Viewing Month: October 1954

Tabell’s Market Letter – October 01, 1954

Tabell’s Market Letter – October 01, 1954

Tabell's Market Letter - October 01, 1954
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—————– Walston &- Co. –..–.;;….. – .– M'EMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw,Id I OFFices COAST TO COAST CONNECnc. BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LETTER October 1,1954 Despite the fact that the Dow-Jones industrials have advanced approxi- mately 33 pOints in a month (from an August 31st low of 333.21 to the Septem- ber 28th high of 366.02), the advance, from a breadth-of-the-market view- point, has been the weakest of the series of rallies that started from the September 1953 low of 254.36. Upside volume has been considerably below that of previous rallies and the number of advances and new highs has drop- ped sharply below that of previous rallies. For example, during the July rally, there were eighteen days in which over 100 new highs were reached and several times the daily new highs reached a total of over 200. There . were ten days in August- when-the daily new highs were overQO. Bycoll1!lari-, ason, there hasn't been a single day in the September rally when total-of 100 or more new daily highs was reached. This means that a smaller number of issues are carrying the market higher while a larger number are doing little marketwise or declining. This action does not necessarily mean that the year-old advance of over 120 pOints has ended. Very few issues have as yet formed vulnerable top patterns. More time and more violent fluctuations would be needed to bring this about. In the course of the next few months, cert2.in individual issues and possibly the averages could reach new high territory. However, recent action does indicate that upside momentum is waning. As I stated in my July article,at some time the market will need a resting period of some duration. Whether the market reaches 370 or 380 or 390 before this occurs is problematical. After the high is reached, I expect a wide trading area similar to that witnessed in 1951-1953. The lower limits of this trading area will probably be 335-315. Such action should be of no concern to the long term investor as I visualize higher levels in the later 1950s.It also should be of no concern to holders for longer term capital gains who should forget about the averages and concentrate on individual issues. There are plenty situations that indicate higher levels over the intermediate term regardless of the action of the averages. -The ac.t.;t,ol'l of. the L'.ails.has—been dLsa.pJlDinting .1.11- theillfl.bilit,;y; of the rail average to confirm the new highs reached by the industrials.Most rails have mediocre technical patterns and should be avoided. That is why I have only two rails on my recommended list. One of these is — MISSOURI-KANSAS-TEXAS,PFD. (73) recently reached a new high at 79 3/8 and has broken out of the long 58-70 range in which it has held since mid- 1952. The reason for the upside breakout was a compromise plan of recapital ization offered by committees representing holders of the preferred and common stock. This plan will first have to be accepted by the management and presented by them to the ICC, the court and the stockholders. It will be a lengthy process. Under the plan, the dividend arrears on the 7 cumu- lative preferred stock, which now amount to approximately 150 a share, will be eliminated. Under the proposal, each share of old 7 preferred will receive 140 in 5 Income debentures and one share of 60 par value Class A. The old common vlould be exchanged share for share for a new 10 par common. The Class A stock would participate fully with the common in a ratio of 3 to 1. Thus 75 of dividends declared would go to the A stock and 25 to the common. According to a recent article in The Commercial & Financial Chronicle, it would appear that, in line with other recapitaliza- tion or reorganization plans, a capital fund for property improvement and retirement of the bonds will be set up before dividends on the A aJld common stocks can be declared. Using pastformulasand.taking.thebest post-war earnings year of 1952, this would result in earnings of about 1.55 on the Class A and about 43.i on the common. Assuming minimum prices of 50 on the proposed income bonds and 7 on the proposed Class A, this would equal a minimum price of 77 on the old preferred and would justify purchases in the 70-65 range. Conditions in this growth territory should improve and eventually warrant the objective of over 100 for the preferred indicated by the technical pattern. Present dividend payments are 5.00 annually to yield almost 7 at 72. While the preferred appears to be an interesting purchase, the common stock appears overvalued at present price of around 8. EDMUND W. TABELL HA1STON & CO. This memorlndu, h not to be construed ,15 an offer or OIit;llatlon of offer' to buy or sell ny securltiu From lime hll time W.ahlon , Co. or any partn.r Ihereo f may h. tI'Ihrrul ,n some or all 01 Ihe ,.cunl,.s meflt,oned h,r.in Th, foreQo,nQ mat.r,at holli b.,n orep!Ired b. III lin a molltter of .nformat,on only It b!lled upon ,nformllon bh..ed reliable bioi! not nee.nanty compl.t II not qu,,.enld III accurat' or finl, and not Intendld 10 fouclole ,ndependent InCiIlY

