Viewing Month: February 1975

Tabell’s Market Letter – February 07, 1975

Tabell’s Market Letter – February 07, 1975

Tabell's Market Letter - February 07, 1975
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08!540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE February 7, 1975 . It was sl!Pposedly.Leo. Dyrocher ,who toldhis banplayrJ1 thaJ.the way to win games was to 0. .., .- put lots of crooked numb;j-So,,th'e -sCorebard. In -any case,the stock market has been posting a few crooked numbers of its own recently, numbers which in many ways are historically unprecedented. For the month of fanuary, for example, the Dow advanced from a December close of 616.24 to 703.69, a 14.2 rise. This constitutes the largest percentage advance chalked up during any January in the past fifty years. It also constitutes the seventh largest advance for any month at all over the last half century. The rapidity of the advance since the Dow posted its low in early December is also largely without precedent. From its December 6 bottom of 577 60, the average rose to 717.85 this Wednesday, a 24.3 rise over a period of 41 trading days. There are only four previous instances since 1926 where the index has posted as great an advance in so short a time, all of them going back to the 1930's. One of them, it must be admitted, was in January, 1930, when the market put on the largest rally within a bear market in history before ultimately proceeding to the 1932 debacle. However, the other three instances where greater advances were posted over a 41-trading-day period were in August-September, 1932, the spring of 1933 and July-August, 1938, all periods which constituted major turning points. For those who think the recent advance has been dynamic, incidentally, it is interesting to note that there was one 41-day period in August-September, 1932 in which the Dow advanced more than 80. It is possible to offer a partial explanation for the rapidity of the recent rise on the grounds that the market in the past couple of years has become noticeably more volatile, a thesis which can be supported in anyone of a number of ways. Nonetheless, after a quarter-century period in.which.it .hasbeen.necessary,to cuse.a,filterofless. than.20.to define.major bulland.bear-mar-kets, an almost-25 advance in two months must be considered striking, to say the least. Trying to explain away such an advance as a mere rally within an on-going downswing seems to us, in light of history, to be tenuous at best. There is also very little in the historical record to support the contention that, due to the rapidity of the rise, a fairly substantial correction must, in fact, ensue. A study of the seven major bull markets since World War II demonstrates that all of them tended to post substantial and lengthy rises before a correction of a s much as 5 took place. The only exception to this rule has occurred when a fairly sharp drop took place early during the base formation period, and it is arguable that we had a case of this sort of thing in November of last year when the Dow, having posted a 15 advance, dropped off to a new low in December although the other averages held their October low. In any case, the record is as follows. The 1942-1946 bull market advanced 57 over 365 trading days before any correction greater than 5 occurred. The bull markets of 1949-1953 and 1953-1956 were similar. The former posted a 282-day, 41 rise before a 5 correction was seen and the latter, a 326-day, 60 rise. In the advance from October, 1957, to December, 1961, there was a 5 1/2 decline ovr 13 trading days early in the base formation period in December, 1957, but this was followed by a 409-day, 60 advance — again without a 5 reversal. During 1962-1966, two substantial declines took place during the June-October basing period but, once this was complete, the market scored a lSI-day, 30 advance. In the 1966-1968 period, the October low was followed by a 22 advance over 145 trading days, and, in the most recent bull market, that of 1970-1973, the Dow,.after a 7 decline-in July,. 1970;'advanced'42 over 205 trading days,until April; 1971;' before any 5 downswing occurred. As noted above, the market is becoming demonstrably more volatile, and under these condi- tions it is perhaps optimistic to set 5 as a possible limit for a correction. Nonetheless, the record supports a strong tendency for major market advances to complete their initial phases with- out much in the way of correction on the way. Dow-Jones Industrials (1200 p.m.) 707.84 S & P Compo (1200 p.m.) 78.02 Cumulative Index (2/6/75) 449.09 AWT/jb ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No statement Of expression of opmion or cny otner motter herem contomed IS, or IS to be deemed 10 be, directly or Indirectly. on offer or the 50llcllollon of on offer to buy or sell onr. serunly referred 10 or mentioned The motter IS presented merely for the converlenc of the Suhscflber V/h.le -He beUeve the sources of our Informolion 10 be rehab e, we ,n no way represent or guarantee the accuracy Ihereof nor of Ihe Ialemenls mode herem Any acllon 10 be laken by the subsCriber should be based on hiS own IOvesligollon and ,nformal Ion Janney Monlgomery Scott, Inc, as a corporation, and liS officers or employees, may now have, or may later toke, poslllOns or trades In respect to any securities mentioned In thiS or any fulure Issue, and such position may be different from any views now or hereafter expressed In this or cny olher Issue Janney Montgomery Scott, Inc, which IS registered with Ihe SEC as on Investment adVisor, may give adVice to Its Investment adVISOry cnd olhel customers Independently of cny stotements mode 10 thiS or In any other Issue Further Information on cny secvnly menhoned herein IS available on requesl

