Petrocelli's anti-Boglehead Blog

Q&A for rpetrocelli's Reirement 2025 portfolio

2008-10-18T04:21:23Z

Ask questions related to the "Reirement 2025" Portfolio here.

Q&A for rpetrocelli's Low Beta Stocks Portfolio

2008-10-09T23:31:36Z

Ask questions related to the "Low Beta Stocks" Portfolio here.

Q&A for rpetrocelli's Know Nothing portfolio

2008-09-03T23:52:45Z

Ask questions related to the "Know Nothing" Portfolio here.

Q&A for rpetrocelli's Petrocelli v. Troutner Bet portfolio

2008-08-06T02:22:27Z

Ask questions related to the "Petrocelli v. Troutner Bet" Portfolio here.

Q&A for rpetrocelli's Petrocelli v. Wagner Bet portfolio

2008-08-06T02:21:22Z

Ask questions related to the "Petrocelli v. Wagner Bet" Portfolio here.

Q&A for rpetrocelli's Petro's 5 Fund portfolio

2008-08-05T01:44:26Z

Ask questions related to the "Petro's 5 Fund" Portfolio here.

Diehards: A Documented History of Performance Chasing

2007-12-22T14:37:20Z

OK. First of all, Take a deep breath and relax. I'm not criticizing the Diehard method of investing, I'm not going to parody a Bogle speech, and I won't comment on flying around the country to mini-conventions to discuss index funds.

I was searching through some old posts. As I did, I noticed this:

Initially, when this forum was "born". The prevailing view appeared to be that beating 500 Index or TSM was like defying gravity. (Hell, even Bogle bet that guy a buck that he couldn't beat the 500 Index, and he doesn't throw around a buck lightly.) There was documented evidence showing that if you invested one dollar in TSM on the day the Magna Carta was signed, you could now own Belgium.

Then the tech wreck came, and the 500 Index and TSM lost about 50% of their value. This gave rise to thousands of posts on the value premium. The prevailing school of thought then became that if you tilted to small and value, you'd beat TSM. Period. (Note that Larry Swedroe and Bill Bernstein were saying this in 1998, and you have to have rocks the size of a mini-Cooper to tout value investing in 1998. But no one here paid any attention to them, which is why we all got royally screwed in the tech wreck.) Hell, even the TSMers started conceding that you may want to add a little small value for "diversification purposes."

Then REITs went on a tear, and we had thousands of posts, out of nowhere, on REITs. This sector fund became a necessary addition to any portfolio. There were even posts where people were putting 20% or more in REITs. Swensen said it was OK, and he worked at Yale, which is a school none of us could get in to, so he had to be right. REITs were good for "diversification purposes."

We had certain mini-bits of performance chasing. How many of you recall a couple thousand posts on PCRDX? It was a "great diversifier."

Even Emerging Markets, which was viewed as a wacky fringe fund to us back in 2000, was now a "great diversifier."

Now I am not saying I am not a performance chaser. I am one of the few to openly admit I do it. In fact, I wrote up an IPS which requires me to performance-chase. I just thought it is interesting how the number of posts on a certain subject changes as that asset class does well. When it goes to hell, the number of posts on it drop.

Has anyone noticed an increase in posts on hot hands investing? Jump on board folks...

Petrocelli

Active (Windsor II) Beating Passive (IWD)

2007-09-14T16:46:00Z

On June 30, 2006, in conversation 51574, I made a "bet" with wagnerjb in which he took an index fund -- ishares Russell 100 (IWD), and I took an actively managed fund -- Windsor II (VWNFX).

Since then, Windsor II has returned 20.58%, and the index ETF has returned 17.31% Thus, the actively managed fund returned 3.27% more. Note that if you included brokerage fees, Windsor II's lead would increase.

I will update you all on the status of the bet periodically. There is a long way to go!

Troutner/Index vs. Petrocelli/Active "bet"

2007-09-14T19:24:29Z

In conversation no. 33614, a discussion was had whether a poster should have been advised to sell Primecap and TSM. This discussion resulted in a "bet" between me and Jeff Troutner in which he took TSM and I took Primecap, with $100,000 in each starting on March 4, 2004.

