Viewing Month: July 1980

Tabell’s Market Letter – July 03, 1980

Tabell’s Market Letter – July 03, 1980

Tabell's Market Letter - July 03, 1980
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TABELL'S MARKET LETTER 909 STA.TE ROAD. PRINCETON. NEW JER6EY 08540 DIYISION OF MEMBER NEW VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – July 3, 1980 -For. – on mutual fund activity provided by the Investment Company Institute. The figures for stock- oriented funds, as we adjust them (see note below), have generally provided a rather dreary pic- ture. There exists, however, in the past two months, an early and very tentative indication of a possible reawakening. – ' The history of mutual fund activity since 1954 can be partitioned, very much like the stock market itself, into two eras, with the dividing line somewhere in the early 1970's. In every single month from October, 1954 through April, 1971, mutual fund sales exceeded mutual fund redemptions. Over that period, a total of 27.6 billion of public savings flowed into equity-oriented funds. This cash inflow, coupled with a generally rising stock market, caused fund assets to increase from 5.3 billion in the fall of 1954 to a peak of almost 60 billion in early 1972. The period since 1971-1972 has generally been the direct opposite of the one discussed above. May, 1971 saw the first month since the figures were compiled in which more mutual fund shares were redeemed than were sold. This pattern very quickly became the rule rather than the excep- tion. In the 119 months from that date through this March, redemptions exceeded sales in 94 of them. With a flat-to-declining stock market in effect, assets reached a low of 31 billion in Sept- ember, 1974. They have since increased to 41 billion. Under these conditions, quite obviously, mutual fund managers were required, on balance, to become net sellers of common stocks. From August, 1971 through last month, stock funds as a whole have been net sellers of 17.66 billion worth of equities. It can hardly be totally accidental that a stock market Which has had to absorb this amount of selling from a single source has been unable to generate a great deal of upside move- ment during tne-decade ill quesuon. . Most recently, however, a glimmer, however faint, has appeared on the horizon. Stock mutual funds enjoyed an influx of new investment money both in April and May of this year. This consittutes the first consecutive string of two months in which sales exceeded redemptions since 19741975. The sales side of this equation provides an even brighter picture. January sales of stock mutual funds were 522.3 million and the figure exceeded 500 million again in April. The January figure, interestingly enough, constitutes the best single month for equity fund sales since October. 1971. The only reason that the funds' cash inflow picture during 1980 has not been more positive is that by and large redemptions have increased along with new sales. However, the analysis of past figures reveals that this fits into an historical pattern — one normally associated with the early stages of market rises. During such periods in the past, both sales and redemptions have tended to increase together. As the market rise continues, sales tend to continue strong while the increase in redemptions slows down. If this turns out to be the case in 1980- 81, the results will be interesting indeed, since stock mutual funds would inevitably become net buyers of equities rather than net sellers as has been the case for the past decade. Over the short term, there exists even more potential for such an eventuality. Despite the fact that funds enjoyed a cash inflow of 88 million in April and May, they were net sellers of 550 million of common stocks, in the process raising their liquid reserve position to 10.13 of assets. Under these conditions, should the cash inflow continue, a switch to net stock purchases by equity funds could become an important market factor. There exists, also, an impressive reservoir of public savings which might be diverted to stock funds in the future. As almost everyone is aware, money market fund assets now exceed 70 billion. Almost 10 billion, in addition to this, is invested in bond and municipal-bond funds. It is certainly not beyond the realm of possibility that declining interest rates could cause a shift of some portion of these vast amounts of funds to equities. NOTE All of the above figures have been adjusted by us. This adjustment essentially involves the elimination from the Investment Company Institute statistics of bond and municipal-bond funds for so long as figures for these funds have been separately available. The numbers, therefore. may differ from those reported in the press and other sources. Dow-Jones Industrials (12 00 PM) S & P Composite (1200 PM) Cumulative Index (7/2/80) 879.86 116.25 866.70 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWTsla No statement or expression of opinion or any other molter herein contained 1, or IS 10 be deemed to be, directly or indirectly, on offer or the 50ile,lollon of on offer to buy or sell ony secunty referred 10 or mentioned The mOiler IS presented merely for the converlenct of the While He believe the sources of our Informe tlon 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 subscriber should be based on hIS own investigation and Information Janney Montgomery SCali, Inc, as a corporation, and Its officers or employees, may now have, or may later toke, positions or trades In respect to any securities menl10ned In thIS or any future Issue, and such pOSitIOn may be different from any views now or hereofter expreued In thiS or any other Issue Janney Montgomery Scott, Inc, which IS reg!Slered With Ihe SEC as on Investment adVIsor, may give adVice to 115 Investment adVisory clnd othel customers IndCpc!ndently of any statements mode In thiS or In any other Issue Further information on any security mentioned herein IS available on request