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Tabell’s Market Letter – October 08, 1954

Tabell’s Market Letter – October 08, 1954

Tabell's Market Letter - October 08, 1954
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Walston &- Co. MEMBERS NEW 'fORK STOCK EXCHANGE AND OTHER LEADING STOCI( AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO ISw;tmld I OFFICES COAST TO COAf CONNECTtC BY DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET lEnER \ October 8,1954 Hopes of stock splits, increased dividends and mergers brought about sharp advances in individual stocks during the past week, but the great bulk of the list did little marketwise. As the year-end approaches, we will undoubtedly witness more of this type of action. Individual issues will continue to pursue their own course regardless of the action of other individual issues or the general market averages. The market does not present a uniform pattern. There are many issues that have reached upside objeciyes andAPearin need of at least resting period. However, there are also many-issues thoat stllYindicate-lilgherre;'elsand should be held for further appreciation. Some of the issues in my recommended list are building up rather interesting patterns and some technical comments appear in order. ALLIED STORES (48) has been showing improving action in line with most other re- tail stores. Technically, the stock has had an intermediate term object,- ive of 65 and there is support at the 45 area. The yield at present prices is over 6. AMERICAN POTASH & CHEMICAL B (59) has reacted a bit from its recent high of 65 and should be bought in the 60-55 range. This stock has advanced sharply since its recommendation in June, but it still indicates higher levels on my technical work. The intermediate term objective is 75 and the long term objective is 110-120. This stock has a steady earn- ings base in the potash field and excellent growth prospects in the higher profit margin boron and lithium developments. BLACK & DECKER (44) reached its first upside objective at the August high of 50. It has now reacted o the strong 45-43 support level and should be bought. The long term price objective is 70-80. FRUEHAUF TRAILER (31) reached a new high of 32 during the past week. Continue to hold. The intermediate term indica- tion is 36-42. LEHMAN CORP. (41) reached a new high during the week at 42. This well-managed investment trust has a common stock portfolio that is very heavy in the technically favorable oil group. Lehman should con- tinue 'ts advance to-ateast thelntermeaiate'terrlFobJet-ive -of-116–48-. —- 0 NEW YORK AIR BRAKE (20) is one of the disappointing issues in our recom- mended list. It has done little pricewise and there is no present indica- tion of any immediate move of consequense. It appears that earnings for 1954 will be around 2.35, the lowest since 1946. However, it would appear f that a cut in the 1.60 annual dividend is unlikely. Can be held for its generous 8 yield but other issues appear more attractive for price appre- ciation. PAN-AMERICAN WORLD AIRWAYS (15) remains my favorite in the air- line group. Earnings for 1954 should be over 2.00 as compared with 1.76 in 1953. Its technical pattern is quite impressive. PENNSYLVANIA SALT (45) is back to a strong support level and should be bought. Higher earnings and a larger year-end extra are possible developments. REPUBLIC STEEL (65) has advanced nicely since its recommendation in April, but would continue to hold. There is a possible 72-78 objective in the tech- nical pattern. SHAMROCK OIL & GAS (54) reached a new high at 54. The up- side penetration of 45-51 trading area indicates a probable 58-60 for the intermediate term. Long term objective is 65-75. UNION OIL OF CALIFORNIA (50) is one of my favorite oil stocks. Intermediate term objective is 60-62 followed by a long term 70-75. Downside risk appears limited to the strong 45 support level. UNITED FRUIT (51). Still like this fine- quality issue for gradual appreciation and good yield. UNITED STATES STEEL (59) has appreciaed-over 30-since its recommendationnMay. Would con- tinue to hold. The objective now appears to be around 64-70. YALE & TOWNE (48) holds around the year's high. Earnings for the third quarter may not be much better than the p'oor second quarter results, but should increase sharply in the final quarter. I like this issue not only for the inter- mediate term objective of 60-66, but for the longer term possibility of 80 or over. ' EDMUND W. TABELL ltlALSTON & CO . ….- –

