A look behind the October numbers

http://www.federalnewsradio.com/index.php?nid=35&sid=2109695

Analyst Paul Yurachek, with Ameriprise Financial Services in Bethesda, Md., reports up arrows across the board for the funds of the Thrift Savings Plan for October.

“Every one of the funds was up in direct proportion to how they should be regarding risk,” he said. “The G Fund is always up. It was up just short of two-tenths of one percent. The F fund almost four-tenths of one percent. The C fund was up 3.8 percent. The S fund 4.48, and the I fund 3.63 (percent).”

Yurachek said the L fund performed well, and was up generally across the board.

He reminds investors that the L 2010 will appear to be identical to the L income fund and that over time. TSP fund administrators are expected to add a 2050 fund.

Yurachek said factors affecting the TSP include, for the F fund, low interest rates which tend to drive up the value of bonds. Yurachek said he remains “mystified” by the stock-related funds of the TSP because even though the economy appears to be recovering, it isn’t recovering quickly enough to provide an additional boost to the economy.

Still, he said, “a lot of companies are coming out with their earnings reports for the quarter, and they were quite good,” accounting, in a small way, for the positive performance of stock-based TSP funds.

Additionally, Yurachek said money managers in mutual funds or pension funds who have missed the run-up to last month’s gains “are jumping on the train, a little late, and creating a demand for stocks because they want their investors to see that they are fully invested at the end of the year.”

Yurachek also offered some perspective on the F fund, which he said is invested in “high-quality, corporate and government bonds.”

Yurachek said the F fund has been a part of the TSP since January of 1988, several months after the TSP was established.

“Amazingly enough, since its inception, the F fund has earned 7.1 percent a year compounded, meaning, if you put $100 into it on the day it opened, it would be work $450 at the end of October of this year,” he explained.

Yurachek said that over the 22 years it’s been around, the F fund has been a “bull market for bonds,” primarily because interest rates have been very low. He said for example, that interest rates hover around the zero mark, with a three-year Treasury bond currently paying interest of four-tenths of one percent.

“It’s been a wonderful time for bonds,” he said, but warns that a “day of reckoning will come,” when, because of the deficit, the nation will need to raise money and will be forced to offer a higher-rate of return on government bonds, which tends to drive rates up for other financial instruments. On that day, Yurachek said the performance of the F fund can be expected to turn down.

Finally, Yurachek noted that the large number of investors who flock to the TSP are proof positive that as much as possible TSP investors “chase the returns,” and will re-allocate their investments as they see what others are making in other funds, as the performance of the F and G funds historically indicate.

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Our model has not missed yet. I am looking for the S&P 500 to run toward 1500 or and then we move all C Fund into G fund.

Like 2008.

Like 2000.

Patience.

Knowledge.

Win.

Meredith Whitney Is a Mere Mortal After All

Lesson #1

There is a hot hand always.

They cool off.

Protect the risks.

http://www.businessweek.com/magazine/content/10_42/b4199049780136.htm

She made one great call back in 2007. Since she founded her own advisory firm, about two-thirds of her picks have fared worse than market indexes

Whitney made six accurate and 13 inaccurate picks through Sept. 30, based on annualized returns including dividends on her 19 recommendations, when compared with the performance of the S&P 500-stock index. She was right seven times and wrong 12 when compared with the 81-company S&P 500 Financials Index

 

Stunning Jeremy Grantham interview

http://www.ritholtz.com/blog/2010/11/have-cash-wait-for-stocks-to-fall/

I have read and studied every major book on the depression since 1873. Grantham is spot on. It is exactly my approach too. Btw. 152 copper pennies minted before 1982 is about one pound of copper. Copper is$ 4.05 today. This is exactly like the early 60s when silver coins were worth more in silver than the coins.

Ride the C fund until S&P gets near 1500. Then move to G fund. Wait for a large retrace. Buy into C fund.

Rinse. Lather. Repeat.

Bears are wrong…

Many experts are bearish on stocks now, just as they were in 1979, says stock guru Jeremy Siegel, a professor at the University of Pennsylvania’s Wharton School.

And just as in 1979, they will be proved wrong, he says.

Among the naysayers is Royal Bank of Scotland, which pronounced in June that the world economy was headed for collapse, which would “destroy the world’s cult of equity,” Siegel notes in Kiplinger’s Personal Finance.

And Pimco chiefs Bill Gross and Mohamed El-Erian say the economy has entered a “new normal,” which will entail meager stock returns.

“But all these doomsayers exhibit the same shortsightedness that [bears] did three decades earlier,” Siegel writes.

So what’s the evidence for Siegel’s view? First, stock returns far surpassed those for bonds in 16 countries over the past century. Second, surging productivity growth will spark a bigger economic expansion than the Pimco heads believe, he says.

“Finally, predictions warning that the wave of baby boomers entering retirement will lead to the liquidation of stocks are similarly flawed,” Siegel writes.

“History shows that pessimists, no matter how fashionable, have always been wrong about long-term prospects for the U.S. economy and the stock market. This time is no different.”

Still, some experts remain pessimistic. “It looks like (bullish) expectations have gotten ahead of themselves,” Jeffrey Coons, president of Manning & Napier Advisors, tells Bloomberg.

“The Fed announcement, the election results — it doesn’t really change the fundamentals.”