Someone just reported on another discussion board that Scottrade lowered the fee for equity trades down to $3.95 after a phone call to the brokerage. It could be because they have a large account or that they trade often I don't know. There doesn't seem to be any official news release from Scottrade. Try giving Scottrade a call if you're interested.

Hi Nick de Peyster,
I couldn't agree more! Garbage in, garbage out is always an accurate cautionary summary.
And since future investment returns and inflation rate changes are unknowable unknowns, the sensitivity of retirement success to these unknowns should be explored. Monte Carlo codes that are fast running with simple input features make that exploration easy. Simulations like these alert the potential retiree to the risks of that decision and the survival robustness of his portfolio.
For example, Monte Carlo simulations can be used to guide the construction of a portfolio by demonstrating the survival sensitivity to the portfolio's standard deviation. For any given projected returns, reducing the portfolio's standard deviation increases its survival prospects. Running a what-if case will put odds to that generic truism.
I also fully agree with your statement that Monte Carlo is only a tool that plays a small part in the retirement decision. It provides some odds estimates. When gambling, the player who knows the odds will likely do better than a player who is ignorant of those odds.
A successful retirement is much more dependent on the emotional stability and the flexibility of the retiree over any calculation, Monte Carlo or otherwise.
Monte Carlo does not guarantee happiness in retirement. But it can enhance a retiree's comfort feelings if a bunch of what-if Monte Carlo simulations all produced portfolio survival estimates in excess of 90%. Even more comfort if those simulations yielded estimates above 95%. We can work a portfolio to increase its survival likelihood over an extended timeframe.
Thank you for your contribution. I enjoyed the opportunity it provided.
Best Wishes

Is it just me, or is the chart in the article saying Mr. Forecaster has an enviable record is actually saying otherwise? Unless that statement means he is right 50% of the time, I'm not seeing it, and I'm being charitable.

@hank, as of the end of January he had 12.7% in below investment grade bonds and 6.3% in unrated bonds. While that clearly doesn't have to mean high yield in every case I guess its a decent estimate and it seems like he's not pushing the envelope in reaching for yield. Unfortunately the SEC doesn't require credit quality to be broken out in the quarterly schedule of holdings so you can't find out the history or what he's done in different environments without finding someone who's saved all the historical fact sheets or making your own judgments and trying to add things up manually based on the SEC filings (no fun!).
I think @davidrmoran has a good question about the impact of rotating. Even if the fund gets caught with it's pants down one month it gets another chance the following month. If the cheap sector with the least momentum takes off one month then the fund would own it the following month, unless the other cheap sectors took off as well (good for the fund) or this one sector all of a sudden wasn't one of the 5 cheapest anymore. That's all possible and it might even be fair to assume it will happen at some point, but it also seems reasonable to assume it won't happen all the time.
The fund could also run the risk of chasing its tail or being whipsawed and that's a common risk associated with mechanical strategies based on momentum. I think its worth paying attention to even though its not clear to me that you'd be able to identify the type of market that would cause those problems in order to get out or reduce for a while, nor do I think it's easy to figure out when things have changed and it's time to get back in before you give away enough gains to make the whole effort questionable.
I did look at monthly returns for DSENX (and the results could be slightly different than DSEEX but this will be more conservative) and the fund trailed the S&P 500 in 13 of its 40 months in existence so far, or roughly 1/3rd of the time. It managed to trail the S&P for 3 months in a row once and 7 of the times it trailed were negative months for the S&P out of 13 negative months for the S&P. Aside from the fact that 40 months isn't enough for any real judgments even the data itself doesn't seem to lead to any big conclusions about when you might expect the fund to do worse. Maybe you could say the fund wins a higher percentage of the time when the S&P is positive but it would be useful to see how the fund performs during an extended negative period for the S&P before considering whether its reasonable to have some expectations. If nothing else, though, reevaluating the sectors to invest in each month doesn't seem to have hurt and may have helped to keep the periods of losing to the S&P short.

- I don't see DSENX as an alternative fund at all. It invests in value sectors of the S&P 500
- nothing akin to MFLDX in it's method. No manager guessing at allocation.
- don't see it as black box either. It is pretty well spelled out what it does.
- not going to do the analysis, but I don't believe any mix of CAPE and DBLTX has achieve the same returns as DSENX.
- as far as what can go wrong, value investing can and does lag growth investing from time to time
I definitely enjoyed this thread though. This fund is one of my favorites and now a high percentage of self managed portfolio. I could sit back and say nothing lasts forever or to good to be true and not invest, but the bottom line is something with this formula is working very well. CAPE is a known commodity. Just hope it doesn't end up a group-think fund 3 years from now. I'll take the chance.

