Welcome to the MONEYLETTER Hotline for December 19, 2007

Investors continue to remain nervous as the year winds down, and well they might be. On the whole we are seeing many disappointing earnings reports. The disappointments are not unanimous, but they are the majority. At the same time we get downgrades as happened today to two bond insuring firms.

What we find odd is that the market remains stubbornly skeptical of the efforts of the Fed and other central banks to ease the credit crunch and get the financial markets back to some sort of normalcy. A central tenet of our investment approach is never bet against the central banks. Perhaps this is a lesson that every generation of investors needs to learn.

Because of the credit woes and the troubles in the housing market, the word recession is now being tossed around freely. The economy is obviously entering a period of very slow growth, and at that rate of growth the economy could well slip a hair or two into negative territory. Technically it could be called recession. But the difference between that and very slow growth is negligible, except to the scorekeepers. If anyone wants to call that recession, so be it. Meanwhile, as the selling continues, values are building up in the U.S. market. There is much too much uncertainty now, but as the clouds lift, the U.S. market may be the place to be. We still like Asia and the emerging markets.

There is no change in our recommended allocations.

New Fund Ratings – For domestic stock funds, three funds are now rated Hold: Wells Fargo Advantage Discovery, Old Mutual Emerging Growth, and Jordan Opportunity. Janus Venture is now rated Sell. There are no changes for international stock funds again this week.

The Economy – As we said in a previous Hotline, the economy still appears to be muddling through. For example, the N.Y. Fed’s report on manufacturing was down, but still positive. Housing, of course, is still in a swoon, but the rate of decline may be slowing. Perhaps more important than the activity indicators is the efforts the Fed is making to ease the credit squeeze. Today’s auction of loans attracted much interest. Tomorrow brings a second auction. The recession talk is premature.

The Stock Market – The stock market will remain choppy for some time. We have reserves, and now is the time to sit on them. Opportunities are being created right now both here and abroad. 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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