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Tabell’s Market Letter – October 15, 1954

Tabell’s Market Letter – October 15, 1954

Tabell's Market Letter - October 15, 1954
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Walston &- Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (s.,h.dl OFFICES COAST TO COAST CONNECTEr. BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LETTER October 15,1954 DOW CHEMICAL CO. Statistics Even though sales have flattened out in the last two years,Dow has Current Market 38t- no equal in the chemical industry Current Dividend 1.00 -A as to groth. Net sales rose from Current Yield 2.6 130 million in fiscal 1947 to 43 Long Term Debt Preferred Stock Common (Shares) 247,535,700 -B 22,651,011 million in fiscal 1953. In seven years, Dow's investment in propert has tripled. Since 1950 it has averaged better than 90 million Net Per-Share-, 1953 Net Per Share,1954 j;l.-54-C- ……….ayeaJ',..( ov.er1jashar)inci3.'p.;Ltal'-' outlay. Much of this expansion was 1. 42 -C certified for accelerated amortiza Sales, 1953 Sales, 1954 430,400,000 -C 428,300,000 -C tion as defense construction. Dow wrote off 65 million (almost 3 a share) in fiscal 1954 and will Market Range 1952-1954 44t – 33t- write off approximately 75 million (3.30 a share) in fiscal A Has also paid 2- stock dividend 2' 1948 -1953 with exception of 1951. It is not expected to pay an extra dividend in stock this year due to a new New York Stock Exchange ruling that regorted earnings of a company are expected to cover cash dividends paid plus the amount of the stock dividend. 1955. Thus, cash flow earnings are equivalent to roughly 4.50 a share. Amortization in excess of normal depreciation is almost 1 a share. With this high amortization rate, Dow is financing plants which can be expected to earn prof its in the future. This heavy cash flow has kept Dow in a sound finan B – Including lOO,OOQ,OOO in subordi- cial position. On May 31st,1954, nate debentures convertible into common cash items exceeded current liabi- at 47.09 a share through July 1,1962. lities and working capital was 150 million. Subsequently the re- C -Fiscal year ends May 31st. ., — – — — – – – maining 50 million in bank loans –were-p-aidoff-and-the-pL'e–rerred– stock was retired at a cost of over 32 million. Dow manufactures over 600 chemical products. In fiscal 1954, 57 of sales were accounted for by industrial chemicals, 32 by plastics and 11 by magnesium. The company is a major producer of chlorine, bromine,styrene, vinyl chlorides, saran and nolyethylene plastics, ethylene and other petro- chemicals. Dow will be najol' roducer of YJolyethylene and synthetic gly- cerine when expansion of olant is completed and in full operation. Plants are operated in Midland, Mich., Freeort, Texas, and eleven other U.S. locations. Dow has a 50 interest in Dow Corning Corporation which holds a leading position in the growing field of silicone chemistry. It has a 50 interest in ETHYL-DOW CHEMICAL COMPANY which produces ethy- lene dibromide for anti'knock fluids. The 50 owned SARAN YARNS COMPANY, nroduces a material to wrap foods. Dow wholly owns Dowell (oil well ser- vicing) and BRAZOS OIL & GAS which has substantial natural gas reserves. Dow's sales have in the Dast been almost entirely to industry rather than the consumer. Now it is attempting to enter the maSs consumer market and has recently launched a program to reach the consumer under its own label. The new TV show MEDIC on NBC is sponsored by Dow and has received very favorable reDorts. It is in competition with the CBS show I Love . Lucy. It. promotes .Saran Wrap,. a Dlast.ic ..material for wrapping foods. This i appears to be just a start to a direct appeal to the consumer. Other products with a mass appeal will undoubtedly follow Saran Wrap. Dow Chemical has no particular appeal for the short term trader. It is a typical long term growth situation. It is, in my opinion, an excel- lent stock for participation in the Monthly Investment Plan which the New York Stock Exchange has so wisely sponsored.From a technical viewpoint,it is slowly building UP a base pattern in the broad 44-34 area. The downside risk appears to be about 35' or P. below current levels. On the upside, the potential over the next several years appears to be 65-75 or over 80 higher. EDMUND VI. TABELL WALSTON & CO.

