Welcome to the September 17, 2008 issue

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Panic has set in today, with heavy losses in the stock markets front and center. After the market cut its early day losses significantly by 3pm, bargain hunters were overwhelmed at the close.

Much of selling can be attributed to the Lehman bankruptcy working it’s way through the markets, along with a virtual shutdown of bank lending in the wake of the government’s takeover of AIG. At the end of the trading day the Dow Jones Industrial Average was down 449 points (that’s 4.1%) and the S&P 500 was down by 4.7%. NASDAQ stocks were down by 4.9%.

Investors are fleeing risk, and confidence is badly shaken. In addition to the equity markets, another indicator was the price of gold, which saw a $70 increase today. This was the largest increase in the price of gold, in percentage terms, in 9 years.

Although it’s hard to consider on a day like today, it’s important to remember that world economies are growing. Underneath all the turmoil, the fundamentals of these economies are solid. And the Central Banks of these nations will be working hard to see that growth continues.

Despite the short-term pain, we remind our subscribers that selling during a time of panic historically has been ill advised. There is no change in our recommended allocations.

New Fund Ratings – For domestic stock funds, three funds are now rated Buy: Russell 2000 Value, S&P 600 SmallCap, and Russell 2000 (all ETFs). Four funds are now rated Hold: Russell 2000 Growth (ETF), Needham Small Cap Growth, TCW Small Cap Growth, and Royce Premier. Four funds are now rated Sell: DWS Large Company Growth S, Vanguard PRIMECAP, T. Rowe Price New America, and PowerShares QQQ (ETF). For international stock funds, two funds are now rated Hold: Janus Global Research and Wintergreen Fund. One fund is rated Sell: DWS Latin America Equity S. There are no other changes.

The Stock Market – We are not just whistling past the graveyard with regard to the equity markets. The recovery from an event like this week will take some time – that’s obvious. But patience will be rewarded, as the values are too compelling. Despite the battering, equities are a better buy now that they have been in a long time.

The Bond Market –

The Select Portfolio – There are no changes this week.

The next Hotline is scheduled for Wednesday, September 24 at 7pm.

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