Hi @BobC,
My bonds have about 3.5 years of effective duration and my cash is in U.S. Government MMFs for now. I'm up to 74% bonds/cash now after a little trading today (incuding a little tax loss harvesting to offset some LT capital gains I took back in February). Thanks for your input, and I agree on avoiding long-term bonds or even intermediate-term bonds that are on the long-term end of the scale.

There is no way I'm going to be able to explain how to build regression models. What I tried to do was just offer the simplest model (100% CAPE + static bond return - static expenses).
I rattled off a few of the many simplifying assumptions inherent in this model. Since the model does not fit the actual performance figures, some of those assumptions must be wrong. One way to figure out which ones is to relax (weaken or remove) some of the assumptions and try fitting the resulting, more complex model to the data.
While it may look like you've got lots of data points to work with (each day's performance), there's lots of noise inherent in that data, especially since you've no real idea what's going on with the bond portion (more below). There are various standard filtering/smoothing techniques that can be tried to deal with this. The end result, while cleaner, would leave you with too sparse a data set to fit to most models. (Call that intuition from experience, I haven't worked the numbers.)
While DoubleLine may say that the bond portion has returned a fairly steady 2.87% annually, it's not clear whether that is net or gross, or what portion of the portfolio the bonds represent ("up to 100%"). One sees, e.g. at least 7% of the fund in cash (so add that to the model). One doesn't even need M* to see the cash. In the latest (semi) annual report, the fund had 7.8% invested in three MMFs (Blackrock Liquidity FedFund, Fidelity Institutional MM, Morgan Stanley Institutional).
Nor is the bond return all that steady. In that same semiannual report, the six month contribution of the bond portion is reported to be 2.3% (not annualized). Annualized, that's 4.65%, a far cry from 2.87%. How likely is it that they're fudging 2.87%? I'm sure that this is a reasonably accurate number. It's the "steady" part that's dubious. Not from a 100,000 foot level, i.e. the bond returns are not bouncing around like some EM bond funds. But it's hardly constant, certainly not close enough to build a model around that assumption.
Personally, I'm comfortable with my prior posts - that the fund should approximate CAPE (for better or worse; I didn't comment on how that might behave) less overhead (leveraging costs, management costs, administrative costs, trading costs, clawback costs) plus bond portfolio returns (as much or as little a black box as one regards all of DoubleLine's bond funds).
Read the fund reports - they give the contributions from the CAPE side and the bond side. Add these numbers, subtract the fund's ER, subtract a bit more for the stuff that isn't reflected in the ER, and you get the total return of the fund. That much is easy to confirm.

FYI: We’ve been hearing a lot of talk over the last few days that just a handful of stocks are driving the rally in US equities. This suggests that the gains aren’t representative of broad market strength, but instead strength in just a handful of stocks. We’ll be the first to agree that the S&P 500’s gains this year are the result of gains in some of the index’s largest members, but that’s only because they have grown so large. As we noted earlier this week, the five largest companies in the S&P 500 have a combined market cap of over $2.75 trillion, and the four largest companies in the index have a greater market cap than the entire Russell 2000 small-cap index. Just because the largest companies in the S&P 500 are doing so well doesn’t mean that the rest of the index is doing poorly though.
The first chart below shows the S&P 500 market cap weighted index over the last twelve months. As shown in the chart, after the rally of the last few days the index is currently just 0.52% below its all-time high from 3/1.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/narrow-rally-is-fakenews/

I can remember Mr. Know-All Gross and a lot of other self-appointed poobahs predicting low, single-digit returns for the last decade (2000-2010), then just about every year thereafter.

While I agree with your sentiment that a lot of these guys are self-inflated blowhards, IMHO Bogle is not in that camp. As I recall, he did predict that in the 2000s bonds would outperform stocks. He also said that stocks would do better than bonds in this decade. (Hard to find citations for these, but I do trust my memory here.)
The numbers seem to have borne him out. Here's a total return chart comparing VFINX and VBMFX from 1/1/2000 to 1/1/2010. Bonds win the total return race, +80% vs. -9.8%. In case you think that this was just luck with the stock market peaking in 2000, here's the comparison from 1/1/2001 to 1/1/2011, bonds winning +72% vs. + 13.9%. Even the comparison from 1/1/2002 to 1/1/2012 shows bonds winning +71% vs. +32%. In the current decade (to date), stocks have outperformed +147% to +28%.

Mr. Gloom, Jeremy Grantham has certainly been forecasting similar numbers for some time. Gosh, if you listen to him, the only place to make real money is investing in timber. The "baby-boomer" concept has also been floating around for some time. I can't speak for all the other baby boomers, but I don't intent to pull money from my retirement accounts until the RMD rule forces me, and then only the minimum amount.

