Welcome
to the January 7, 2009 issue
View MONEYLETTER Hotline
as a PDF (click icon): 
or keep reading...
We warned in the last Hotline that the fundamentals
were not driving the market in the last days of the year. Today one of the
fundamentals did drive the market, namely anticipation of Friday’s employment
report, and investor’s did not like what they heard. This should come
as no surprise. We believe the December economic numbers, which are now being
rolled out, will in general show that the economy’s decline has begun
to slow, but they will still show a decline. While there will be an improvement
in some numbers, others will remain as ugly as ever.
One that will remain ugly is employment. The employment numbers lag. It takes
a while for business to be bad before business begins to cut employment. That
is happening now in response to last year’s economic slide. In the midst
of the gloom a very important positive development is taking place – namely,
the improvement in the bond market. The bond market has been virtually closed
for weeks, but this week the bond market was active, including a successful
large GE capital offering. Thawing the bond market was a chief goal of the
Federal Reserve, and it appears the Fed has begun to achieve its goal. This
is very important. Our view remains that higher stock prices will be firmly
in place by the end of the first quarter of 2009.
There is no change in our recommended allocations.
New Fund Ratings – For domestic stock funds, two funds are now
rated Buy: FBR Focus and Russell 2000 Value (ETF). Two funds are now rated
Hold: Diamonds Trust, Series 1 (ETF) and Rydex Russell Top 50 (ETF). For international
stock funds, two funds are now rated Sell: Oakmark Global and UMB Scout International.
The Stock Market – The market had had a good run. The short-term
test now is whether the market can hold its recent lows. If so, we can expect
another leg up. The important test for the market will be its response later
this month to the Obama stimulus package.
The Bond Market –
The Select Portfolio – There is no change for this portfolio.
The next Hotline is scheduled for Wednesday, January 14 at 7pm.
Back
