Viewing Month: January 1971

Tabell’s Market Letter – January 08, 1971

Tabell’s Market Letter – January 08, 1971

Tabell's Market Letter - January 08, 1971
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE MEMBER AMERICAN STOCK EXCHANGE January 8,1971 The picture of an unfolding bull market continues to emerge in the day-to-day sequence of stock market events — almost in textbook fashion. The most obvious phenomenon of the last two weeks – –ha sbeen-the, broadening -ofmarket Jeader-s hip,.In ethelastoweek oLthe,oldwear.,Ahes'&andN ; York Stock Exchange Indices penetrated their January-March trading ranges confirming the upside penetration by the Dow made at 800 in early December. Last week, although the Dow failed to penetrate its December 30th high, all of the broad-based indices continued to move ahead into new high territory, and substantial pluralities of advancing over declining stocks indicated the healthy undertone of the market. As 1970 drew to a close, there was practically no important technical indicator that had not turned positive and confirmed the market uptrend. This included the whole series of lagging indicators which have a high degree of historical reliability in signaling market bottoms and which achieve this reliability at the cost of reversing course a number of months subsequent to the actual low. There is, in other words, very little point at this advanced stage in looking for further confirmation that an important upswing is underway. The upswing has been confirmed by just about every device possessing the slightest degree of statistical validity. All this is, no doubt, embarrassing to the diehard bear who is still muttering incantations about rallies in a bear market. It is equally embarrassing to the timid investor who is willing to admit that the name of the game has changed but who is waiting for some sort of weakness on which to purchase stocks. What the Casper Milquetoast forgets, of course, is one of the characteristics of the early stages of an upswing is that precious little weakness tends to present itself. Since June, the largest correction which has appeared in the DJIA has been under 4 and there is, on a historical basis, little reason to expect that,cQrrections !lluch greater.than this will take place until a – – – mUCh more–advanced- stage'o- tne upswing. -. The point was reached. some time ago-whn-ih-erewas- – only one sensible course for the investor, that course being to be long equities to the maximum extent prudently permitted by his personal investment situation. For the investor who is not now in that position, we think it advisable to get there and do so as fast as possible. The advisability of such a policy is further underscored by the decreasing rewards available to those remaining out of the equity market. The rally in fixed -income securities, albeit that it was a natural and predictable consequence of the monetary policy of the past year, has been, in its own fashion, just as dynamic as the advance in the stock market. Short-term governments, of course, are now returning less than 5 vs. as much as 8 this Spring, and AAA corporates are well under 8 vs. levels in excess of 9 a few months ago. Moreover, from a technical point of view, most fixed income securities appear to be reaching near-term objectives, thus indicating that the opportunity for further capital gains in long-term bonds is, from this point, somewhat limited. In this sort of environment, of course, the entire focus of technical work changes radically. As we said above, there is little point in looking for further confirmation of the bottom. Indeed, the focus of effort at the moment is to look for those signs which typically begin to appear toward the middle stages of an advance and, of course, ultimately, for signs of a top, although, with most indices and individual stocks having objectives well above current levels, one would hardly expect the emergence of these signs for some time. Already, however, some of the early signs of maturity are 'beginning to appear. A few stocks are approaching near-term objectives or supply . areasindicatingthat'their limIted potential'from presemt'levels-suggests- themas pOssibsv,itch''–' candidates. Moreover, new candidates for leadership begin to emerge as base formations are penetrated on the upside, a case in point, from last week's trading, being the airlines. It is the kind of market where the investor should be highly critical of his own performance. It is typical of the formative stages of an upswing that almost all stocks go up, at least a little. In 1954 and 1958, for example, averages of all major industry groups scored advances on the year. The challenge for the investor is to take advantage of shifting leadership so as to own those equities which are likely to score the biggest percentage advances. The challenge of 1969-1970 was that of preserving capital. The challenge for 1971 will be increasing it. Dow-Jones Ind. (1100 a.m.) 837.97 S&P (1100 a.m.) 92.39 AWTmn ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL No statement or expression of oPInion or any other maller hereIn contamed IS, or IS 10 be deemed to e, directly or ndlfl'!1!ly, on offer or the 5011l110110n of an offer 10 buy or sell any security referred to or mentioned The moiler IS presented merely for the convenience of the subscriber WhIle we believe the sources of our Information to be reliable, we in no way represent or guarantee the accuracy thereof nor of the statements mode. herein, Any action to be token by the sub 5mber should be based on hiS own investigation and Information Montgomery, Scott & Co, as a limited partnership, an lis partners or employees, may now have, or may later take, positions or trades m respect to any seCUrities mentioned In thiS or any fuftJre Issue, and such pOSition may be different frm any views now or hereafter expressed In thiS or any other issue Montgomery, Scott & Co, which is registered With the SEC as an Investment advisor, may give adVice to lIs Investment adVISOry and other customers 'ndependently of any statements made In thiS or In any other Issue ,

