Tabell’s Market Letter – June 16, 1972

Tabell’s Market Letter – June 16, 1972

Tabell's Market Letter - June 16, 1972
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! TABELL'S MARKET LETTER t , …1 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVlElION OF MEMBER New VORk STOCK EXCHANQE. INC MEMBER A.MERICA.N STOCI( EXCHA.NGE June 16, 1972 What follows is, in essence, nothing more than an exposition of past history showing how the inves- tor might have achieved superior portfolio results over the past 6-1/2 years. While it obviously contains I n – o def — We inite – i m – plic – ations ,—.,. for -th-.e. -f-u-tu r-e.,- – -w e thin – k the poi -. nt made –.- suggested last week that the action of the Ilow-Jones In may, in fact, be of some i -. – —- -,.- . dustrial Average since Jan ntere ualy, st 1 . —- 966c —- ould ..-. – – -. be described by a trendline which started at roughly 879 in 1966 and has been moving downward slightly ever since with a standard error of some 68 points. Under this conception, the market could be regarded as moderately over or under-valued when 68 pOints above or below the central trendline and is distinctly over-valued when 136 pOints above or below that line. A similar computation can be made for the S&P 500 stock index, for which the central trendline has a slight upward slope. The following table assumes that an investor, 'in January, 1966, had formulated an investment policy as follows. As the market rose above its computed trendline, he wished to be 50 invested in stocks; when it became moderately over-valued, he wished to be 25 invested; and, when distinctly over-valued, he wished to be 100 in cash. Conversely, as the market became moderately under-valued, he wished to in- crease his stock investment to 75 and, at the distinctly under-valued figure, he wished to be 100 in- vested in stocks. Following this policy he would have made an initial investment followed by 14 changes in his stock pOSition in a 6-1/2-year period. The dates these changes would have been made and the value of the account on each of these dates, assuming an initial 100,000 investment, together with the current value, are shown below. The performance of the stock portion of the account is assumed to be the same as the DJIA. The table is for illustrative purposes only and commissions and taxes are not in- eluded. -Date DpA Desired Stock lnvestment Action Cash Portfolio Value 1/3/66 968.54 25 Buy 25,000 75,000 100,000 5/13/66 876.11 50 Buy 26,192 48,807 97,614 – 8/19/66 3i',nfu7 804.62 8-766'7 75 50 Buy 25,399 SBlt55'1 23,407 49-;l59 93,631 99-;-919 9/25/67 943.08 25 Sell 27,818 77,778 103,704 lI/1/67 867.08 50 Buy 26,970 50,807 101,615 9/4/68 938.28 25 Sell 28,532 79,340 105,787 7/9/69 861. 62 50 Buy 27,527 51,813 103,626 12/3/69 793.36 75 Buy 26,932 24,880 99,521 5/4/70 714.56 100 Buy 24,880 0 92,107 11/30/70 794.09 75 Sell 25,589 25,589 102,359 1/22/71 861. 31 50 Sell 28,839 54,428 108,857 4/12/71 926.64 25 Sell 30,310 84,739 112,986 8/3/71 850.03 50 Buy 29,414 55,325 110,650 2/16/72 922.94 25 Sell 31,221 86,547 115,396 6/15/72 945.96 86,547 116,897 As the last figure shows, the present value of an account invested along the lines of this policy is 116,897 giving a 16.9 increase over the six years. A simple policy of buying and holding the Dow over the 6-1/2-year period would have resulted in a 2 loss, For the more sharply rising S&P 500 a 29.5 gain would have been shown vs. a 16.2 gain achieved by Simply buying and holding. Now it may be argued that neither of these results are particularly spectacular in terms of actual return. It should be pOinted out, however, that the investment policy suggested would have enabled the investor to outperform the market with a relatively low degree of risk. Despite the fact that the hypothetical per- formance was better than that of the average, the investor, for the bulk of the period, was 50 or less in- vested in stocks. He thus maintained, for the.most,part, a highly defensive,position with no. sacrifice of capital gains Prospects' – – .- – It may also be argued that superior stock selection over the 6-1/2-year period could have achieved still better results. The same would be true under the plan suggested above. Had the performance of the stocks owned under the plan been better than that of the market, the overall results would have been proportionately better. We purposely started this exercise by saying that it represents history and history only. If the inves- tor were to adopt such a polley today, as of mid-197, and the market were to do something inconsistent with its 6-1/2-year record, such as moving ahead to substantive new highs, the policy would obviously turn out to be inferior to that of Simply holding common stocks. What we have been repeatedly suggesting in this letter, however, is that the behavior of the market in the past 6-1/2 years may have some implica- tions for the future. Under these conditions a policy of adjusting equity exposure in accordance with market levels may well prove rewarding for the investor. Dow-Jones Industrial (1200 p. m.) 943.03 ANTHONY W. TABELL S&P (1200 p.m.) 108.21 DELAFIELD, HARVEY, TABELL AWTmn No statement or expressIon of opinIon or ony other matter herem contolned IS, or 15 to be deemed to be, directly or indirectly, on offer or the 5011(llollon of on offer to buy or sell any security referred to or mentioned The matter .s presented merely for the canverlIence of the subSCriber While we believe the sources of our Informa tlon to be reltable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any action fa be token by the subscriber should be bosed on h.s own inVestigation and information Janney Montgomery Scali, Inc, as a corporation, and Its officers or employees, may now have, or may later toke, pOSlhons or trades In respect to any cur.tles mentioned In thiS or any future Issue, and such pOSition may be different from any views now or hereafter expressed In th.s or any other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as on Investment adVisor, may give adVice to lIS Investment adVisory and othel customers Independently of any statements mode In ,I-IIS or In any other Issue Further Information on any security mentioned herein IS available on request

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