Archives for August 2021

Are your investing your TSP nest egg, or just parking it?

Most of us with money in a 401k, IRA or some other form of retirement account think of ourselves as investors. In the quiet of our homes or apartments we may, at times, feel like time players. Kings of Wall Street. That sort of thing!

But is it possible that instead of being major players, some with 7-figure nest eggs, that we are actually more like relatively affluent parking lot attendants? Parkers, not investors?

Financial planner Arthur Stein believes that millions of active and retired feds — anyone with money in the treasury securities G-fund, or F (bond) fund — are not investors in the true sense. They are, in a sense, putting (or parking) their money in funds that don’t move like the stock market.

People in the C fund, S fund and I fund, however, are investing in stocks (large, small cap and an international stock index). And while the C fund, S fund and I funds do go up and down — sometimes big time — over the long haul they have outperformed the treasury and bond funds. By a lot.

Not that there’s anything wrong with that!

Or is there?

So what’s the difference between a true investor and a parker? We’re gonna find out today. Art Stein will be my guest on our Your Turn show at 10 a.m. EDT. You can listen anywhere in the world, or on 1500 AM in the Washington-Baltimore area. Or catch it later when it is archived on our home page. Bottom line is listen to see if you are an investor, parker or maybe both. And the pros and cons (both in investment returns and peace of mind, of being one or the other). Or a combination of both.

If you have questions for him please send them to me before showtime at: mcausey@federalnewsnetwork.com.

Meantime, here’s his explanation of what an investment is, and isn’t:

The TSP Is Not an Investment!

The TSP is not an investment. The 15 funds available to TSP participants are not investments. The TSP funds are a way to own investments.

The only “investments” available in the TSP are stocks and bonds. Stocks and bonds are investments because they increase or decrease in value, produce income or do both. Choosing TSP funds means choosing to invest in stocks or bonds or both.

TSP participants also determine their allocation between different types of stocks and bonds by choosing among the 15 available funds.

“Asset allocation” is the percentage you invest in different types of stocks and bonds by choosing among the different TSP funds. Your asset allocation between stocks and bonds is important for many reasons, including:

The U.S. stock funds (C and S) outperformed the bond funds over the last 1, 5, 10 and 15 years. The U.S. stock fund outperformance was substantial.
All three stock funds are much more volatile (fluctuate in value by greater amounts) than the bond funds. And the G-fund never fluctuates in value (zero volatility).
All the funds (except G) involve the risk of loss of principal and earnings. The G-fund is guaranteed by the U.S. Government, which means losses should never occur.
Past performance is no guarantee of future performance.

Asset allocation should be based upon your financial and personal situation. For instance:

How high a return you will need to maintain an investment balance when making withdrawals during retirement.
Risk tolerance – Emotional ability to ignore market fluctuations and losses in order to obtain long-term gains.
Perceptions of riskiness. Do you feel that the stock and/or bond markets may decline and never recover?
Whether investments are needed in the short, medium or long term. Or all three? Stocks suffer more from volatility and stock market declines but are more likely to increase purchasing power over long time periods.

Asset allocation is a difficult decision but a key determinant of future returns.

Nearly Useless Factoid

By Jonathan Tercasio

On the night of May 14, 1998 — when the series finale of “Seinfeld” aired — Frank Sinatra died at Cedar-Sinai Medical Center in Los Angeles. As the story goes, so many people were indoors to watch the finale that traffic in L.A. was light, allowing the ambulance carrying Sinatra to quickly get to the hospital.

Source: IMDb

Bumper crop of TSP millionaires ahead?

Unless the stock market tanks, big time, during the next 51 days the number of federal Thrift Savings Plan millionaires is expected to skyrocket.

At the current pace, some long-time federal investors with relatively modest salaries will become double millionaires. And a few will move into the $3 million-plus category, or move into the $3 million club.

As of June 30, 2021 there were 98,879 millionaires. That was up from 45,219 in June of 2020.