After just about 3 years and 6 months, here's where the "bet" stands:

Primecap: $146,330
TSM: $138,504

Primecap has returned 7.87% more.

I'll keep you updated.

Boglehead Moderators: Paging Nurse Ratched!

2008-05-08T13:53:01Z

Recently, there was a thread over there in which a younger guy was dating a divorced older (meaning older than him, but much younger than me) woman. Moreover, this woman had a kid to boot, which I assume was a drawback because he was 24, and it put the nix on nooky. (That's just an assumption on my part simply because I have two kids.)

This poster turned to the Bogleheads for advice. That was not surprising because Bogleheads are known as masters of the art of love. They are the professores di amore. In fact, they have a chapter in the Bogleheads Guide on how to get to third base without spending more than 5 bucks. The thread lead to about 40 posts in which everyone, including the original poster, pretty much proved that either they, or someone else who posted to the thread, was a jackass. This lead to another thread on whether you should have a mistress. Pretty soon, people were discussing their private parts, Miley Cyrus' photo shoot, dogs sleeping with cats, and all sorts of mean nasty, horrible, things.

This lead to a redefinition of the off-topic forum as somehow, sorta, kinda being limited to do with money or consumer goods or other topics which don't deal with either of those two, but which the moderators will permit, such as your favorite unknown actor. That brings me to my point.

Somehow, in the midst of all of this, it was decided that a discussion of who will win the Masters would not be permitted. If you are a golfer, the Masters is sacred.

If you were a Catholic and a football fan, it would be like Pope Benedict visiting New York, saying mass, and then playing quarterback for the Giants in the Super Bowl. I was reminded of the scene in One Flew Over the Cuckoo’s Nest where Nurse Ratchet won’t let McMurphy see the World Series. The thought of not being able to watch the World Series is unthinkable to a baseball fan like McMurphy, even if he is a sociopath.

Similarly, the thought of not being able to discuss the Masters while people are discussing topics like, “Best way to save string” is maddening. Now I can understand why you wouldn't want people asking questions about whether to dump their girlfriend. That's even more true if the person asking the question is such a loser that he doesn't have friends to discuss the issue with. I can also understand why you don't want people discussing their mistresses, or even other people's mistresses, or even dumping their mistresses, on a forum devoted to important things like investing, and selling books and DFA funds. But the friggin' Masters? As Reverend Wright would say, "Is you outside your mind?!

Well, I guess I may have to start my own forum. Wait. I kind of do have my own forum. Thanks for the right side of the page.

Petrocelli

"Why do I Bother to Battle Bogleheads?"

2007-12-21T19:34:27Z

Jack Bogle recently gave a speech to a bunch of people from Yale with a lot of dough explaining why he is kicking Wall Street in the ass, firmly and repeatedly. Which is actually kind of odd, since he's probably talking to the people who are getting the ass-whoopin'. (Go figure.)

The speech was titled, "Why Do I Bother To Battle?" It got me to thinking as to why I bother to battle with the Bogleheads.

The following is a parody of Bogle's speech. In order to actually understand the parody, you probably have to at least glance at the transcript of Bogle's speech, because my top 10 list tracks Bogle's. Otherwise, the parody isn't funny. Come to think of it, the parody probably isn't funny in any event. Come to think of it even more, no one will probably ever read this damn thing except me, and about 10 other people, and 8 of them think I am either the devil, or Dan Wiener, or maybe both.

Here's a link to St. Jack's speech titled Why do I Bother to Battle. Read it if you are having trouble sleeping. Without further ado...

"Why do I Bother To Battle Bogleheads"

Remarks by Petrocelli

Annoying Internet Poster

At the Wasco State Men's Prison Singles Mixer

Wasco, California

December 13, 2007

With the television writers on strike, I'll try to ease your ache for for the David Letterman Show by giving my ten reasons for "Why do I bother to Battle?" (The strike matters not to me: I've always been my own writer. Which explains why Bogle and I both use terms like "matters not" rather than "doesn't matter". It makes me sound like one of those guys from England in the 1700s. Although nobody has written like this since Melville.)