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Tabell’s Market Letter – February 14, 1975

Tabell’s Market Letter – February 14, 1975

Tabell's Market Letter - February 14, 1975
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, tNC MEMBER AMERICAN STOCK EXCHANGE February 14, 1975 – , – It Ain't Necessarily So Ira Gershwin, f2!gy and Bess Technicians get understandably tired of tilting at the same old windmills but it is, unfortunately, time to have a go at another one. As we enter 1975, the fact that the U. S. economy is in a recession is known to just about everyone. The corollary that corporate profits will be down in 1975 is just about as well known, and again, just as in every period of declining prefits in the past, we see the endlessly repeated litanies about the declining profits picture having unfavorable implications for stock prices. The financial community spends millions of dollars in attempts to forecast earnings on the impliCit assumption that, somehow, aggregate earnings and aggregate stock prices are, in the short run, correlated. Not only ain't it necessarily so, it just ain't so at all. Switching from Gershwin to Al Smith, let's look at the record. Earnings for the Dow-Jones Industrial Average were first measured on a quarterly basis starting in 1929. Thus we are able to measure percentage changes in 12-month earnings starting with the first quarter of 1930 running through the third quarter of 1974. a total of 178 quarters. For four of these quarters, in 1932-33, earnings were negative and comparisons are thus distorted. This leaves us with 174 quarters which can be studied. Of those 174 quarters, 12-month earnings for the Dow declined in 60 of them. Was this bearish for stock prices Hardly, and indeed, the scale is tilted slightly in the opposite direction. In slightly morethanhalL of .tllosLq!l,!rters, 39f. 60,-!1rices .roseJatherth'lnfe!l. .Thu ,paradox – – ically, a foreca-st of declining -ea-rnings is, however marginally, bullish for stock pries. (A bit- of the same tendency is manifested on the upside. Of the 114 quarters in which earnings rose, 46, or more than a third, saw declining prices). The reason for all this, of course, is that the market anticipates rather than follows. It is, sensibly, willing to pay higher prices for recessionary, below-normal earnings and is less willing to place a premium on rising, above-normal earnings. Thus, Dow-Jones earnings have been expanding steadily for three years through the third quarter of 1974, having almost doubled in the process. Yet, in 10 of those 12 quarters, the PIE ratio, the price paid for those earnings, has declined, the net result for the three years being a 280-point drop on the Dow. This is a fairly graphic example of the fact that multiples tend to move in a direction opposite to earnings. This is amply borne out by the record. In the 174 quarters since 1930, the quarter-to-quarter change in the PiE ratio has been in a direction opposite to the change in earnings in 125 of those quarters. In the 60 quarters in which earnings were down, the multiple increased 45 times and decreased only IS. The fourth quarter of 1974 is a perfect example of this sort of tendency. Although the final figure is not yet in, 12-month earnings will probably be down for the first time in three years. Stock prices, nonetheless, rose over the quarter and will probably wind up doing the same In the first quarter of 1975. It can be shown, moreover, that the multiple is a great deal more important in determining the course of prices than are earnings. As noted above, falling earnings produced falling prices less than half the time and rising earnings, rising prices only about two-thirds of the time. Yet, in 129 out d 174 quarters, multiples'a-nd prices nave -ilioved -in tile sa-me direction. ,,- To forecast multiples, as we have noted in the past, it is necessary to turn to technical work and, in our own view, at least, that work suggests higher prices, at least over the intermediate term. Such higher prices, a product of the market's willingness to place a higher valuation on the below-normal earning power of a recession, would be a phenomenon totally consistent with the historical record. Dow-Jones Industrials (1200 p.m.) S & P Compo (1200 p.m.) Cumulative Index (2/13/75) 455.37 AWT/jb 733.26 81. 68 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No stotement or expression of opInion or any other motter herem contained IS, or IS to be deemed to he, directly or Ind.rectly. on oHer or Ihe solicllollon of on offer to buy or sell any security referred 10 or mentioned The motler IS presented merely for Ihe convel'lIcnce of thc subscriber Whlfe we believe the sources of our Informahon to be rehable, we In no way represent or gualantee the accuracy theref nor of the itatemenls mude herein Any cchon 10 be token by the subscriber should be bosed on hiS own ,nveSl,gahon and Information Janney Montgomery Scott, Inc, as a corporohon. and ,ts officers or employees, may now have, or may laler take, pOSitions or trades In respect to any sccullhes menl16ned In Ih,s or any future Inue, and such poslhon may be different from any views now or hereafter expressed In Ihll or any other ,ssue Janney Montgomery Scott, Inc, whICh IS reglStercd wllh the SEC as on Investment adVisor, may give adVice to Its IOvestment adVISOry and other customers Independently of any statements mode ,n Ihls or rn any other Issue Further rnformatlon on any security mentioned herem IS available on request