With few exceptions, their investment “secret” is not much of a secret. Buy and hold, through good times and bad. Max out contributions to ensure you get the full 5% match offered most workers who are under the FERS retirement plan. And Stick with the stock indexed C-fund ( S&P 500 large cap stocks) and the small cap market represented by the S-fund.

During the 2008-9 Recession, tens of thousands of TSP holders moved from stocks into what many felt was a much safer — as in less volatile — place: The G-fund. They invested in special government securities.

Many also shifted their future allocations to the G-fund, even as the others — especially the C-fund and S-fund — were on “sale” (compared to their pre-recession value) by more than 30%. Many who rode out the recession entered it with modest account balances, but emerged with massive gains.

And now, number of federal and postal workers/retirees on the verge of millionaire status is staggering.

Between June 30 of last year and June 30 of 2021, the number of feds with accounts worth $750,000 to $999,999 went from 71,636 to 99,708. Hundreds could make the switch if the markets continue to rise or remain steady between now and the end of September.

During the same period, the number of workers/retirees with half a million to $749,999 moved from 170,993 in mid-2020 to 212,110 in June of this year.

The driving force, in addition to steady investing and time (average investor has been at it nearly 30 years), is the stock market itself.

In a column here last week, financial planner Arthur Stein explained why he advises most clients NOT to put all or most of their TSP account in the treasury securities G-fund. He encouraged his active and retired federal clients not to put all or most of their investments in the super-safe/super-dull Treasury securities G fund.

While it is safe in the sense that it has never had a loss, many pros believe that its rate of return isn’t enough to keep pace with inflation and actual living costs in retirement. Between January and June 30 of this year, the G-fund rate return was 0.6%. The F-fund (bonds) was down 1.5%, while large stocks (C-fund) were up 15.2%; small stocks (S-fund) were up 15.5%, and the higher risk/higher reward international stock (I-fund) returned 9%.

Over the last 15 years, the G-fund returned 2.5%, the F-fund was up 4.6%, and the C-fund, S-fund and I-fund were up 10.8%, 11.3% and 4.7%, respectively.

Here’s The TSP performance chart, courtesy of Arthur Stein:

TSP Stock Funds Reach New Highs During the First Half of 2021

Share prices for the TSP stock funds (C, S and I) rose to record highs during the second quarter as a substantial decline in U.S. COVID-19 cases, increased vaccinations, economic re-openings, low interest rates (as a result of Quantitative Easing (QE) by the Federal Reserve) and fiscal stimulus led a surge in the economy. C Fund share prices hit a record high on June 30. The S-fund and I-fund peaked a few days earlier.

YTD and 1-year returns are Total Return for the period. One, three, five, ten, and fifteen-year returns are calculated as Compound Annual Returns. This is for illustrative purposes only.

An investment cannot be made directly into an index. Past Performance is no guarantee of future performance. All investments involve various risks including loss of capital and volatility. Returns are rounded to tenths of a perfect. Returns include reinvestment of all income and do not account for taxes. The bond funds did not do as well. For the first six months of 2021, the F-fund declined 1.5% and the G-fund increased only 0.6%. The bond fund returns were less than the rate of inflation.

Nearly Useless Factoid

By Jonathan Tercasio

23-ounce cans of Arizona iced tea have been sold for 99 cents since 1992. They’re even cheaper, on average, than bottled water.

Source: MarketWatch

Census experts puzzled by high rate of unanswered questions

Census Bureau statisticians and outside experts are trying to unravel a mystery: Why were so many questions about households in the 2020 census left unanswered?

Residents did not respond to a multitude of questions about sex, race, Hispanic background, family relationships and age, even when providing a count of the number of people living in the home, according to documents released by the agency. Statisticians had to fill in the gaps.

Reflecting an early stage in the number crunching, the documents show that 10% to 20% of questions were not answered in the 2020 census, depending on the question and state. According to the Census Bureau, later phases of processing show the actual rates were lower.

