FOR
IMMEDIATE RELEASE
Contact: Tom Allen
(720) 272-0504
email: tom@tspfundtracker.com
TSP Funds: Crossing a Big Valley
12/08/2008
Like the overall stock market, the stock funds in the federal
employees' Thrift Savings Plan have hit new lows in the last two
months. The TSP Funds that are composed only of corporate stocks
(C, S, I, and L Funds) are down an average of about 40% from
their highs reached in October 2007. Of course this is only a
loss on paper, unless you have sold your funds. The TSP Funds
are the 401K-type mutual funds owned by more than 3 million
federal civilian and armed forces employees. Two of the TSP
Funds, the G and F Funds, are composed of government bonds and
their values have not suffered from the stock market downturn.
But the recent stock market downturn is only temporary, says Tom
Allen, editor of the TSP Fund Tracker, a website that tracks
daily changes in TSP Fund share prices. He says, "The share
prices of stocks and the TSP Funds are at such low levels now
that they can only go up from here in the long-term. Stocks
currently are priced for a significant recession as indicated by
the current S&P 500 Index of around 900, which is about 12 times
the $75 of predicted 2009 operating earnings for all 500
companies in that index. During non-recessionary times the S&P
500 Index has typically risen to somewhere between 15 and 25
times its earnings. If 2009 earnings for the Index are $75 and
the end of the recession starts to become apparent, then the
Index can be expected to rise to 15 to 25 times $75, or
somewhere between 1100 and 1350. This will be an increase of 25%
to 50% from the current 900 level of the S&P 500. The TSP stock
funds (C, S, and I) will rise a similar amount."
Allen says the current economic recession will likely end by
late 2010 as banks resume normal lending, home prices stop
falling, the unemployment rate tops out, and consumers begin
spending. He explains that stock prices may suffer large falls
prior to the end of the recession, but these price drops will
only be temporary. Allen points out that the 2-year graph of the
TSP Funds show stock prices at the end of 2008 appear to be
"crossing a big valley" (see graph, below). He believes that
when the first evidence of the end of the recession appears,
stock prices will rise from this "valley". The question is: How
deep and wide is the valley?
The daily-updated graphs of the TSP Funds can be viewed at
http://www.tspfundtracker.com. |
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