>> So DSEEX may not resemble balanced funds so much as equity funds with "a little extra"
Yes, this not-really-like-hybrid take is the nut I return to, and always underlies my original bond queries. To return, empirically, to performance: since DSEEX inception, it is close to impossible to find any period where a combo of any proportion of CAPE and PDI (to choose probably the most aggressive and successful of the opaque Pimco offerings, although it is CEF with a premium) does as well as DSEEX.
As puzzling, the last year-plus its bond portion has "detracted," meaning that since 4-5/17, CAPE has marginally outperformed DSEEX.
Also not seeing that it is truly more volatile; as I noted earlier, its swings do not to me appear to be more dynamic, and its UI per MFO Premium is the same as steady TWEIX.

However they trail Danoff's starship fund FCNTX which is up 8.4% YTD, has a lower ER and does not require an advisor to escape paying the front-end load. But to each their own.

CAPE cannot be traded at ML and maybe not at some other brokers, not sure, which irks me.

Looking at comments on other boards, it seems that Merrill Edge generally blocks online trades of any ETN. Nevertheless, you can trade ETNs there, or so says a poster in this M* thread.
The catch is that you have to call a Merrill broker to do it. Or you can go elsewhere to buy the ETN for a few bucks, such as $4.95 at Schwab or Fidelity. CAPE is available online at both.
Note that brokers often block sales of a few higher risk securities. Here's a 2016 article talking about restrictions imposed by Fidelity, Vanguard, and TD Ameritrade:
http://www.investmentnews.com/article/20160623/FREE/160629978/fidelity-blocks-opening-trades-on-several-etf-products-citing

I would think that investing in DSEEX would give similar diversification to a vanilla hybrid fund that had a roughly 50/50 stock/bond mix. The difference is one of magnitude of performance (i.e. getting hammered harder).
In DSEEX, you get full exposure to CAPE. That means that if $10,000 invested in CAPE were to drop 10%, losing $1,000, then you'd expect a $10,000 investment in DSEEX to similarly lose $1,000 before even looking at the gains or losses on the bond side.
That $10,000 investment in DSEEX, aside from getting you stock exposure, buys nearly $10,000 worth of bonds in the fund's portfolio. If bonds drop 4%, your $10,000 worth of bonds lose $400.
So the $10,000 investment loses $1,000 + $400 = $1400.
This is as one would expect:
100% stock exposure x $10,000 x 10% loss + 100% bond exposure x $10,000 x $4% loss
= $1,000 + $400
= $1400
= (10% + 4%) x $10,000 = 14% x $10,000.
In the vanilla 50/50 hybrid fund, that $10,000 invested buys $5,000 worth of "real" stock and $5,000 of bonds. When stocks decline by 10%, the $5,000 worth of stocks drops $500 in value. When bonds decline by 4%, the $5,000 worth of bonds drops $200 in value.
So the $10,000 investment loses $500 + 200 = $700.
This too is as one would expect:
50% stock exposure x $10,000 x 10% loss + 50% bond exposure x $10,000 x 4%
= $500 + $200
= $700
= (50% x 10% + 50% x 4%) x $10,000 = 7% x $10,000.
Note that DSEEX is likely not providing the full 200% exposure (100% to CAPE, 100% to bonds), but it's still a reasonable approximation. DoubleLine writes that while: "Each $1 investment seeks to obtain $1 of exposure to the CAPE® Index ... and $1 of exposure to the underlying portfolio of bonds ... market fluctuations likely will preclude full $1 for $1 exposure between the swaps and the fixed income portfolio.

Yes. For instance, while the S&P 500 was busy dropping 10% between Jan 26 and Feb 8, CAPE dropped 9.07% (from 125.85 to 114.44), AGG (pick your own proxy for DSEEX's bonds) fell 1.06% (using Yahoo's adjusted closing prices of 107.98 and 106.84).
In that same stretch, DSEEX fell 10.04% (using Yahoo's adjusted closing prices of 16.54 and 14.88). That's about as close to an exact sum of the two markets (using CAPE, not S&P 500) as you can get. Both markets dropped and DSEEX dropped accordingly.
Since the stock market has until recently gone straight up during DSEEX's lifetime, there aren't many stretches where both bonds and stocks have fallen together.