IRA distributions and asset allocations are essentially independent concepts. If you want to pull money out of the market you can do that while keeping your money inside your IRA.
Not that Bogle has ever suggested significantly adjusting allocations based on market conditions, let alone pulling money out of IRA, which wouldn't be necessary for that purpose. For example, "Fix your proper allocation and either leave it completely unchanged, irrespective of circumstances, or change it, but never more than 10 percentage points. Never be 100% in the market or 100% out of the market."
http://premium.working-money.com/wm/display.asp?art=107

I'm still concerned about market valuations here, and May is around the corner. Examples of high current price to historical TTM free cash flow ratios (data from Morningstar): MCD 28.7; AMZN 45.2; CSX 52.3; FB 36.9. I'm whittling away at my equity allocation, being up to about 66% bonds/cash now. Although I'm 64, I'll weight back into equites when valuations are more reasonable. I've been on this train ride before when derailments can happen quickly. And so it goes...

FYI: (Attention John Bogle, here are 10 needles in your haystack !)
While it's true that most funds won't beat market indexes over long stretches after accounting for fees, here's a closer look at a handful of Morningstar Medalists that did.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=804177

The amount of dollars you should have in cash/CDs/short-term bonds depends on what you need to withdraw from your portfolio. We advocate 4-6 years, some folks use longer time frames. Let's assume a person needs $1,250 per month from their investments. That would mean $15,000 per year multiplied by five for five years of protected income stream. This does not account for any taxes that might need to be withheld. You would gross up the monthly amount to accommodate that.
On a $300,000 portfolio, that would require $75,000 be in cash/CDs/short-term bonds. Have at least 6-12 months of this in cash or CDs maturing in the near term. The remaining portfolio can be invested as aggressively as your risk profile and time horizon allow. In years when the stock markets are good, you would capture gains from your equity investments to replenish the $75,000. In lean years, you use dollars from your set-aside stash. The last two market crashes have meant recovery of values in about 5 years or less for our clients. The stash means you won't have to sell devalued assets in a down market.
Does this work? Yes. We have used this strategy with many clients for 30 years. The variables are the dollars needed, the number of years selected for protection, whether to withhold taxes from distributions in retirement accounts. Many clients reduce spending in years when returns are not good or negative. Some do not have that option. The key is to establish a very conservative total return projection for your retirement, and be able to adjust your cash flow need. If you base your lifetime income projection (to age 100) on a 7% annual return, you may be asking for a rude awakening.

FYI: Portfolio returns in the early years of retirement could have a large bearing on the success or failure of a retirement income strategy; a few years of early market appreciation means a high likelihood for a healthy retirement, while a flat or declining market in the early years could throw a wrench into the calculation.
It is called sequence-of-return risk, and it poses a serious conundrum for advisers putting together a retirement-income plan for client
Regards,
Ted
http://www.investmentnews.com/article/20170425/FREE/170429938?template=printart

Hi @VintageFreak,
I'm pretty much with you on the subject ... as I average in (or down) when making changes within my portfolio; and, I also keep some powder dry (cash) for the unexpected pullbacks that most did not see coming in the markets. When stocks are selling towards their lows I hold more and when they are pricey I hold less. Currently, based upon the TTM P/E Ratio of 24.4 (April 21st) for the S&P 500 Index they are pricey in my book. And, if you buy on the come line of forward estimates ... you are buying just that estimates. Most times these forward looking estimates get revised downward and although you may win some come line investments often times you'll lose by buying when they were very richley priced.
Before, someone calls me out on the TTM P/E Ratio for the S&P 500 Index I'm linking my reference source(s).
http://online.wsj.com/mdc/public/page/2_3021-peyield.html?mod=wsj_mdc_additional_ustocks
and, here ...
https://www.advisorperspectives.com/dshort/updates/2017/04/04/is-the-stock-market-cheap
Yep, I'm thinking stock prices are extended and they usually by history go soft during the summer months and rally during the winter months. Still with my plan to reduce my equity allocation towards its low range during the summer. Come late summer or early fall I'll let my market barometer and equity weighting matrix be my guide as to when to start to average back upward. And, I also know that some say that this strategy (Sell in May) does not work in modern day investing. The below link will provide an article that explains the Sell in May strategy in some detail.
http://www.etf.com/sections/features-and-news/should-you-sell-may-go-away?nopaging=1
Perhaps, this is Old_School investment mythology ... but, for me, it has worked more times than not. With this, I plan to "keep on keepin' on."
Old_Skeet
Trailing Note: Since, comments were made below about bond duration and maturity I thought I post mine. My portfolio as a whole bubbles, according to Morningstar Portfolio Manager, with a bond duration of 3.4 years and an average maturity of 5.9 years while my fixed income sleeve bubbles with a duration of 2.71 years and an average maturity of 4.91 years. So my hybrid funds seem to be carrying longer durations and maturities and run the overall numbers upward for the portfolio as a whole.