10. Damned if I know why I bother to battle. I just do it, and I don't know how to stop. I just getting in an exchange with Andy on Dan Wiener and, next thing you know, my fantasy basketball team goes to hell.

9. Because in all my 50 years of life, I have never done anything but battle. Actually, that's probably a bit of an overstatement. Most of the time, I was lying around without a job, drunk, playing the Beatles' Revolution Number 9 backwards to find out whether Paul was dead. However, it does take a lot of effort to spin a turntable backwards at the right speed.

8. Because the great battlers of history have always been my heroes. Think Martha Stewart. Think Britney Spears. Think Al Capone. Heck, think Dan Wiener.

7. Because all the battlers finally lost their battles. Except Dan Wiener, who has a nice summer home on Cape Cod. Actually, Martha didn't do badly either, and Britney's finally lost some weight and grew her hair back, and would be OK if she just would get a damn car seat for her kid. In fact, she's pretty hot now, and drunk most of the time. OK. Never mind number 7.

6. Because on the Diehards forum, no one else is battling to point out how truly odd it is that a group of people who obsess over low costs spend thousands of dollars to fly all over the country to hear people tell them not to spend money. Someone's got to do it, by the process of elimination, I got the job, although bilperk is helping me out a lot these days.

5. Because when the battler stands pretty much alone, he draws a lot more attention to himself. If you have a large ego (like Jack Bogle and me), that's a nice extra dividend. Especially because those who are outside the system -- our 'man on the street investors', exemplified by the Bogleheads of the internet who are at this very moment eating an early bird special and stealing sugar packets from the table on the way out -- give me strength to carry on.

4. Sad to say, I no longer play squash, and playing golf on 'grown up courses' is now out of the question because I keep hitting balls over the fence, and I pretty much suck at golf. So what else could I do but take those old athletic battles to the Bogleheads.

3. Because what I'm battling for -- building our Diehards forum anew to give posters a fair shake -- is right. Mathematically right. Philosophically right. Ethically right. Hell, M* Darrin may even get a bonus.

2. Because even when I battle, I love the give and take, the competition, and the challenge of my field. I love it when Sunny writes one of those posts that make a calculus textbook look like the Hustler magazine joke page. I love it when Adrian calls for my banning, although I'd wish he'd quit calling the SEC. In fact, I'd bet the SEC wishes he'd stop calling. And it does kind of suck when the Bogleheads call my office. Actually, forget number 2 too.

1. Simply because I'm a battler by nature -- born, bred and raised to make my own way in life. Actually, my parents took care of me until I was about 35. But I really didn't need it. Really. I am very self-sufficient.

This lovely evening is now over for me. Let's dim the lights for slow-dancing to an oldie -- Chicago's Color My World. It's men's choice. Wait. You're all men. Damn.

Hot Hands Investing

2007-09-14T19:45:48Z

About 4 years ago, I began studying an investing method advocated by Dan Wiener's Independent Advisor for Vanguard investors known as "hot hands" investing. The concept is relatively simple: You buy the best performing diversified Vanguard fund each year. (The term "diversified" exclude regional funds, like Pacific Stock Index, and sector funds, like REIT Index and Healthcare.) You sell it when it is no longer the best performing diversified fund.

I initially floated the idea of hot hands investing on the Diehard forum. I received a lot of advice, and a number of comments comparing Dan Wiener's name to a hot dog. However, the overwhelming response was that I shouldn't engage in such shenanigans.

Luckily, I ignored the response. I bought the hot hands fund, International Explorer.

International Explorer then went on a run. It has been the hot hands fun 4 years in a row. It has returned about 91% in 4 years. Compare this to Lifestrategy Growth, which has returned around 41.7%. (For the record, I compare everything to Lifestrategy Growth just for a frame of reference.)

Bottom line: Think outside the box.

