TSP Funds: Perspective October 2019

I’ve seen comments about buying-the-dip because there is blood-in-the-street so I wanted to pass on part of my perspective on the markets today.

First comment: The SP500 down a few percent from an all-time high and fears of recession does not equal “blood in the street”. Blood in the street is when valuations reset to something close to historical norms of say 50-60% below today’s levels. The reset will begin when the SP500 companies no longer authorize the wall street brokerages to buy back their stocks on the open market (Goldman Sachs has largest buyback desk). And this will occur sometime in the next couple of years due to politics, credit ratings, or a real recession.

Chart: I posted this chart on my website under my market commentary in mid-September. Using my TSP seasonal almanacs, I simply added the average seasonal progression via the lines and triangles to show how the market was following a seasonal pattern but with more volatility. The average seasonal low comes in early to mid-October, UNLESS the market is in the process of a crash which happens from time-to-time.

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Following the Seasonal Pattern

Second comment: A Tsunami of trillions of dollars have been burned on corporate stock buybacks and mergers that has reduced the supply of financial assets available on the open market. This supply and demand dynamic drove this bull market (without aggregate organic profits since 2012) and it was enabled by the central banks setting interest rates below inflation and below zero in Europe and Japan (a bubble blowing monetary madness). When this Tsunami pulls back it will take everything with it, even the good company’s stock prices.

No Buybacks no Bull market

Third Comment: We are in a massive distribution formation at the top of a secular bull, turned secular bubble. Most traditional free-market market analysis does not apply in a distorted central bank driven market.

Today the SP500 (TSP C fund) is below its August 2018 high and the TSP S fund is 10% below its August 2018 high – distribution, distribution, distribution. Market tops take time. Secular market tops aided by central banks take longer.

Fourth Comment: The seasonal tendencies of the market are still there (if you know what they really are), but they can be overwhelmed by the Tsunami as discussed, so blindly following a seasonal strategy is dangerous at this point in history. Seasonal analysis improves trade percentages, but use other investment tools with them.

Be careful not to assume the future will be like the last 10 years. History cycles and the markets cycle – doing what worked in the past will not work much longer. There is a lot of unrealized risk out there…

Deutsche Bank is over-priced by $7.24

Final Comment: They did not fix anything. They transferred losses from the banks and debtors to savers (pensions) after the last crisis. And they are accelerating this trend today. The political-financial complex remained and continued to create more risk that will be off-loaded once again.

Don’t take on their hidden risk. Not now. There will be a better time when future returns will be higher and risk lower – after the reset.


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Categories: Perspectives, TSP Charts