Viewing Month: March 1977

Tabell’s Market Letter – March 04, 1977

Tabell’s Market Letter – March 04, 1977

Tabell's Market Letter - March 04, 1977
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETOH. NEW JERSEY 08540 DIVISION or MEMBER NEW YORK STOel( EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANoe But thought's a weapon stronger; March 4, 1977 We' W a i.- l t l – win a – I1–t our tle l-'0– obnag-tetlr-e-s. by T its aid;- – – – – 'T- .,.. The Good Coming, Charles Mackay This letter has often sermonized in the past on the virtues of Charles Mackay's book, Extraor- dinary Popular Delusions and the Madness of Crowds. We have even gone so far as to say that anyone not familiar with the history entailed therein ran serious risk of finding himself Ill-equipped to deal with the stock market. Mackay's book Is probably the best extant history for the lay reader of such bizarre events as the SOlth Sea Bubble, and the Holland Tulip Bulb Mania, along with a chapter, which makes Interesting reading in the light of today's fashions, on the Influence of politics and religion on the hair and beard. A fact that may not be widely known, even among those familiar with the book, is that Mackay, a Scotsman who lived from 1814 to 1889, earned his primary reputation as a poet, and the quote above Is taken from one of his poetiC efforts. The quotation Is, we think, as applicable to the current stock market as his book is to markets In general. There has been a distinct change which has taken place in the past three or four weeks In the character of the stock market. It Is certainly one deserving of notice and the application of Mackay's stronger weapon, 1. e., thought. Thought and analysis will, we think, help us a great deal In formulat- ing a forecast as to the future course of stock prices. However, before suggesting any drastic change In investment policy, we prefer, with Mackay, to wait a little longer. The change which has affected the market in recent weeks can be summarized very simply; It has turned weaker. This may not be totally apparent to those who have watched the Dow-Jones Industrial Aver- age rebound twice with moderate vigor from around the 930 level. What is taking place, however, Is exact- ly the reverse of what this letter consistently pointed out was happening in December and January, when a lackluster performance by the-Dow was-masklng-a- m-arker1liat WaSilfl-lfclualitY/acUng verywe11. 'in-the .- past few weeks, exactly the reverse has been the case. The DOW-Jones Industrials have been the strongest component of the market, a fact which can be documented by the following table. DJII DJ Trans. DJ Utll. S&P 500 Mld-february Low 926.03 2/11 221.14 2/14 104.84 2/15 99.51 2/14 Late February Low 926.20 2/25 Amex Index 219.91 2/28 Cum.Index 104.23 2/28 Bdth.Index 98.82 2/25 Mld-february Low 111.79 2/14 653.11 2/14 832.99 2/11 Late February Low 110.20 2/28 641.41 2/28 830.49 2/25 As we are all aware, the general market ceased Its decline In mid-February and then staged a mild rally before resuming Its downtrend. Of all of the averages documented above, including our Cumula- tive Index and ,Dally Breadth Index, all went to new lows at the end of February, with the Cumulative Index, In our view the most accurate measure of the overall market, posting a new low by a substantial amount. Only the Dow was able to hold above Its mid-February low and is now, Indeed, rallying off that low. The question Is, of course, what we are to make of this phenomenon. The lows of mid-February and late February are, In all cases, close enough to each other so that,lf a rally were to continue from these levels, we would have a potential for a so-called double bottom. The upside Implications of that double-bottom base formation are not, at the moment, too terribly excltlng,and we, for one, would prefer to see backing and fllllng around current levels so that a base suggesting a meaningful advance might be formed. The likelihood of such an event Is strengthened by the fact that most of the averages have now moved above the downtrend channels projected from the year–end highs to their lows of last month. Those bullishly Inclined will cite the fact that the renewed strength in the Dow may Indicate that this segment of the market has completed Its correction and that, once the other Indicescomplete-their own correctlonary phases, the market can again get Itself Into gear on the upside. Our own Interpretation of indiVidual patterns suggests that this argument is, indeed, not without plausibility. It Is further true that none of the averages mentioned above have, at their recent bottoms, broken their November lows, lows which from a technical point of view, do, In fact, have true significance. Indeed, only the Dow and the S & P are close to their levels of last November. All of the other indices remain well above them. In short, the question of whether the November lows will be broken or whether the double-bottom thesis will prove to be valid remains unresolved. Before It can be resolved, we will, It seems to us, have to walt a little longer . Dow-Jones Industrials '1200 p. m.l S & P Compcs Ite (1200 p. m.l Cumulative Index (3/3/77) 951. 80 101.11 651. 23 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWT/jb No statement or expression of op'nion or any other motter herein contolned IS, or IS to be deemed to be, directly or ,ndirectly, on oHer or the soliCitation of on offer to buy or sell any security referred 10 or mentioned The motler IS presented merely for Ihe convcrlence of Ihe subscnber Wl'l!le.JIc believe the sources of our lnformolIOn to be reliable, we In no way represent or guorontee Ihe accurocy Ihereof nor of the statements mude herein Any acllon 1-0 be token by the subSCriber !inould be bosed on hiS own Investlgolton and Informotlon Janney Montgomery SCOll, Inc. as a corporation, cnd Its offlCers or employees may now hove, or may loter loke, poSitions or trodes In respect 10 any seculltres mentioned In thIS or any future Issue, and such position may be different from OilY views now or hereafter expressed In thiS or any other Issue Jonney Montgomery Scott, Inc, which 15 registered With the SEC as all Investment adVisor, may gIVe adVice to Its Investment adVisory and othel customers mdependently of ony slotements mode In Ihls or In ony other Issue further ,nformatlon on any security mentioned herein Iii availoble on request

