Bear Market 2007-2009

We now have the first historical instance of having suffered through two major bear markets in the same decade...first the 2000-2003 debacle and now the most recently devastating 2007-2009 period.

These two major back-to-back 50%+ declines in the same decade have proven, beyond the shadow of a doubt, that all of the "journalistic experts" out there who would have you pick a portfolio and hold it forever are, have been, and always will be totally and absolutely WRONG!

If you think this latest bear bust and the one in 2000-2003 were anomalies you'd be wrong. In fact, in addition to the latest and the 2000-2003 tech bust, the 21 months between 1973 and 1975 saw a similar 50% decline in stock prices that would have required a similar DOUBLING of prices just to get back to breakeven. The bottom line is there's simply no reason for having to accept the risk of sitting through those protracted bear markets.

In fact, without adjusting for the relatively high dividends of the time, it took 7 1/2 years until mid-1980 before the S&P 500 finally returned to its January 1973 levels. For those 7 1/2 years investors who had followed even simple intermediate to long term trend following systems would have re-allocated their assets to bonds or another investment medium and avoided the lion's share of that bear market's severe damage.

TSP Pilot avoids the lion's share of all major bear markets by applying simple fund timing mechanisms to all portfolios of retirement funds. Funds never maintain the same relative momentum and excess performance profiles indefinitely.

The fact is a top fund this year, or for that matter the last five or ten years, stands a historically and statistically proven likelihood of showing you a below average performance in any future period.

High performing funds never maintain their superior status for more that a few months at a time. Holding on to a fixed portfolio for years with the expectation of future gains that may match past some performance is simply foolhardy.

A quick look at Table XXV will prove the utility of TSP Pilot's simple fund timing mechanisms beyond a shadow of a doubt. A simple buy-and-hold investor in the TSP stock funds would have seen his/her TSP account fall by 55% from the October 2007 high to the March 2009 market low after the bust of the sub-prime mortgage market.

As in 2000-2003, this newest bear market would have cut a hard-earned retirement "nest-egg" in the TSP stock funds in half! A full recovery of those account losses would then have required a DOUBLING in market values just to get back to breakeven!

While Wall Street professionals kept saying over and over again "buy and hold and never look and hold and never look back," the market then proceeded to wipe out another $6 trillion of investors wealth over the period.

Almost unbelievably, it was during those depressing bear market years when investors lost so much money and confidence that those same Wall Street professionals who preached "buy and hold and never look back!" were making their biggest salary bonuses in history. We now know why they didn't want you to look back!

TSP Pilot Steers You on the Right Course
...and at the Right Time

While most TSP investors in the historically high returning C, S and I funds saw their account values SLASHED by HALF during this period (see Maximum % Draw Down (Mdd) below in Table XXV), the average of both TSP Pilot Portfolios was actually UP by nearly 6% having taken almost no downside risk in the process!

All of the TSP stock funds and L Fund portfolios had negative returns and negative Ulcer Performance Index (UPI) for the period. In contrast the TSP Pilot portfolios had POSITIVE return and UPI numbers.

Amazingly, both TSP Pilot Portfolios during this recent bear period provided a market risk exposure even lower than the TSP Income L bond Fund while providing 2-3 times the growth potential of any combination of the other TSP funds (see Table XXV below).

Even the new TSP L Funds would have lost from 8% to 39% for the same period (after actually having been down over 50% at one point)! Even the TSP Income L Fund, invested 80% in the TSP bond funds, would have been down nearly 12% at one point, and that fund offers little to no chance for a recovery should the market turn back around again.


Table XXV shows the TSP funds (including the L Fund proxies) awash in minuses during this period. In fact the numbers for the (Ulcer Index (UI)) risk metrics show high values (when they should be low)!

In fact Table XXV shows that the Ulcer Index (UI) measure for the total risk assumed by the TSP Pilot Standard Portfolio actually fit between the two most conservative TSP L Funds! The low volatility of the TSP Standard Portfolio would have allowed you to sleep quietly at night without prematurely pushing the account "liquidation" panic button.

In other words...Higher Returns + Reduced Risk is what TSP pilot is all about. You maximize your Thrift Savings Plan retirement while sleeping in peace at night.

TSP Pilot is successful because its effective fund timing and fund selection criteria (see main menu bar links above for more info). Our professional use of these factors usually place you in the right funds at the right times--not always, but most of the time.

As it did in 2000-2003, and recently again in 2007-2009, TSP Pilot will dramatically reduce your future market exposure and risk during important market down cycles.

TSP Pilot preserves the value of your retirement account by reducing your exposure to down markets while increasing your exposure during bull markets.

For example, there was no "miracle" stock fund selection or allocation that accounted for most of TSP Pilot's Standard Portfolio annualized return of 11.4% during the 2000-2003 bear market. In fact the case can easily be made that fund timing (choosing the right time to be invested in a fund) is a more powerful tool than fund selection (choosing which fund to be invested in)--especially in a portfolio as limited and closely correlated as are the five funds currently available in the Thrift Savings Plan.

Not only would TSP Pilot investors have largely avoided the devastating 2000-2003 and 2007-2009 bear market losses, but they would have been invested in the TSP stock funds for most of the previous years of the historic bull markets of the 1990's. Those historic pre-2000 profits would have been preserved rather than squandered during the 2000-2003 and 2007-2009 market busts.

A buy-and-hold investor would have needed to summon up enormous staying power to sit through those years and do nothing while watching hard earned portfolios steadily erode, day after day and month after month.

Don't test the retirement waters alone. Put your TSP ship a league ahead by requesting your FREE BACK ISSUE or by SUBSCRIBING at our special reduced rates today!