Viewing Month: December 1974

Tabell’s Market Letter – December 06, 1974

Tabell’s Market Letter – December 06, 1974

Tabell's Market Letter - December 06, 1974
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 081540 DIVISION OF MEMBER NEW YORK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – – The-was c;-;inlY little tr about in lastweek's-'ae;ktt!d!rmaii-e-.-T'h-e- DC;;-'- led off the week with a IS-point decline, followed it with desultory action on Tuesday and Wednesday, and plunged again in late Thursday's trading and early Friday's through its October 4 low of 584.56 to its lowest level in 12 years. All this was accomplished on reduced volume in the 11-13 million share range. The impression given was not so much of a rush to sell equities, but of the lack of anyone with the inclination to buy, even at the week's reduced 'price levels. Certainly there was precious little stimulus in the week's financial news to awaken interest in common stocks. The 1974 recession, the probable existence of which was apparent to a small coterie of economists some six months ago, finally became a page-one news event, having attained the ultimate accolade in becoming the subJ ect of cover stories in the leading newsweeklies. There is implied here no criticism of TIME magazine for reporting on a subject which is admittedly newsworthy. In doing so, it is simply performing its journalistic function. We have in the past, however, tried to draw the distinction between journalism and forecasting, and we are inclined to feel that once an event attains the status of a TIME cover story, it is pretty well discounted as far as the stock market is concerned. Indeed, we tried to document statistically a few weeks ago the fact that a recession which began in early 1974 and may end in mid-1975, is entirely consistent with the prospect of a stock market bottom in 1974's final quarter. Indeed, if the economic scenario turns out to be as suggested above, the fourth quarter of 1974 is precisely the time the stock market should'bottom; –,— .– – – —- With the word recession having become front page news, the nasty word depression is being heard mentioned in more rarefied circles. We have conceded in the past that elements which could lead to a contraction justifying this appelation are, in fact, present. We have also noted that if, indeed, they were not present, it would be very difficult to explain away the current level of stock prices. By any objective historical standards, current price levels now allow for anything short of total economic disaster in 1975. Part of the reason for the market's current confused state, it seems to us, is that the ana- lytical techniques which Wall Street has developed over the past few years find themselves singularly ill-equipped to handle 1975 prospects. Analysts are agreed that corporate profits should be lower, certainly in the first half of next year, and that the bulk of listed companies will probably spend most of the upcoming year reporting unfavorable earnings comparisons. Yet modern analytical theory has centered on trying to focus on those companies which were report- ing consistent quarter-to-quarter earnings growth. Indeed, the characteristic lunacy of the 1968-72 period was the delusion that companies which were able'to exhibit such growth were worth almost any price. As we move into 1975, however, we find ourselves in a period when most companies will not be reporting quarter-to-quarter earnings growth — in fact, just the opposite. This is a hard economic fact and it must be faced. Yet, it should be obVious the common stocks of these companies are worth something. It is the business of putti ng a precise numerical tag on that something which current analytical technique finds difficult. And yet;' the -delus ion that' declining earnings are worth nothing is the mirror image of, and comparable in irrationality to the delusion of a couple of years ago that rising earnings were worth anything. Thus, the dilemma, and it is, in part, we think, the reason for the market's desultory be- havior. Yet, like all other market eras, this one, too, shall pass, and we will be forced to come to grips with a conception of fundamental value that does not depend on quarter-to-quarter earnings comparisons. Judged by such standards, we think current prices will be found in the future to have been, on a long-range basis, bargains indeed. Dow-Jones Industrials (1200 p.m.) 581.27 S & P Compo (1200 p.m.) 65.45 Cumulative Index (12/5/74) 366.85 AWT/jb ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL No statement or expression of opInion or any other matter here,n contained IS, or , to be deemed to be. directly or mdlrectly, on offer Of Ihe SOIH;llohon of on offer to buy or sell /lny security referred 10 Or mentioned The matter IS presented merely for Ihe COnVef'lenCIl of the subscnber Wtnle we believe the sources of our Informo. t.on to be rellCJble, we m no woy represent or guarantee the accuracy thereof nor of the statements mude herem Any ac110n to be taen by Ihe subscnber shOuld be based on hiS own Investlgotlon and Information Janney Montgomery SCali. Inc, as a corporation, and lIs officers or employees, may now have, or moy later toke, positions or trades In respect to alty securities meMlaned lit thiS or any future 'Sue, and such posrtron may be drfferent from any views now or hereafter expressed In th.s or any other Issue Jonney Montgomery Scott, Inc. wtllch .s registered With the SEC as on .nvestment adVisor. may give adVice to Its mvestment adVISOry and other customers mdependently of any statements mode m thiS or In any other Issue Further InformatIOn on any security mentioned herein IS avarloble on request