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Tabell’s Market Letter – March 11, 1977

Tabell’s Market Letter – March 11, 1977

Tabell's Market Letter - March 11, 1977
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DrVISION OF MEMBER NEW YORK. STOCK. eXCHANGE, INC MEMBER AMERICAN STOCK. EXCHANGE March 11, 1977 We noted in this space last week that, despite the market's having held around recent lows, no meaningful base which would suggest an lmmediate substantlal advance had yet been formed. ,,, 'Th1sWeek's-decline froifl'a Iuesaayil\tra-'daVlfiICor-91i-0-tOThu'fsdaY'-s- low of 938 prtortba-late-' — , Thursday rally could very well be the start of the sort of Sideways action that would lead to a more important base formation. One item prominently featured in this week's financial news was the sharp increase in mutual-fund net sales, whlCh reached 141 million for the month of january. This was the highest in- flow of cash into mutual funds since january, 1975 and, with that single exception, the largest net inflow since October, 1971. Actually, the increased cash inflow had been foreshadowed by a rise in sales to their highest level since 1969 in December, year-end sales flgures of 661 million being the third highest figure recorded for any month Since the data has been mamtained. This rise was offset during that month by a sharp, probably tax-mduced, one-month mcrease m redemptlOns. In january, sales were almost the equal of December, and redemptions dropped off to a more normal level. Thus, the record cash inflow. After 18 months of consecutive net redemptions, through last October, the funds had modest net sales in November and December followed by the near- record net sales figures for the first month of 1977. It is interesting to note that mutual fund managers were not mclined to react to the influx of new money. All of it went toward a buildup in cash positlOn and, indeed, some 59 million worth of stocks were sold during the month, raising cash positlOn at a percent of net assets to 6.44, the highest level m a year. It must be stressed, in looking at these flgures, that the analysls of mutual fund statistics is a tncky business and has become more so in recent years., The first th10g that must be noted is the meanmglessness of netted figures such as net sales, net redemptions or redemptions as a per- cent of sales. This has been due to a secular trend toward net redemptions which has existed through- out much of the 1970's, possibly reflecting well-advertised public disinterest 10 the stock market. The a– … -problem can be solved-by 100king-atialesanaCeaempt1onsasseparate items-atherth'an as net– – figure. The other fact to keep in mind in looking at fund statisllcs lS that we are looking at the behavior of two sets of individuals. When we look at such things as sales and redemptions, we are examining the behavior of the mutual fund mvestor. When we look at such data as changes in cash pOSItion, we are noting decisions made by the mutual fund manager. With this in mind, let us look at a few statistics — first of all, fund redemptions. The historical tendencies of th,S statistic have been that lt dries up sharply during bear markets, rebounds a bit after bottoms and then begins a new sharp rise as a bull market gets underway, reflecting, no doubt, investors' tendency