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Tabell’s Market Letter – October 22, 1954

Tabell’s Market Letter – October 22, 1954

Tabell's Market Letter - October 22, 1954
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I) Walston f,- Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK ANO COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO ISw;h.dd I / OFFICES COAST TO COAST CONNECTEC BY DIRECT PRIVATE WIRE SYSTEM TAB Ell'S MARKET lEnER October 22, 1954 The action of individual issues continues to highlight the stock market pattern. For example, the cement stocks were active and stronger last week and one issue in our recommended list, Penn-Dixie Cement, moved up over ten points in less than five days. It is this rotating strength that keeps the market strong with some groups moving forward while others consolidate and rest. This type of action should continuR over the fore- seeable future. Investors and speculators alike must realize that their market decisions should first be geared to the action of the individual securitY,Goncerned, and sec.ondly, to the actio!! of .the-,.-avet'ag-es., Stock-k. – whose technical pattern suggests a move from 40 to 60 over the next year Ior so and Stock B whose technical pattern suggests a drop om 25 to 20 over the same time period will both most likely reach their individual objectives regardless of whether the averages are 375 Dr 25 a year from now. I I l I As far as the general market is concerned, the technical action of the averages continues favorable for the longer term. 'The industrial average, which had shown poor internal market action during the September rally to 366.40, had its expected decline, but it met support at right where it should — at the highs of the July and August rally tops of 351.50 and 352.27. The October 15th low was 351.54 and the market has rallied to a high of 360.46. The important points to watch are now the September-October high of roughly 366 and last week's low of 351. A decisive penetration of either of these will most likely furnish the clue as to the action of the general market over the near term. An upside pene- tration would most likely indicate a further advance to the 375-400 area and a downside penetration would indicate a decline to the 330-315 support level. The election returns mayor may not exercise considerable influence on the direction of the breakout, despite the fact that the market appears to ignore the possibility of strong Democratic gains and aEossiQle delay ir!. President Eisenhoj\'er' sG)),nstructive t,ax program that will eventually help the worker more than big business. The rails also have shown improving technical action. They held up very well while the industrials were declining and,during the past week, the rail average reached 121.50 and equalled the August high of 121.51. 11 decisive penetration of the August high would most likely indicate an extension of the advance to the 127-130 area. On the downside, a decline below the September low of 114.93 would probably indicate a drop to the 110-105 support zone. However, regardless of the action of the averages, individual issues will continue to pursue their own course over the intermediate term.There are several issues that I continue to like kmerican Potash B, after reaching a new high of 69 1/2, on the announcement of the plan to construct a new plnt to make lithium chemicals, reacted to 64 1/2. I believe this stock should be bought on all minor price declines.There is support in the 65-60 area. The long term price objective fer hmerican Potash on my technical work continues to be over 100. I c(.ntJnue to like Pan-American-World Aiways. It is selling in the 15-16 range and has the most favorable technical pattern in the favorabl airline group. I would also add to holdings of Yale & Towne in the 47-44 area. Earnings for the third -quarter- will most likely be not much bett-er than-those of — the poor second quarter but from there on, earnings figures should improve sharply. The initial objective is 60 followed by higher levels over the longer term. \'Jestern Union should also show improved earnings next year. Some sources indicate possible 10 earnings in 1955. The stock reached a new high during the week at ,- '59' Would continue to iJu,r on minor price declines. I also favor purchases of Black & Decker and Dresser Industries. EDMUND W. nBELL VJIlT ST0N & CO. '0 t'nil' mlll' me,,oradum is not tI.!IV' olin ,nter'II In be lome cOllrl,led or .11 01 f ff t ., lin off,r Of lohcltehon 0 0 ef' 0 the ,.curitie. m.ntloned hr., Th,' b II n .ecurit lounyCJo'rnI'd. m . I hal r.t. in b or From 'tin. to prepared b.it fia! and nof me 1,1 ,n , Wahton til a m, ,ded to &C flu for, o, of clo oir 'oarnmy ,tpiooIllI,'OtI.l'Ythereo'fI, l1 indep,nd.nt ,nquory .t.,bll,ed upon i'olm.IoolI beli ….d rehabl, but no' lI,ceerlly comp II no quotran ee u ,

