Welcome to the MONEYLETTER Hotline for December 5, 2007

Welcome to the MONEYLETTER Hotline for December 5, 2007 "Choppy trendless market" has been our mantra for the past few months, and so far the phrase has stood us in good stead. For two days gloom envelops the market, and then the third day we have a powerful rally that appears to come from nowhere. The answer is that this alternate behavior reflects the facts of our very weak economy, hence the gloom, and the fact that the Fed (and now the administration in the person of the Treasury Secretary) are now working to stem the weakness, hence the buying.

Our sense is that this market wants to go up. But the facts, earnings reports, corporate guidance and many indicators keep pushing it down. Then hope, Fed speeches and potential credit-market fixes stimulate the rallies. What caused today's rally? A survey that Friday's employment numbers will be much stronger than expected. This survey has been very wrong before. But the market seized on it. This is a market, as we said, that wants to go up.

We are now in the season of year-end projections. The economic projections see very slow growth. The earnings estimates, however, still look for good earnings growth for U.S. corporations next year. That makes no sense, but it says an underlying optimism runs through Wall Street. For our part, we remain neutral, and a touch wary on the domestic market, while more positive overseas.

There is no change in our recommended allocations.

New Fund Ratings – For domestic stock funds, Gamco Growth AAA (closed) is a new Buy. Two funds are now rated Sell: Rainier/Small Midcap Equity and Wells Fargo Advantage Small Cap Growth. For international stock funds, Emerging Markets 50 ADR (ETF) is now rated Buy.

The Economy – To quote Briefing.com, the economy is muddling through. Auto sales last month held their own. They were expected to do worse. Mortgage applications rose. The demand for refinance has not collapsed. The latest manufacturing survey was barely positive. But it was positive. The recession talk is premature.

The Stock Market – We still see U.S. stocks facing very strong headwinds. While Asia is slowing we still expect growth there to continue to relatively rapid. We favor equities, and international equities in particular.

The Bond Market --

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

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