@LLJB has done a great job in describing DSEEX, both here and in earlier threads such as this one.
I agree that the use of swaps doesn't significantly affect the risk in and of itself. I believe that the swaps used by the fund involve only net performance. (See, e.g. equity swap into here.) That is, the fund gets an income stream equal to the performance of the index (if the index goes up 1% it gets 1% of the swap value) while it pays the counterparty a fixed rate.
So if the index goes up more than the cost of the swap (usually the case) the fund nets some income. If the index goes up less than the cost of the swap (or even goes down), then the fund owes the other side some money, net.
All that is at risk with the swaps is the net income since the last time the two sides settled their debts (called a "reset"). These resets happen periodically so there's just a limited amount of income at risk should the other side default.
IMHO the fund's added risk comes from its use of leverage. Not in the traditional sense of borrowing money to invest, but in using $1 of investor's cash to gain $1 of exposure to the index and $1 exposure to the bond market. That's where the derivatives come in. The risk is from the leverage, not the derivatives. The derivatives are simply a means to that leverage.
Almost no cash is needed to own or service the derivatives; the vast majority of the cash is used to invest in a bond portfolio. Should both equity and bond markets drop, this 2x exposure can hammer the fund. (Should both go up, the fund can soar.) As wxman123 noted, TANSTAAFL.
As DoubleLine writes:

Each $1 investment seeks to obtain $1 of exposure to the CAPE® Index via swaps and $1 of exposure to the underlying portfolio of bonds managed by DoubleLine. ... This portoflio has no financial leverage because no money is borrowed .... There is implicit economic leverage due to the use of unfunded swaps ....

https://doubleline.com/dl/wp-content/uploads/6-30-2016_CAPEStrategy-10FAQ_JSherman.pdf

CAPE cannot be traded at ML and maybe not at some other brokers, not sure, which irks me.
Fwiw, DSEEX / DSENX profile is interesting to compare w/ say TWEIX (MFO Premium), and they have the same UI....

This is very helpful @LLJB. There are two ways to invest in the CAPE strategy, through the OEF or through the Barclays ETN, CAPE. I don't think I understand fully why there are warnings about investing in ETNs; it seems to boil down to assessing the stability of the issuer of the debt instrument (Barclays). For the investor, there is an essential difference, in my opinion. ETNs pay no income or capital gains, but OEFs do. In the case of DSEEX/DSENX, distributions are monthly and there are annual CG payouts. I don't see any notable difference in the overall returns of the two instruments. The ETN acts like a growth stock that pays no dividend, but CAPE is not that. Trading CAPE can be a bit of a challenge as the spreads are wide and the bid/ask prices reflect current market sentiment and are often at variance with the last price quoted. Maybe others know more about the ETN structure as it pertains to this strategy. I like it for a taxable account if I don't need regular income from it.

Thank the Lord these factor articles never mention CAPE and the fund based thereon, which handily outperform all of the above (or appear to; could not find graphs for some).

But as you like to tutor us, averages can be so misleading. (And rates mean little.) The tax on my old 3ksf ranched-out cape worth a little over $1M in a town next to Weston Mass. is within a few percent of the average of the NJ towns listed above

You wrote that taxes in eastern Mass suburbs were very close to the NJ level. I'm fine discussing whatever metric you had in mind when observing that the levels of taxes were close.
Rates mean little when they're just the "official" figures. The state rates given in the USA Today article were "effective" rates, i.e. actual percentages after exemptions, abatements, whatever chicanery goes into one's tax bill. For example, the official rate for California is 1% (Prop 13), while the effective rate in the article is 0.77%. That's because Prop 13 caps annual increases, so the effective rate of each home is reduced over time. (California is the oddball state where property taxes are standardized.)
Geographically, you must be right on the Weston border: "Danoff my neighbor in Weston"
https://mutualfundobserver.com/discuss/discussion/comment/92578/#Comment_92578

Oh, I know; there are worse. But as you like to tutor us, averages can be so misleading. (And rates mean little.) The tax on my old 3ksf ranched-out cape worth a little over $1M in a town next to Weston Mass. is within a few percent of the average of the NJ towns listed above (just under $19k compared w/ just over $20k). Everything will be higher this year, of course. I must ask my NJ friends in some of the above towns about the reality of "losing their tax base as high income earners flee". One argument is that this will be a good thing in the long run.

FYI: The level of stock markets differs widely across countries. And right now the U.S. is leading the world. What everyone wants to know is why—and whether its stock market’s current level is justified.
We can get a simple intuitive measure of the differences between countries by looking at price/earnings ratios. I have long advocated the cyclically adjusted price/earnings ratio, or CAPE, that John Campbell, now at Harvard University, and I developed 30 years ago.
Regards,
Ted
https://www.barrons.com/articles/america-the-worlds-priciest-stock-market-1517019872

I looked at alternatives ( L/S, Merger, futures, even market neutral) a year or so ago, because I thought stocks and bonds were overpriced even then and cash paid so little. I came to the same conclusion about L/S funds as David but BPLSX was closed (somehow SFHYX escaped my radar) so I started a position in it's global cousin BGLSX/BGRSX. It has done pretty well and seems to be positioned to avoid huge draw downs.
All of the other alternatives are reasonable, ie more cash, options etc, although the performance of FPACX has not inspired confidence in the last three years ( it lost more than the SP500) in Jan 2016, making me wonder what was involved.
One of the problems with mutual funds is you are investing in someone else's ideas about returns, safety and risk. Usually they are consistent, and reliable but not always. Of course the farther away from "bread and butter" diversification ( major asset classes, cash as ballast etc ) the more of a black box.
Certainly a portfolio with 30 to 50% cash will be significantly less volatile, but your returns will lower. There is a greater argument to made for cash with a 25 return now than a year ago
The key is 1) know what return you need and be sure you won't stick your neck out and get burned and 2) know exactly what you will do when a crunch comes and the market is down 20 % . If you can't stand the heat...

