Welcome to the MONEYLETTER Hotline for January 23, 2008

It has been a tumultuous week in the financial world since the last Hotline. Only today, and only in the last half of the trading day, was there any sense that rationality had returned to the U.S. market. An earlier sign that perhaps reason was returning to the markets was the rally in Asian markets in response to the Fed's dramatic 75-basis points (3/4%) cut in the short-term rates. Otherwise the market has faced constant and persistent selling as the bears and short-sellers pounded away at the confidence of the investing public.

The most bizarre aspect of the week was the wave of selling from Asia premised on the belief that the U.S. economy was heading for a devastating recession. True enough, last week's economic numbers were dismal, topped off by a Philadelphia Fed manufacturing report as gloomy as any reports have been for a long time. The economy is close to stalling. But to conclude then that it is time to push the panic button over a substantial recession is making a huge and unjustified leap.

The Fed's action at least caused some rethinking in Asia. We believe it will cause some rethinking here too, but there is resistance. The bears have seized control of Wall Street, which follows the latest market trend. With a downtrend firmly in place, Wall Street automatically pooh-poohs any action that might turn the trend around. We think the naysayers are wrong. The stimulus will work and we will see that by the last half of this year. Until then we will experience a tug-of-war between the bulls and the bears. We believe patience now will be rewarded later.

There is no change in our recommended allocations.

New Fund Ratings – For domestic stock funds, Janus Enterprise is now rated Buy. Two funds are now rated Hold: USAA Growth and Gamco Growth AAA. Wells Fargo Advantage Discovery is now rated Sell. For international stock funds, T. Rowe Price Emerging Europe and Mediterranean is now rated Buy.

The Economy – The economy now depends on the effects of the stimulus, which we believe will be positive, but it will need some time to show. The December economic numbers will be weak, but do not be misled. They are numbers prior to the Fed cut. We also need the promised stimulus from tax cuts and rebates. Do not underestimate the amount of stimulus coming. The consumer needs all the help she can get. We look for a very weak economy this quarter, with a pickup as we go through the year.

The Stock Market – The stock market has been focused on the woes of the financial system. Today's rally was sparked by efforts to shore up the bond insuring firms. The good news is that the Treasury is working to prevent the unraveling of the financial structure. The Fed's action in lowering rates is a key element in holding the system together. We continue to favor equities, even more now.

The Select Portfolio – S&P Latin America 40 is to be sold and replaced by U.S. Global Gold Shares.

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