Good evening, TSPwire Tactical Investor!

After the recent rate cut everybody on the Wall Street are talking about the same question: Which way our economy will go? Will we have to deal with Recession or Inflation?

This week economic data came with mixed signals. According to the Wall Street Journal, the government reported surprisingly weak income among Americans in August, a surge in their spending and weak inflation that came at 1.8% excluding volatile food and energy prices. (Note: the Federal Reserve board generally consider rate cuts as long as core inflation stays below 2%.) Last week investors had concerns that potential future rate cuts, on top of the 0.5% cut that we had on September 18th, may send too much low-cost cash into U.S. economy. Those concerns resulted in drop of U.S. Dollar against all major currencies. (Note: on Friday U.S. Dollar hit its lowest point in a decade.) A weak dollar also generally supports commodity prices. Gold rose on Friday to the highest level since 1980.

Treasuries (F Fund) also can become a victim of the weak dollar and inflation fears. That combination of factors generally results in a drop of Treasury prices and rise in yield which in its turn drags value of F Fund down.

Based on our analysis do not believe that U.S. Dollar will be able to recover any time soon. Because of that assumption we are putting our holdings in I and C funds (i.e. 50% in I Fund and 50% in C Fund).