Viewing Month: December 1966

Tabell’s Market Letter – December 02, 1966

Tabell’s Market Letter – December 02, 1966

Tabell's Market Letter - December 02, 1966
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Walston &Co. –,;……;,..; Inc. ;…-…;….;.. MUNICIPAL BONOS UNDERWRITERS MUTUAL FUNDS Members New York Stock Exchange and Other Principal Stock and Commodity Exchanges TABELL'S MARKET LETTER OFFICES COAST TO COAST AND OVERSEAS December 2, 1966 Last week's market was a desultory affair. The Dow-Jones Industrial Average moved lower on each of the five days of the week. Although decline s were small, the biggest drop in price being a 5.90 point decline on Tuesday, the closing low of 789.47 reached on Friday was moderately below the previous week's low close of 794.98 and brought the Dow for the seco time, to around the 790 level previously mentioned by this letter as an important downside target. Of interest is the fact thaton this second approach to the 790 support level, most of our shorter term market indicators had reached, or were close to, oversold territory. As wehavenoted,before,the,.bJstoJ'Jcal.pattern,favors in the of December, but any such irregularity should probably be viewed as an opportunity to esta- blish positions prior to the start of the DecemQer-January rally. One of the most interesting features of the recent market has been the behavior of short interest on the New York Stock Exchange, a figure which is released by the Exchange shortly after the 15th of every month. As of November 15th, the total number of shares in short position increased to a record level of 14.1 million, which was an advance from 12.6 million shares in the previous month. The 14. 1-million-share figure represented the peak of a rather steady rise in short interest which had been going on for the past six months, ever since May of this year. It is, at least theoretically, true that a high short interest tends to be a supportive factor for the market in that shares sold short must, eventually, be repurchased. Certainly, this reasoning cannot be faulted. It has, however, to minimize the significance of the current high short interest level. J i'c 1 EOr this usually takes two forms. On the one hand, it is argued that a t ort interest repre- sents short sales against the box, or short sales rna pa 0 arbitrage situation. This reasoning seems spurious. In a year such wh ost investors have losses, short sales against the box in an effort to po 0 ro . ould be relatively low. There is, moreover, no reason tosuspect ltta'ge'shorts-should be any different presently than it has been in terest is based on the fact that 1 reason for discounting high short inthroughout the year and so far has proved of little help to the st cK In general, 0 n . more later. c erned with the short interest do not look at the raw short interest figure ,u her at something called the short interest ratio, a number arrived at by dividing t interest by the average daily volume for the previous month. A study of this ratio back to the time it was first computed in the early 1930's, is in- teresting. Throughout most of the 1930's and early 1940's, it fluctuated in a range between . 4 and 1. 5 – – in other words, a short interest of between 1/2 and 1 1/2 times daily volume. During the 1950's it tended to be generally higher, remaining for the most part between just under one and two times trading volume. For the month ended November 15,1966, average daily trading volume was 6.77 million shares. Thus the short interest ratio was 2.09 or more thantwo day's volume of trading. Since 1933, a short interest ratio of over 2 has occurred only four times, early 1933, Spring, 1938, Summer and Fall, 1949, and Spring, 1958. The reader will immediately recog- nize these previous periods as major market turning pOints. Of even more interest, however, is the behavior of the short interest ratio in relation to the trend of the market. The low in wasthe short interest ratio this year was in May when a ratio of 1. 10 reached. At that time the Dow was hovering just underneath the 900 level. Since then, while the market has been moving sharply downward, the short interest ratio has been increasing. In other words, the short sellers have been selling – – not on a rally, as is the usual case – – but into the teeth of one of the sharpest market declines in years. This also, is a rare phenomenon. A sus- tained rise in short interest in the face of a falling market has again occurred on only a few occasions since the early 1930's. These occasions are Fall,1932, Spring, 1938, Spring, 194 , Spring, 1949 and Summer, 1953. Each of these points also constituted a major stock market low. It is, of course, possible that economic events in 1967 will bear out the negative ex- pectations of those who have sold short. However, the historical implication of the recent be- havior of the short interest ratio cannot, it would seem, be ignored. Dow-Jones Ind. 789.47 ANTHONY W. TABELL Doll!..l.ones Rqils 201 50 WALSTON & CO. INC. A ,,'irhII;)WLr.lA.Jetter t8 published for your convenience obtained from sources we believe to Bnd mformatlon Rnd Is not an offer be rehable. but we do not gUarantee to sell or a Ita occuraey BOilllitaUon to buy Walston & Co Bny Inc see\ and lil!'t.Ie&md Bed Tb i d' e n- ftIIPto;ven mQ have an intereBt in or pUl'chase and &ell tbe referred to herein. …. 0 cers, rectors or WN.801