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Tabell’s Market Letter – February 21, 1975

Tabell’s Market Letter – February 21, 1975

Tabell's Market Letter - February 21, 1975
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– – -…– -…- . .— TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08!540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERtCAN STOCK EXCHANGE February 21, 1975 Long-time readers of this letter will be aware that It has, m the pa st, been somewha t crltica I of the large, institutionally-favored growth stocks as investment vehicles and even more critical of the so-called — rie-deCiii6n theory tflat;—fi1tfie early1970-' s7iea.-tOWh-at-we oeffevealooe-excess-iifereUance onthem- —.;.. by many investment managers. In March-April, 1973, we devoted a senes of five letters to examining the impllcatlOns of this concept and trying, as best we could, to refute it. Smce that time a great deal of water has pa ssed under the bridge, and it is perhaps worthwhile to reexamine the growth favorites of a few years ago and make some assessment of their current prospects. The table below shows the price perform- ance of eight representative growth favorites compared to the DnA from theIr 1973 high to their low of 1974 and from that 1974 low through this week. 1973 HIgh 1974 Low Change 2/19/75 Change DnA 1067 573 – 46.3 736 28.5 Avon Products 140 19 – 86.7 35 89.9 Coca Cola 150 45 – 70.2 75 67.5 Eastman Kodak 152 60 -60.1 85 39.9 IBM 365 150 – 58.S 21S 44.7 McDonalds 77 21 – 72.4 41 94.7 Merck 101 47 – 54.0 73 56.6 Sears, Roebuck 123 41 – 66.3 63 50.9 Xerox 170 49 – 71.2 77 57.6 As far a s these issues' performance during the bear market wa s concerned, our earlier fears were borne out. All eight issues declined by a greater percentage than did the Dow, and, in some cases, that decline was 1 1/2 to almost 2 times as great. However, that relatively inferior performance picture has changed dramatically since last fall's bottom, and the eight Issues involved have been leaders on the up- ,sldec,aILoLtheJlJhaYing.movd-ilheac!Jl.y. more,than the Dow and some a period when the Dow was up only 2S–'Thls price improvement' has having come cl coincided with ose ups itdoe dborueb. jlki nogu tds ufrri norgn; fairly impressive base formations which, although they do not suggest anything like a return to the 1973 highs, do suggest somewhat higher prices over the intermediate term. It IS when we go beyond price that the comparison becomes interesting. The table below shows the price/earning;ratio and its ratio to the Dow-Jones pie for the three dates m question. PiE Ratio to PiE Ratio to PIE 1973 Hi DnA PiE 1974 Low DJIA PiE 2/19175 RatlO to Dill PiE DJIA 15.9 5.S 7.4 Avon Products 64.S 4.1 9.7 1. 7 IS.3 Coca-Cola 47.0 3.0 12.9 2.2 21.7 Eastman Kodak 44.S 2.S 16.S 2.9 23.5 IBM McDonald's 41.4 S1.S 2.6 5.1 12.1 12.9 2.1 2.2 17.5 25.1 3.4 Merck 51.0 3.2 16.7 2.9 26.2 3.5 Sears, Roebuck 34.6 2.2 9.6 1.7 14.5 1.9 Xerox 53.S 3.4 11. 