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Follower ○○○

TREA - Is the time to sell coming?

As someone who has a very large part of my retirement investment in TREA I am starting to track the markets more closely again in case a recession or other financial emergency hits and TREA falls as it did in 2008.  I just wanted to start a thread on prospects for selling TREA given the COVID-19 pandemic and its economic consequences (additionally spurred by MathModelsRules post).

All of my retirement contributions at TIAA have been converted to an IRA, mostly because of transfers between financial institutions when I temporarily got out of TREA in 2008-2009.  Thus, if I were to sell off most or all of my TREA I would be transferring them (temporarily) to a TIAA Traditional IRA and receive 1% return (currently).

I look forward to comments on this.

 

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271 Replies
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Frequent Contributor

Re: TREA - Is the time to sell coming?

In a savage down market, a positive 1% may look pretty good.

So much depends on your exposure and concentration. If TREA continues to be your principal source of retirement income, the current market offers an opportunity for rethinking.

So far, TREA has held up well by my lights, but it's only one of several sources of retirement income for me.

Bob

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Frequent Contributor

Re: TREA - Is the time to sell coming?

During financial crisis, stocks bottomed in Mar 2009 and T-REA bottomed in Feb 2010. 

YBB
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Participant ○○

Re: TREA - Is the time to sell coming?

I agree with GLI-Bob. TREA has held up well. But my own guess (and it's just a guess) is that IF the overall economy takes a dive -- with unemployment and other dislocations -- not just the market dip we're seeing now, TREA will go down on the order of what happened in 2008-9.

Of course TREA did bounce back from that crash, so any dive might not be long-lasting.

I myself wanted to take some money out of TREA and into "cash" today, but it turns out that my last transfer from TREA was within the first calendar quarter, and so I can't remove any more until next quarter (which begins April 1). I hope TREA doesn't dive before then, and also that I'm not part of a large crowd that wants to move on that day.

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Frequent Contributor

Re: TREA - Is the time to sell coming?

I was pleasantly surprised to see that at the end of February TREA's AUM hadn't budged from the end of January.  But I would expect to see a decline in AUM at the end of March.

More importantly, it's the liquidity guarantee that matters. If someone wishes to sell at the end of March, it will be honored.

For what precious little it's worth, I find it hard to grasp what current conditions would drive TREA's portfolio down 40% (short of a nuclear war).

Over time, though, climate change may likely alter the nature of investing, but I am hardly a skilled futurist.

We do seem to be living and investing in interesting times, which should have the salutary effect of keeping us humble. 👍

Bob

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Participant ○

Re: TREA - Is the time to sell coming?

TREA moves slowly, so there is no need to do anything in a hurry.  If you have a larger than wanted allocation in TREA, you may have a good opportunity in the next few weeks to trade some of it for stocks.  But I wouldn't trade TREA for 1% interest.

TREA is 1/6 of my TIAA assets, and I'm happy with that.  I see no reason to think that the current petro-viral troubles will hit it harder than other sorts of equity.  In fact, I suspect that it will do better than most investments.  It is certainly outperforming REITs.

John

 

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Participant ○○

Re: TREA - Is the time to sell coming?

Unless TREA has changed how it updates its valuation (rolling appraisals of properties) change in its market price is likely to lag the current decline in stocks by some weeks, and even then change in the price may be dampened by appraisal lag. But TREA is unlikely to be immune to what's been going on in the broader equities market. When I took a slice out of my TREA holding last month the broader equities market was still very strong. I can't do anything more to my holding until April 1. By then who knows what will have happened?

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Frequent Contributor

Re: TREA - Is the time to sell coming?

"by appraisal lag."

Do you expect your home to be reappraised in light of covid-19?

Since MSU has shut down, should we expect East Lansing homes to be reappraised?

Perhaps you are thinking some tenants may not be able to make payments due, in large part, to social distancing?

Of one thing you can be certain: the Account's liquidity guarantee.

Bob

P.S. No snark intended, Juris, but is this your first Bear Market since you retired?  Kinda gets your attention in a different way than when a salary is coming in.  (I assume MSU will continue to make payroll for our colleagues who have been sent home.)

P.P.S. FYI: Risk factors for the Account are enumerated beginning on page 15 of the Prospectus.

 

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Frequent Contributor

Re: TREA - Is the time to sell coming?

I also sold all my TREA in 401K last Friday; it felt too much like 2008 (to me only), during which TREA was the last to fall (I know that there is no RE bubble this time around).  Moving to 3% SRA Traditional helps me to sleep better. :)

I want to emphasize that it was just me.