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Tabell’s Market Letter – July 11, 1980

Tabell’s Market Letter – July 11, 1980

Tabell's Market Letter - July 11, 1980
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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 STOCI( EXCHANGE r July 11, 1980 In the it-maybe elementary fmancIal mathematIcs. . … here;yith ,a on .- – – The stock market has been rallying of late in response to lower short-term interest rates, albeit the unprecedented bond-market rally of this spring appears now to be entering a correctionary phase. Much of the bond-market strength, however, has been concentrated in short-term instruments, and long-term bonds are still priced to yield relatively generous returns on an historical basis. A reason- able working estimate of yields currently available from taxable bonds of high quality would be 12. Stocks, by contrast, provide current returns nowhere nearly so generous. How, then, to justify the purchase of stocks at current levels and, by extension, the sharp rally in the stock market since last March, at a time when the prospect for dividend improvement is hazy at best The obvious Justification is that bond income remains fixed while stock dividends presumably will grow. This argument can, of course, be pushed to excess, as it was, for example, in the early 1970's. In considering the purchase of a low-yielding stock versus a higher yielding bond, two key questions need to be asked. The first is how many years of dividend growth will be required before the yield for the common based on purchase price is equal to the presently available bond yield. The second is how many years will be required before the total return from the equity investment will equal that which would have been available from purchase of the bond. ' , ,I Growth Ra tel C–u-r-r-e-n-t–Y-l-d-. H 2 3 5 6 7 8 9 10 —-2— —-4— —6– —8– -1-0— -1-2— 14 —– 16 18 20 126/200 64/101 43/69 33/52 27/42 22/36 19/31 17/28 16/25 14/23 91/151 46/ 77 31/52 24/40 19/32 16/27 14/24 13/21 11/19 10/17 71/121 36/ 62 24/42 19/32 15/26 13/22 11/19 10/17 9/16 8/14 5 6/-99–1-9/-50-1-9/-34-14/.2 1 4 2/-13–1-/-1 45/ 81 23/ 41 16/28 12/22 10/18 8/15 7/13 6/12 6/11 5/10 36/ 65 18/ 34 12/23 10/18 8/15 7/13 6/11 5/10 5/ 9 4/ 8 28/ 52 14/ 27 10/19 8/14 6/12 5/10 5/ 9 4/ 8 4/ 7 3/ 7 21/ 40 11/ 21 7/15 6/11 5/ 9 4/ 8 4/ 7 3/ 7 3/ 6 3/ 6 15/ 29 8/ 16 5/11 4/ 9 4/ 7 3/ 6 3/ 6 2/ 5 2/ 5 2/ 4 10/ 19 5/ 11 4/ 8 3/ 6 2/ 5 2/ 5 2/ 4 2/ 4 2/ 4 1/ 3 The table above attempts to answer these questions. The column headings show various hypothetical dividend-growth rates and the row headings show various assumed current stock yields. For each junction point, the figure to the left of the slash shows the number of years required until dividends grow so that the yield on purchase price for a stock purchased at the current yield shown is equal to 12. The figure to the right of the slash shows the number of years required for the total return on the stock (assuming reinvestment of dividends) to equal that of a 12 bond (assuming reinvestment of interest). To cite an example, a stock currently yielding 5, with an anticipated dividend growth rate of 10 annually, would begin to yield 12 on cost after 10 years. After 18 years, the total return would be equal to that of a 12 bond purchased at the same time. How does this all work out in terms of actual yields available today As the most simple-minded possible example of available stock yields, we examined the dividend figures for the 20 largest companies on the New York Stock Exchange, taken in terms of market value, with no more than one representative of any single industry allowed in the sample. The average current yield for those 20 companies is 5.14 with a range between 1.1 and 9.5. The average historical dividend growth rate has been 11.075 measured from the final quarter of 1969 through the first quarter of 1980. The range of growth rates has been from 2.5 to 23. A theoretical portfolio constructed using those parameters would, after nine Ybars, provide a yield on cost in excess of 12. After 16 years, the total return would exceed that of a 12 bond assuming reinvestment of income in both cases. It should go without saying, of course, that the growth rates cited above are historical, and future projection is, at best, hypothetical. It should also be noted, however, that the above example considers income only and not potential capital gains from stocks, which presumably would accrue over the long term along with dividend growth. It is interesting, however, that if historical dividend growth rates can be projected into the future, over a reasonable period, the income from high-quality stocks might well exceed that of first quality bonds even at current near-record interest rates. j , Dow-Jones Industrials (12 00 PM) 886.01 S & P Composite (12 00 PM) 117.11 Cumulative Index (7/10/80) 885.00 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWTsla No stalemenl or e)(preSSlOn of opU'lion O( ony other molter herein contolned IS, or IS 10 be deemed to be, directly or ,nd,rectly, On offer or the soliCitation of an offer to buy Of sell any security referred to or mentioned The matter IS presented merely for the of the subscnber While we believe the sources of our Informo- tlon 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 subscriber should be based on hiS own investigatIOn and information Janney Montgomery SCali, Inc, as a corporation, and lIs officers or employees, may now have, or may loter toke, posltlons aT trodes In respect to ony Securities mentioned Ln thiS or ony future Issue, and such posItion may be different from any views now or herllafter eprllssed In thIS or ony other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as an Investment adVisor, may give adVice to lis Investment adVisory and othel customers Independently of any statements mode ,n thiS or In any other Issue Further mformallon on any sentlaned herein IS available on