Caveat: If you buy the hot hands fund next year and it tanks, don't blame me. You shouldn't be taking investment advice from an anonymous internet poster who adopted the name of a shortstop.

Bogleheads Hate FundX

2007-09-16T13:38:00Z

I have a portfolio which kind of follows the FundX monthly upgrader portfolio (“MUP”). It goes against every single precept of Boglehead investing. When Bogleheads read about it, they tear their garments, and unleash a loud wailing from Walmarts throughout our fair country. They threaten to sew salt in to my ocean-view acreage, scatter my flocks, and send pizzas to my house which I did not order.

The system is the polar opposite of a buy and hold portfolio. It is like "hot hands" investing on steroids. Each month, you buy or sell funds based purely on a formula which the newsletter calculates using performance over the past 1, 3, 6 and 12 months. Some months, like this month, you have to sell 4 funds and buy 4 different ones. (Don't try this in a taxable account.)

I follow the portfolio because I think of investing as being on a level slightly above fantasy basketball. Making trades using the MUP is kind of like going to the waiver wire each month. What fun is having money if you can't play around with it?

This portfolio is wacky. It has an average expense ratio of 1.1%. This fact, standing alone, would result in commitment proceedings being initiated against me under Boglehead law. It presently holds 19 funds or ETFS, has held 32 different funds or ETFs in 10 months since I started tracking it on November 17, 2006. (For the math challenged, that means I have sold 13 of the funds, and bought other funds, in about 10 months, I think... My math could be wrong...)

As some of you know, my advocating of momentum investing has caused some Bogleheads to report me to the SEC. I still think it’s a good idea, although my lawyers tell me I should probably not talk about it here. Nonetheless,…

Since November 17, 2006, the FundX portfolio has returned 13.24% versus 7.56% for the 500 Index. This is so even though I have around 20% cash/bonds in the portfolio.

YTD, it is up 8.92% versus 6.02% for the 500 Index.

In the last 3 months, it has lost .52% versus a loss of 2.11% for the 500 Index. So it has lost less in the last down market.

What does this mean for you? You have three choices: (1) sell all your Vanguard funds and follow a risky momentum investment strategy; (2) buy, hold and rebalance a portfolio of low cost Vanguard funds; or (3) do both. I vote for 3. That way, you can hedge your bets, and if (1) works you can drive the people who slavishly follow (2) nuts, which is nice. If it doesn't work, just keep it to yourself.

Whatever you do, don’t follow investment advice from an anonymous poster with the screen name of a shortstop. Only an idiot would do that.

A 5 Fund Vanguard Portfolio

2007-09-19T12:38:49Z

Back on January 1, 2004, I entered the Mutual Fund Forum contest in which contestants submitted 5 funds. My 5 funds were:

Cap. Opp.
Selected Value
Global Equity
International Explorer
Healthcare

I have continued to track the portfolio. Since 2004, the portfolio has had an average return of 16.97% versus 9.84% for the M* Total Market Index, and 17.88% for the EAFA Index.

I'll keep you updated on this portfolio.

Applying to a fantasy league...

2007-09-29T13:01:00Z

For those of you unaware of such stuff, there is a time-waster known as "fantasy basketball" where you assemble line-ups of players, and keep stats based on your players' stats.

There are also forums where people discuss fantasy basketball. Some of these forums have classified sections where people seek out owners and leagues. It's kind of like match.com for balding middle aged guys who like both stats and the NBA.

I recently responded to a post on one such forum from a person who was trying to start a keeper league. I sent an e-mail stating that I would like to join.

I received back an e-mail which said:

"i do have a spot left, but i like experience owners, doing a keeper league and 1 year league is different, how many leagues r u in right now"

If, like me, you are old enough to remember the Beatles, you can probably recall when people used punctuation and capital letters, and even friggin' words and such, when they wrote to each other. Although I realized my commissioner was probably a pimply-faced 16 year old in Des Moines who was running a league in between downloading porn from hotblondes.com, working as the part-time fry-cook at Mickey D's, flunking English, and smoking drugs that I have never heard of, I wrote back and explained I have been in basketball fantasy leagues since 1989.