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Tabell’s Market Letter – October 29, 1954

Tabell’s Market Letter – October 29, 1954

Tabell's Market Letter - October 29, 1954 page 1
Tabell's Market Letter - October 29, 1954 page 2
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For Il of Earnings 1929 ' 540 1937 465 1946 470 For l or While quite a few Issues appear Dividends 478 352 high enough, there are an equal or larger number of issues that still indicate higher price levels. 454 The technical pattern appears to suggest an even more selective These ratios, however, ignore market than the very selective some important facts. The divi- market we have witnessed Over dend payout today is less than 50 of earnings. This is a very low ratio. A 66 payout is the past five years. Best opportunities for capital enhancement appear to be in the backward IS- much more applicable over a pe- sues that are just a shade below riod of time. They also ignore thc top quality and aTe in an upward fact that these ratIos apply only earnings trend. to the 30 stocks in the Dow-Jones Industrial Average. There are Summary many light blue chip Issues that In summary. the market shows are selling at only six to eight no signs of an important top like Urnes earnings and are YIeldmg 1929, 1937 or 1946. .. 6 to 8. This present situation is qUIte different from 1929, 1937 and 1946. In these past periods all issues were sellIng at high prIce to earnings and low dividend yields. These Hhght blue chip or secondary issucs could have a considerable price rise before thcy catch up with thc ratios that prevailed in past periOds of overvaluation. It is possible, however, that an intermediate correction could occur at any time. ThIS mtermediate correction could occur from present levels or from a somewhat higher level. If the November election turns out favorably from a Republican viewpoint, the mdustrial average may reach approxImately the 400 level Whatever reactIon occurs will Technical Viewpoint be comparatively mild There are successive support zones at 330 The last consideration is the and 315. This compares with a outlook from a technical view- 1954 low of 278. point. On a broad overall pattern, Even If such a reactIOn occurs, there IS nothing in the present it will be extremely selectIve. technical pattern that ,suggests There are many mdividual issues anything resembling 1946 or 1937 that indicate higher levels over or, even less, 1929 Very few vul- the next year regardless of nerable distributorial patterns wheth'er the averages are selling have been formed. Some stocks at 400 or 325. appear in need of a restIng or The present market IS a'much consolidation period These are more intellIgent market than mostly in the group known as those of the past. Low-prIced and growth stocks General Electric, tertiary Issues will not advance for example, has reached all up- just because the general market side obJectives and may hold in is in an uptrend Purchases must roughly the 48-38 area for a year be confined to issues with im- or two before resumll1g ItS long- provmg sales and earnings. term uptrend On the other hand, Regardless of temporary inter- there are a great many secondary ruptions, the market IS headed for issues that still mdlcate higher higher levels over the longer term levels WhIle the averages are There may be a resting period for selling at new highs, thiS does not a year or two during which the apply to the general run of stocks. industrial average may hold in a At present levels of around 360, range bounded by 400-370 on the the industrial average is now con- upSIde and 330-315 On the down- SIderably above the 1946 high of SIde Dunng this period individ- 213 and the 1952 high of 295. Yet ual issues could advance mdI- over 60 of the 1,000 most ac- vidually. The overall trend is tively traded Issues on the New toward higher levels and I doubt York Stock Exchange and the If the Dow-Jones Industrial Aver- American Stock Exchange are age sells, except momentarily, selling below the highs reached in much below 300 for the next the 1946-1952 period. decade. 4 , SENT OUT AS MARKET LETTER OF OCTOBER 29,1954 Reprinted from 17,e COMMERCIAL anef FINANCIAL CHRONICLE Thursday, Octobe.,. 