Welcome to the MONEYLETTER Hotline for November 20, 2007

The Fed gave us the first installment of its new expanded view of the economy to be issued quarterly. One aspect of the new view stood out for us, and that is that the Fed has turned more cautious about the outlook. Compared to June, the Fed has moved its outlook to the slower side, and the lower end of the range of their forecast for next year has been reduced the most. The lower end of the Committee's forecast for next year is now 1.8% annual growth as opposed to 2.5% in June. 1.8% is very slow indeed.

Nothing the Fed has said points to any near-term action on their part. A forecast or two on Wall Street, by forecasters we respect, look for even slower growth than the low end of the Fed's range. Reading the Fed, there is no doubt that the Fed is very conscious of the weakness of the economy. The Fed has said (after its last meeting) that it believes the downside risk to growth and the upside risk to inflation are equal. Reading the latest minutes and the forecasts, we think the Fed is more concerned about very sluggish growth than anything else. We think we are in for a further interest rate cut either this year or early next. The cut will come from a reluctant Fed.

There is no change in our (new) recommended allocations.

New Fund Ratings – For domestic stock funds, three funds are now rated Buy: American Century Ultra (closed), Vanguard Growth Equity, and Turner Mid Cap Growth. Two funds are now rated Sell: Oberweis Emerging Growth and Pin Oak Aggressive Stock. For international stock funds, Quant Emerging Markets is now rated Hold.

The Economy – The credit difficulties simply will not go away. Surprisingly in the face of the difficulties, housing starts rose in October. Permits did decline, however, taking some of the shine off the increase. One disturbing development is that evidence from the commercial real estate market indicates that market is feeling the heart of the credit tightening. The sector has, until now, held up against the weakness elsewhere in real estate. The economy will be struggling to grow in the immediate months ahead.

The Stock Market – The stock market is acting as expected. We have looked for a flat, choppy market, and that is what we are getting. There is too much profit uncertainty and sluggishness for stocks to mount a meaningful rally.

The Bond Market –

The Select Portfolio – There is no change for this portfolio.

We wish you all a most delightful Thanksgiving holiday.

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