>>Again, math denseness on my part probably, but I have been graphing CAPE, DBLTX, and DSEEX since 12/13, and it looks like the bond add (delta) to the last is somehow greater than if you just owned the etn with some fraction of DBLTX. Thoughts?
DSEEX essentially gets the CAPE return for free, without investing any assets, and then gets a fixed income portfolio on top of it with the assets in the fund. That fixed income portfolio is currently shorter duration and higher credit quality than DBLTX.
The return for DBLTX is lower than CAPE so if you couldn't use the assets of the fund twice, as DSEEX does, you would reduce the overall return of CAPE for whatever portion you used for DBLTX. That could cause the effect your talking about but it would be caused by the difference in leverage.
However, if you could use the same assets to invest in both DBLTX and CAPE you would come out ahead of DSEEX... except last year when I guess the shorter duration helped DSEEX after the election made enough of a difference to pull DSEEX ahead of CAPE plus DBLTX by a couple hundredths of a percent.
If you look at the Performance page for DSEEX at M* and add CAPE and DBLTX to the graph to compare you'll see the annual returns for each below. In fact, if you go down to the bottom of the page you can even look at the monthly returns for the 3 funds and for the S&P 500, which is included as the benchmark.

okay, don't forgive my thickness, but the auto-churn is monthly, so is there not some correction month by month?
Correct, no guarantees, no more than of SP500.
Discussion was performance compared with SP500: how could it be worse.

\\\ If the sectors with high CAPE just keep getting higher and outperform those with a lower CAPE ...
forgive thickness, but not seeing how:
>> subdivides the S&P 500 into 10 sectors, [every month] eliminating the 5 with the highest relative CAPE ratios, leaving what we believe are the 5 better value proposition sectors. Index methodology eliminates the one sector with the worst one-year momentum ...

@davidrmoran: "I am having trouble thinking of a scenario where their monthly churn re the four auto-chosen SP500 sectors could underperform SP500 in aggregate."
If the sectors with high CAPE just keep getting higher and outperform those with a lower CAPE, DSENX's equity portion would underperform the S&P, though it would still rise, no? Or maybe the sector they've avoided as a value trap zooms back up before they rebalance...

@LLJB, fine digging.
You are welcome always, but again, David S gets the first and most important credit for uncovering and writing this thing up.
Question re 1:
I am having trouble thinking of a scenario where their monthly churn re the four auto-chosen SP500 sectors could underperform SP500 in aggregate. (Maybe thickheadedness on my part.) Thoughts?
Question re your last point:
Again, math denseness on my part probably, but I have been graphing CAPE, DBLTX, and DSEEX since 12/13, and it looks like the bond add (delta) to the last is somehow greater than if you just owned the etn with some fraction of DBLTX. Thoughts?

As I mentioned, I looked at their quarterly schedule of investments for December and they've used the swaps to get equity exposure with no cash outlay. Almost 80% of the NAV was invested in bonds of one sort or another, 13+% was what I would call cash and 8-% was other. I think, but I'm guessing, that almost all of that "other" is unrealized gains on their swaps. The notional amount of the swaps is very close to the amount they have invested in bonds and cash, so the NAV excluding the unrealized appreciation on the swaps.
So, what are the risks and how likely are they? I'd be happy if others have more to add because I would suggest for a minute that my list is complete.
1. As with any investment other things can do better. If the fund's 4 sector investments don't do as well or better than other sectors then the fund would have a more difficult time keeping up with the S&P 500, for instance. The theory is that CAPE has predictive ability and that will drive better returns. The studies I've read suggest CAPE does have statistically significant predictive power but it doesn't tell you much, if anything, about what will happen in the next month. I know they've done a great job of beating the S&P 500 every calendar year since inception but I'm not aware of anything about CAPE that would make me think it'll always be that way.
2. If the equity markets crash then the fund will perform just like the sectors it's invested in but it should do a bit better thanks to the income from the bonds. They won't have margin calls based on what I can determine and they know when their swaps expire so they should be able to sell bonds in an orderly fashion to pay off losses on those swaps. Without getting into the nitty gritty it looks to me like they have enough highly liquid bonds that they shouldn't end up having to sell less liquid bonds in a fire sale.
3. The worst case I can think of would be something like hyperinflation that drives short term interest rates very high and equity markets down, like in the 70s. If the transition to that was sudden then they'd be holding bonds that would lose value and could more than offset the income they pay plus they'd be losing money in equities just like their index and they'd do worse than the index rather than better. Is that possible? Sure. Is it likely? Probably not very.
4. Could they run into a problem where the counterparty on their swaps, Barclays in most cases, experienced a crisis and wasn't able to pay what the fund was owed? I guess so although you'd have to assume that's less likely today than 10 years ago but that would only eliminate gains the fund had made rather than the cost of its investments, which would depend instead on the counterparty to the hundreds of bonds they own.
It seems to me if you like or believe in CAPE as a "factor", since that's essentially what this fund is, then it's a pretty nice approach they've developed.
@hank, I also know you suggested taking a look would be under the hood of the bond holdings. I will eventually read the prospectus but just glancing through the list of investments and the fact sheet didn't strike me as anything crazy. It looked like a Gundlach bond portfolio and to a large degree I consider that a good thing.

