S A

'False' Diversification May Prove Costly In 2007

Thank you for the very intersting article.

A few questions if I may:

The article mentions the following general equity categories used to create the portfolio:
" * U.S. stocks (married with hedging strategies discussed on page 3)
* U.S. bonds (varied durations)
* Physical commodities (such as oil, wheat, corn, etc.)
* Commodity stocks (energy, base metals, etc.)
* Timberlands
* Physical gold & silver
* Gold stocks
* U.S. commercial real estate
* Foreign commercial real estate
* Foreign bonds
* U.S. dividend-paying stocks"

1. Can you please describe what you use as a proxy for each category?

2. Can you please add more details on the weighting of each category?

3. The article studies the performance of the portfolio during only one market cycle - specifically, only one bear market period is examined (2000-2002). Have you studied the performance of the same portfolio during other bear market periods for the S&P 500? In other words how do we know that the portfolio is not a one "trick pony" tailored to one time period and may not work for the next cycle?

Thank you,
SA.