Welcome to the July 2, 2008 issue

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Markets worldwide – and that includes our own – are showing the kind of pessimism that we see in a full-fledged bear market. We have not yet seen the kind of capitulation that marks the final stages of a bear market, but we have come close. Some well-regarded market strategists are making the call that the market is at or very close to a bottom. We do not make such calls, but we certainly go along with the view that the market is deeply oversold and that any positive news, particularly with regard to oil, should trigger a meaningful rally.

The market is acting as if the economy is in the middle of a recession that is far from over. Or inflation is raging. Neither is occurring and, in fact, the economy continues to surprise. The market remains blinded by oil. Oil is a legitimate worry. But it remains hard to believe that the current oil price is sustainable. No one in the industry believes so.

Meanwhile, the employment report will be released tomorrow. The market is braced for bad news. So far these past weeks the market has overdone the gloom and been positively surprised. We expect the pattern will repeat. We continue to see equities as the preferred asset class as we look out over the next six months.

There is no change in our recommended asset allocation

New Fund Ratings – For domestic stock funds, Bridgeway Aggressive Investors 2 is now rated Buy. For international stock funds, two funds are rated Hold: American Century Global Growth and Metzler/Payden European Emerging Markets. T. Rowe Price Emerging Markets Price is now rated Sell. There are no other changes.

The Economy – Despite the many obstacles, the economic numbers continue to reveal an economy pushing ahead slowly. The latest manufacturing survey showed activity nosing into positive territory in June. This was unexpected. In construction spending, private spending (other than for housing) also surprised. Underneath all the worry and all the negative chatter, the economy has managed to move. We expect slow growth to continue.

The Stock Market – Pessimism is in total control. There are worries, yet prices continue to offer good value. A small shift in sentiment is all that is needed to set a rally going.

Bond Market –

The Select Portfolio – Claymore/BNY BRIC (ETF, Ticker Symbol: EEB) is to be sold with the proceeds reinvested in Rydex Energy Services.

We wish you all a glorious and safe 4 th. Time to party. The next Hotline is scheduled for Wednesday, July 9th at 7pm.

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