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Tabell’s Market Letter – December 13, 1974

Tabell’s Market Letter – December 13, 1974

Tabell's Market Letter - December 13, 1974
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– TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIYISION OF MEMIlEA NEW VORK STOCK EXCHANGE, INC MEMIlER AMERICAN STOCK eXCHANGE ' – . – – – – – – – – – – – – – – '–.–….,, ….. – —- – ….-.,…- -.,… —.,.- – . December 13, 1974 – …. …….,.. -'—- – . –.- Since inflation has been much in the news of late and there was, at one time, at least, a con- ventional wisdom that common stocks provided a means of protecting capital against inflation, we completed this week a study which traces the history of the Dow-Jones Industrial Average plus its earnings and dividends from 1929 through the third quarter of 1974, expressed in constant-iollar terms, the adjustment factor being the Gross National Product deflator with a base period of 1958. The results of the study are interesting. As of September of this year, the actual Dow figure of 607.87 was only 353.62 when expressed in constant 1958 dollars. This compared, interestingly enough, with a constant-dollar high in the third quarter of 1929 of 678.74 and a more recent con- stant-dollar peak of 869.29, achieved in the final quarter of 1965. Expressed in constant-dollar terms, in other words, the Dow has been gradually trailing off to its current low level for the past nine years. An explanation for the decline, however, does not lie in Dow earnings,even when those earnings are adjusted for inflation. Constant-dollar earnings for the Dow in 1929 were 39.35. The 99.60 earned by the Dow for the twelve months ended September, 1974, adjusts to 60.16, an all-time peak. Indeed, real-dollar corporate profits have given a good account of themselves over the past 25 years. Throughout the 1950's and early 1960's, they remained reasonably constant around the 35 level except for the occasional recession trough. In the relatively inflation-free period of the mid-1960's, they rose to a peak of 50.76 in the third quarter of 1966 and then declined to a low of 37. 71 in the fourth quarter of 1970. The recent recovery, however, ha s rega ined a II of the groundtost;and;asnoted above the-60 16 figure 6f'1974'-stlilrd quafterrepresentsanantime- -,,- record. Since payout ratios have declined, dividends have not kept pace with inflation as well, thus, perhaps, providing some explanation of the current low level of prices. For example, in 1964 the Dow paid 28.66 in 1958 dollars as dividends. For the twelve months ended September, 1970, it paid only 22.81 in 1958 dollars. Yet, despite the recent dismal record, the study suggests that stocks have managed to show a positive constant-dollar return over the years. If return is defined to include dividends plus capital appreciation, an investment in the DJIA at the 1928 close would have appeciated, with divi- dends reinvested, some 388.6 percent as of the third quarter of 1974. This works out to an annual real-dollar interest rate of around 3.5 percent. However, this figure, it must be recalled, meas- ures from a peak to a trough. If we measure from 1929 to the high of 1972, for example, the 1928 Dow investment, dividends reinvested,would have appreciated 783 percent for an annual return of around 5 percent in real dollars. And measured from 1949 to date, the annual real-dollar return on the same basis works out to better than 6 percent. On an annual basis the total return on the DJIA, including dividends and capital appreciation, has been positive in eighteen of the past twenty-five years. The table below lists this percent- age return since 1950, the 1974 figure being for the twelve months ended September. 1950 21.17 1955 24.09 1960 – 7.86 1965 12.43 1970 3.67 1951 15.59 1952 3.32 1956 2.83 -1957 -11.51 1961 21.32 1962 – 8.47 1966 -18.63 -1967 15.17- 1971 6.13 197-2.-14 15- 1953 1.52 1958 35.98 1963 19.14 1968 3.67 1973 -19.23 1954 48.90 1959 18.81 1964 16.89 1969 -16.23 1974 -38.95 Over the short term, obviously enough, the market may continue to fluctuate but the study shows that in the long run common stocks have been able to protect and enhance capital even in inflationary periods. Dow-Jones Industrials (1200 p.m.) 597.78 S & P Compo (1200 p.m.) 67.63 Cumulative Index (12/12/74) 360.53 AWT/jb ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No stalement or expresSion of opinion or any other matter herein conlClined 15, or Is to be deemed to be, directly or IndHectly, on offer or the solicitatIOn of on offer to buy or sell any security referred to or mentioned The molter IS presented merely for the convellenctl of the subscriber While we believe the sources of our mforma- han to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any actIOn to be token by the subKrlber should be based on hiS own investigation ond information Janney Montgomery Scott, Inc, os a corporation, and Its officers or employees, may now have, or may later toke, positions or trades 1M respect to any seCUrities mentioned m thiS or any future luue, and such position rT\(y be ddferent from ony views now or hereafter eypressed In Ihls or any olher Issue Janney Montgomery Scott, Inc, which IS registered With the SEC 05 on Investment adVisor, may give adVice to Its mvestment adVisory and other ctJstomers Independent!y of any statements mode In thiS or In any other Issue Further mformotlon on ony secunty mentioned herern IS available on request