21, 1954 ,. Higher Market Ahead Over the Long Ternt By EDMUND W. TABELL Partner. Walston & Co., New York City Members New York Stock Exchange Market analyst' sees black-and-wbite contrast between 1929', and today's market, citing interVening inflation population increase, national output rises, and growth in leading com panies' earnings and dividends. Maintains possible imminent Democratic election vdory would Dot entail long-term economic harm. Concludes while intermediate correction could ocCur at any time, market shows DO sign of major top, with D-J Average rise to 600 by 1958-1960 a 'distinct possibility ' The stock mal kct. .15 measured today's market and that of 1929 by the Dow-Jones L II d 1I S t l' i a 1 is almost as great as the differ- Average IS now Wlltllll shoottng ence between black and white dIstance of the tamed 1929 high Concern over the fact that an of 386 Not so average is approaching the 1929 many yea rs high ignores the t rem end 0 u s ago thIS goaI was conSIdered 'almost im- changes that have occurred in the past 25 years It ignores the ' \ change in the -purchasmg power possible ot of the dollar. In 'terms of a con- achievem e 11 i. stant 1929 dollar, the '–present, Now It Iooits market is seUmg around 230 as as though the compared WIth 386 in 1929 It high of 25 ignores the cUlTent replacement years ago will value of a company's plant. It easily be passed – possibly In 1954 Ignores the fact that population has increased 40 million since 1929. It. ignores the fact that the na- -undoubtedly tion's total output (in real terms inthenext -not just in dollars) IS more than year Or two. dOUble what it was In 1929 It It appears Edmund W. Tabell ignores the fact that personal in- that my 1948 predIctIon that the come (after taxes) has increased Dow – Jon e s Industrials would 236, that industrial capacity has reach 450 by the late 1930's may doubled, as has the output per have been quite conservatIve. A worker. It ignores the changes level of 600 by 1958-1960 now in Individual companies. General seems a distinct possibility. Electric at the 1954 high of 481,6 QUIte a few people are begin- sold about 45 above the 1929 ning to think that the stock mar- high of 33Sh-but sales have in- ket is dangerously hIgh, and that creased 290 since 1929. Earn- the possibility of another 1929 ings have increased 200 and div- market crash is increasing. In my idends have increased 220 in OpInIOn, the dIfference between the past 25 years . ,, Difference in Technical 'dustrial Average In a little over a Conditions year Such superficlal thinking also 19nores the dlfference in tcchmcal stock market conditions from 25 years ago Speculative trading was rlfe in 1929 and the volume of trading greatly exceeded that of today, despite the fact that there are a much larger number of shares presently listed In 1929, brokers' loans were about seven times present levels and accounted for 9 of the value of New York Stock Exchange stocks. Today, brokers' loans are less than 1 of the value of New York Stock Exchange stock pflces. OutrIght gamblIng was a large part of 1929's volume. Today It has dIsappeared almo.t entIrely and we 'havc an investment market to a large degree wit h a relabvely small amount of speculatIon on a high margin basis. To compare the present 25tImes-earnmgs and less than 3 yield on some growth issues to a sIInilar condltion III 1929 also ignores some very important dIfferences., Today only a handful of growth issues are selhng at very hlgh price-to-earmngs rahos and low YIelds. They comprise a small segment of the entire market This Possibly If we revjew some of the reasons why the market started Its advance 13 months ago and then evaluate the changes that have occurred since that time, we might arrIve at some concIuslOn of how vulnerable the market is at present price leels. In the first place, the advance' has taken place wIthout any nse in general business. The Federal Reserve Board index of production was 133 m September, 1953. It is around 125 today Over the next SIX months, the general expectation is for no great change, but any change that occurs WIll most lIkely be toward slightly higher levels Thus, the business pattern should not be a depressant factor on stock prices, The main factors that brought about the 30 advance from the September; 1953 lows were roughly. (1) The long-term factors of the increase in consumptlOn demand brought about by not only the increase in consumer Income but by a more eqUltable distrIbution of such Income, the population growth and the tremendous increase In money supply condItion applied to almost every (2) The more favorable mvest- stock in 1929. Such a comparison ment climate brought about by also ignores the motivation of the the Eisenhower Administration. buyer Today, these growth issues (3) An easy money market. -such as Minnesota MIllmg, Dow ('4) Stock prices were under- Chemical and others-are largely valued on the basis of hlstoncal being bought for cash, not for any Immediate rIse in price and divi- pnce-to-earnmgs rahos, yields and the spread between stock and dends-but for long-term growth bond prices over the next 10 or 15 years. A drop In price would not disturb the buyer, who, in most cases, (5) Technical market consideratIOns. would' welcome such a develop- As far as the fundamental fac- ment to add to holdings. In 1929, tors enumerated in the