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Tabell’s Market Letter – July 18, 1980

Tabell’s Market Letter – July 18, 1980

Tabell's Market Letter - July 18, 1980 page 1
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TABELL'S MARKET LETTER ..- ……. 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANOE INC MEMBER AMERICAN STOCK EXCHANGE July 18, 1980 — -level-on occurred, carrYing the average to its highest hivel in 22 months. The significance of this event has not, of course, gone unnoticed in the investment community. In the last three years, each time the Dow has rallied to this area, it has met with resistance, and on three occasions, serious corrections have ensued over relatively short periods of time. -Da-te 09/08/78 11/14/78 10105/79 11/07/79 02/13/80 04/21/80 -DJI-A 907.74(H) 785.26(L) 897.61(H) 796. 67(L) 903.84(H) 759. 13(L) Points -122.48 -100.04 -144.71 Change -13.49 -11.15 -16.01 Trading Days 48 24 47 Breadth (A-DIU) 721. 18(H) 669.36(L) 692.16(H) 644.16(L) 667.13(H) 621. 16(L) It would, therefore, not be unprecedented over the short term to see the market again retrace a portion of the strong advance in the Dow which, in the period of 63 trading days, has seen the Dow advance from a low on April 21 of 759.13, to a new closing high on July 17 of 915.10, or approximately 20.55. From a short-term technical point of view, the three-month rally has done just about all that could be expected. When the longer-term outlook, however, is examined, a number of building blocks seem to be . ,tn. . .. .,.. .., e. .., 80's, As of this letter are aware, a recent examination of the four-year-cycle a new major cycle began on March 6, 1978 where the Dow closed at 742.72. Our conclusion sug- gested, in part,, .in terms of cycle analysis, therefore, it seems to us that the market is at a crucial stage, Extension of the present advance to new highs would suggest that the now-two- year-old market cycle continues in its upward phase. If this is the case, the historical record would support the likelihood of a protracted period of advancing prices with further substantial percentage increase. Our interpretation of the four-year-cycle would seem to be confirmed by the market action of this week. It is interesting to note that the cyc Ie which began on March 6, 1978 is now 598 trading days old, While the average cycle length of the seven cycles studied in the post-war experience is 1043 days. The decisive penetration of the overhead supply between 850-900 which has repeatedly turned back all attempts at a meaningful advance for the past three years indicates substantially higher long-term objectives, The point-and-figure chart of the Dow-Jones Industrial Average on the reverse side of this letter properly puts into perspective the potential significance of the recent strength in the market. Since the three-year trading range of 900-760 on the DJIA was penetrated by a 920 posting on the upside, it is possible to project long-term upside objectives in excess of 1200 on the DJIA, This is not to say that there are not possible areas of concern on the horizon. Breadth of the market action, although recently in gear with the DJIA short-term, must be watched closely. Classic breadth analysis suggests potential bearish implications when a new high in the market averages is unconfirmed by a like high in breadth, While the Dow-Jones Industrial Average moved to new high territory yesterday, our breadth index at approximately 655 remains below the levels of September, 1978 (721.18), October, 1979 (692.16), and February, 1980 (667.13). This sort of action could set the stage for a divergence of the classic sort. It should be remembered, however, that breadth divergences historically have taken place over protracted periods of time, and there have often been lags between new highs in the averages and ultimate confirmation by market breadth, How this breadth action evolves should be watched closely as it could give a major clue to the long-term performance of the market. Dow-Jones Industrials (12 00 PM) 921. 59 S 8. P Composite (12 00 PM) 121. 97 Cumulative Index (7/17/80) 916.73 ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL RJS sla No statement or expression of opinion or any other motter herein conlolned IS, or IS to be deemed to be, directly Of indirectly, on offer or Ihe 501lCllahon of an offer 10 buy or sell any secunty referred 10 or mentioned The matter IS presented merely for Ihe convel'lence of the subscriber While we believe the sources of our Informohan to be reliable, we In no way represent or guarantee the accuracy thereof ncr of the statements mude herem Any action TO be la'.en by lhe !oubscnber should be based on hiS own mvestlgatlon and Information Janney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now halle, or may later toke, pOSitions or trodes In respect to ony secuntles mentioned m thiS or any future Issue, and such pOSItion may be different from any IIlews now or hereafter expressed m Ihls or any other Issue Janney Montgomery Scott, Inc, which IS registered with the SEC as on Inllestment odvlsor, may give adVice to lIS Investment adllisory and athel customers Independently of any statements mode In thiS or In any other Issue Further Informallon on any security mentioned herein IS available on request i 10100 1100 1'-'00 eoo lOC 0;;0 600 J )O ac.o /00 0 , l1li ,, DOW JONES 1l'Jl!U0 I -AT INDEX , 20 POINT , .i ( f / ! IV

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Tabell’s Market Letter – July 25, 1980

