Tabell’s Market Letter – July 02, 1970
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Walston & Co. Members New York Stock Exchange and Other Principal Stock and Commodity Exchange. OVER 100 OFFICES COAST TO COAST ANO OVERSEAS TABELL'S MARKET LETTER July 2, 1970 There comes a time, usually in the terminal stages of bull markets, when all the available financial news is good and the clouds in the economic sky, if any, appear as only specks in the distance. Often there are vague, sub-surface indications of trouble ahead, but these become dwarfed in the prevailing euphoria of the times. Viewed with 20/20 hmdsight, the end of 1968 and the early part of 1969 obviously constituted just such a period. Earnings were mcreasing; stocks were advancing, and there,appeared limit to the price the market was willing to pay for a whole host of companies whose earnings were, with apparenf certainty, gc,niftoTIse-alrever'ac'celer – ating curve on into the infmite future. — I II To be sure, the seeds of collapse were present and could be detected with a sharp eye. Inflation was proceeding at an increasing rate, and the beginnings of the monetary stringency obviously called for to stem that inflation were beginning to be seen. The rest, as, some 300 points lower on the Dow, we are sadly aware, is history. It is interesting to contrast the situation at that time with the present one, which is almost the diametric opposite. The dominant financIal news at the moment heralds disaster or, at least, pending disaster. The most obvious example, of course, is the Penn Central bankruptcy and the accompanying concern national liquidity crisis. It is not our intention to minimize the im rt e Penn Central debacle or to ignore the very real probability that Jlo a ies equal or greater size, may well follow Penn Central into the courts. si noting that the liquidity problems now facing numerous American ow pretty well advertised ones and have had ample time to be reflecte 1 ck es. There is an old adage that i,,0;-, cctiOl1 to ,the.fr,ont is i months ago, the subtile, dimly-seen portents may be heralding . than deterioration. To take one example from the market's technical a 0 let conSider for a moment recent odd-lot statistics. Without going into detail on the in retation of these statistics, suffice it to say that, while the market has been drif – ower, the ratio of odd-lot sales to purchases has been rising, odd-lot volume as a percentage of total volume has been decreasing, and odd-lot short sales have been moving up sharply. All these are trends which, if continued, could have encouraging significance. Likewise, on the fundamental front, there are signs that all is not lost. Fortune Magazine headlines its economic forecast this month The Great Turnaround and says The U. S. economy has turned the corner on its 1970 readjustment. At the same time, the Federal Reserve Bank of St. Louis, the most respected advocate of the monetarist economic position, concludes that the current hesitation in economic activity has been more moderate than in the three previous recessions, although further expressing the reservation that recovery may be slower than in past'periods. It may just be possible that we are about to achieve the neat trick of slowing down inflation without causing an economic .d'.ownturn of u.ndue seriousness. Now all this could be cancelled out by a wide wave of bankruptcies or anyone of a number of potential economic disasters. But it remains true that many stock prices are at levels which are patently silly barring only the possibility of economic collapse. Should this collapse not materialize, the probability of many of these stocks doubling in price over not too long a period does not appear remote. But nobody talks about doubles any more. That sort of talk was characteristic of 1967 and 1968. Dow-Jones Ind. 689. 14 Dow-Jones Trans. 120.47 AWT'mn ANTHONY W. TABELL WALSTON & CO. INC. This IIHlrkct letit'f IS Iuhhsht'.\ for '''UI t(JlIH'nlt)l!'C ,(1111 lllfo!lnntlfln ,Inn not ,Ill ofTu 1'-' sell or Il '1oh'ltatm to buy ,HI) hl'(UILtll'lI 'lhe tn. (ormation ….. ns ohtnillctl flOm ;,null'e We h.-lll'v,' to he rellllllil'. hut \H. do lIot !..1.l.arante Its ,11'(UIM'V, W.\I'!ton F… Co, Ine It.. nffil'erll, dlledors or l'ITlpioyL'!s may have an mtm e9t In 01 llUll'hu'!(' .11\'\ sell the 'W' UJ rpft,! rC'tl to herem WN.30t