Welcome to the April 23, 2008 issue

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Earnings season rolls on, and the season has been favorable for investors. Earnings have come through with something like 65% of the earnings beating expectations. As we said last week part of the performance is because expectations had been driven so low by fear; fear that dominated Wall Street during much of last quarter. But we believe that fear-driven expectations explain only part of the earnings performance. The other part is that overseas growth—and that means Asia—is providing a market for American firms.

As a result we are not seeing production plunge, as we would expect to occur in a recession. In fact, business equipment is holding up very well. This is a surprise and undoubtedly reflects the strength in export demand that we find showing up in the earnings reports and outlooks.

While the earnings have been encouraging, the word from the commodity pits has not. Oil prices are a true problem, and there is not much to be done about them. They can and will further weaken an already weak economy. The outlook now is that the oil price will weaken as the year proceeds. But forecasts have been wrong so far this year. We are encouraged by the behavior of the world stock markets recently. There is no question that confidence is returning. Bad news is not ignored, but is being taken in stride. We continue to see equities as the asset of choice in this environment.

There is no change in our recommended allocations.

New Fund Ratings — For domestic stock funds, seven funds are now rated Buy: Brandywine Blue, Bridgeway Aggressive Investors 2, Heartland Value Plus, U.S. Global Holmes Growth, Vanguard Primecap (closed), Fidelity Growth Company (closed), and GAMCO Growth AAA (closed). Two funds are now rated Hold: Fidelity Growth Discovery and Hussman Strategic Growth. For international stock funds, four funds are rated Buy: Janus Overseas (closed), T. Rowe Price Emerging Europe & Mediterranean, Harbor International, and Janus Global Research. Fidelity Global Balanced is now rated Hold.

The Economy — Next week brings a Fed meeting. We look for only a token rate cut at this time.

The Stock Market —

The Bond Market —

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

The next Hotline is scheduled for Wednesday, April 30th at 7pm.

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