Welcome to the February 25, 2009 issue

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Weekends appear to be lethal of late. For the second week in a row, investors returned from a weekend and croaked the market the following session. This week at least we had an oversold rally the very next day. Today, after President Obama’s speech, the market trend remained down.

The market needs two things now. One is relatively convincing evidence that the economic slide has lost force. The other is a detailed – and convincing – plan to solve the banking crisis. We think the economic evidence is on its way. It is all up to how rapidly the stimulus package works its way through the economy. Our view is that we will see some evidence over the course of the next two months.

The bank rescue plan is promised shortly. We saw the first shoots of the plan today as Secretary Geithner discussed the stress test. But the market still knows nothing about the rest of the plan. Until it does the market will remain nervous, with a bearish tendency. The market is deeply oversold, and a meaningful oversold rally is long overdue. We expect the economic news to remain dreary over the next 2-3 weeks, with some improvement after that. With some help from Secretary Geithner, we could then see a more significant rally over the course of the next quarter. These past two weeks have been very discouraging, but we look for better performance as we move into the Spring quarter.

There is no change in our recommended allocations

New Fund Ratings – For domestic stock funds, TCW Select Equities N is now rated Buy. Two funds are now rated Hold: Champlain Small Co. and American Century Value. For international stock funds, Vanguard Global Equity is now rated Sell.

Vanguard Global Equity is in the Vanguard family Venturesome and Moderate portfolios. We will switch the fund into Vanguard International Growth in both cases.

The Stock Market – Last week we spoke about a test of the lows. As we know the market crashed through the lows late last week. That explains some of he pessimism we have seen this week. We are encouraged by the behavior of the market over the past two days. As we said, an oversold rally of size is over due. We continue to believe that we are in the bottoming process of the market.

The Bond Market –

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

The next Hotline is scheduled for Wednesday, March 4 at 7pm.