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Tabell’s Market Letter – December 09, 1966

Tabell’s Market Letter – December 09, 1966

Tabell's Market Letter - December 09, 1966
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Walston &Co. —–Inc. —– MUNICIPAL BONOS UNDERWRITERS MUTUAL FUNDS Members New York Stock Exchange and Other Principal Stock and Commodity Exchanges OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER December 9, 1966 The stock market reversed itself sharply this week, and the Dow-Jones Industrial Average reached an good advances the first four days of the week, followed by SOme irregularityon'Friday. This week's intra-day top of 818 represented the third attempt on the part of the Dow to move decisively through the 820 level comparing with intra-day peaks of 822.93 on September 16th and 827.33 on November 16th. Basically, our inclination at the moment is to feel that this level will be breached on the upside following the year-end, with perhaps some irregularity between now and the end of December. Meanwhile, we think a'number of individual issues will tend to out- perform the'market.- One such- issue ,isreviewed below. KELSEY-HAYES COMPANY Current Price Current Dividend Current Yield 27 1. 30 4.8 Long Term Debt Common Stock 17,000,000 3, 002, 422 shs. Sales-1967-E Sales-1966 290,000,000 282,129,000 Earn. Per Sh. 1967-E Earn. Per Sh. 1966 4.00 3.45 Mkt. Range 1966-65 307 I 8 – 16 Despite the cloudy outlook currently surround ing 1967 prospects for the automotive industry, the shares of Kelsey- Hayes Company continue to warrant consideration by investment accounts seeking price appreciation and better-than-averag dividend income. Having recently been added to our Recommended List, we are projecting a price objective in Kelsey-Ha s a these shares. 'oged almost dramatic earnings Wl9wth i r s . Compared with a low e in 1964, net income for the ed August 31, 1966, rose n increase of better than 1000/0 to –,- Kelsey is wheels, hubs, brak , product mix. In ad .. ru .rnd equipment for the automotive industry with e or brakes, rims and drums dominating the broad 0 rv' g the automotive industry, where Ford and General MotOrs are its leadin u 0 s, but where Chrysler, American Motors and Kaiser Jeep also are serviced, Kels ells to manufacturers of trucks, buses and tractors. Aircraft parts constitute the Ie lng non-automotive lines and include such items as compressor and turbine blades for jet engines, gear box assemblies and electronic scanning devices. Because of the increased Vietnam war requirements, sales of helicopter transmission housings are up sharply. If there is anything glamorous in KW's product mix, it could be the sales potential that seemingly lies in disc brakes. With increasing emphasis being placed on car S!J,fety, disc brakes are expected to become standard equipment on almost all cars in a few years. These brakes offer such safety advantages as consistent straightline braking, lack of brake fade and the doing away with the danger of water in the brake. At present, KW disc brakes are standard equipment on several 1967 Ford model!;!, General Motor's Toronado and Eldorad and Chrysler's Barracuda, Charger. It is anticipated that disc bra'kes will become standard on still more auto lines in 1968 with some industry analysts suggesting that 1968 model market penetration could exceed 500/0. In anticipation of this possibility, KW has bud- geted 14 million for expansion of brake facilities in the current fiscal year. Selling at approximately seven times the 4.00 a share estimated for fiscal 1967 and providing a return of 4. 8 on the current 1. 30 annual dividend, which must be considered a candidate for liberalization, these shares are recommended for purchase. From a technical standpoint, there is considerable downside support around the 25 level, the issue's relative strength index remains and our..price objective is in the low 40 'so Dow-Jones Ind. 813.02 Dow-Jones Rails 206. 68 HARRY W. LAUBSCHER for ANTHONY W. TABELL WALSTON & CO. INC. AWTamb Thll market letter I. publlebed for YOUr convenience and information Rnd Is not an offer to sell or a soliCitation to buy any IleCUritiea dl8Cuaaed. The In. formation was obtained from sources we beheve to be rehllble. but we do not guarantee its accuracy. Walston & Co., Inc. and Ita officers, direclon or employees may have an Intereflt In or pupcbase and sen the securities referred to herem. 6