7 2.0 lS.5 2.5 As can be seen, at its 1973 high, the Dow was selling for 15.9 times earnings and the growth stocks were selling at premiums from anywhere from two to five times the Dow's PiE. These premiums, as the table shows, completely disappeared in the bear market, and, with a single exception, the ratio of the growth stocks' pie to that of the Dow was lower at the 1974 lows than it had been at the 1973 hIgh, des- pite the fact that the Dow multiple had declined to 5.8. This erosion of premiums explains a good part of …, –thehugeJprice declines forthe growth,lssues. iff T , ; 7' – – .. …. What is interesting, however, is that, at recent prices, the premiums of early 1973 had just about re- turned. The only exceptions are Avon Products and Xerox, which are still considerably lower in relation to the Dow than they were in 1973. All of the other stocks now have premiums over the Dow just about as great a s they enjoyed at their 1973 highs. None of this is intended to suggest lower prices for the growth issues and, indeed, as noted above, technical work suggests somewhat higher levels. It does, however, suggest that future appreciation for these issues is going to have to come largely from Improvement in the earnings muillpies the market is willing to accord the average rather than an increased premium for growth stocks in relation to the average. NOTE The above comments are based on technical factors. Further mformation on all issues is available on request. Dow-Jones Industrials (1200 p. m. 1 S & P Compo (\200 p. m.l ANTHONY W. TABELL DELAFIELD, HARVEY TABELL Cumulative Index (2/20/75) 457.97 AWT/jb No statement ar ellpreSIOn of opln'on Of any other matter herein contained IS, or ,s to be deemed to be, directly or indirectly, on offer or the saficltallon of an offer to bvy or sell any security referred to or mentioned The mal1er IS presented merely for the Convefllenc(; of the subscr,ber While -Ne believe the sources of our Informa- tion to be rel,able, we In no woy represent or guarantee the accuracy thereof nor of the stotements mude herein Any action to be token by the subscriber should be based on hiS own Invesllgotlon and ,formation Janney Montgomery Scott, Inc, as a corporollon, and ,ts officers or employees, may now hove, or may later take, posilions or lrades In respect to ony secuntles mentioned In thiS or any future Issue, and such position may be different from any v,ews now or hereafter ellpressed In thiS or any other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as an Investment OdVISor, may give adVice to Its Investment adVISOry and othe, customers Independently of any stotements mode In thiS or In any other Issue Further Information on cny security mentioned herein IS available on request

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Tabell’s Market Letter – February 28, 1975

