Good evening, TSPwire Tactical Investor!

Since last Monday majority of TSP funds (except for F Fund) had two up days and two down days. Both upward movements were fueled by mergers and acquisitions (MA) news. We should thank for that Daimler Chrysler which decided to cut their losses by selling portion of their business and Microsoft that allegedly decided to grossly overpay for aQuantive Inc.

Some investors also bet that Feds will be willing to cut rates on their next meeting. In our opinion it would be very foolish of them to do that. Dollar stays very low against major currencies. Economy 101: reduction in rates gives companies access to cheaper funds, increases amount of cash in economy which eventually results in inflation of currency. Rate hikes work in opposite direction – i.e. reduce amount of cash that floats around and increase value of currency.

Now lets put all facts together. One - All fundamental indicators of economy in US either stay the same or got worse yet US stock markets keep moving up being fueled by MA activities and speculations. Two - Because of the situation with bleeding US Dollar against major currencies we do not believe that Feds will decide to cut rates any time soon. Three – US housing markets keep sinking and might eventually affect the rest of US Economy even more. 

Recent growth in US stock market is not supported by changes in economic fundamentals and therefore carries highly speculative character. While our models showed improved scores for C, S and I Funds (C got the best score) in current environment we do not want to gamble with our funds and we decided to stay in G Fund for the upcoming week.