to sell as they get even. Generally, the level of redemptions levels off fairly close, but in advance of, the end of a bull market. The last redemption peak was 10 early 1976, and was nearly equalled last December. Since a leveling off-tendency has been apparent for about a year, data on redemptlOns would tend to suggest cautlOn at the moment. When one looks at sales, however, a different story presents itself. Historically, sales tend to dry up along with redemptlOns during bear markets. After rebounding a bit, they generally do little durmg the early stage of upswings and, generally, commence a sharp increase around the middle of a bull-market cycle. Thus, the rise 10 sales to almost all-time peaks m the past two months must be considered an encouraging factor and would, lf it were to continue, suggest a healthy market. Finally, an analysis of the amount of their portfolio that mutual fund managers have chosen to retain in cash leads uS to some interesting conclusions. Cash position generally tends to reach a peak near major market lows, to decrease sharply as bull markets get underway and, finally, to remain flat for a period of time, increasmg again as bear markets begin. Thus, cash positlOn reached anBlltime hlgh of-13. 5 a month before the bottom-m1974'a-rfd decnn'ed toa-low 01 54-3 last- September– – , October. Last week's rise to a new high was only modest, and this actlOn during 1976 could be attributed to a slmple flattening of the cash posltion curve. Such a flattening has generally persisted in the past for as much as two or three years pnor to bull market peaks, agam suggest10g longer life for the current upsw lng. The most bulhsh configurahon of mutual fund data in coming months would consist of a contlnuing rise in sales accompanied by a like rise, at a somewhat slower rate, 1n redemptions. Thls should also, on an h1stoncal basis, be accompanied by a w1lhngness of managers to invest the cash 1nflow so that overall cash pOSition rema1ns stable. It will be 1nteresting to see If such action, in fact, takes place. Dow-jones Industrials (1200 p.m.) S & P CompOSite (1200 p.m.) Cumulatlve Index (3/10.77) AWT/Jb 948.39 100.74 618.76 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or e)(preSSlon of oplrllon or any other molter herein tontalned IS, or 1 to be deemed 10 be, directly or Irldlrectly, an offer or the soliCitation of an offer to buy or sell any secuTity referred to Or mentioned The malter 1 presented merely for the canveT'lence of the subSCriber While oNe believe the sources af our Informa tlon to be reltable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Aoy actIOn 10 be toen by the subKrlber should be based on 1115 own Investigation and information Janney Montgomery Scott, Inc, as a corporal lon, and Its officers or employees, may now have, or moy later take, POSitions or trades Irl respect to any securles mentioned In 1hls or any future Isue, and such pOSition moy be different from any views now or hereofter expressed In thIS or any other Issue Jonney Montgomery Scott, Inc, whtch IS registered With the SEC os on Investment adVisor, may give Cldvlte to Its Investment odvlsory and othel customers Independently of ony stotements made In thiS or In any other Issue Further Information on any security mentioned herein IS OVOilabie on request

