Welcome to the November 5, 2008 issue

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We have argued recently that the momentum of the crushing bear market has broken and that we are in the next phase of the market. Did we speak too soon? Despite today's jarring 5% or so drop in the market, we do not think so. We now have to see whether this decline continues. Keep in mind that on Tuesday the market rallied about 3.5%. We believe that this seesaw action represents the tension between the current dismal performance of the economy and the tentative signs that the massive policy supports of the last month are beginning to have an effect.

We warned in the latest issue of Moneyletter that the economic numbers concerning last month's activity would be dismal, and the numbers are coming through as advertised. A private estimate ahead of Friday's October employment report turned out considerably worse than expected. And the normally slow-moving nonmanufacturing sector showed a sharp drop last month. Today's economic numbers alone were enough to unnerve the market.

Of course, there was also the reaction to yesterday's election. We believe that Wall Street is wary as a business-friendly administration is replaced by a new one in these difficult times. The Street needs visibility. We do believe that the policy measures put in place will begin to show their effects as this year moves on. We have already seen some thawing in the credit markets; we need to see much more. We continue to look for slowly improving global stock markets as we move into next year.

There is no change in our recommended allocations.

New Fund Ratings - For domestic stock funds, three funds are now rated Buy: American Century Value (closed), Vanguard Equity-Income and Fidelity Focused Stock. Four funds are now rated Sell: S&P SmallCap 600 Growth Index (ETF), Heartland Select Value, Royce Premier and Fidelity Blue Chip Growth. For international stock funds, Matthews Asia Growth & Income is now rated Hold. T. Rowe Price Global Stock is now rated Sell.

Fidelity Blue Chip Growth is in the Fidelity family Venturesome and Moderate model portfolios. For the Venturesome portfolio the replacement fund is Fidelity Mega Cap. In the Moderate portfolio we will purchase more Fidelity Focus with the proceeds. T. Rowe Price Global Stock is in the Moneyletter Moderate portfolio. We will replace the fund with S&P Global 100 Index (ETF).

The Stock Market -

The Bond Market -

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

The next Hotline is scheduled for Wednesday, November 12th at 7pm.

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