Tabell’s Market Letter – November 15, 1974

TABELLWS MARKET LETTER J 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCK EXCtANOE, INC MEMSER AMERICAN STOCK eXCHANGE November 15, 1974 A consensus is now being reached (having extended last week all the way to the Office of the – Pres ident of the U'S) that'theU ;'Seconomy is 'now'inarecession'9'o'manyrthatsuch a'con-'- OF census is necessary will be a surprise, since it is widely believed that economists have a clearly defined set of rules as to what a recession is. Such is not, in fact, the case. A recession is arbitrarily defined as such, usually well after the fact, by the prestigious National Bureau of Economic Research, and these gentlemen are generally uncommunicative about the criteria used. Veteran NBER-watchers, however, have come up with a rule of thumb. They have noted the fact that every time in the postwar period that real Gross National Product has declined for two consecutive quarters, the NBER has later defined that period as a recession. Since real GNP has now declined for three quarters, all of 1974 to date, it is thus agreed that the NBER will at some point in time get around to defining a 1974-7 recession. Yet in many ways it is a unique one. The following table shows the changes in current-dollar Gross Domestic Product, real Gross Domestic Product, and the price deflator for the 1929-33 de- pression, three of the four postwar recessions and the current period. (All figures are in billions ,and GNP is used for 1973-4). The differences are rather striking. In 1929-33, of course, physical output was declining sharply and prices were also declining, albeit not at a rate sufficient to keep pace with the decline in output. In 1953-54 and in 1957-58 current-dollar output was declining steadily,and rising prices Simply accelerated the stated decline in real output. In 1969-70, how- ever, and again today, we have a very different sort of an animal. In both cases current-dollar output was rising. It was the fact that prices were riSing at a faster rate, especially in 1973-74, that caused real-dollar output to decline. -What we are suggestin;f; of coUrse, is'that the major culprrtfiT'ine currenCinstan-c-e is not'fall.. ing output but riSing prices. In other words, inflation rather than recession. Whatever curative measures are considered, it seems to us, should take this factor into account. Current Dollar Change Real Gross Change Price Deflator Gross Domes- Annual Domestic Annual Change Year Quarter tic Product Rate Product .ocRca…te- Annual Rate 1929 1930 1931 1932 1933 Full Yr. 102.3 89.6 75.3 57.7 55.3 -12.4 -16.0 -23.4 – 4.1 202.2 181.9 167.9 142.9 140.3 – 7.7 -14.9 – 1. 8 – 2.6 – 9.0 -10.0 – 2.4 1953 1954 2 3 4 1 2 366.1 364.6 359.5 359.1 358.8 – 1. 7 – 5.4 – 0.4 – 0.3 415.0 412.4 407.5 401.4 400.6 – 2.4 – 4.7 – 5.8 – 0.8 0.7 – 0.7 5.7 0.4 1957 1958 – 1969 1970 3 444.0 4 439.5 1 432.8 3 – 937.6 4 944.8 1 954.0 2 966.5 3 982.5 4 986.8 – 4.0 – 6.0 3.1 3.9 5.4 6.8 1. 7 453.0 446. 435.7 ..725.3, 721. 3 717.1 718.5 723.2 715.1 – 5.9 – 9.1 – 2. – 2.3 0.8 2.6 – 4.4 1.9 3.5 – 5.4 6.4 4.5 4.1 6.4 1973 4 1344.0 1974 1 1358.8 2 1383.8 3 1411.6 Dow-Jones Industrials (1200 P.m.) S & P Compo (1200 p.m.) 4.5 7.6 8.3 650.03 72.14 845.7 830.5 – 7.0 12.3 827.1 – 1.6 9.3 821. 1 – 2.9 11.5 ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL Cumulative Index (11/14/74) 402.14 AWT/jb No statement or e)(prenlon of opinion or eny other motter herein contained IS, or IS to be deemed to be. dlreClly or indirectly, on offer or 'he sollcltollon of on offel to buy or sell ony security referred to or mentlonod The motter IS presented merely for the COnVef'lenCE of Ihe subscriber While He bellevo the sources of our information 10 be reliable, we In no way represent or guarantee the accuracy thereol nor of the statements mude herein Any action to be loken by the subSCriber should be based on hiS own Investigation and Information Janney Montgomery Scott. Inc, as a corporation, and Its officers or employees, may now have, or may later toke. posllloM or trades In respect 10 any securities menhoned In Ihls or any future lSue. and such position may be different from any views now or hereafter expressed In this or any olher Issue Janney Montgomery colt, Inc, which IS registered With the SEC as on Iflveslmenl adVisor, moy give adVice to lIs Investment adVisory and other customers Independently of any statements mode In thiS or 1M any alher Issue Further IMformotlon on any security mentioned herein IS aVailable On request