Tabell’s Market Letter – February 28, 1975

Tabell's Market Letter - February 28, 1975
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE February 28, 1975 For the first time in 1975 so far, investors were reminded, this week, that it is possible for the stock -market to-do .something besIdes-go up .In .a–sharp two-day'decline.inMondays–and 'Duesday' s ctrading., the – ' Dow gave up some 30 points descending from 749.77, the high for the rally to date, to a Tuesday close of 719.18. Much of the ground lost, however, was regained in Wednesday's and Thursday's trading. The decline, although the sharpest to' interrupt the upswing so far, was still a relatively mild affair. True, more than 1000 stocks declined on both days but this contrasts, interestingly enough, with the fact that we have had no fewer than 12 days since the rally started on which the market saw more than 1000 ad- vances. Volume was also relatively light, dropping to an average of 20 million shares versus the consid- erably higher levels which previously had been chalked up on the upside. What was interesting was the nervous reaction which seemed to permeate the financial community. This, in our experience, is a fairly typical phenomenon during the first moderate decline following a major market bottom. The memories of the bear market remain too much with us, and a couple of sharply-down days awaken fears of its revival, even though rational analysis tells us that this is unlikely to be the case. From a technical point of view, the drop has little Significance. It met support where one would ex- pect it to do so, at around the 710 level and the most probable course of action from there on out would be the building of a new short-term base, preparatory to further attempt at new bull market highs. About the only thing that would suggest that something more serious was in the offing would be a downside penetra- tion of 700 which would indicate a test of the support at around 675. For the moment, at least, we would tend to regard this latter course as a possibility rather than a probability. What the week's weakness may be suggesting is some moderation of the rather amazing rate of advance that has characterized the rise so far. The DjIA is up, after all, some 30 since the rally began on the 6th of December, this in a period of just 54 trading days. Since the first of the year there have been only fouLperiods .when .the market decJi!)ed, .,-srneasurjOdbybr.e9gtil, fortw9or .moJ-econ.eutiv.e tr-,ding days and the longest period we have seen so far in which the market failed to make a new high has been under two weeks. Concomitant with the rally and undoubtedly a partial cause ( although not, as many analysts seem to believe, anything approaching the entire cause) has been an almost unprecedented rally in short-term interest rates. The prime rate, as we all know, has dropped from a level of 12 to under 9 in just five months. The treasury bill rate, almost 9 late last summer, has plummeted to close to 5 in recent weeks, and other short-term interest rates have been descending with almost equal rapidity. We have returned, and we think this is of some Significance, to the normal yield curve in which longer bonds offer yields in excess of shorter ones. The so-called reverse yield curve of last summer was, of course, an expression of investor expectations — of the fact that relatively high short-term rates were not expected to be per- manent. The fact that long and short rates are now in a more normal relationship to each other may indicate that the rally in short-term instruments may be close to at least a slowdown. As we said above, all this is suggestive, not of the fact that the rally is over, but that its most dy- namic phase lies behind us. The initial rally of a bull market historically does nothing more than recoup the most irrational phase of the previous bear market. It was, after all, only last September that the Dow was selling under six times earnings and protected dividends were offering 10-12 yields. It is certainly arguable that such levels were, by any objective standards, irrational, and the rally has done nothing more than make them another episode in the history of the stock market's occasional aberrations. Typically, as an upswing moves into a less ebullient phase, stock selection becomes more and more important. This is particularly so in the present instance. As the present rally has progressed, more and more stocks have moved into the clearly defined minor uptrends, and we would expect this phenomenon to continue– The problnn is that-many of these iswhijetheir-technrcaTpafferns su'gge'st higher levels do, not, as yet, appear to have sufficient base patterns to suggest major upside reversals. We recently compiled a list of stocks in major downtrends where the minor-uptrend objective is less than the price that would be required to score a major upside breakout. The list mcludes 328 issues, a fairly sizeable num- ber. Quite obviously, some of these will broaden their bases and evidently attain major-uptrend status . .A great many others, however, are probably best regarded as sales on strength. Luckily, however, as the market moves into the sort of sedate phase where selection becomes impor- tant, leadership tends to become more clearly defined and, from a technical point of view, the process of stock selection becomes somewhat easier. If in fact we are now entering into such a phase, it will be incumbent on the investor to adjust his portfolio, which by now, certainly, should be aggressively com- mitted to equities, to take advantage of it. Dow-Jones Industrials (1200 p. m.) 730.84 S & P Compo (1200 p.m.) 80.80 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (2/27/75) 454.42 AWT/jb No statement or e)presslon of opinion or any other mOiler herem contained IS, or 1 to be deemed to be, drrectly or tndlrectl(., an offer or the soliCitatIOn of on offer to buy or sell ony security referred to or mentioned The molter IS presented merely for the convellIenCe of the subSCriber Whl e we believe the sources of our informatIon 10 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 subSCriber should be based on h,s own investIgatIon and Informollon Janney Montgomery Scott, Inc, as a corporatIon, and Its offIcers or employees, may now hove, or may later lake. posItIons or trades In respect to ony securtt,,!s menhoned In thIS or any future ISSUe, and such posItIon may be dIfferent from ony vIews now or hereoker expressed In thu or any other Issve Janney Montgomery Scott, Inc, whIch IS regIstered Wllh the SEC as on Investment adVIsor, may gIve adVICe 10 .Is Investment adVIsory ond othe. customers Independently of any statements made In thIS ar In any other lssve Fvrther informatIon on any security menhoned hereIn IS (wodable on reqvest

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