The search for fallen angels continues to be a fruitless exercise in 2006. As our table below reminds, all the major asset classes continue to stay afloat.

Yes, there’s a touch of red ink on the ledger, with commodities bleeding a bit this year. But the tumble isn’t quite what it seems, at least not yet.
For starters, we’re using the Goldman Sachs Commodity Index as a proxy, by way of the Oppenheimer Real Assets mutual fund. Alas, this benchmark is heavily concentrated in energy, which comprises more than 69% of the weighting. We prefer the DJ-AIG Commodity Index, which caps energy at a 33% weighting and in the process makes for a more diversified mix of raw materials. There are mutual funds and a recently launched exchange-traded note that track DJ-AIG, but none go back three years, and so for the moment we’re still using Oppenheimer to fill out that slot in our table. In any case, DJ-AIG is up slightly this year, with the Credit Suisse Commodity Return Strategy climbing 1.4% this year through last Friday.
For investors who are widely diversified, the above table offers great news, namely: your portfolio has done well. Diversification is a risk-management system that often means holding asset classes that have retreated. Not this year. But while that makes looking at trailing returns a happy occasion, it complicates the task of rebalancing, i.e., selling winners and redeploying capital to losers (or winners that haven’t won quite as much as others).
Deciding where to redeploy begins with looking at trailing performance, although it hardly ends there. Putting a valuation on the various asset classes and coming up with a reasonable outlook for returns completes the task.
In the here and now, we present only the first step of the thousand-mile journey. Sometime in the near future we plan on launching a premium service that goes the extra miles–an event that will be duly noted on these pages. In the meantime, we’re watching the trends, crunching the numbers and wondering where new opportunities will emerge. Mr. Market will eventually offer a new deal, but for now his lips are sealed and allure is limited.