we will go into a double-dip recession, neither are we likely to see the sort of robust growth that will rapidly bring down the still unacceptably high levels of unemployment, particularly long-term unemployment. My Take: I think we are slowly getting better, but we could do much better to help the recovery along.

Other articles I found interesting:

Are the Helicopters About to Take off?

S&P 500 P/Es too high?.......... Bloomberg’s Chart of the Day

Morici: Friday's Jobs Report: Outlook Darkens for Economy, Obama

Friday, forecasters expect the Labor Department to report the economy shed 70 thousand jobs in July and unemployment rose to 9.6 percent. Economists expect the private sector created about 100 thousand jobs but government employment fell 170 thousand, as more temporary census jobs disappeared. Thirteen months into recovery from a deep recession, this is disappointing. The economy must add 13 million private sector jobs by the end of 2013 to bring unemployment down to 6 percent.

What’s up with all these articles on deflation in the last two days?!

Defending Yourself Against Deflation

Why Bonds Tell a Better Story Than Stocks

This might be interesting for those of you looking at the I Fund……

Europe After the Bank Stress Tests, August 4, 2010, Bill Witherell, Chief Global Economist

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flight23
Posts: 1342
Joined: Mon Jul 26, 2010 10:47 am

Post by flight23 »

Thanks for these posts, I find them extremely informative and generally very unbiased (which is rare).
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SgtWs

Thank you....

Post by SgtWs »

I try. I do goof up a bit, but I'll take my lumps.

User avatar
flight23
Posts: 1342
Joined: Mon Jul 26, 2010 10:47 am

Post by flight23 »

Hoping for a nice end of day bull rally to close positive...
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SgtWs

Afraid to speak.......

Post by SgtWs »

I'm afraid to speak here......cuz the market will react strongly in the opposit direction of whatever I say........

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flight23
Posts: 1342
Joined: Mon Jul 26, 2010 10:47 am

Post by flight23 »

4 minutes left... S&P @ -1.8 for the day
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MLKMAN
Posts: 435
Joined: Tue Jul 13, 2010 8:19 pm

Re: Afraid to speak.......

Post by MLKMAN »

SgtWs wrote:I'm afraid to speak here......cuz the market will react strongly in the opposit direction of whatever I say........


Well the market was waiting for you....................it didn't know what to do!! :wink:
"We are all faced with a series of great opportunities brilliantly disguised as impossible situations."

SgtWs

I'm prediciting.......

Post by SgtWs »

I should predict a crash, so maybe then we would have a huge run up.....like about 2,000 points!

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Fund Prices2024-03-28

FundPriceDayYTD
G $18.15 0.05% 1.05%
F $19.08 -0.06% -0.74%
C $82.21 0.11% 10.55%
S $82.43 0.30% 6.92%
I $42.57 -0.24% 5.95%
L2065 $16.38 0.02% 8.37%
L2060 $16.39 0.02% 8.38%
L2055 $16.39 0.02% 8.38%
L2050 $32.73 0.01% 6.95%
L2045 $14.91 0.02% 6.58%
L2040 $54.38 0.02% 6.22%
L2035 $14.34 0.02% 5.79%
L2030 $47.67 0.02% 5.38%
L2025 $13.15 0.03% 3.43%
Linc $25.61 0.03% 2.82%

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