Welcome to the January 27, 2009 issue

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

This Hotline is being recorded one day early because of a heavy snow storm forecast to hit our area tomorrow Wednesday, the 28th.

The thick gloom that has surrounded the market in the past few weeks appears to have dissipated just a bit this week. As we see it, the reason for this is that we are getting more signs that some areas of the market and the economy are either improving or appear to have hit bottom. Not every area by any means, but enough to encourage some investors to step up.

We have been talking about a thawing in the credit markets, a most essential condition for any market recovery. This week we had the huge purchase of Wyeth by Pfizer, a merger that was made possible by banks willing to lend Pfizer $22 billion. The thawing of the credit markets continues.

There were cracks in the gloom on the economic front too. Yes, Monday’s slew of job cuts was depressing. At the same time, existing home sales rose last month. Foreclosed homes had much to do with it, but a sale is a sale, and the overhang of unsold homes dropped noticeably. Also, home price declines appear to have leveled off in November according to the latest survey. The price decline is not getting worse.

These indications – and others like them – are contributing to the better tone in the market so far this week. We believe the stimulus package will sustain the tone. Our view remains that a stock market recovery will be evident over the next 2-3 months.

There is no change in our recommended allocations

New Fund Ratings – For domestic stock funds, three funds are now rated Buy: Vanguard Convertible Securities, Fairholme Fund and Nicholas Fund. Two funds are now rated Hold: Sequoia Fund and DJ Select Dividend Index. For international stock funds, Tweedy Browne Global Value is now rated Buy.  

The Stock Market – The action of the stock market so far this week was very encouraging. The ability of the market to remain steady in the face of the job cut announcements was unexpected. The earnings announcements have been extremely mixed, but here too the market has responded better than to be expected. Finally, there appears to be a begrudging improvement in market sentiment. We expect it to continue. 
  
The Bond Market –

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

The next Hotline is scheduled for Wednesday, February 4.