Welcome to the MONEYLETTER Hotline for December 12, 2007

Stocks traded sharply higher early in the day today in response to the decision by five North American and European central banks to add cash to their banking systems to help ease ongoing credit concerns. But after the initial surge, the markets were swayed more by the troubles than the potential fix. The Dow Jones Industrial Average reversed an early 272-point gain, dropped into the red late in the day, and then rallied at the bell to finish up 41 points at the close.

The Federal Reserve Bank is coordinating the liquidity increase with the Swiss National Bank, the Bank of Canada, the Bank of England, and the European Central Bank. Today’s action comes on the heels of yesterday's 294-point decline in the Dow, which was the result of disappointment in the Fed announcement of a 1/4 percent interest rate cut. As we mentioned last week, the domestic stock markets are currently locked in a herky-jerky pattern. Over the last month, we have seen 4 days of 200-plus-point declines, and three such gains. The basis for the trendless market: our weakening economy and accommodations by the Fed.

Economic weakness is being confirmed in recent fourth-quarter earnings announcements, particularly in the banking sector. Bank of America's Chief Executive Officer Kenneth Lewis said his company's fourth-quarter results would be quite disappointing due to writedowns in the home loan market. Like us, Lewis expects improvement in the second half of 2008. We remain somewhat wary on the domestic market in the near term, while more positive overseas.

There is no change in our recommended allocations.

New Fund Ratings – There are no fund recommendation changes this week. The Economy – Action by the Fed to commit up to $24 billion in Europe and $40 billion in the U.S. are "designed to address elevated pressures in short-term funding markets" according to a statement accompanying the action. We continue to believe recession talk is premature.

The Stock Market – The market (as measured by the Dow Industrials) is down less than one percent since the 1st of November, but it's been an unsettling ride to get there. We continue to favor equities, and international equities in particular. Most European markets finished higher today after hearing about the Fed's funding plan. We also emphasize the need for discipline during trying markets like these.

The Bond Market – Treasuries prices dropped today in the wake of the liquidity announcement. 2-year notes increased by 17 basis points and 10-year yields went up by 9 basis points as of 3:30 this afternoon.

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

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