Tabell’s Market Letter – February 16, 1968

Walston &- Co. Inc. – – – – – . .. , , FI L /! Members New York Stock Exchange and Other Principal Stock and Commodity Exchanges OVER 100 OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER February 16, 1968 From time to time this letter has had occasion to remark on something called the bull-bear syndrome, noting that the disease occasionally afflicts some market analysts and a great many investors. We have suggested that the most noticeable symptom of the 'disease is a compulsive desire to pin labels on the stock market — calling it either al a bull market or, (b) a bear market, without any room for intermediate gradations. We think that this compulsion has always been an enemy of rational thought insofar as the stock mar- ket is concerned,and we suspect that it is becoming more and more so today, For example, just how, pray, does one go about defining a bull market and a bear mar ket The most tempting thing is to saya buli' marketeXi'Stswhen a given'average let us say the Dow-Jones Industrials, advances x and, conversely, a bear market exists when said average declines y/o. All well and good. If the standard of a 20 decline in the Dow-Jones Industrial Average is utJ\ed to define a bear market, we have had four such markets in the past 25 years occurring in 1946, 1957, 1962 and most recently, in 1966. By this standard, the drop from an intra-day peak of 951. 57 in the Dow last September to an intra-day low of 826.46 this week, a decline of 13.2, does not yet qualify. There are a couple of things wrong with this kind of a definition. The first thing is that looking at the market in terms of percentage decline and percentage advance may obscure some much more important characteristics. Let us take the two most recent bear markets- 1962 and 1966. These were actually fairly similar in extent, but the characteristics, it seems to us, were quite different. By and large, a great severe debacles in 1966 came back very sharply to reach w i stocks that suffered oi),nd a year later. This included airline, office equipment, electronics, andJttPuT e e technology issues. By contrast, in 1962, a great many stocks -siderable period of time, casualties of the bear 0 remained for a conarge number of cases, have not even today, six years later, moved peaks. Thus, the two markets- both bear m!rkets by percentage during and after the fact. . ' yo Another difficulty of 1960 during which year t rule, this fails to al a standards is typified by the market of me 18 from January to October. By the 20 et, yet it was a period in which a great many issues declined to major n s. e we make the percentage required to define a bear mar- ket smaller than 20, e i urselves including such periods as the drop from August 1956 to February 1957, or t ay-July drop of 1965, periodS which very few people consider ones of major decline . Nor do bull markets admit of easier definition. It is arguable, for example, though not, we think, very cogently,that 1967 did not constitute a bull market at all since, after all, the Dow did not make a new high. This tortured bit of reasoning will come as some surprise to the holders of those mutual funds whose managers had little difficulty achieving a 50 to 100 increase in net asset value for the period. All of this leads, of course, to the problems involved in defining today's confused stoc market. We have had since last September, it seems obvious enough, a market very differ- ent than the one we enjoyed in the early part of 1967. If the 1967 period constituted a bull market, are we then to say we have now entered a bear ,market phase We a!,e, frankly, not so sure. To the holder of a whole- host o- f h-i-gh-.l.y…i–n-f-lated IIglamo- ur II issues, the last five months have constituted a real doozie of a bear market. To a great many otre r investors the results, so far, at least, have not been overly painful. Gerald Tsai, Jr., in a recent speech, forecast that 1968 would bring a whipsaw mar ket, and we are inclined to go along with this definition as being as good as any. Just how it will shape up in terms of the averages is, in fact, anybody's guess, but we are quite certain it will produce highly attractive investment opportunities in individual stocks. Dow-Jones Ind. 836. 34 Dow-Jones Rails 224.66 ANTHONY W. TABELL WALSTON & CO. INC. AWTamb This market letter 18 pubhshed for your convenience and informntlOn flnd is not an off('r to sell or ,!. soheltat\on to buy any securities dLScussed. The in senformation WAS obtaIned from BOUfel'll we believe to be rehable, but we do not g'Unrantee its accuracy Walston & Co., Inc. and its officers, directora or emlo),eell may have an Intereat in or purchase and the secuTltJE'S refenoo to helcin WN801