"Live in the present" might work better as a matter of tactical allocation (stocks or bonds this year? here or there? defensive or aggressive?) but the strategic question (how much do I need to squirrel away over each of the next 35 years to have a reasonable chance of meeting my goals) has to include a "likely market return" variable.
David

I just know I suffered 50% losses in the first correction and 20% in the second correction. That's what I meant by invest in the present. Sometimes it is best to leave the battlefield and live to fight another day. Now if you are wrong and the party you left ended up winning the battle, then you don't partake on the spoils. However, what I've learnt is you get over missed opportunities in 1 week, while you never get over ...death.
I think that works for me.

I can remember Mr. Know-All Gross and a lot of other self-appointed poobahs predicting low, single-digit returns for the last decade (2000-2010), then just about every year thereafter. Mr. Gloom, Jeremy Grantham has certainly been forecasting similar numbers for some time. Gosh, if you listen to him, the only place to make real money is investing in timber. The "baby-boomer" concept has also been floating around for some time. I can't speak for all the other baby boomers, but I don't intent to pull money from my retirement accounts until the RMD rule forces me, and then only the minimum amount. At least that is the plan. As for inflation, most folks have been terribly wrong about that since the 2007-08 economic meltdown.
All the predictions for low returns are based on interpretations of current valuations, economic growth, and other guesses. And keep in mind that the prediction in question is for the S&P 500. What about other U.S. markets, developed international, and emerging markets, not to mention non-traditional investments? It seems to me that there is no way to predict this with any accuracy - heck, the weather people can't even get it right for the next 24 hours, and they have all sorts of ways to monitor things. The best thing is to assume your portfolio will achieve a very conservative return during your retirement years, and then run some scenarios to see if your dollars will outlast you. I would urge a similar strategy for the accumulation phase up to retirement. If the numbers turn out to be better, wonderful. You will have saved "too much".

Okay, no charts, graphs or data support for this, but.....
Reported that the baby boomers (born 1946-1964) are retiring at a rate of 10,000/day (don't know if this counts weekends, too). Although also reported that only 1/3 saved enough for a decent retirement, one may suspect this bunch put away a lot of money via the normal investment vehicles of 401k, 403b, 457 and IRA's during the lots of jobs and money decades.
These folks will also hit the RMD stage, and start pulling money from these accounts, as well as some folks who will need to pull money before RMD.
So, my question is whether this money leaving the investment system will be offset by new investment money from the current working folks?
If there is more "out" money, versus "in" money, is the amount enough to affect the outcome of continued returns going forward, being 4%/annual or whatever.
What say you?
Thank you,
Catch

Unfortunately, St. Jack has done so much evagelizing with platitudes (e.g. lower costs = higher returns), that it's easy to forget that he's more than a salesman. But I have read a couple of more solid writings by him, and feel that Lewis is right. These predictions are based on solid analyses and long term data.
He may not be right in a day, a week, or even a year or two. But he's got a great decade time span track record, and as Graham said, "In the short run, the market is a voting machine but in the long run, it is a weighing machine." After a decade on a treadmill of more modest returns, the currently rotund market may slim down to a more normal weight.

Nicely put, on a day when SP500 p/e (Shiller) is about to hit 30.

"Live in the present" might work better as a matter of tactical allocation (stocks or bonds this year? here or there? defensive or aggressive?) but the strategic question (how much do I need to squirrel away over each of the next 35 years to have a reasonable chance of meeting my goals) has to include a "likely market return" variable.
Over 35 years, shifting the assumed annual return from 4% to 6% annual return changes your end value by 100%. (That's a simple compounding calculation assuming nothing other than a fixed amount invested and held for 35 years.)
I'd also be cautious about taking double-digit growth in the stock market as an entitlement. It might return 15% a year this century and the dividend checks might be delivered by unicorns, but I'm not sure that's the way to plan. Market returns are a combination of capital appreciation plus dividends. Capital appreciation is a combination of economic growth plus P/E expansion (a/k/a the supply of greater fools). The lower your starting P/E, the greater the prospect of expansion.
In the 20th century, per capita US GDP grew 2.3% annually; in the current century, it's been about 1%. P/Es in the 20th century averaged in the low teens; in the 21st, they're in the mid 20s.
Perhaps the rise of our Robot Overlords will change everything. Perhaps The Chinese Century will be different. Perhaps Mr. Trump's tax package will sail through Congress unscathed by partisans or lobbyists, hundreds of billions in overseas earnings will be repatriated and American corporations will again be the envy of the world.
Don't know. For me, the question is just, do I want to bet my future security on it?
David