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Tabell’s Market Letter – December 20, 1974

Tabell’s Market Letter – December 20, 1974

Tabell's Market Letter - December 20, 1974
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TABELLS MARKET LETTER i -1 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCK EXCHANGE. INC MEMBER AMERICAN STOCK EXCHANGe December 20, 1974 One day as I sat musing, sad and lonely and without a friend, a voice came to me from out of the gloom, saying, 'Cheer up, things could be worse.' So ..-.. –'- ..-…qlq-,-1ru pn9…U.! ep9QI thJ.ng.ggt…V!.9'''''''' Anon . F It is Our custom each year to divide our year-end forecast into two parts, the first part being a review of the year just ended — setting the scene, as it were, for our forecast for the upcom- ing year. When we devoted ourselves to this task about a year ago, we noted at the time that it was somewhat of an exercise in masochism. We pointed out that the Dow-Jones Industrial Average, at its low of early December, 1973, had decllned some 25 from its January, 1973, high of 1051. 70. We suggested, moreover, that that statistic did not tell the entire story of the decllne. We noted that our Cumulative Index, an unweighted average of all issues traded on the NYSE, had dropped from a January high of 979.26 to a low of 555.02, suggesting that the average NYSE issue during 1973 had posted a 43 loss. We were forced to note, in addition, that the 1973 deCline, as measured by the Olmulative In- dex, was part of an on-going process, since the high in that Index had been made back in 1968 at a staggering level of 1455. This average, in other words, had, a year ago, lost almost two-thirds of its value over a three-year period. All this, we noted, had brought the market to a period of al- most unprecedented skepticism with regard to earning power, and we noted that, at its low of December, the Dow had been selling for approximately 9.6 times esti mated 1973 earnings, pOint- ing out this was the lowest level which had existed since 1951. Then things got worse. The Dow, already down 25 in 1973, had by October 4, 1974, taken another 31.3 percent loss, and the S & P 500 had decllned 36. I percent. Our Cumulative Index performed, for a change, about the same as the S & P, reaching a low of 355.80 in October for an additional 37.9 percent –.dclIne,,Tis r!,-oJ,lh !hese market av.,,g2.s ha;otsted tJelr tobeJ.Qs1'he Q!GmbElf…d,,-qle to 577.60 in the Dow Industrials to below the 12-year low of 584.56 recorded on October 4, and the recent new low of our Cumulative Index at 354.92 posted on December 16, has not been, to date, conflrmed by the broader based market indices such as the S & P Industrials and Composite Index or the NYSE Composite. . The market's total disinterest in record levels of corporate earning power became even more pronounced. Dow earnings, S86.15 for the year 1973, had increased to just under the SIOO annual rate by September, 1974. We painted out a year ago that the 9.6 multiple being accorded 1973 earnings had not been exceeded on the downside all the way back to 1951. The multiple under six times eatnings now being applied to the Dow has been exceeded, since earnings flgures for the average have been available. This includes periods such as 1932, 1938 and 1949, an era previously regarded by market historians as the absolute nadir of investor confidence. 1974, moreover, was the phase of the bear market when the mania for investment in growth stocks at any price finally collapsed under its own weight. Through the middle of 1973, most of the major institutional growth favorites had been able to resist the market's decllne. In 1974, the inevitable flnally took place, as the following table which gives the December 31, 1973, close and the current price of eight representative growth favorites shows. 12/31/73 12/19/74 Change Avon Products 633/4 27 5/8 – 56.7 Coca-Cola Eastman Kodak 126 1/2 116 50 1/2 603/4 – 60.1 – 47.6 IBM McDonalds. PolarOid Sears, Roebuck 246 3/4 57 69 7/8 80 1/4 169 30 1/4 19 1/8 48 5/8 -31.5 46.9 – 72.6 – 39.4 Xerox 122 3/4 52 1/2 – 57.2 It has, in short, not been a pleasant year for those of us charged with managing equity invest- ments. We concluded our Jetter of a year ago by saying, We start 1974, in other words, with equity markets in general in a more profound state of demoralization than has existed 10 the adult lifetime of most investors. As we said above, we think it is this fact that is central to any market forecast for 1974. As we suggested, that state of demoralization is now even more profound. Just as the existence of that state was central to our forecast of last year, it is eVen more central to our forecast for 1975. We will discuss this point in next week's letter. A VERY MERRY CHRISTMAS TO ALL Dow-Jones Industrials (1200 p.m.) 600.75 ANTHONY W. TABELL S & P Camp. (1200 p.m.) 67.20 DELAFIELD, HARVEY, TABELL Cumulative Index (12/19/74) 355.70 AWT/jb No statement or exprelon of opInion or any other matter herein conlalned Is, or Is 10 be deemed 10 be, dlreclly or Indirectly, an offer Or Ihe sollCllotion of an oHer to buy or sell any security referred to or menlloned The matter IS presented merely for the converlenCIli of the subSCriber While He believe the urces of our Informa- lion to be reliable, we 10 no way represent or guarantee the accuracy thereol nor of the statements mode herein Any action to be token by Ihe subscriber should be based on hiS own investigation and Informohon Janney Montgomery Scott, Inc, as a corporation, and 115 officers Or employees, may now have, or may later lake, positions or trades In respect fo any SeCurities mentioned In thiS or any future Issue, and such position may be dlffererrt from any views now or hereafter expressed In this or any other Issue Jonney Montgomery Scoll, Inc, which IS registered With the SEC as on inVestment adVisor, may give adVice to Its Investment adVISOry and oth!!1 C1Jslomers Independently of any statements mode 10 thiS Or 10 any other Issue Further mlormahon on any security mentioned herein IS available on request

