The prolonged and devastating weakness in financial stocks came to an end last week as the Government presented a plan that takes strong measures to create liquidity for those institutions that are immobilized by underperforming mortgage-backed securities. Although Lehman Brothers was forced to seek protection by declaring Chapter 11 bankruptcy, most financial stocks rallied sharply on Thursday and Friday. The extraordinarily high market volatility was matched only by that witnessed in the October, 1987 meltdown.

If passed by the joint houses of Congress, the proposed measures should create increased confidence in our financial institutions and result in a gradual resumption of activity in the Nation's credit markets. In this regard, investors are better off today than one week ago.

Beneath the hysteria and the emotions of the marketplace, our Nation's economy faces the same challenges that it did six months and one year ago. It will take time for the economy to absorb the excess supply of housing that is currently on the market for sale and to adjust to the reality of higher energy prices. However, in our opinion, the marketplace has now discounted these problems and most stock prices should hold above their recent lows during future market downdrafts. Although we believe that the recovery in the stock market will be gradual, many solid long-term opportunities are currently available for diligent and circumspect investors.

At The Killen Group we continue to navigate these treacherous waters by pursuing our value oriented investment philosophy that has served us so well in the past and produced positive year-to-date results for our individually managed accounts. After this past week, we have a higher level of confidence that the low point for our investment portfolios occurred in mid-January of this year.

This commentary is intended for informational purposes only. It is not an offer to buy or sell any security and should not be considered investment advice.