Tabell’s Market Letter – July 25, 1980

Tabell's Market Letter - July 25, 1980 page 1
Tabell's Market Letter - July 25, 1980 page 2
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,…,; – – – – – – – – – -TABELL'S MARKET LETTER 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YOAK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGe July 25. 1980 —– —— …. – ' . – . – ' -…….. … After rocketing 169'.5'4' points from'the Aiitil 21 closing low of- 759.13 on the Dow-Jones -Indus- trial Average to a three-year closing high of 928.67 on Monday of this week. it would seem logical to examine the significance of the short-term and long-term positions of the market after this remarkable 22.33 advance. —r Clearly from a short-term point of view. the market should be ready for a rest after its prolonged advance in the short period of just 64 trading days. The familiar 10-day oscillator of total advances minus total declines is useful in measuring past oversold as well as overbought markets. An inspection of similar overbought conditions in the last few years. coupled with the breadth characteristics of this advance which have fallen to date somewhat short of expectations. would suggest a short-term pause or possibly a retracement of the advance into the strong support area of 900- 880. Assuming our interpretation of the short-term position of the market to be correct. where does this leave us in regard to the long term secular trading range of the DJIA Last week this letter suggested the recent strength in the general market supported our bullish interpretation in terms of duration and magnitude of the four-year-cycle. The recent strength in the Dow-Jones Industrial Average. confirming new highs recently registered in the Standard 8. Poors 500 and the New York Stock Exchange Composite. must be put in proper perspective against the long- term behavior of the Dow. As the chart on the back page reflects. the equity market from 1940 till 1966 was supported by a secular uptrend advancing at a rate of about 8.9 a year on the Dow. It was simple to manage money within this framework — bull markets were long and profit- able while bear markets,were short. and although irritating. new highs were registered within a reasonably short period of time. However. -computed 'from slope- — – — Jones has been virtually zero. The most statistically accurate description of the market on the averages for the past 15 years is that it is a wide. flat trading area. The continuation of this trading range concept has recently become challenged. The market has spentmost oJ its time in a trading range. for. the Jast lS,ye1!rs. between 800 and 900. despite occasional excursions outside these levels in either direction. As can be seen on the chart on the opposite page. there have been occasions since 1966 when it looked as if the trading range might be decisively penetrated. However. in each case there has been no follow-through (1973 and 1976 on the upside — 1974 on the downside). The current market strength presents again the possibility of the end of this secular trading range. We know the market. in terms of the Dow-Jones Industrial Average. as well as the S 8. P 500 and the New York Stock Exchange Composite. has moved decisively above all the benchmark peaks that have been established since the bear market of 1976-78. Knowing the Dow has traded within the range of 800-900 during most of this period. it is important to note the recent strength in the Dow. Penetrating. on the upside. the three-year trading range which began in the fall of 1977 constitutes breakout from this trading area or base formation The three-year-old base formation indicates a plausible long-term upside objective in the Dow in excess of 1200. If this long-term objective were to be approached. the entire 15-year trading range (1966-1980) would. in turn. be penetrated on the upside which would indicate a brand new market cycle. This admittedly bullish sequence of events we have projected, because of the recellt shortterm strength in the general market must be taken at face value. There are a nu-fiber of other technical factors that must be evaluated before confirmation of a move outlined above may be considered. However. as a child must crawl before he walks. it becomes necessary for the market to first break out of its three-year trading range decisively before it can break out of its 15-year trading range. What is being observed is the market is again trying to take its first step. Dow-Jones Industrials (12 00 PM) 919.37 S 8. P Composite (12 00 PM) 120.97 Cumulative Index (7/24/80) 924.16 ROBERT J. SIMPKINS. JR. DELAFIELD. HARVEY. TAB ELL RJS sla No statement or e)(pre5S10n of opinIon or ony other motter here'n contolned IS, or 15 to be deemed 10 be, directly or Indlrt!dly, on Offt!f or the SohClfotlon of on offer 10 buy or sell ony security referred to or menlloned The molter IS presented merely for the conver-Iena; of the subscriber While we believe the sources of our Informo- han to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mode herein Any action to be to!..en by the subSCriber should be based on his own Investigation and Information Janney Montgomery Scott, Inc, as a corporation, and It5 offICers or employees, may now have, or may later toke, positions or trades In respect 10 any seCUrities mentioned In thiS or any future Issue, and such position moy be different from any views now or hereafter expressed In thiS or ony other Issue Janney Montgomery ScoT!, tnc , which IS registered With the SEC 0 on mvestment adVisor, may give adVice 10 lIs Investment adVisory and othel customers Independently of any statements mode In tnlS or m any other Issue Further mformatlon on any security menhoncd herein Is available on request '00 Io-t,Io-)1momoo0()o('QJo') Oo(o(r-)- 0 0 t- 0 U) eo 0 0 CD 0 U) U) 0 0 U) II I I I I I I I I I T – '– 0 til I c 0 I 0 tn 1 I c 0 0; I I 0 U) N I 0 to N I 0u- I c 0 I — — .-J a.-J CD CD J OJ Z , aZ I 0r &-E OJ (J CO 0 U) I 096i' 6/6T fItS I usr 9t6f St6T nLSf ELSI VSI IL61 OLSf 696r' fI9S. 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