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Tabell’s Market Letter – March 18, 1977

Tabell’s Market Letter – March 18, 1977

Tabell's Market Letter - March 18, 1977
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW VOAK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE March 18, 1977 . '. ,C ,The recent short-term action of the stock market remains constructive as the Dow-Jones In- dustrial Averages ad';aced25'10 polntSoVe'r five sfraighftradi aaYstii.rooghWednesday-onlilsweek;- The averages broke out of a minor base on our 2-point and 5-point unit charts, respectively. indicating a short-term upside objective of 974-980. As the averages approach these levels, conventional wisdom would indicate the heavy overhead supply at 980-1020 would necessitate a pause or possible test of the previous lows. It appears we are in the process of broadening a potential base which would be sufficient enough to ultimately penetrate the supply previously mentioned. This type of sideways action leading to a more important base formation is viewed constructively; however. a major ingredient in this process of formation will be time. The New York Stock Exchange earlier this week released their monthly figures of NYSE firms carrying customers' stock margin accounts. Margin debt increased again 10 February and for the 17th month in the last 18 has not declined. Margin customers of the NYSE member firms added 210 million to their indebtedness, bringing a total margin debt to a record 8,480 million at month end. This is the third month in a row customers' margin debt posted an all-time high in the series that dates to January, 1965. The former record of 7,900 million was set in December, 1972. The number of margin accounts for the same period between December, 1972, and February, 1977, has increased from 750,000 to 840,000. Although margin debt is at an all-time high, it is interest- ing to note that the number of margin accounts is still, after almost ten years, well below the level set in September, 1968, when margin accounts numbered 945,000, In the following exhibit, we compare margin debt to margin accounts and show this as a ratio. We have taken the highs and lows of margin debt and compared them to the corresponding major highs and lows of the DJIA. EXHIBIT I . .. . Margin Debt(mll) . Accounts (thou) Ratio June, 1968 ,- High 6690' 940 14.05 Date Dow-Jones n/29/68 .. 985.08 —eo- July,1970 Low 3780 770 20.37 5/26/70 631.16 December,1972 High 7900 750 9.49 1/11/73 1051.70 December,1974 Low 3910 625 15.98 12/6/74 577.60 February, 1976 High 8480 825 9.72 9/29/76 1041. 79 From 1965 to date the range of this ratio is 20.37 high on July, 1970 and 9.35 Iowan Octo- ber, 1972. The ratio tends to be high at market bottoms (July, 1970 and December, 1974) and low at market tops. The relative high ratio in June, 1968, a market high, can obviously be attributable to the large amount of speculation in the market. Also, the ratio peaks before a market high and after a market low. If these observations are correct, the recent or a subsequent j1igh in customer margin debt would indicate the DJIA could be higher at a later date. EXHIBIT II Margin Debt Total Market Value Percentage Date Dow-Jones June, 1968 High 6690 641037 1.043 11/29/68 985.08 July. 1970 Low 3780 531077 .712 5/26/70 631.16 December, 1972 HIgh 7900 872000 .906 1/11/73 1051. 70 December,1974 Low 3910 511054 .765 12/6/74 577.60 February, 1976 High 8270 802504 1. 031 9/29/76 1041. 79 Another way we are able to analyze the customer stock margin debt is to compare it to the total market value of equities listed on the NYSE. From 1965 to date the range of the percentage of margin debt to total NYSE market value has been 1.10 high on September, 1966. and .597 low on January, 1971. Jhe observations see.'! e the sae. J'he hlg!!er !h.e.pentage of !!!.argin debt to mark'..t valtle, the higher the averages and, conversely, the lower the percentage, the lower the averages. Although the above exhibits would allow for stock prices to go higher, one set of figures re- leased by the NYSE would argue this point. Customers carrying margin accounts under 40 equities now stand at 1. 5 billion or 18 of total margin debt. In simplest terms. this means the quality of credit has deteriorated during the month of February with 18 of the debt in accounts in the lowest equity class against 15 in the same class in January. It should be remembered in August of 1974, this ratio reached a high of 23, a series record,and was thought to be a major contributor to the decline in late 1974. Dow-Jones Industrials (1200 p.m.) 962.85 S & P Composite (1200 p.m.) 102.03 Cumulative Index (3/17/77) 661.76 RJS/jb ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL No stolemen! or expression of optnlon or any other motter herein contolned Il, or 15 to be deemed to be, directly or Indorectly, on offer or the SollCllotlon of on offer to buy or sell Clny secunly referred to or mentioned The maHer IS presented merely for the (onverlenn of the subscriber While Ne believe the sources of our Information to be rehoble, 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 hIS own Investlgollon and Information Janney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now have, or may later take, positions or trades In respect to ony securities mentioned In thiS or any future Issue, and such POSition moy be different from any Views now or hereafter expressed In thiS or any other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as an Investment adVisor, may give adVICe to Its Investment adVisory and other customers Independently of any statements mode rn thl or In any other Issue Further information on any security mentioned herern IS available on request

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Tabell’s Market Letter – March 25, 1977

