Welcome
to the March 18, 2009 issue
View MONEYLETTER Hotline
as a PDF (click icon): 
or keep reading...
Today belonged to the Federal Reserve, and we add to Chairman Bernanke in
particular. It was not the Fed’s interest rate call that excited the
market; rates were left unchanged at zero. No, it was their announcement that
they will be buying Treasuries and stepping up drastically their purchasing
of mortgage-related paper. The Fed has said it would do everything it could
to turn the economy around, and with a great deal of ingenuity it is doing
it. The market resisted the Fed for some time, but finally Wall Street has
come to believe.
We are now seeing a sort of informal global effort to fight the recession
coming into play. Actually, the Fed is following a tactic that the Bank of
England introduced. The Japanese also announced today that they would step
up their purchases of Japanese Treasuries. The result here was a huge rally
in the Treasury bond market. This is precisely what the Fed wanted. Get longer-term
rates down.
For the stock market this can only be good news. The lower rates go, the
better for stock valuations. At the same time, evidence of further deceleration
in the ongoing recession came from the housing market. The increase in starts
was surely overstated, but that does not deny that some improvement is occurring.
Improvement is what the market needs to see to continue this rally. We believe
we are going to see it.
There is no change in our recommended allocations
New Fund Ratings – For domestic stock funds, three funds are
now rated Hold: Vanguard Dividend Appreciation Index ETF, Vanguard Dividend
Appreciation Index and DWS Large Company Growth S. Three funds are now rated
Sell: Nicholas Fund, WHG SmidCap and Heartland Value Plus. For international
stock funds, Metzler/Payden European Leader is now rated Buy. Tweedy, Browne
Global Value is now rated Hold. DJ Global Titans is now rated Sell.
Heartland Value Plus is in all three Moneyletter portfolios. In the Venturesome
portfolio we will substitute Royce Special Equity for it. In the other two
portfolios, the substitute will be T. Rowe Price Cap Appreciation. Last week
S&P Global 100 Index was rated Sell. The fund was in the Moneyletter Moderate
portfolio. The fund was replaced by Fidelity China Region.
The Stock Market – Many on the Street will be telling us that
the market needs to test the lows of two weeks ago. We are not certain that
this market fundamental need hold now. In any case we firmly believe that the
market has made a significant turn during the past two weeks.
The Bond Market –
The Select Portfolio – Heartland Value Plus is to be sold and
replaced by Fidelity China Region (ticker: FXI).
The next Hotline is scheduled for Wednesday, March 25.