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Tabell’s Market Letter – January 22, 1971

Tabell’s Market Letter – January 22, 1971

Tabell's Market Letter - January 22, 1971
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TABELL'S MARKET LETTER l —'J 909 STATE ROAD. PRINCETON. NEW JERSEY 08540 OIVISION OF MEMBER NEW YORK STOCK EXCHANGE MEMBER AMERICAN STOCK EXCHANGE January 22, 1971 It is wise, in the stock market as elsewhere, to be somewhat SUSPIClOUS about universally-held opinions. This is often difficult to do. Market analysts are not totally unreasoning beings and, for – an6Pin1(;,-n-to-be-aTinostunrversahn-th-e'1irllTpliite–;-it'niu-st-pos-seSs'ahlghd-egree 6f plausibllity-.- — – At the moment, inspection of the market views of a number of observers reveals a forecast which appears, on the surface at least, highly plausible and which is the focus of a good deal of agreement. That forecast runs more or less as follows. The market (most observers have gotten around to agreeing with us on this point) is in a healthy state, and the long-term outlook is good. However, so the conventional wisdom runs, the persistent rise since November has been too great to be sustainable, and the market is in need of a correction of some sort if it is to remain soundly based. Now our conviction, based on experience, is that, whenever an opinion is as common as the one above, the market tends to surprise the proponents of that opinion. In this particular instance, the surprise could take one of two forms. 1) The market could continue to advance without any notice- able correction or, 2) the correction, when it finally arrives, could be bigger than anyone suspects. Concerning the second alternative, we are, of course, wary of such an occurrence, but we confess we are unable to see in our technical work, at the moment, any of the sort of deterioration that would normally accompany significant vulnerability. We are forced, therefore, to a closer examina- tion of the conventional theory that a significant correction from these levels is inevitable and that, were such a correction to occur, the market would, thereby, find itself in a more healthy condition. Like many pieces of conventional wisdom, this theory does not find its elf borne out by the facts. Indeed, an inspection of stock market history seems to indicate that precisely the reverse is true. In other words, the market will indicate a sound technical base by continuing to advance without substantIal corre6t16n and, conversely,- a protractea'Clownswing attJ5 stage would suggest greater – vulnerability to come. To buttress this conclusion, we ask that the reader bear with us through a recitation of some arid statistics. The bull market is now 166 trading days old and has scored, so far, a 35 advance in the Dow. If we define bull markets as upward swings without an intervening correction greater than 15 , we find that there have been eight such since 1942. twe are making an exception here for the 1945-1953 upswing, generally considered by most analysts to be a separate market phase even though the sub- sequent correction was only 13.) These eight upswings have ranged from 284 to 1211 trading days in length. Thus the historical record would suggest that there should be at least another six months of life remaining in the present advance. Now let us examine the interruptions that have occurred in the present upswing. A 4 downswing in the Dow took place in early June, and a 7 decline occurred in late June and early July. This is consistent with the historical record since it is fairly common, following a sharp drop, to have wide swings early in the process of a base formation. Since July, however, there have been only four notable corrections — none of them as great as 4 and none lasting longer than 16 trading days. It is this lack of downside action, evidently, that leads many analysts to feel some sort of purgation is required. However, six of the eight previous bull markets continued longer than the present one without a single 4 correction ever being observed once the base formation stage was passed. The 1957-1960 upswing, for example, once past the base, continued almost a year and a half from the low before a 4 correction took place and it was, by that time, four-fifths completed. In the majority of past cases, an advancehas been at least Iialf-way complete from a-time standpoint before a 4 ,— downswing interrupted it. What about the chances for a 7 correction, one which, in the present case, would bring the Dow back to 790 In most previous bull markets, no such correction has ensued until the latter third of the advance and, in at least two cases, the bull market ran to its ultimate completion without ever scoring a decline of this magnitude. Greater corrections, i.e., 10 or more, have occurred exclusively in the terminal stages of previous bull markets, and six of the eight past bull markets never saw a 10 correction during their entire history. We are thus inclined to find ourselves at variance with the conventional thmking in this regard. We think that the more the market continues to display the sortof strength it has been showing, the greater the likelihood of its internal condition being basically a healthy one. Were the market to undergo a modestly severe decline here, we would conSider it an indication that the advance had reached a more mature stage than we now have reason to suspect it has. Dow-Jones Ind. (1100 a.m.) 858.02 ANTHONYW. TAB ELL AS'&ArPT(F1R1R00 a.m.) 94.53 DELAFIELD HARVEY TABELL 'I No statement or exprE!Ulon of OpinIon or any other motler herein contolned IS, or IS to be deemed 10 be, directly or indirectly, an offer or Ihe ;ollCIlollon of on offer 10 buy or sell any security referred 10 or menlloned The matter IS presented merely for the convenience of the subscriber Wltlle we believe the sources of our information to be reliable, we In no way represent or guarantee the accvracy thereof nor of the statements mode herein Any action to be taken by the sub 5crlber should be based on hiS own investigation and Information Montgomery, Scott & Co, as a limited partnership, and lIs partners or employees, may now have, or may later lake, pOSitions or trades In respect to any seCUrities menltoned In this or any future Issue, and such posilion may be different from ony views now or hereafter expressed In thiS or any other issue Montgomery, Scoll & Co, which IS registered With the SEC as an Investment adVisor, may give adVice 10 Its Investment adviSOry and other customers Independently of any statements mode In thiS or In any other Issue

