also, let’s not lose sight of my larger, non-Vice-related point. the economy isn’t doing well and the numbers can be fudged and dishonestly cited for only so long.

More supporting evidence for your argument from the casual dining industry.

For the first time in years, the $70 billion casual dining industry — sit-down eateries that generally serve alcohol and sell entrees from $10 to $20 — is taking a hit.

Some of the big names — from Applebee’s to Cheesecake Factory to Outback Steakhouse — report recent slides in sales at stores open at least one year. Many of their stocks are hovering at 52-week lows.

Some folks are eating out less. Others are trading down to fast food. Some are skipping dessert or ordering less wine. The result is that casual dining’s growth is slowing, and no longer outpacing the industry.

In June, Red Lobster’s same-store sales were down 5%, Ruby Tuesday was down 2.3%, and P.F. Chang’s was down 1.1%. In May, the last month reported, Applebee’s was down 1.9%, and Outback was down 2.6%.

Meanwhile, Cheesecake Factory reported a 1.3% same-store sales decline in the first quarter and has warned the second quarter will be flat to slightly negative. The chain has never had two negative quarters in a row, says Michael Dixon, chief financial officer.
[...]
“In the 12 years I’ve covered this industry, I don’t recall a downturn of this magnitude,” says Lynne Collier, restaurant analyst at Stephens Inc. Nine of the 10 casual chains she follows have seen traffic decline in the past three months, she says.

Sounds like the effect of erosion in discretionary income to me.

I don’t see how … you see “should never have a negative return in any time period

That’s not what zero-beta means.

Maybe repeating it to you enough times will drive the point home? Eventually.

You highlight the above quote, but fail to address the info from the following page..i.e. “you may lose money by investing in this fund.”

that’s an SEC requirement no matter what fund is being hawked. whatever their specific beta, they “promise” to do well during good and bad markets. not “better than the S&P” but “significant capital appreciation.” not happening at the moment, i’m sure we can all agree on that.

their claims though still aren’t the (my) point. vegas isn’t doing well. I was just there, and let’s just say that capacity utilization isn’t what it normally is. rooms were cheaper pretty much everywhere, tables were either closed or not close to full, slots were a ghost town, reservations weren’t needed even at the high end spots. combined with industry numbers, my anecdotal experience tells me that we have a serious problem. a week after we were told (absent real proof or even context of course) yet again that the tax cuts are working and the deficit is dropping, the reality of low/zero beta funds (based on the historically honored idea of vice being ok in any economic climate) not doing well in the most recent quarter, I’m calling bullshit.

“It is the Advisor’s philosophy that although often considered politically incorrect, these and similar industries and products…will continue to experience significant capital appreciation during good and bad markets. The Advisor considers these industries to be nearly ‘recession-proof.’”

They have no shorts, very few bonds, and off hand I see no stocks with negative betas, or at least not enough to make the portfolio beta zero I don’t see how by stating “recession proof” you see “should never have a negative return in any time period.” You highlight the above quote, but fail to address the info from the following page..i.e. “you may lose money by investing in this fund.” Even so, hypothetically with just unsystematic risk, there will still be deviations from expectations which don’t assure a positive return all the time.

Also…I don’t disagree with your mattress concerns. See the Prudent Bear fund.
http://www.prudentbear.com/funds_pbfund.html

How exactly do you annualize a 1 year return? -You don’t its already an annualized return.

Not sure what you think you’re tying to prove, but the 1-month, 3-month, 6-month, 9-month returns were not annualized, and that’s all I was saying.

While a zero beta portfolio is supposed to return the risk free rate, as you can see, this one doesn’t, meaning it isn’t a true zero beta portfolio, although few are.

Not quite. A zero beta portfolio has an expected return equal to the riskfree rate. It’s still a risky portfolio with, as you say, unsystematic risk. Because of that, its actual return will always deviate randomly from the expected return. So just because the actual return differs from the riskfree rate, that doesn’t mean it’s not a zero-beta portfolio.

According to your interpretation they claim the fund will never go down over any period

That’s not my interpretation, that’s your interpretation of my interpretation. My interpretation was only that being a zero beta portolio, it shouldn’t move down with the market.

Maybe you are familiar with the concept of “abnormal return”? A zero beta portfolio which goes down 1.38% when the market goes down 1.91% is not doing better than it’s supposed to, it’s doing worse. It has a negative abnormal return.

Matt’s point, and my point in the wages-of-sin comment, was simply that the Vice Fund over the last three months didn’t produce the positive returns it’s supposed to produce even if the market goes down. Is that so difficult to grasp?

According to your interpretation they claim the fund will never go down over any period, thats quite a spin. Especially with the quote you pulled out. Even the most novice investor would have trouble believing that.

How exactly do you annualize a 1 year return? -You don’t its already an annualized return.

It’s true that the Vice Fund beat the S&P 500 (-1.91%) over the last three months. But Matt is holding the fund to the standard they themselves have said they should be held to:

…recession-proof. No matter how bad things get, people will keep drinking, smoking, watching the bouncing silicone, and betting the mortgage payment at the tables

If you want to get technical, the fund claims to be a zero-beta investment, so it shouldn’t move down when the market does.

And only the last three numbers in that table are annualized returns.