>> The funds are not planning to buy low and sell high. They're planning to track the index, wherever it leads ....
Where would that be?
Reminders:
etf.com:
The Barclays ETN+ Shiller CAPE ETN tracks an index that selects 4 sectors in the S&P500 using longterm relative value and price momentum. The 4 sectors are equal-weighted. Stocks in each sector are cap-weighted. CAPE is a unique offering in the LC segment, as it covers just four of the nine S&P500 sectors at any time. The underlying index equally weights the four sectors with the strongest relative strength and momentum. This exposure is dynamic, subject to a monthly rebalance ...

from @MikeM, a few weeks ago:
If you believe in the axiom buy low sell high, value, this strategy does the work for you.
From the Doubleline site:
Strategy
The Shiller Enhanced CAPE strategy offers exposure to the “cheapest sectors” of the large cap equity markets using an “Index Overlay” technique while the remaining assets are invested in a fixed income portfolio...
...The Relative CAPE Ratio subdivides the S&P 500 into 10 sectors, eliminating the 5 with the highest relative CAPE ratios, leaving what we believe are the 5 better value proposition sectors. Index methodology eliminates the one sector with the worst one-year momentum, to try and avoid the value trap...
Using a total return index swap to gain the exposure to the Barclays Shiller CAPE US Sector Index, the remaining assets are then invested into, what we believe to be, a lower-risk bond portfolio with the goal of trying to outperform cash.

Hi Guys,
Jim Stack is a very defensive oriented money manager. He is a constant worrier which is a positive characteristic for a money man. He is a rock-solid, good man.
For years he has assembled and follows a series of Bear market signals. The current status of those signals is that only one has turned yellow suggesting almost no warning of a Bear market? As of February, Stack's assessment was very similar. Here is the Link to that conclusion:
http://www.moneyshow.com/articles/GURU-45616/stack-on-stocks-a-cautious-bull/
Not much has changed to prompt a reversal in his judgment. His largest worry today is the rather extended length of the current positive trend. I interpret his scorecard as no immediate action needed.
Best Wishes

As of last night's close 70% cash and 30% bank loan. I have been making adjustments based on personal/retirement issues however. The link below from this site may be prophetic. Let's hope that panic buying day last week is not the reverse of that panic selling day in February of 2016 that marked the bottom. The newsletter writers per Market Vane have been at multi decades levels of bullishness.
http://www.mutualfundobserver.com/discuss/discussion/31645/wsj-asks-who-else-is-left-to-buy#latest

A fair number of funds have similar strategies (though they're often tied to the S&P 500 index or something else less "esoteric" than the CAPE index).
The idea is not the the bonds moderate the volatility, but that they enhance returns. That is, you're getting 100% equity exposure for virtually nothing (hence they high leverage multiplier), and you've got cash left over to "enhance" the index returns.
The funds are not planning to buy low and sell high. They're planning to track the index, wherever it leads, but also to add alpha from fixed income. To do that, they have to make more on their (long term) loans than it costs them (short term rates) to buy index tracking derivatives.
I've not tried to work through the details, but this Kiplinger article in the WashPost a few years ago expands on what I wrote, in its description of MWATX and PSPAX, two funds that try to enhance S&P 500 returns through futures.
http://www.washingtonpost.com/wp-dyn/content/article/2008/04/07/AR2008040700711_pf.html
PIMCO claims it has been doing this since 1986.

