The 15 Basis Point Portfolio and Bobodex 10 Collide
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By Jim Wiandt
Year-to-date, Matt Hougan's 15 (actually 13.65) basis point portfolio is hanging tough, while Bobo is drinking heavily.
It's been a tough year as the Dow meanders its way back toward 10,000, international markets get absolutely crushed, and bonds and commodities and, to a degree, small-caps sort of hold down the fort. I thought it would be interesting to go back in and look at Matt's famous 13.65 basis point portfolio, as well as Bobo's (for years, IndexUniverse.com's own Bill Miller) Bobodex 10 portfolios have done year-to-date. As a reminder, here's Matt's 13.65 bps portfolio: Asset Class Weight Fund Ticker ER U.S. Stocks 40% Vanguard Total Market VTI 0.07% European Stocks 20% Vanguard Europe VGK 0.12% Asian Stocks 10% Vanguard Pacific VPL 0.12% Emerging Markets 5% Vanguard Emerging Markets VWO 0.25% Fixed Income 15% Vanguard Total Bond Market BND 0.11% REITs 5% Vanguard REIT VNQ 0.12% Commodities 5% iPath Dow Jones AIG Commodity ETN DJP 0.75% Blended Expense Ratio 0.1365% And here's what the Bobodex 10 looks like: Asset Class Weight Fund Ticker YTD Large Cap US 10% Fidelity Nasdaq Composite ONEQ -14.58 Industrials 10% Industrial Select Sector SPDRs XLI -12.95 Asian Stocks 10% iShares FTSE/Xinhua FXI -31.90 Large Cap US 10% iShares NYSE 100 NY -15.47 Natural Resources 10% iShares S&P Nat Resources IGE -12.27 Financials 10% KBW Bank ETF KBE -23.10 Large Value US 10% PowerShares HG Div Ach PHJ -9.72 Large Cap US 10% Rydex Russell Top 50 XLG -16.15 Total Market US 10% SPDR DJ Wilshire Total Mkt TMW -12.92 Large Cap US 10% Vanguard Large Cap VV -13.75 Total Year-To-Date Return -15.61% Here are some selected year-to-date returns to put those returns in context. Asset Class ER Fund Ticker YTD U.S. Large Cap .10 SPDRs S&P 500 SPY -14.51 U.S. Small Cap .20 iShares Russell 2000 IWM -5.35 International Developed .34 iShares EAFE EFA -21.67 Emerging Markets .25 Vanguard Emerging Markets VWO -25.26 Fixed Income .20 iShares Lehman Aggregate AGG 2.55 REITs .12 Vanguard REIT VNQ 4.62 Commodities .75 iPath S&P GSCI Total Return GSP 8.42 Precious Metals .40 SPDRs Gold Shares GLD -3.95 Bobodex 10 ETF Portfolio -15.61 Hougan's 13.65 Basis Point Portfolio YTD Return -13.56 So the gist of it is that unless you decided to pour all of your money into oil at the beginning of 2008, this has probably been a tough year for you. Those with heavy international exposure are getting hammered, and pretty much equities markets across the board are not looking pretty. The saving grace for Hougan's portfolio, in fact, is his "diversifiers," including 15% fixed income as well as 5% in real estate and commodities. As far as Bobo goes, it's hard to say what he's thinking. But let me tell you, that is one surly monkey right now. He's long had a zen feel for magically picking winning ETFs with his dart throws and he's very sensitive to claims that these returns are "random," and yesterday told me, "ooo eee ah ohhhhhhh....." as he collapsed into a pile of old banana peels, his breath stinking of cane wine. Professor Jerimore Djinkowski, who chairs the economics department at Northeast State College, noted, "This appears to me to be a classic case of reversion of the mean. Bobo's picks are random. And in the stock market, what comes up, must go down." I've decided not to share those comments with Bobo for now. Let's keep a sense of perspective, after all. Hougan's discount "market" portfolio is only up on Bobo by 205 basis points this year, and this is as bad as that little monkey has ever had it... And with the Dow headed for 10,000, Hougan may still take that bet with Friedman. Look on the bright side, the dollar is now at 1.4243, levels not seen since October 2007. So as bad as it's looking in the U.S., the rest of the world is looking even grimmer. Can't wait for that big global bull run in 2011.
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