I told teenager that I generally play in money leagues where there are pots of more than $1,000, and that I was in 3 of them this year, but I wanted to be in a keeper league. I promised that I would never quit, and that I was kind to animals, and that I never called directory assistance for numbers I could look up myself.

I directed the illiterate, acne-ridden teenager, to my yahoo fantasy sports profile which shows I have won numerous fantasy sports trophies. For crying out loud, I am in the head to head championship in a $1,500 money league in baseball, and I know so little about baseball that I could not identify my fourth round pick from a police line-up. This is because I am the king of the spreadsheet, and statistics can really help the ignorant. In contrast, in hoops, even when I make a dumb pick and select Al Harrington in the 7th round, I know who he is, and could guess his stat line blindfolded.

I received this e-mail back: "im not sure man..."

That's it. Four little words. They hung in the air. Damn. I was wait listed by teenager. What would I tell my parents? Should I have written a better essay to get in? Now I will have to go to a second tier keeper league, which would impact my earning ability for the rest of my life.

First of all, sonny, don't call me "man", and learn to use an apostrophe. (It's down next to the enter key.) I read the e-mail and laughed out loud. (Or as the teenager would say, I "LOLed.") This jackass is making getting in to a keeper league harder than getting in to an Ivy League college -- which by the way I did back in 1977, mostly because I used punctuation and full words.

Second of all, I am not going to beg someone to get in a league, unless it is a league of female pornstars or Hooters girls, and there is a live draft. (If anyone knows of such a league, I want in. Unfortunately, all the leagues I am in are middle aged balding guys. In fact, we are all happy to have the "ing" on "balding".)

In any event, I wrote back to the teenager with the following response: "No problem. I'll make it easy for you: I am out." I imagine teenager was disoriented by this response. It had capital letters, and a colon. He probably thought to himself, "wat is this dude sayin". (That's a question, but teenager does not use question marks.)

In any event, I am still a man without a keeper league. I will continue to apply and some day, hopefully, I will be selected. I can only hope...

"I just want to be loved! Is that so wrong!?"

2007-09-15T11:47:00Z

I expect many Diehards are SNL fans. Do you remember John Lovitz’s impression of playwright Harvey Fierstein? Lovitz pretended that Fierstein was hosting a talk show from his bedroom, making advances towards male guests, and being rebuffed. He would look in the camera and yell, “I just want to be loved! Is that so wrong!?”

Well, that’s kind of how M*’s rating system makes me feel. My posts are now being regularly voted down by the hardcore Bogleheads. They are probably hatching some fiendish plan to downgrade all my posts, which will later be discussed in detail at Diehards VII at an Econo Lodge somewhere. It hurts my feelings. I am going to cry. I may need psychotherapy.

The rating system in only a day old, and already my posts are being downgraded. Look at this thread. It’s a post about Selected Value, which is a favorite fund of mine. I made a casual comment about the fund which took about a minute to write. Honestly, I was just trying to write anything so that we can get over 20 posts a day, just to help M* Darrin at bonus time when Mansueto calls him in and asks him, “What the hell did I spend all that money on the forum upgrade for?” So I wrote a James Joyce stream-of-consciousness ramble on Select Value.

It’s not my best post, but right now, my post has a rating on negative 3, and everybody else has a positive rating. OK. It ain't a weekly lampoon post, but is it really that friggin’ bad? Sudhi has posts with a positive 1 for crying out loud. A negative 3? I don’t think so. Maybe it’s a 0 or a negative 1. For crying out loud, statsguy wrote almost the same thing as me, and he has a positive 3. I think it’s the work of “A & A" ... and at least two other Bogleheads since I voted for myself.

I just want to make it in to the column on the left of the “highest rated users.” I’ll print it for my kids and grandkids to show them that I was very popular at one point. In the meantime, I’ll have to figure out who the hell “SmartSometimes” is, and what makes him so darn popular.