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Tabell’s Market Letter – December 16, 1966

Tabell’s Market Letter – December 16, 1966

Tabell's Market Letter - December 16, 1966
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Walston &Co. -…;.,;.;;,..;;,,;; Inc. ;;…,;;……;;…;;., MUNICIPAL BONOS UNDERWRITERS MUTUAL FUNDS Members New York Stock Exchange and Other Principal Stock and Commodity Exchang OFFICES COA.ST TO COAST AND OVERSEAS T.ABELL'S MARKET LETTER December 16, 1966 December is, traditionally, the time for taking stock of the results of the previous year and for looking ahead to what the new year may hold. In this and next week's letter we shall attempt to do this, this week by reviewing the market action of the year just past, and next week by offering some thoughts as to the outlook for 1967. It is, unfortunately, impossible to make any review of the past twelve months pleasant reading for most investors. During most of the year the Dow-Jones Industrials, along with most popular averages, were in the process of one of the sharpest declines of the post-war period, dropping 26.50/0 from 1001. 11 on February 9th, to a low of 735.74 on October 7th. On a percentage- basis, this decline.ranked in magnitude with the sharp drops of 1957 and 1946, although it was of somewhat lesser degree than the decline of 1961-62. It was, however, considerably more severe than 'Previous drops in the post-war period such as 195l, 1960, or 1965. These percentage figures are, of course, interesting, but they miss what seems to this letter to be the central fact of the 1966 bear market — the fact that it is part and pa of aJ. ongoing process which began not in February 1966, but five years ago in the latter part of 1961. That ongOing process is the continued erosion of investor confidence in common stocks. What do we mean by investor confidence Perhaps the best tangible measure of on-I fidence is very simply the market price of 1. 00 of earnings of a highgrade industrial corpo- ration. According to this definition, the price earnings ratio of the Dow-Jones Industrial (which is composed of 30 highgrade companies) confidence as any. The history of the Dow-Jones pIE over t e noeasure of investor t ive ears is an interest- . ing one. At the 1961 high, the Dow sold for 24. 2 an sharp break in the Spring of 1962 corrected this figure to a low of 16.2. grea market of 1962-66 was not accompanied by any great surge of e, by mid-1964 investors had marked prices up only slightly to 19.1 times gs proved to be the high for the period. The-1966 drop r s to 13.5 a-s-of-September, a figure not previously seen (with the led this letter to commen , aro of 1958) since 1954. It was this fact that August, that we prefer to think that the recent stock price we n ore stocks close to attractive long-term purchase levei.s than has be me in a great number of years. By these sta ecent bear market is a quite different animal than 1962 or 1957. For example, bo ese markets were accompanied, at their peaks, by orgies of speculative excess an stock prices which were statistically high by then-prevailing sta ards. The readjustment took the form of sharp IJquidation of a technically unsound situation. There was some of this sort of thing, of course, at the 1966 high, but it was limited to a few stocks. The 1966 decline, by and large, was a continuing adjustment by the market to a changed set of economic conditions and improved alternative yields on forms of investment . competitive with common stocks. . Viewed in this light, some of the technical statistics regarding the 1966 decline a lot more sense. The fact that volume decreased as the decline progressed, rather than in- creasing as in 1962 or 1957, becomes logical if one sees the decline as due to a lack of buy- ing interest rather than the pressure of paniC selling. The fact that short sellers have spent the last six months sellin-g borrowed stock directly into the face of a severe decline, is equally logical if one views th'e drop as part of a long-term erosion of confidence. And the fact that many stocks are, at the moment, selling close to their highs for the year, rather than near their lows, indicates that solid fundamental improvement can outweigh the techni- cal factors which produced the 1966 weakness. The 1966 drop has, therefore, been a horse of quite another color from the similar bear markets of 1957 and 1962 — the most recent comparable periods in the memory of present investors. It is, therefore, likely that the aftermath may also be somewhat diffE!rEmt We will discuss this prospect next week. A V ERY MERRY CHRISTMAS TO ALL. Dow-Jones Ind. 807. 18 Dow-Jones Rails 206.80 ANTHONY W. TABELL WALSTON & CO. INC. Thill market letter III published for your convenience Bnd And 111 not an offer to sell or a soJleltation to buy any eeeuritiea dil5euaeed. The In- fomlAtlon was obtained from Munes we believe to be reliable, but we do not guartLntee Its lleeuraey, Walston & Co Inc. and ita oftleen. directors or employeea may have an Interest In or purchase and sell the seeuritles referred to herein. WN&Ol