The rates have averaged 1% to 3% in 170 years of previous U.S. censuses, according to University of Minnesota demographer Steven Ruggles.

The information is important because data with demographic details will be used for drawing congressional and legislative districts. That data, which the Census Bureau will release Thursday, also is used to distribute $1.5 trillion in federal spending each year.

The documents, made public in response to an open records request from a Republican redistricting advocacy group, don’t shed much light on why questions were left unanswered, though theories abound. Some observers say software used in the first census in which most Americans could respond online allowed people to skip questions. Others say the pandemic made it harder to reach people who didn’t respond.

Confusion over some questions, including traditional uncertainty among Hispanics about how to answer the race question, may have been a factor, but some experts hint at a more sinister possibility. They say the Trump administration’s attempt to end the count early and failed efforts to put a citizenship question on the form and exclude people who were in the U.S. illegally had a chilling effect.

“I think it’s the pandemic and Trump. The very threat that citizenship was on the questionnaire, the very notion it might have been on it, may have deterred some Latinos from filling it out,” said Andrew Beveridge, a sociologist at Queens College and the City University of New York Graduate School and University Center. “I think a lot of us are flabbergasted by it. It is a very high number.”

Ruggles initially thought it had to do with the software used by people who answered online — about two-thirds of U.S. households. Other countries such as Australia and Canada, which have used similar software for censuses, saw the number of unanswered questions drop to almost zero because respondents couldn’t proceed if they didn’t answer a question.

“I guess in the U.S. version they must just have accepted incomplete responses,” Ruggles said. “If the non-response rate was consistently high across response mode, that is just strange.”

Acting Census Bureau Director Ron Jarmin said recently in a blog post that the blank answers spanned all categories of questions and all modes of responding — online, by paper, by phone or face-to-face interviews.

“These blank responses left holes in the data which we had to fill,” Jarmin said.

In a statement last week to The Associated Press, Jarmin declined to go into details, saying only that the bureau would release updated rates later this month “based on the correct numbers.”

To fill in the holes, Census Bureau statisticians searched other administrative records such as tax forms, Social Security card applications or previous censuses to find people’s race, age, sex and Hispanic background.

If available records didn’t turn up the information needed, they turned to the statistical technique called imputation that the Census Bureau has used for 60 years. The technique has been challenged and upheld in courts after past censuses.

In some cases, statisticians looked for information answered about one member of a family, such as race, and applied it to another member that had blank answers. Or they assigned a sex based on the respondent’s first name. In other cases, when the entire household had no information, they filled it in using data of similar neighbors.

“Imputation has been shown to improve data quality and accuracy compared to leaving these fields blank, or without information from respondents,” Census Bureau officials Roberto Ramirez and Christine Borman wrote recently in a blog post.

The Census Bureau in April released state population totals from the 2020 census. Those are used to divvy up the number of congressional seats in each state during a once-a-decade process known as apportionment.

The agency released a slide deck presentation about the high rate of unanswered questions, along with group housing records and the first details about the rate of non-responses, in response to an open records request from Fair Lines American Foundation. The Republican advocacy group sued the Census Bureau for information about how the count was conducted in dorms, prisons, nursing homes and other places where people live in groups. Fair Lines says it’s concerned about the accuracy of the group housing count and wants to make sure anomalies didn’t affect the state population figures.

With the information showing high rates of imputation, some Republican-controlled states may try to leave college students out of redistricting data, claiming they were also counted at their parents’ homes, to get a partisan edge, said Jeffrey Wice, a Democratic redistricting expert.

“That will be hard to prove but would inject more uncertainty and possible delay into redistricting,” Wice said.

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Follow Mike Schneider on Twitter at https://twitter.com/MikeSchneiderAP

Hot dates: 2 spacecraft to make Venus flyby

BERLIN (AP) — Two spacecraft are set to swoop past Venus within hours of each other this week, using the maneuver to do a little bit of bonus science on the way to their main missions at the center of our solar system.

