Welcome to the February 4, 2009 issue

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The financial sector continues as the stumbling block to a better-acting market. We saw that today as concern about Bank of America swung the Dow to a triple-digit loss. At the very same time the Nasdaq was unchanged. What is going on? What we have is a market that is so concerned about the financials that developments elsewhere are being temporarily ignored. Yet it is those developments that we think are giving us the indications about the market's future.

As the economic numbers come out, they are giving every reason to believe that the deterioration of the economy is slowing. The decline has certainly not stopped, but the odds are high that the economy has begun the bottoming process for this recession; this while the stimulus package is still working its way through Congress. Both the manufacturing and the non-manufacturing surveys of activity show that activity slowed its decline in both cases. In both cases, the new orders numbers showed improvement.

Over in housing, the pending home sales number surprised by increasing 6.3%. This is by no means the first indication we have had that the battered housing sector is showing a pulse. Equally important, business continues to raise money in the bond market. We believe that part of the reason for the economy's dive last quarter is because the bond market was closed to borrowers for at least two months. Now it is up to the stimulus package to provide the muscle for substantial improvement leading to economic growth. We believe that by next quarter a stock market recovery will be evident.

There is no change in our recommended allocations

New Fund Ratings - For domestic stock funds, Wells Fargo Advantage C&B Mid Cap Value is now rated Hold. Five funds are now rated Sell: Berwyn Fund, T. Rowe Price Small-Cap Value, DJ Select Dividend Index (ETF), Russell 2000 Value (ETF) and S&P SmallCap 600 Value Index (ETF). For international stock funds, Wintergreen Fund is now rated Buy.

Berwyn Fund is in the Moneyletter Venturesome and Moderate portfolios. We will switch the fund into UMB Scout Stock (Ticker: UMBSX) in both portfolios. Russell 2000 Value is in the Moneyletter Venturesome and Moderate portfolios. We will substitute Powershares Dynamic Large Cap Value (ETF, Ticker: PWV) for Russell 2000 Value in both portfolios.

The Stock Market - Employment numbers are due this Friday. The reaction of the stock market will be important for the short-term market outlook.

The Bond Market -

The Select Portfolio - Russell 2000 Value (Ticker: IWN) is also to be sold in this portfolio. The substitute fund is TCW High Yield Bond (Ticker: TGHNX).

The next Hotline is scheduled for Wednesday, February, 11.