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Tabell’s Market Letter – December 27, 1974

Tabell’s Market Letter – December 27, 1974

Tabell's Market Letter - December 27, 1974
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– – –.—- – …. ———- TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIYISION OF MEMBER NEW YORI( STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE December 27, 1974 We undertook last week the melancholy task of reviewing the year 1974 In preparation for a forecast for 1975. We were forced to point out that the Dow-Jones Industrial Average had taken a 31 shellacking on -. —top of a-25 decl-Ineln973.andthat-our-Gumulativeindexln-our-vlew-a more-accurate measure-of-the – true performance of 'the average NYSE stock, had lost more than three-quarters of its value since its high of 1968. It Is against this background of almost total carnage that we must survey the outlook for the year ahead. Before venturing a prediction, a cautionary word regarding attitude appears appropriate. Bernard Baruch once remarked that one of the most useful exercises for the investor was to continually repeat to himself that 2 plus 2 equals 4. Baruch, actually, was referring to the irrationality that normally accompanies bull market tops. However, as technicians are well aware, tops and bottoms are often mirror images of each other, and we think the advice is equally appllcable In the sort of slough of despond In which the stock market now finds itself. It Is all too easy for the investor, bruised and battered by the lambasting he has taken over the past couple of years,to forget the fact that stocks have been and w1ll be again vehicles for ca pita 1 appreciation. Those who have studied markets are only top well aware that a substantial rebound from the ultimate low, wherever and whenever that low may occur, is a virtual certainty. The problem, of course, lies In the timing and Identification of that low. In one sense, the Investor with resources and patience can afford to be unworried, even about the timing. We Indicated last week that the current earning power behind the DJIA can today be bought at the lowest price In recorded history. Regardless of what may take place In the interim, we think, a s we have repeatedly stated, that the prices at which high-grade equities are currently avallable wlll prove, in the light of history, to have been amazing bargains. In order to put together a 1975 forecast, 1t is necessary to look at both the technical and fundamental outlook. The consensus economic forecast developing for 1975 calls for a deepening recession with the decline of perhaps 20 In overall corporate profits and a drop of, perhaps, 10 in the earnings of – the–8- &-P500-.-Gu1te–clearlymar-ketvalulngthelat-estJ.2months-eamings aLthe-figufe-itjiscurrently . valuing them, is worried about something a good deal worse. And yet, we know of few reputable voices talking about anything substantially worse than the above scenario. The spectre of worldwide depression is, admittedly, there, but It would hardly seem to be the foregone conclusion the market is saying it is. Without venturing Into the murky waters of economic forecasting, we should only Ii ke to point out that it has been profitable, at most times and In most places, to bet against the apocalypse. It Is also worth pointing out that, In the light of hindsight, the most profitable times to buy stocks have been those when whatever economic hobgoblins were bullt Into the market's price structure have failed ultimately to mater- ialize — I.e., the inev1table postwar depression of 1949. From a technical point of view, there