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Tabell’s Market Letter – January 29, 1971

Tabell’s Market Letter – January 29, 1971

Tabell's Market Letter - January 29, 1971
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,— —————……., TABELL'S MARKET l LETTER – – —–J 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 OIVISION OF MEMBER NEW YORK STOCK EXCHANGE MEMBER AMERICAN STOCK EXCHANGE – January 29, 1971 It is an oft-voiced criticism of the military establishment that generals are invanably superbly prepared to fight the last war. The failing, however, is a human one and hardly restricted to the military. It is at least' an arguable premise that investors also equip themselves to wage the investment battles of the past, ''giving'little'thought as-to 'how-the-future environmentmaydiffer frompast-ex-perience- 'I'hus,–manycin- – –' vestors may be entering the 1970's superbly equipped to cope with the environment of the 1950's and 1960's. This proved somewhat expensive in the 1969-1970 bear market,and it may, we have a feeling, prove to be expensive in the future. The tendency to look backward is not a new one, as anyone with a decent financial library and an in- clination to browse through it will be aware. Twenty years ago, in the early 1950's and late 1940's, in- vestment theorists, still scarred by the memory of the 1929-1932 depression, devoted a great deal of in- tellectual energy to devising plans by which portfolio managers could avoid a repetition of that disaster. One method, widely advocated at the time, involved the use of so-called formula plans or plans under which switches were made between cash and stock in accordance with a pre-determined formula. The plans had one difficulty, however. Unprepared to cope with the rising markets of the 1950's and 1960's, they tended to take their us ers out of the market early in that rise and, as stocks continued to advance, they fell into total disrepute. This is illustrated by the table below which contrasts the percentage results of investment in the DJIA via a typical formula plan — the constant -dollar plan — with the policy of Simply buying and ho1dmg the average. The constant-dollar plan is a Simple one whereby the market value of stocks in an account is maintained at the same level each month, by purchases if the market has fallen during the month or by sales if the market has risen. The table shows the various dates at which an mvestor could have started such a plan since 1926 and the results for each of four termination years, 1945, 1955, 1965 and 1970. In each instance, the number to the left of the slash is the percentage change achieved in an account by buying and holding the Dow, and the number to the right is the percentage change under a constant- dollar formula. -Start E-N D Date 1945 1955 1926 22/100 210/201 1927 – 4/ 73 141/174 1928 -35/ 31 62/132 1929 -22/ 44 96/145 1930 17/ 81 196/181 1931 147/142 526/242 1932 22V152 714/252 1933 93/ 89 388/190 1934 85/ 83 369/184 1935 33/ 50 238/150 1936 7/ 27 171/127 1937 59/ 64 304/164 1938 24/ 32 215/132 1939 28/ 32 225/132 1940 47/ 42 272/143 1941 73/ 58 340/158 1942 61/ 50 309/150 1943 41/ 36 259/136 1944 26/ 24 220/125 1945 153/100 — -1946 175/107 1947 169/105 j)-A-r—E 1965 1970 516/276 433/267 378/249 314/240 223/207 179/198 290/221 