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Tabell’s Market Letter – December 23, 1966

Tabell’s Market Letter – December 23, 1966

Tabell's Market Letter - December 23, 1966
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Walston &Co. – – – – I n c . …….- – – MUNICIPAL BONDS UNDERWRITERS MUTUAL FUNDS Members New York Stock Exchange and Other Principal Stock and Commodity Exchange. OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER December 23, 1966 As we set out to follow the dictates of tradition and issue a forecast for the stock market in 1967, we are impressed with the extent to which the stock market picture today is, in effect, a mirror image of the situation existing when we bent ourselves to the same task 8 year ago. At that time the stock market had just spent the last six months in a sharp and dramatic rise during which the Dow had risen over 130 points,and many stocks had score,d advances well in excess of 1000/0. We said at that time, Our brethren in the economic forecasting field have already consulted their oracles and their view of the outlook for 1966 pr()fits is almost uniformally roseate. This view is, no doubt, comforting to those who persist in the illusion that it is ;ather tiian' the expe-ctatiori- of earnings that determines the short-term course of stock prices. We are inclined to believe that the corporate profits outlook for 1966 is quite adequately reflected in the prices that are being paid or stocks today. We are, therefore, less impressed by the generally good profits out- look than we are by the number of potential psychological factors which could disturb marke equilibrium at some time during the year, i. e., tight money, balance of payments problems, Vietr.am, etc.. At present, the situation is just about reversed. The popular averages have spent most of 1966 in a precipitous decli ne from which they have, just lately, staged a mild recov- ery. Meanwhile, the economists mve looked at the business picture for 1967 and concluded that all is far from serene. The possibility of a – – – let us come right out and use the nasty word — recession in 1967, is a real one. And yet, just as a year ago, we cannot help but feel1;hat the uncertainties in the economic outlook are reflected in the prices currently being paid for highgrade common ic re — as we have pointed out for the past four months – – – by historica a un mono bargains. , We noted in our letter of last week that we 196 cline essentially as part of an ongoing process of erosion in investor has been going on since 1961. – tr by , mean something wholly foreign to the t o . experience, we feel that this erosion if it is not ended already, technica.l parlane, e hav – yea!' ahead. In other words, we feel, in e p iod during which a base will be formed for the next major upswmg n 0 es. The crucia urse, what shape is this base most likely to take, and how,long will it exten r t' Here, historical experience is not of much help. In 1957 and 1962, for example, ase required only a short time to form and within 4-5 months after the lows were m the market was embarked on a move which ultimately led to new high territory. Following the 1946 break, however, the base formation required a long 33 months before the averages, in June 1949, began their push into new high ground. It seems to us that the ultima te form the 1967 base will take will depend in great de- gree, on factors not now known — largely concerning the uncertain business picture for next year. If, on the one hand, the extent of the 1967 contraction becomes clear early in the year, the base could be completed in early 1967 and the market could begin an upward move of major proportions. If, on the other hand economic uncertainties continue to beset the market throughout the coming year, the process of a base forma tion could well extend through 1967 and beyond — possibly involving a test of the October lows. r The above does not necessarily constitute equivocation so long as we keep our eye firmly on the ball. What we are looking at, regardless of the near-term uncertainties, is a proeess which will ultimately lead to stock price levels considerably higher than those pre- vailing tOday. The investor's prime concern during 1967 should be to get himself long of those stocks which have the fundamental and technical potentials to be the leaders of the next bull market. A VERY HAPPY AND PROSPEROUS NEW YEAR TO ALL. Noon Dow-Jones Ind. – 800.89 Noon Dow-Jones Rails – 208.87 ANTHONY W. TABELL WALSTON & CO. INC. AWTamb '(bIll market letter is published for your convenience and mformatlon And 15 tlot an offer to sell OT a IIOIleltaUon to buy any securities dll!cusaed Th I was obtained from sources we bl!heve to be reliable. (!DIDloYeee' DIS' have an Interest In or purchase and sell the we do not guarantee referred to herein. its aceurftcy. Walston &. Co.. Ine. and its officen ' di;-…….-..le'lI nor WN101