are various factors to be considered In looking into the upcoming year. Not the least is the decennial pattern, unusually reliable at this point in the decade. It will be re- called that this pattern tells us that all years ending In 5 in this century have been up years for the stock market. It Is worth noting, also, that 1976 is a presidential election year, an occurrence which has also tended to favor rising markets. We have also suggested In this letter in the past that many of the precon- ditions for a market bottom have recently been present, such as a record level of institutional cash posi- tion. What has been absent so far, at least, in terms of obvious clarity, are the signs of a sort of selling cllmax which has terminated in so many bear markets In the past. We have also noted, however, that m deeply soldout periods, such as the present one, such a climax Is not a necessary precursor to a market turn. Also relevant to a forecast is the action of Individual stocks, which suggests that, in many cases, despite the move of market averages to new lows, earlier lows, some going as far back as 1971, are, In a number of cases, being held. Individual chart patterns suggest that a number of Issues, perhaps a fairly -substantial number,- are, at least;-runningoutofsteam(;m the downside; –;. ,.. ,' … – -r- Thus, a forecast for early 1975 must, It seems to us, call for continued testing of the recent lows possibly Including some slight penetration of those lows. It seems, however, sensible to expect that the long, two-year bear market, If not already ended, wlll come to an end sometime fa1rly early in 1975. This does not necessarily call for an Immediate advance. It should be noted that the process of rebuilding in- dividual base patterns will be a long and arduous one. It therefore seems illogical even If the market 1S to make a low In early 1975 to expect any sharp rally, at least in the early part of the year. Depending on how qUlckly bases form, however, the outlook for the latter part of 1975 could be conSiderably better. The prophet Isaiah reminds us that to everything there is a season. 1975, in our view, w1ll be the sea- son for planting of the stock market profits of the second half of the 1970's. WE WISH YOU ALL A HAPPY AND PROSPEROUS NEW YEAR. Dow-Jones Industria Is (12 00 p. m.) 603. 18 ANTHONY W. TABELL S & P Compo (1200 p.m.) 67.40 DELAFIELD, HARVEY, TABELL Cumulative Index (12/26/74) 353.39 AWT/jb No slotement or eXpreS510n of opInion or ony olner matter nereln contained IS, or IS to be deemed to be, directly or indirectly, on offer or tne SoliCitation of on offer to buy or sell any security referred 10 or mentioned The motler IS pre.sented merely for tne convellenc of the subSCriber Wnlle we believe tne sources of our information 10 be reliable, we In no way represent or guorontee tne occurocy thereof nor of the .statements mude nereln, Any actIOn to be token by the subSCriber nould be bo.sed on hiS own IIlvestlgatlon ond ,nformotlon Jonney Montgomery ScOll, Inc, os 0 corporotlon, and liS officers or employees, may now hove, or may later toke, posItions or trode.s III respect to ony securities mentioned In tnls or any future Issue, ond sucn position may be dliferenl from any views now or nereafter exprened In thl5 or any otner l,SSve Janney Montgomery Scott, tnc, WnlCn IS registered wltn tne SEC 0 on onvestment adVisor, moy give adVice to Its onve5lmen! odvlsory ond otner customers Independently of ony stotements mode on tnls or In any otner Issue Furtner onformatlon on ony secvrlly mentioned herein 1 ovolloble on reque5t

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