Tabell’s Market Letter – March 25, 1977

Tabell's Market Letter - March 25, 1977
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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 March 25, 1977 Last week's intraday high of 971. 58 on the DOW-Jones Industrial Average approached the 9749ao-short.rirft;'objective-s mentlorimfii1thrStet–er'laSt'week . Sinc; th'Jfe DJIA h-a-g' ciecline;'d– 32.33 pOints in six consecutive trading days and as we have discussed, appears to be testing the previous lows in the Average. We continue to feel we are in a time-consuming process of broaden- ing a potential base which would be sufficient enough to ultimately penetrate the heavy overhead supply present at 980-1020. However, the ability to break decisively the November, 1976 low of 924.04 would destroy this sideways action of the market. Since December 5, 1968, when give-up checks were terminated, through May I, 1975, when negotiated rates went into effect, the brokerage industry has been faced with the prospect of reduced commissions and reduced volume. Since 1968, these various factors have had an influence on total volume, but to date only in degree. Last week the New York Stock Exchange released their Monthly Review and we discussed the series Margin Debt. Another series mentioned in that re- lease was the number of shares listed on the NYSE. This figure, like margin debt, has reached an all-time high. In itself, this figure is constructive and not surprising due to the many stock splits and new issues admitted to the NYSE. However, looking at the figures compared to the average daily volume per month on the NYSE, we find some mteresting comparisons. Date DJIA Chg. It Days It Shares Avg. Daily Shares/ this Swing Listed Volume Volume 12/ 3/68 985.21 13196 14860 .888 5/26/70 631. 16 -35.94 367 15551 12296 1. 265 1/11/73 1051.70 66.63 12/ -6/74…–5-77-,,60., –45-;e08 665 19323 18750 1.031 –48f.-……,..–2-l737..,…. -1'5007 . – -1-;448,–' – 9/21/76 1014.79 75.69 452 24080 19741 1.220 2/28/77 936.42 -7.72 III 24612 20971 1.174 A 25 percent yield filter was run against the DJIA and the above exhibit shows the highs and lows from December, 1968, to date. The number of shares listed and the average daily volume for each respective month is also shown. From December, 1968, to February, 1977, the number of shares listed increased from 13,196 million to 24,612 million or 86.51 percent increase. More surprising was the fact that average daily volume for the same period mcreased from 14,860 million to 20,971 million or an increase of 41.12. In other words, volume is increasing but at a slower rate than the increas ing number of shares listed. A major factor affecting the volume figures is the large block activity on the NYSE. Since 1968, the institutionalization of the stock market can be shown by the block share (10,000 or more) volume as a percentage of total monthly volume. In December of 1968, this figure was 12.50 percent. In the short period of less than eight years, the figure has increased to 22.22 percent in September of 1976. Although the current figure is below this all-time high level, there is evidence that this percentage will continue to remain high for at least the immediate future. Date DJIA Chg. It Days Monthly Block Trans Ratio this Swing Volume (thou) 12/ 3/68 985.21 267480 33425 12.50 5/26/70 631. 16 -35.94 1/11/73 1051. 70 66.63c 367 66.5 258220 393750 32647 12.64 -81090- 20.59,., 1.2/ 6/74 577.60 -45.08 481 315150 44829 14.22 9/21/76 1014.79 75.69 452 414550 92101 22.22 2/28/77 936.42 – 7.72 III 398440 77397 19.43 Total volume has been down but relative block activity has been greater. A subtle reason I !I for the ability of this ratio to remain at its relatively high level might be the new institutional in- vestor's acceptance of indexing, investments weighted in line with one of the popular stock aver- ages. It is interesting to speculate on the potential negative effects indexing could have on total volume after participating institutions have completed their conversion to indexing. Dow-Jones Industrials (1200 p.m.) 933.59 S & P Composite (1200 p.m.) Cumulative Index (3/24/77) 99.56 622.64 RJS/jb ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL No statement or expression of opinion or any other moiler herein contained 1, or 15 to be deemed to be, directly or rndmcty, on offer or the sollcltolLon of on offer 10 buy or sell ony security referred 10 or mentioned The mailer IS presented merely for the conver'1en of the subscriber While 'l'Je believe the sources of our mformatlon 10 be reliable, we In no way represent or guarantee the accuracy thereol nor of the statements mude herem Any action to be toen by the subscrtber should be bosed on hiS own mveshgctlon and Information Janney Montgomery Scoll, Inc, os 0 corporotron, ond Its officers or employees, moy now have, or may later loke, positions or trades In respect to any securities menttoned m thiS or any future Issue, and such POSition may be different from ony views now or herellfter erpressed In thiS or any other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as on Investment odvlsor, moy give adVice to Its mvestment adVisory and othel customers Independently of any statements mode ,n thiS or In any other Issue Further Information 0'1 C'ly security men honed herem IS available on request

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Tabell’s Market Letter – March 31, 1977

