Welcome to the January 21, 2009 issue

View MONEYLETTER Hotline as a PDF (click icon):     
or keep reading...

We have only had two days of trading this week, but in those two days the market has swung 600 points. During those two days the market came close to the November lows.  We do not know whether today’s bounce can be considered a test of the lows, but if not it is the next thing to it. Tuesday’s 300-plus point decline is testimony to the jangled nerves of traders after this long bear market. The test for the market now is whether it can build on today’s rally. A further move up would be very encouraging.

We have tackled the issue of realigning the allocations and the portfolios. In the course of so doing we also slightly shifted the allocations of the Venturesome and Moderate portfolios toward domestic stock funds and away from overseas funds. The results of our rebalancing and realigning are in the issue of Moneyletter about to be mailed to you. All of our trades are presented in that issue.

There are two factors moving the market now. Earnings, of course, as we are now in earnings season. The news has been mixed. But then there is the new President’s stimulus package, which will be unveiled shortly. The promise is that it will be powerful and believable. If so, we believe the market response will be very favorable. Our view remains that a stock market recovery will be evident over the next 2-3 months.

New Fund Ratings – For domestic stock funds, Wells Fargo Advantage C&B Mid Cap Value is now rated Buy. Two funds are now rated Hold: Russell 2000 Value and Powershares High Yield Dividend Achievers. Rydex Russell Top 50 is now rated Sell.  For international stock funds, USAA International is now rated Hold. 

     The Stock Market – A functioning bond market is a prerequisite for a stock market recovery. We are seeing a thawing in the bond market. Now we need to see the return of risk-taking. It may come by seeing yields sliding in the junk bond market, which has shown some tentative signs of recovery.   

The Bond Market –

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

The next Hotline is scheduled for Wednesday, January 28 at 7pm.