237/211 488/257 409/248 1144/318 976/308 1517/328 1299/319 870/265 739/256 831/260 706/250 572/226 482/216 438/203 366/193 702/240 594/230 526/208 442/198 545/208 458/198 639/218 539/209 773/234 656/224 711/226 602/216 613/212 517/202 536/200 450/191 402/176 334/166 446/183 373/173 435/180 363/171 Start Date 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 E- – N 1955 175/105 144/ 93 107/ 76 81/ 62 67/ 53 73/ 57 20/ 19 DDA T' E'' 1965 1970 446/181 373/172 384/169 319/159 311/152 256/142 260/138 211/128 232/129 187/119 245/132 198/123 139/ 95 107/ 85 98/ 75 71/ 66 94/ 72 67/ 62 122/ 85 92/ 75 66/ 55 44/ 46 42/ 39 23/ 30 57/ 48 36/ 39 32/ 31 14/ 21 48/ 40 28/ 31 27/ 24 9/ 14 10/ 10 4/ I – 13/- 9 6/ 10 , .., 71.-4,,– 'O. 11/- 9 4/ 6 The first column suggests the reason for the vogue of formulas in the late 1940' s. It shows that a con- stant-dollar plan formula would have enabled the mvestor to avoid the risk of buying at the top m the late 1920's and would have, in 1945, given him a proht rather than a loss even had he started the plan at that time. The formula, in fact, produced results superior to buy/hold in 10 of the 19 starting years up to 1945. However, as the second two columns show, the experience ending with 1955 and 1965, was qUIte different. A glance at the figures mdlcates that the investor, whenever he started his fund, would have been better off simply by buying stocks and holding them rather than operating under the formula. It is, however, the last column showing results ending in 1970 which is of interest. For starting years from 1926 through 1955, the policy of buy and hold tends to be clearly superior. However, in the middle 1950' s that superiority erodes and, as the table shows for every starting year since 1958 the investor would have fared better under a constant-dollar plan t\-ian under a plan of SImply holdmg stocks. Ihe wheel, in other words, may have come full circle. The long ago-discarded concept that portfolIO policy should center on aggressive switching between stocks and cash may again have a great deal more validity than many analysts now suspect. ANTHONY W TABELL Dow-Jones Ind. (1100 a.m.) 865.42 DELAFIELD, HARVEY, TABELL SAWT.t-l prcsslon..o slalemen( or of opinion or any other mottcr hercin contomcd IS, or IS 10 he deemed to be, directly or indirectly, an offer or the SOllcltollon of an xMto buy or sell any seCUrity referred 10 or mentIoned The mailer IS presented merely for the convenience of the suhKJlber WhIle we believe Ihe sources of our mformolton to be relloble, we In no woy represent or guarantee tile acc;urai)' tllereof nor of the statements made Ilerem Any action to be taken by the sub- SCriber should be based on hIS own Inveshga\ian and Information Montgomery, Scott & Co, as a limited partnership, and Its portners or employees, may now have, or may later take, positions or trades in resRcct to any seCUrities mentioned In Ihl or any future Issue, and such pOliti on may be different from ony views now or hereafter expressed In thl or any other Issue, Montgomery, Scott & Co, which IS regltered With 'Ile SEC as an Investment advisor, may give advice to 11 Investmenl adVisory and other customers 'Independently of any statements mode In IIlls or In any other issue

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