first catestocks were bought in hope of a gory are concerned, there IS no resale at a -profit in a very short change in the favorable. longperiod of tIme. They were bought term patterns Consumer mcome on a low margin and a drop in has reached new hIgh levels and prices -eIther scared or forced the lS expected to continue a slow up- holder out of the market. trend. This should result 10 lDcreased demand. Gross natwnal Some Correction Ahead . product in the second quarter is While it Is evident that the up slightly from the fIrst quarter present market is in no way com- despIte a decline in government parable to 1929 as far as vulner- spending. Consumer spendmg and ability is concerned, would it not capital spending are showing signs be logical to expect some correc- of improvement All of this spend- tion of the unprecedented nse of mg is motivated by the huge over 30 in the Dow-Jones In- money supply pumped into our 2 (I \, I ( I economy in war and prewar years 1954 election could cause a short- At the present time, our gross national product amounts to about term decline. a Republican VOIncttohrey-ootrheervehnannd 2.82 for every dollar of active loss in the Senate or House- money. This is up from about 2 could result in a further advance at the end of 1945, but still sub- above the 1929 highs. stantially below the 3 60 ratio The easy money market should which was cstablished during the contmue regardless of whether 1910s and 1920s. A return to this there is Republican Or Democratic fIgure over the next five to eight control of Congress. This is an years would drive business for- important factor in stock prices, ward to much greater volum'c because of the spread between than we have yet enjoyed. The YIelds in bonds and stocks The population growth contmues to average yield on the stocks in the exceed estimates despIte the fact Dow-Jones IndustrIal Average IS that the bIrth rate for the next now 158 above the YIeld on few years may flatten out because high grade bonds This is down the young men and women reach- only sllghtly from 180 a year 109 marrIagcable age today are ago, despite the fact that stock the depression babies of 20 years yields have dropped rather sharp- .. ago There are. a much smaller ly A contInued firm or slightly number of them However, the higher bond market will be a sus- excess of bJrths over deaths In taining influence on stock prices. the first six months of 1954 IS an Here again there is nothing m the amazing 10 greater than last bond market picture that could year's all-time previous record. result in sharply lower stock The enormous crop of postwar prices. bables is growing up Today they are concentrated in the 6-14-year Invulnerability age group. From 1955 to 1960, The fourth factor of undervalua- they will be in the 11-19-year age tIon has been partially corrected group. After that they WIll be grown up and ready to marry and by the 30 rise in prices over the past year and some stocks that an accentuated crease wIll start populabon InIn the 30-year have advanced sharply could be subJect to a correctIonary or rest- stretch from 1945 to 1975, the ing perIod. Nevertheless, the im- number of people will expand by mediat,e pattern IS not particu- 65 to 75 millJon, We are only a larly vulnerable. The table below thIrd of the way through this 30- shows how much you paid for 1 year period of enormOus population growth These long-term fac- of earnings and 1 of dividends in the three periods of stock market, tors have Improved since a year hIghs in the last '25 years as com- ago. pared with prices a year ago and today' . Possible Election Repercussion There could be a temporarily. unfavorable change in the second factor The forthcoming national For!U or Earning!! 1929 19.30 1937 1660 For ;1 or Dividend!! 2990 22.00 election could result m Demo- 1946 1680 28.40 cratic control of the House and 1953 pOSSIbly the Senate This might result in a delay of the EIsen- . Today hower constructIve program and 'Septlmber 900 1310 1625 2262 cause a temporary market decline Today's figures are apPlOxIma- Over the longer term, it WOuld tions, but there is no doubt that cause no great harm. A trend the present prIces have gone a such as that which elected Eisen- long way toward discountmg the hower so spectacularly in 1952 undervaluation that eXIsted a year does not end in two years 1954 ago – but they have not yet results WIll be dommated by local reached the overvaluations of past lssues, The Democrats may show stock market highs The table be- some gains in hne with usual off- low shows where the Dow-Jones year national elections The 10ng- industnals would be today if 1929, term, trend still remams favor- 1937 and 1946 ratIOS prevaIled to- able for 1956 and 1960, but the day 3

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