Blue Monday, Puce Tuesday

Even before the Sun crept over the International Date Line this week, turning Monday into Tuesday, news editors around the world, but especially in the U.S., were bracing for great news: A stock market crash of historic and catastrophic proportions. Black Tuesday. Hot ziggity!

If there’s anything the media loves it’s bad news. The kind of stuff that scares the stuffing out of readers, listeners and viewers. Tuesday had all the makings of a bad (which is to say good) news day.

At the opening bell (gavel, whistle, starters pistol?) the market did what many had predicted it plunged. Commentators agreed that the better-late-than-never-but-not-much action of the Federal Reserve Board wouldn’t save the world from financial chaos and ruin. Then the market rebounded.

Black Tuesday turned into Puce Tuesday.

Long-term investors who pulled all of their money out of the market may turn out to be correct. But for the short-term they may have sold low, only to see the market rebound as bargain hunters took advantage of what they saw as a “for sale” sign on a variety of stocks.

Many financial planners were swamped Tuesday with calls from clients who wanted to sell. Paul Yurachek, who is based in Bethesda, counseled TSP investors who are 5 or more years away from tapping their accounts to stay cool. “You grit your teeth and ride it out… It’s easy to bail, but the questions is when do you go back in. You have to pick the right time to get out and the right time to get back into the market. You have to be right twice!”

So what does it matter if you are sitting on the sidelines when the market is having a very good day?

Yurachek says that over the 20 year period from 1986 to 2006 the S&P 500 has returned an average of 11.7 percent a year. “If you missed the 10 best days out of that 20 years you made 8.6 percent. If you missed the 30 best days,” he said, “you made 4.7 percent.”

If history is any judge, a lot of people bailed out this week. Time will tell if they were smart or just scared. At the regular meeting of the TSP board this week, it was pointed out that there have been a number of events that triggered a big sell off – usually of the international index I fund, or the S (small) cap and C (S & P 500) fund. One was the February 2007 collapse of the Chinese stock market compounded by a computer glitch on Wall Street. In 2006 there were several events – concern over the sub-prime mortgage market, a one month report that inflation hit 4 percent and the Israeli bombing of Lebanon in response to a rocket attack.

To hold down costs and discourage frequent trades, the TSP beginning in April will limit individuals to two trades per month by computer. Additional trades will have to be made by mail. The new TSP rules are similar to those of other 401(k) plans, but they’ve riled many people. Some think the government is playing Nanny with their investment choices and exaggerating the cost of frequent trading.

For the official word on that, go to the TSP website (http://www.tsp.gov/) and click on the Information About Interfund Transfer Restrictions button.

Nearly Useless Factoid

According to 7-Eleven, the chain sells more than 10,000 pots of coffee an hour every hour of every day of the year. As if that weren’t enough, it sells more hot dogs in Washington, D.C. than anywhere else. Behold, the diet of feds.

To reach me: mcausey@federalnewsradio.com

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.