Yes, am also looking hard at DGRW, wondering about it vs CAPE for placement of some burning cash. Although Malkiel now has me thinking about IEMG and ESGE....

I moved some DSENX into DLEUX a few months ago, a small amount to start. My thought was; I like the CAPE theory, so if there is better value in Europe then CAPE should work well there. Maybe better than US.
If I compare the US version to Europe, The U.S version has done better, but not by a lot. But I take that with a grain of salt because domestic stocks have all been on a tear. so maybe not a good comparison. If I compare it to FEU, a broader Europe ETF, it under performs substantially over the last 3 months, 1.7% to 6.1% for FEU and by about 5% over one year, 23% for DLEUX versus 28% for FEU.
I don't know what it all means over this short time, but I don't have a huge stake in DLEUX to give it much worry. I don't plan to move any more DSENX to DLEUX at this point, but I'm not going to sell either. Still an experiment.

@davidmoran: are you the only one on this board who owns this fund? I own a lot of DSENX, but I have been unimpressed with the European version of CAPE. What I did buy last year were BCVSX and MOTI.

As it should have. He was talking about stocks, and there's a big difference between being a customer of a company and knowing a company. It's the latter sense in which he meant one should know what (company) one is investing in.
Still, when it comes to industries, knowing means something different. Working in an industry can give you a good sense of the health of that industry if you are attentive.
I was wondering whether you had any thoughts about how the CAPE index model will be adjusted for the new sector since this is a thread about DSENX. When real estate was carved out of financials, the CAPE index was modified to use a non-SPDR index fund, IYR.
I imagine that was done because it needed an index fund with a ten year history, and by definition, XLRE was a new fund without a history. Though IYR might have been chosen because it was more inclusive, holding mortgage REITS such as NLY that XLRE excludes.
However, that might mean that the CAPE index added a new group of companies (mortgage REITs) that it had not tracked before. A discontinuity. Regardless, another imprecision arose - the old history of the financial sector included real estate, while the sector itself no longer did. Was any attempt made to correct for this (e.g. recalculating the financial index history after pulling out the real estate component)?
This time things are even more interesting. The CAPE index tracks XLK for technology, but XLK combines technology and telecom. That's why there are ten "sectors" that the CAPE index uses, while there are eleven S&P sectors.
It is possible that State Street will decide to keep XLK as it is, in which case the CAPE index won't have to do a thing (other than watch the technology+communications "sector" continue to grow in weight). But what if State Street does finally create a communications Select Sector SPDR? There won't be any history for the new SPDR (just as there was no history for XLRE). Would the CAPE index turn again to a non-Select Sector SPDR? Also, as happened with XLF, the history for XLK will no longer precisely represent the new XLK after communications companies are carved out.
DSENX in turn will need derivatives that track whatever index or indexes the CAPE index chooses to track. Will they exist?
And they say that a machine can run an index fund.

@Ted, Thanks for the article.
Last line from the article say it all:

“CAPE tends to be too pessimistic and PEG may be too optimistic,” Yardeni said by phone. “The truth may lie somewhere in between.”

FYI: By virtually any measure, U.S. stocks are expensive. Under one especially harsh lens, the cyclically adjusted price-earnings ratio popularized by Robert Shiller, equities relative to 10 years of profits are more stretched than any time in a century, save the dot-com era.
But there’s still a methodology that bulls can take comfort in -- price not just to earnings, but to earnings growth. Favored by legendary investor Peter Lynch and known as the PEG ratio, the technique takes the standard valuation snapshot and adds time -- time for a stock to grow into its price.
Regards,
Ted
https://www.fa-mag.com/news/forget-cape-ratio--peter-lynch-tool-has-s-p-500-getting-cheaper-36555.html?print

@Old_Skeet, your sector momentum strategy sounds exactly like that momentum news letter you used to link a few years ago. Are you copying that guy's strategy? Can't remember the name of the letter or the guy who ran it. Invest in the 3 leading sectors and replace sectors based on current strength.
Kind of why I like the CAPE strategy of DSENX albeit the opposite strategy. They do do it better than I could.