Tabell’s Market Letter – March 31, 1977

Tabell's Market Letter - March 31, 1977
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—– TABELL'S MARKET LETTER i I J – 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK eXCHANGE, INC MEMBEA AMERICAN STOCK EXCHANGE March 31, 1977 Those who seek out news events as an explanation for the behavior of the stock market have been haying a hard thne oLit Ja,tely. Paradoxically,. th.eculprJt.in ,the .present instance has notbeen.a short- … … age of ;ew -';;;nts .Indeed, tl;r;–hav bee'; plerrty of those.- We-ha'; had, amog '(;ther-thing-th' declining dollar, the coal strike, Mideast hostilities, etc. The problem has been, rather, the market's response to these events or, more precisely, its lack of response. The market, as those of us who make a living following 1t are painfully aware, has done, in the past few weeks, practically nothing. There has, in other words, been a total lack of response on the market's part to events which, in other times and at other places, might have jarred it into violent movement. In this sort of atmosphere, the upward move of some eight pOints, which took place in the Dow on Tuesday and Wednesday, was perhaps of more than passing interest. We were assured by various pundits that this strength was due to the Department of Commerce's release on that day of the Consumer Price Index for February, which stood at 188.3 of its 1967 average, a rise of 0.6 from the January figure before seasonal adjustments. This rise was reputed to have been of a lesser magnitude than the financial commumty was expecting, thus triggering the minor rally m the stock market. The conventional chain of reasoning, which suggests that moderation in inflation is bullish for stock prices, is complex and a bit tenuous. It posits that renewed inflation wlll cause a response on the part of monetary authorities in the form of tighter money or slowed-down monetary growth. This, in tum, 1S supposed to produce higher interest rates which are then supposed to affect stock prices in a negative direction. Presumably, an abatement of inflationary pressures makes the Fed less inclined to act in this pernicious fashion and is, therefore, stimulative of equity prices. Never mind that all the links in the foregoing chain can be criticized both theoretically and empirically. It has, over the past year or so, prov1ded a reasonably good explanation of the market's short-term behavior. If it is, indeed, fear of inflationary pressures which is currently depressing the market, it may be that we have a feature built into the current price structure which is more apparent than real. In — contrast towhat seems tObe awJ'-dely-p-revaifingTmPresslOn;lf is,-rteasi;an arguable prem!' e' that' – -, a) the economy's recent progress in combatting inflation has not been all that bad and b) that the prospects for the immediate future, at least, may be somewhat better than the conventional wisdom envis ions. Let us exa mine first of all the recent record. One plausable view of the Consumer Price Index is as an annualized six-month rate of change. Using a change rate suggests the pace at which prices are actually growing, and a six-month penod tends to smooth out shorter term fluctuations. On this basis, the most recent record has been rather good. The rate of change for the six-month period ended June, 1977 was an annualized 9.0. This figure declined sharply throughout the latter half of last year, reaching an annual rate of 4.4 in Decem- ber. For the past two months, it has increased, but not seriously, and the February figure represents a 5.4 annual rate of change. This is not terribly out of line with the level which prevailed throughout all of 1976 and, mdeed, is a considerably lower rate of increase than tended to prevail in the post- recession period. Indeed, at no time since the early part of the 1960's have we seen long periods of a better performance on the part of growth m consumer prices. If recent action is not that unsatisfactory, what are the prospects for the future We have, in the past, confessed our own bias in the direction of the belief that money-supply growth is the most important determinant of price change. As an outgrowth of this thinking, we have stated our belief in the efficacy of a neutral monetary policy, one in which short-term changes in the money supply are held within as narrow a range as poss1ble. Strangely enough, for six years now, there has been some evidence at least that this sort of policy 1S being followed. The month-to-month change m the six-month average of the broadly defined money supply (M2) has been fluctuatmg for the most part in a narrow band on either side of 0.8 per month, the only exception being a protracted period of slower growth during .- the 1974 receSSion. -Now it is arguable that this'rate is perhaps'too high and; indeed-;Ts SuggestiVeof price increases at approximately a 5 annual rate. Strangely enough, it 1S just this sort of behavior, for the most part, that we have been having. The point is that there have recently been none of the wide swings in monetary change which characterized the early 1970's, and which may have been responsible for inflation in the double-digit range. Indeed, the steady rate of monetary growth could, given time, continue to moderate the rate of inflation as it was apparently doing throughout the latter half of last year. Under these cond1tions, antiCipated mflationary pressures, which may be bullt mto current stock-market levels, might very well be illusory. Dow-Jones Industrials (1200 p.m.) S & P Composite (1200 p.m.) Cumulative Index (3/30/78) 756.54 89.08 681.424 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWT/jt No stalement Of epreSlon of opinion or any other matler herem contained IS, or IS to be deemed to be, directly or indirectly, on off!!r or the sollcltotlon of on offer to buy or sell any security referred to or mentioned The molter IS presented merely for the converlence of the subscriber Whde oNe 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 10 be token by the subSCriber should be based on hiS own Inve511g01l0n and information Jonney Montgomery Scott, Inc, os a corporation, and lIs officers or employees, may now have or moy later toke, poslhons or trade In respect to any seCUrities menlloned In thiS or ony future Issue, and such pOSition may be d,fferent from any views now or hereafter expressed In Ihls or any other Issue Janney Montgomery Scott, Inc, wh,ch IS registered With the SEC as on lflvestment adVisor, may gille adllice to lIs Investment adVISOry and othel customers .ndependently of ony statements mode In thiS or In any other Issue Further Informoilon on any security mentioned herem IS avollable on request

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