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Participant ○○

Re: TREA - Is the time to sell coming?

Please, Bob. You don't have to make stuff up. All I was saying is that there is always appraisal lag with TREA. I wasn't even complaining about it. I'm pleased with my move a few weeks ago. I'll assess the situation with TREA in a few weeks when my remaining TREA investment isn't locked in (added: limit of one withdrawal per calendar quarter -- on April 1 I'll have a free hand.)

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Explorer ○○○

Re: TREA - Is the time to sell coming?

Hi Juris,

You should almost always do as your gut tells you. So, you moved from TREA doing nothing this year to SRA TIAA Trad. giving you 3%. Not a bad move as I see it.

I do not have such a choice since my TREA is mostly in a Roth IRA. If I move to a Roth IRA TIAA Trad. I would get something like 1%. Zero vs. one percent makes little difference except if TREA goes down in the future. I am at the present taking my chances.

What is important is not to get the virus at our age and most of the rest is unimportant.

S

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Frequent Contributor

Re: TREA - Is the time to sell coming?

@NSkipper : Same for me (in IRA/Roth IRA), unless I roll them over to a CD or something like that.

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Participant ○○○

Re: TREA - Is the time to sell coming?

Juris, I find what you wrote very reasonable.   I have not taken any action myself but I understand your points well. 

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Frequent Contributor

Re: TREA - Is the time to sell coming?

I don't believe I made anything up.

I asked questions to get perspective.

That's how my mind works.

Perhaps the times promote testiness.

I have no idea why Henry thinks he needs to apologize to me.

We are all individuals who at the end of the day have to be comfortable with our own decisions. 

May everyone stay in good health.

Bob

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Frequent Contributor

Re: TREA - Is the time to sell coming?

@GLI2019 : Point is well-taken and said post so modified.  Thank you.  :)

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Participant ○○○

Re: TREA - Is the time to sell coming?

Bob wrote:

"...

Perhaps the times promote testiness.

...

We are all individuals who at the end of the day have to be comfortable with our own decisions.

May everyone stay in good health."

+1    Agreed.

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Follower ○○○

Re: TREA - Is the time to sell coming?

Hi All,

I was one of the 2008-2010 TREA timers and FWIW this doesn't feel much like 2008 to me...I'm still at 55%, though I'd gotten up to 65% and one of the things I like about it is that with that much TREA and provided you have multiple contracts it's easy to rebalance/overbalance into stocks when they're down ...

Anyway, thus far the moves have seemed proportional to REIT moves to me and if big writedowns start happening they should happen slowly, as others have said, though of course one does need to watch it and in particular I'll be paying attention to what happens with office and retail post coronavirus ...

All best,

Pete

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Follower ○○

Re: TREA - Is the time to sell coming?

TREA is approx 5% of my portfolio (held in an IRA). I was happy to have it in 2018 when it was up approx 5% at a time when my equities and most everything else other than TIAA Traditional were down. I am also pleased that it has been essentially flat year to date.

That said I am thinking of moving it all to TIAA Traditional on Monday. Since I hold it in an IRA if I do transfer it I will only earn 1% or so on the traditional.

My concern is that I think that we are in for some very ugly times and a deep long lasting recession lies ahead. If I am correct commercial real estate will suffer. I know that this is market timing which I have abhorred in the past but this would be a way to protect 5% of my portfolio and I can always rebalance back to TREA or Equities if/when we return to more orderly markets. I know that I will never correctly call the bottom of the market but I also know that I only have to get this approximately right.

As I type this I realize how conflicted I am and I might choose to do nothing at all. We are living in interesting times.

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Frequent Contributor

Re: TREA - Is the time to sell coming?

5% position can be considered a foothold position and you shouldn't lose sleep over it. In my TIAA account, T-REA is 37% and I have said before that on any 3% decline from recent high, I will take it down 5% foothold or so. Also, if TIAA closes T-REA, you may not be able to get in if you sell completely. Traditional within IRA is BAD.

But your concern about a possible recession and its impact on commercial real estate is well taken.

YBB
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Frequent Contributor

Re: TREA - Is the time to sell coming?

@Bikechuck : That is also my concerns (both the prospects on commercial RE and the poor 1% option at TIAA). 

While TREA in my 401K was all transferred into 3% Traditional two weeks ago; my TIAA IRA portion has no place to go.  I certainly will not be settled with the TIAA 1% APY.  If I do the transfer, I will seek a long-term CD (say from NFCU) with a higher APY.  

I am currently on the closely-monitor mode for that part of fund.

Just an input for your consideration.  

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