Welcome to the June 4, 2008 issue

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Last week the market was worried about oil, but still managed to rise. This week so far the market is worried for the umpteenth time about the financial sector, but it has not managed to rise. We suspect that the difference is that last week was the last week of the month, and some window-dressing was at work. This week is the first week of the month, and window-dressing is in reverse.

As the market sells off this week, fretting about Lehman’ s financial condition or possible downgrades of two bond insurer firms, we think the market is looking in the wrong direction. The economic numbers we have seen this week from the manufacturing and non-manufacturing surveys are telling us that the U.S. economy is showing strong resilience. The top-line numbers were good, but what was even better were the new orders figures, especially for non-manufacturing. These are not the numbers of an economy in a recession.

While the U.S. numbers are a pleasant surprise, some of the overseas markets have had trouble this week. In Eastern Europe, the Russian market fell heavily today mostly over concern about less than expected earnings from an oil giant. The Brazilian market has fallen because interest rates are almost sure to be raised. We see these as temporary setbacks. From our perspective the U.S. market is looking more attractive as the numbers roll in. We continue to view equities as the top asset class for investment now.

There is no change in our recommended allocations.

New Fund Ratings — For domestic stock funds, Wells Fargo Advantage Discovery is now rated Buy. American Century Growth is now rated Hold. Fidelity Fund is now rated Sell. For international stock funds, three funds are now rated Buy: U.S. Global Eastern Europe, Metzler/Payden Europe Emerging Markets, and Fidelity Emerging Markets. Driehaus Emerging Markets Growth is now rated Sell.

Fidelity Fund is in all three Fidelity family model portfolios. In the Fidelity Venturesome and Moderate portfolios we will switch the fund to Fidelity Convertible Securities. For the Fidelity Conservative portfolio, the proceeds from the Fidelity Fund sale will be invested in Fidelity Leveraged Companies, a holding already in the portfolio.

The Economy — The consumer remains the fulcrum of the economy. So far the consumer appears to be holding on despite great difficulties. The tax rebates are helping. Some relief from oil prices will help even more. We see growth picking up as we move into the fall.

The Stock Market —

Bond Market —

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

The next Hotline is scheduled for Wednesday, June 11 at 7pm.

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