Earnings are one of three data feeds in Old_Skeet's market barometer. If I were to use only forward earnings estimates as my guide to set my equity allocation I'd currently be heavier in equities. I currently use three data feeds to gague the S&P 500 Index ... an earnings feed comprised of both reported and forward earnings estimates, a breath feed and a technical score feed which consists of a combination of RSI and MFI. With the combined feeds incorporated into the barometer which in turn feeds my equity weighting matrix I get meaningful information which assist me in setting my equity allocation within my portfolio. In addition there is Old_Skeet's SWAG (Scientific Wild Ass Guess) as a back up that takes other things into account such as seasonal trends, my personal market outlook along with news driven events which I have used a good number of times in the past as buying opportunities for special investment positions.
Folks ... if you don't wish to actively engage the markets as I do with part of your portfolio then there are asset allocation funds that will do this for you. As I have aged, I am turnning more over to the more active professional asset allocators and throtteling back my own activity. This is the reason I narrowed the band width of my equity allocation form a 40% to 60% range to a 45% to 55% band width a few years ago. In the next few years as I enter the 70's, age wise, I'm thinking of going to an equity band width range of 40% to 50% equity. This will still allow me to be active within my own portfolio but put me in competition with my conserative asset allocation funds held within my hybrid income sleeve which now consist of nine funds with plans to expand to twelve. In doing this, I'll be reducing the number of my all equity funds held from the current number of twenty to sixteen trimming in the growth area of the portfolio by four funds (13 to 9).
Back to earnings ... Forward estimates are just that "estimates." And, often they get revised downward more so than revised upward. Come to think of it I can't remember of to many upward revisions. Once announced they become as reported (TTM) earnings. For March 2017 ending S&P reported earnings (TTM) for the S&P 500 Index at $99.70. Seems, this is a big spread from where they currently are to what the article suggest they might be going forward.
Below is a link to a S&P as reported earnings recap.
https://www.advisorperspectives.com/dshort/updates/2017/04/04/is-the-stock-market-cheap
The question ... How much faith do you wish to place in forward estimates?
From my perspective stocks are extended based upon reported earnings. Thus, I am in the process of rebalancing my portfolio towards its low range for equities. I am, at this time, not willing to bet the forward earnings "come line" although I am expecting earnings to improve I'm thinking forward looking estimates stated in the article are currently more of a dream than a reality.
And ... so it goes.

FYI: (Sorry St. Jack, the Linkster doesn't agree with your prediction of a 4% return on stocks going forward. As indicated below the historical averages since 1928 are higher, and I believe they will continue in the future at a least a 6% or higher.)
One of the biggest questions facing retirement investors right now is what to expect from stocks over the coming decade.
It matters the most if you're at or near retirement, since that number will affect your ability to finance a reasonable life after work.
That's the disconnect many long-term investors feel right now. After decades of double-digit returns from the stock market, some market observers — among them Vanguard Group Founder John Bogle — warn that stocks could fall short of expectations.
Bogle puts the number at 4%, a return many investors once associated with bonds, not stocks. He predicted lower returns in an interview published by CNBC.
Regards,
Ted
http://www.marketwatch.com/story/what-if-john-bogle-is-right-about-4-stock-returns-2017-04-25/print
S&P 500 Arithmetic Average:
1928-2016 11.42%
1967-2016 11.45%
2007-2016 8.65%
S&P 500 Geometric Average:
1928-2016 9.53%
1967-2016 10.09%
2007-2016 6.88%

FYI: France’s CAC 40 (it’s most widely followed equity index) gained 4.14% today (in local currency), which was its biggest one-day gain since August 2015. Below is a chart of the CAC 40 over the last four years. While the index was set to close at a new 4-year high today when we got into the office early this morning, it actually closed the day at 5,268.86, which is just 0.05 points below its closing high of 5,268.91 reached on April 27th, 2015! French investors will have to wait at least one more day for a new closing high.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/france-germany-test-multi-year-highs/

Any index is a portfolio of stocks, selected by using some rules. I am wondering what is so special about S&P 500 index, that it is very difficult to beat its performance. It seems to me that, at least theoretically, it is possible to create another index that consistently beats S&P 500. One example is CAPE index that showed outperformance for the last 15 years. Probably some smart ETF try to accomplish that, but I am not sure whether they are successful.