During the recent furlough, thousands of prudent/overly nervous federal investors moved a total of $2 billion from the stock funds of the Thrift Savings Plan into it’s super-safe, super-sluggish Treasury securities G Fund.
The stock market didn’t react (as in plunge) the way the investors feared it would. In fact the S&P 500 index (which is the same as the TSP’s C Fund) is at a record high. The stock market barely blinked during the shutdown. In fact…
As of yesterday, the year-to-date returns for the G Fund were up 1.32 percent. The YTD for the C Fund was 19.83 percent. For the S (small stocks) fund, it was 27.39 percent, and for the international stock index I Fund it was 15.53.
At the same time people were fleeing the C, S and I funds for the safety of the G Fund, about 8,200 people hit the TSP for hardship withdrawals. The money (minimum withdrawal is $1,000) was apparently needed to help pay bills, or in anticipation that the feds would not be paid for the time they didn’t work. Congress surprised a lot of people by authorizing back pay. So while the money was delayed for some, it will not be denied anybody. That has created an interesting dynamic in some federal offices between those who had to work (and were paid) and those who didn’t work and will also be paid.
It appears that many if not most people — specifically politicians, the press and a large chunk of the general population — misread the impact and length of the shutdown. A lot of people, including those who pushed for and permitted the shutdown, now say it was an incredibly stupid and futile exercise.
Did feds who fled the stock market for the safety of the G Fund make a mistake? When do they come back into the more aggressive/risky C, S and I funds? Did they sell low and will they be buying high when/if they come back?
Today at 10 a.m. on our Your Turn radio show, we will be talking with CBS MoneyWatch columnist Allan Roth. Roth takes a studied approach to investing, and says his goal in life is to never be confused with Jim Cramer. I’ll ask Roth about the wisdom/folly of anticipation-trading by TSP share-holders and what strategy, if any, you should consider.
Later in the show, we’ll be joined by Federal Times senior writer Sean Reilly to talk about what politicians and cost-cutters have in mind for federal workers and retirees.
Listen if you can (1500 AM or online), and if you have questions email them to me at firstname.lastname@example.org or call in during the show at (202) 465-3080. The show will be archived here.
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Will new budget negotiations unravel the sequestration riddle? For the first time since the government shutdown ended two weeks ago, House and Senate lawmakers are sitting down at the table to negotiate about the fiscal 2014 budget. At the top of the agenda will be what to do about the automatic budget cuts known as sequestration that have ensnared what remained of the traditional budget process this year. However, budget experts and insiders say sequestration is likely to stick around — at least in some form — and about the best agencies can hope for is a small-bore deal that grants them some greater flexibility in implementing the cuts, these experts said.
Thousands of feds turned to TSP to weather shutdown Hardship withdrawals shot up in the first few weeks of October and thousands more employees opted to shift their investments out of higher-risk areas and into the G Fund, TSP officials said at at the board’s monthly meeting Monday. During the shutdown, some 8,200 participants requested hardship withdrawals, compared to 5,500 during the same period of time last year.