The European Space Agency’s Solar Orbiter probe, a cooperation with NASA, will swing around Venus early Monday, using the planet’s gravity to help put it on a course to observe the Sun’s poles.

About 33 hours later, the European-Japanese spacecraft BepiColombo will get even closer to Venus in a maneuver designed to help it slow down sharply and safely steer into the orbit of Mercury in 2025.

“Without the flyby, we would not be able to reach our target planet,” said Elsa Montagnon, the spacecraft operations manager for BepiColombo. “The energy required to enter into orbit of Mercury would be prohibitively expensive in terms of propellant.”

Both probes have numerous scientific instruments on board, some of which will be used to take a closer look at Venus as they zoom past.

The measurements will add to those taken by the Japanese probe Akatsuki, which is already in orbit around Earth’s hotter neighbor. NASA and the European Space Agency are planning to send three more missions to Venus toward the end of the decade.

TikTok executive talks shopping and the famous feta pasta

NEW YORK (AP) — Feta cheese was scarce in some stores earlier this year. The culprit? TikTok, where videos that showed an easy-to-make baked feta pasta recipe went viral.

TikTok, launched in the U.S. in 2018, has become a force in the shopping world, influencing people to buy things they’ve seen on the app, from cheese to leggings.

Now TikTok wants to capitalize on that power. It hired Sandie Hawkins last year, whose job as general manager is to make money for the company in North America. She works with brands directly, getting them to buy ads on the app, create TikTok videos and explain how they can use it to boost sales.

In an interview with The Associated Press, Hawkins talks about the difference between an influencer and a creator and why she ended up buying feta cheese, too. The questions and answers has been edited for length and clarity.

Q: How do you create a TikTok video that goes viral?

A: That’s the beautiful part about the platform — you don’t know. Any piece of content on the platform can take off. The magic of TikTok happens on the front page, the “For You” page. It starts to learn the type of content that you like and bring that type of content to you. It’s not based off of the people that you follow.

Q: What is it about TikTok videos that makes people want to buy what they see?

A: I think it’s the evolution of product placement. You have real people that are demonstrating product or wearing product and using it in a way that you would use it or wear it. Maybe if you’re a dancer and you see leggings that are super comfortable and somebody who’s dancing and you see that they’re not sliding down or they’re not riding up. They’re not trying to pretend that the products are doing something that they don’t.

Q: You call people who make TikTok videos creators instead of influencers. Why?

A: We choose to call them creators because anybody can do it and anybody can take off on the platform. There was a fashion creator who is big on TikTok and she started wearing her Gap hoodie in her videos and they started taking off. And she’s not somebody that Gap was following or sending clothing to, which would be more of that influencer side. She was somebody who wore a Gap hoodie one day as an outfit and then Gap hoodies started taking off because people liked what she was wearing.

Q: People know that influencers on other social media apps are paid and can’t be trusted. How do you stop that from happening on TikTok?

A: There is an authenticity to the platform. People don’t want to be fake. Based off of what I’ve seen, folks would just not talk about it rather than start endorsing things that they don’t believe in because their followers would stop following them. They would lose their credibility, which is so important.

Q: Have you bought anything you’ve seen on TikTok?

A: I have made the feta pasta. I’m not a very good cook, but I do love watching recipes on TikTok. And when I saw the feta pasta recipe, I thought to myself, that is something that I could make. And so I went out for the feta cheese, which started selling out in stores. It took me a few times to actually be able to find it.

Q: Users can’t buy anything directly on TikTok right now. Is that going to change?

A: We’re always looking for ways to evolve our features and to make shopping on the platform better. It’s definitely something that we’re looking forward to continue to push on, consolidating that path to purchase.

Archives for August 2021

The TSP Is Not an Investment!

Nearly Useless Factoid

TSP Stock Funds Reach New Highs During the First Half of 2021

Nearly Useless Factoid

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