Pioneer Natural Resources (PXD) and Texas' Permian Basin is a energy game changer for the U.S.
From Article:
"People just don't seem to realise how big the Permian is. It will eventually pass the Ghawar field in Saudi Arabia, and that is the biggest in the world," said Scott Sheffield, founder of Pioneer Natural Resources and acclaimed 'King of the Permian'.
Article:
telegraph.co.uk/business/2017/03/05/permian-shale-boom-texas-devastating-opec/

FYI: Wall Street pros say bull markets don’t die of old age. But after eight years of rising stock prices, being on the lookout for signs of a market peak makes good financial sense.
Regards,
Ted
http://www.usatoday.com/story/money/markets/2017/03/07/bear-market-warning-flags/98695888/

>> if the style of investing were to fall out of favor.
This has been mentioned before. What does it mean and how would it happen? Wholesale bailing from US LC equities? CAPE tracks SP500 quite closely (regularly outperforming it to some extent) over the last 4.5y, 3y, 2y, 1y, and ytd. So 'style of investing' decline would entail overall slump in SP500, right? Anything else?

Thanks for the provocative question @LLJB. A good one for @BobC or @msf to answer.
I'd like to play around with it (more for self-education than anything else), if you don't mind. DSENX is what I'd consider a "black-box" fund. To me the term to characterizes funds which (1) make extensive use of derivatives and/or (2) allow an unusually high degree of latitude on the part of the manager. I'll assume DSENX has the ability to short assets (related to use of derivatives).
Derivatives are subject to numerous risks. The linked summary prospectus http://www.doublelinefunds.com/wp-content/uploads/Shiller_Enhanced_CAPE_Sum_Pro.pdf prominently defines some of those. The Class N .89% ER is quite reasonable for this type of fund. Reported turnover is 67%. My understanding is that brokerage/trading fees are not reflected in a fund's ER, so expect a much higher amount of hidden cost compared to a plain vanilla equity fund.
If you create a 100% exposure to some type of equity index(s) through use of derivatives, while at the same time investing a significant portion in fixed income, than of course you're leveraging-out the equity exposure. Price swings on the equity side should be exaggerated compared to actual equity values. The managers, as you suggest, probably count on their fixed income holdings to moderate or offset the inherent equity volatility. Lipper's breakdown of holdings:
Bonds: 42%
Equity: 33%
Other: 18%
Where I'd take a second look, since you seem very knowledgeable about the equity orientation, is at the types of bond holdings allowed. It appears from the prospectus that fixed income (average maturity out to a maximum of 8 years) may include CMOs, high yield, floating rate, and just about anything else the manager wants to buy - including the kitchen sink. A lot of funds will try to hedge equity fluctuation with high quality bonds. This latitude in the fixed income end is a bit concerning to me. But I'm not Jeff Gundlach. :)
Not entirely sure what you hope to achieve through this fund. I've used black-box funds with varied success over the years, usually as hedges against equity/bond losses - but nothing quite like this one. Oppenheimer's ill-fated commodities fund (QRAAX) used derivatives to invest in various commodity futures. At times the fund would report bond holdings as high as 110% while still being fully exposed to commodities! The fund I replaced it with, Capital Income (OPPEX), is also a bit of a black-box. I trust the current manager. But in the wrong hands the fund could take a Kamakize dive at just the wrong time. Those buying DSENX are likely making a similar calculation based on Gundlach's excellent record.
FWIW: Lipper scores (3-year + old) DSENX very highly, giving 5 (its highest score) for "capital preservation" among "diversified equity" funds. These ratings are based on performance comparisons rather than any in-depth analysis. So tables could turn quickly, I suspect, if the style of investing were to fall out of favor.

FYI: He correctly predicted the past six months’ market performance. His outlook for the next six months will disappoint you.
The U.S. stock market will be trading right where it is today in six months’ time — at 2,370 on the S&P 500 Index.
That’s the latest six-month forecast from Sam Eisenstadt, whose short-term stock-market-timing model is the best I’ve seen in my four decades of monitoring the investment-advisory industry.
Regards,
Ted
http://www.marketwatch.com/story/sam-eisenstadt-a-supreme-forecaster-has-bad-news-for-stock-investors-2017-03-07/print