Thrift Savings Plan (TSP) For Public Service Employees

The Thrift Savings Plan or TSP, administered by the Federal Retirement Thrift Investment Board, was created for U.S. civil service employees and uniformed members of armed services. Individuals can make contributions to retirement savings.

The program is a part of the Federal Employees Retirement System, or FERS. Others include the FERS annuity and Social Security.

TSP is designed to closely resemble what’s available in the private sector with tax deferred 401Ks. It is also open to employees covered under the older Civil Service Retirement System or CSRS.

There are five funds; all can be selected in varying amounts, including a diversified mix in the S&P 500; a mixture of corporate and treasury bonds; an index of developed foreign country markets. and a set share price of a money market fund, tied to intermediate treasury bonds. ( See the Earl J Weinreb NewsHole® comments.)

Stock and Bond Investments

Most investment advisers are not certain how much stocks and bonds go into what can be considered a “balanced” investment portfolio.

What had been a simple assumption prior to the 2008 financial meltdown is now subject to conjecture. That’s due to the fact both stocks and bonds can fall in unison, and they may recover differently.

As in the past, the 60% stocks and 40% bonds formula may not be standard any longer. And changes in formulae adjustments as investors age, may no longer hold.

The solution calls for more flexibility because there is no set stocks/bonds formula for an investor to use; many factors affect choices.

Upcoming inflation, retirement age and health of both investor and beneficiary, all come into play. Plus, the possibility that bonds may return more than stocks in coming years. ( See the Earl J Weinreb NewsHole® comments.)

Mutual Fund Costs

I always tell investors to look at costs of mutual funds. I invariably advise index; that is, unmanaged funds, or Exchange Traded Funds (ETFs).

Several problems persist with managed funds, aside from the fact managers often cannot do as well as the indexes they are supposed to follow.

One, is that they trade too often. The average turnover of a portfolio each year can be 100%. Some funds run much higher.

Less trading costs are important, in addition to lower management fees. And remember, trading produces bid/ask differences, and more tax bites. ( See the Earl J Weinreb NewsHole® comments.)

Financial Moral Hazards

The Obama administration and Democrats always attempt to undertake measures to prevent future financial meltdowns. They feel they are expert in their attempts to regulate whatever is required to maintain financial stability.

The Dodd-Frank Act of 2010 is a prime example.

However, suggested remedies will fail. All they will accomplish is the message that Washington is doing something. In that respect, politicians are doing what is expected politically by uninformed masses. But financially, government will be making a mess of things.

By creating super regulation, all the bureaucrats set up are moral hazards. They give investors ill-conceived confidence that markets are mistakenly being well supervised and secure. So investors will take bigger risks.

Regulators give investors the impression the latter will be bailed out if the financial system runs into a debacle. The ever-bigger-risk cycle will continue.

Moral hazards are what helped the recent financial meltdown to occur, with institutions “too big to fail.” So-called “bailouts” did not work as promised. The new regulations will still exaggerate problems. ( See the Earl J Weinreb NewsHole® comments.)

Stock Market Expectations

Some experts still offer evidence that stocks will remain a good long-term investments. Other observers have added to this optimism.

Studies do show that whenever stocks are off very much from their highs, future returns are usually better. That doesn't guarantee short term performance, but improvement can be expected over time.

However, this longer view can be suspect under present economic conditions.

The role of inflation due to our tremendous budget deficits, plus higher and higher taxes, and the crowding out of private capital investment, can easily hamper securities market projections.

Further securities market advances will depend on corporate earnings growth. They will be problematical with government spending and borrowing that will usurp the private supply of needed capital. ( See the Earl J Weinreb NewsHole® comments.)

Short Selling Securitie

A short sale occurs when a trader borrows shares, which he then sells. The loan is repaid for less money if all goes well.

Share prices rise and fall as a firm's earnings move, but other influences move stock, including speculation about where the company is heading.

To intentionally manipulate security prices is illegal. But Wall Street pros believe short-selling raids do occur. Two experts have described their theory of how such manipulation may have worked when the Bear Stearns investment company got hit by disaster.

Wharton finance professor Itay Goldstein. and Alexander Guembel of the Saïd Business School and Lincoln College at the University of Oxford described the procedure in their paper entitled, "Manipulation and the Allocational Role of Prices."

Their finding claimed traders purposely drove the Bear Stearns stock price down and undermined the corporation’s reputation and condition, and caused the share price to fall sharply. Goldstein and Guembel found that such intent works when the idea is to damage a firm; Ordinary traders do not have the same power.

Bear Stearns was finally sold out to the Chase Bank after corporate damage was accomplished by the poor market psychology of this short selling. ( See the Earl J Weinreb NewsHole® comments.)

Unused Credit Cards in Wallet

Lots of unused credit cards in your wallet, for which you have no use, could be a problem.

You may already use a number of cards, maybe those that give special discounts or privileges.

A zero balance on your credit card won't hurt your FICO score. (The FICO is a copyrighted score that is used by about 90% of the largest banks for their credit decisions.)

Closing an account could hurt your credit standing. If you continue not to use the card, the bank may cancel it, or charge for it due to inactivity.

Your balance-to-limit ratio, may increase as a result of closing the account. That may also cause a decline in your credit score.

Try using little-used cards, even semi-annually, to prevent closure by banks. That could help your credit score. Use the card to make small purchases. Be sure to pay any balances off each month. ( See the Earl J Weinreb NewsHole® comments.)