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Truthfully I thought that this fund would hold up better during times of stress like we're experiencing now but it seems to be doing no better at best. Does anyone with more knowledge or insight care to offer their thoughts? Thank you.
I'm sure you know all this already, but... It uses derivatives to get exposure to both the stock and bond market with the same money, so it's leveraged, in a way -- and when both the stock and bond markets get hit, it will take a hit on both sides and fall more than just the stock market alone.
So it's poor performance now makes sense to me. We're paying the price today for the benefits this leverage gave us (I own it) before.
What I don't know is what to think of it going forward. Presumably Grundlach will add value over the long term to the bond side, as he's always done, but I wonder if its super-simple quant model (rebalancing based on CAPE) will make any sense in the future?
I think a lot of quant models will need to be completely rejiggered, as historical patterns will matter less in a coronavirus world.
But like you, I'd love to hear more from others on this fund.
It is a value play, if I understand the methodology correctly. M* calls it a blend. Lipper calls it a value. Value has been hit pretty hard lately.
I don't really think of it as a quant fund. More of a sector rotation strategy. From their description:
Their holdings as of February 29:
I added to the position in my IRA on the 18th when Treasuries were going haywire. But I'm pretty much fully invested there now. I would add it to my taxable if I could. I really like reinvesting those monthly dividends.
brutal, brutal time, even if, as everyone points out now, you went heavily into bond funds of all types for safety and near-future cashflow needs
I will be selling gsy and mint over the summer, presumably at some loss, just for cashflow
vcsh will be next
So there seems no particular or new reason to jettison CAPE, whether you understand it or not.
Certainly the DSE_X bond sauce has failed to add value for some time now.
It is remarkable to see (for this short, monthlong span) DVY do a full ~9% worse than VIG and OUSA, since the first two are so widely touted.
Of course it is mindblowing to see everything down like 26% in ~31 days, even after today's pop.
Wait'll this new state gets really serious. I just had a college friend die last night of covid19, healthy, 72, took ill 2w ago, on ventilator 12 days in a highly regarded NJ hospital, best care, seemed to be rallying, cardiac arrest in the middle of the night. One of the 780 US deaths thus far. His family and friends are stupefied and (of course) worse. Alan Finder helped me unpack my cartons of LPs and whiskey 55y ago into our freshman dorm.
Wait till we are discussing all this in a month or three or six, following the "president"'s Easter goal and back-to-work order.
Complete coincidence that we both trained to be academics and teachers, argued about history of ideas (and politics) 50+ years ago, and were teachers for a while, and then each separately wound up in journalism and editorial work forevermore. It is shocking (literally) to have someone in good health die like this. I sure am hoping everyone here is able to stay mostly safe and scrubbed and more or less isolated even in their declining wealth.
I hadn't realized until one of your earlier comments how DSENX has consistently underperformed CAPE. Yeah, I own DSENX too, not a big part of my portfolio, but big enough to hurt.
Gundlach's a smart guy. If he can't add value on the bond side... maybe it's time to just buy index funds and call it a day.
I bought into DSENX shortly after you brought it to the attention of this board, so I had plenty of good years with it too. I understand the CAPE side of it and trusted the secret sauce bond side would help during a bear. Obviously wrong. I feel better now after moving that money going forward with AKREX and YAFFX.
Yes, the last year and two the DL bond sauce has not helped, has done the opposite, slightly. (It was DavidS who brought it to our attention, as so often!) But it is the severity of this recent bond plunge which has made DSE_X finally underperform CAPE for its lifetime.
I myself am holding and think (hope) y'all are being short-termers, but I understand the sentiments. I might have bought or switched to CAPE instead at some point if it were available at ML.
It is not easy to see in this storm significant value added by anyone, Hogan-Putnam, Yackts, Akre; I observe that PRBLX is back to being a notable leader. But good ol' SPY has outperformed too, so to speak, depending on what time slice you choose. Hang in.
So if you are a long-termer (at 73- I have only so many terms left) I believe you will be hard-pressed to find something reliably outperforming SPY over time. Would like to know examples.
Did not look to MFOP to screen for LCG like the named winners from TRP and Fido, also Polix and Akre, yet I am sure they have outperformed CAPE. But who else?
Given AGG's relative outperformance recently, am thinking it plus CAPE in some proportion could be my new retirement grail.
(I realize this simply reposes your already posed question.)
Also depends whether you are comfy w ETNs, which are not in the MFOP database, at least this ETN, so you can't check UI and such.
I guess my advice would be dive into CAPE all by its lonesome, sure. Or split evenly w VOO / IVV so you can have fun tracking outperformance --- if it continues.
Did you ever see this from a couple years ago (SMWilliams seekingalpha, cached)? Sounds unlikely.
This ETN could essentially play a similar role to an overall index equity ETF as a core portfolio fund with better risk-adjusted returns. However, since this is not an ETF but an ETN, I'd be hesitant with recommending it due to the fact that it has no underlying holdings but instead is an unsecured debt obligation only. The ETN only has 4 underlying indexes that it tracks in equal weights every month, so for an investor who wants to track the ETN but is uncomfortable with the ETN structure, you can see the indexes that it tracks online and replicate it by buying ETFs that cover those sectors, currently 25% consumer discretionary, 25% health care, 25% industrials, and 25% technology. The ETN has a 0.45% fee, Vanguard's Sector ETFs have a 0.10% fee, so depending on trading costs, you might end up paying less fees and you'd own an actual interest in the sector's stocks rather than just a credit note.
To replicate this ETN in its current state with Vanguard ETFs, you'd calculate the total equity allocation you have and buy 25% of it in each: the Vanguard Consumer Discretionary ETF (VCR), the Vanguard Information Technology ETF (VGT), the Vanguard Healthcare ETF (VHT), and the Vanguard Industrials ETF (VIS) - which is what it holds as of September 29. Every month you'd check back on the website (or on this site which might have more up to date information on its holdings) and see what portfolio changes have been made and adjust your own portfolio. Although this would take much more time than just buying a simple static ETF portfolio, which should be enough for most people, but if you want to optimize your portfolio for less risk, this could be a relatively simple adjustment to make.
I think they are quite honest in stating the risk of losses. I looked at a 1-month chart of DSENX and CAPE on Yahoo and found the former was down -29.46%, while the latter declined -17.93%. CAPE's performance for this period is almost exactly the same as SPY. My bad is owning more of the MF than the ETN. It would take some time for me to figure out my total return in several different positions, with different purchase and sell dates.