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Tabell’s Market Letter – December 30, 1966

Tabell’s Market Letter – December 30, 1966

Tabell's Market Letter - December 30, 1966
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W- – -a-lsItnocn .&- -C-o-. MUNICIPAL 80NDS UNDERWRITERS MUTUAL fUNDS Members New York Stock Exchange and Other Principal Stock and Commodity Exchange. OFFICES COAST TO COAST AND OVERSEAS TABEll'S MARKET lETTER December 30, 1966 For some years now, we have studied the familiar seasonal tendency of the stock market to stage a year-end rally, and it has been the custom of this letter each December to point out some of the conclusions that can be derived from a study of this phenomenon. We have suggested that an exhaustive study of chart patterns since the Dow-Jones Average first was computed in 1897 indicated that such a rally, however minuscule, invariably had taken placE'. A number of interesting facts about the market action of the year end may be noted. (1) – As stated abov-;;, an identifiable rally has bken place in e;ery year since 1897. This rally often has been of great magnitude with advances as great as 280/0 ha been recorded. It also, on occasion, has continued with only minor interruptions for as long as six months into the new year. However, on other occasions, it has been of only a few days duration, reaching a top extremely early. Thus, in 1960 and 1962, the rally reached a peak in the first week in January. In 1961, 1963 and 1964 it continued into the latter part of February or March. In 1965, the rally peak was reached in early February. (2j – There has been a persistent tendency for the rally to begin early in years the market has been up, and late in years when the market has been down. In recent upward years, 1959 and 1963 are examples, the rally commenced from early in December. In 1962, it began late in the year and 1966, a downward year, is no exception to this rule. (3) – The important thing to watch in connection Otion in the early months of the new year is the low for the previous as been broken in forty-one years out of the past sixty-eight, includin . e three of these forty-one cases, it was broken in January and February. it never been broken later than mid-March, with the single exception e market is able to hold above its will not be broken. For January 1960 and January 196 i I .e e r&i e December low was broken early in 1964 it never was broken. 1965,as nntprtl above, was reached an intra-d I 0 1 4 ow of 850. 19 being broken in June when the . I (4) – In yea n been downward tWO-thl ds Again, 1965 was an ex cember low has been broken, the subsequent trend has e time. 1960, 1962 and 1966, of course, are typical cases. (5) – The magnitude of the rally is an important Clue as to the year's market trend. For example, an advance of 100/0 or more from the December low has been followed by an ward or neutral market in twenty-eight of the thirty-three years that such an advance has occurred. An advance of less than 100/0 from the December low before an identifiable correct ion takes place has been followed by a downward market in twenty-three of the thirty-five years. In 1961, 1963 and 1964, the year-end rally approximated 100/0. In 1960 and 1962, for example, it was less than this figure. (6) – The length of time in which the rally continues into the new year also is important. For example, in eighteen years the rally continued into March or later. In sixteen of these eighteen years the eventual trend was upward. In 1964, the year-end ;rally continued into March and in 1961 and 1963, into late February. In the coming year, therefore, the December low of 779. 34 is an important point to watch. If the present rally tops out in early January and breaks this low, it would be a strong indication of probable market weakness. A like indication would be a failure of the Dow to advance 100/0,or to approximately 865. On the other hand, if a rally continues into February or March, or reaches above 865, an extension of the upswing might be indicated. Dow-Jones Ind. – 785.52 Dow-Jones Rails – 203.02 ANTHONY W. TABELL WALSTON & CO. INC. AWTamb This market letter I. pubUshed for YOUI' convenience and Informfltion I\nd ta not an ofter to sell or a eollcttatlon to buy any securities dlseusaed. The In. formation was obtained from sourees we beheve to be rellable. we do not guarantee Its accuracy. Walston Co.. Inc. and Ita officers. or ftl1JJ101eeB mlQ' have an interest in or purchase and sell the secuntles referred to herein. \l!……WNB01J

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