Tabell’s Market Letter – July 02, 1982

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIYISION OF MEMBER NEW VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE –..,,…..-,….,.. ,.,.-.,.,I——-,…..– -.July2;-lJ——,——-'I-, .. ' .. i A distinction which investors often fail to make is the one between forecattng and the formulation of investmellt policy. The former is an art onto itself, involving many possible disciplines, technical, economic, and fundamental. The latter 18 derlvative. It consists of using forecasts, along WIth other tools, to approach, as closely as possible, a desired invest- ment result. As market technicans, we find ourselves, perforce, in the forecasting dodge. We have, in the course of that career, issued a number of forecasts, whose ultimate outcomes have ranged from being correct — to an extent amazing even to us — to being gloriously, spectacularly, and totally wrong. When contemplating the latter category, we have been known to console ourselves by turning to that page of the Official Baseball Encyclopedia which tells us that Babe Ruth for many years held the major-league record for career strikeouts. One of the things we have always tried to do in the process of forecasting is to suggest, along with each forecast, a relative degree of certainty. The word relative deserves emphasis since, in this trade, the certamty of any forecast is invariably a considerable order of magnitude below 100. We are perfectly willing to admit that this degree of cert'ainty often falls sufficiently low to make an opinion vulnerable to accusations of hedging. The relative veniality of this sin in comparison to the strikeout is a matter best left to the reader's opinion. All of which brings us to a discussion of the formulation of investment policy as we enter the second half of 1982. It is a period in which the market has declined sufficiently to make I–'-'–s,aoef,ec..tQe statem'lnt thatH!8119.81lwill,.be…known,–histor.ically-. as a beap – markeL . 0 1' the -pasl,t—lF-. three quarters that bear market has posted three recognizable lows, in terms of the Dow, 824.01 on September 25, 795.47 on March 8, and 788.62 on June 18. It remains, of course, a possibility that the last one will, historically, come to be known as the bear- market low. It also, obviously, remains possible that one or more lower lows will be scored before the whole dreary process is over. On this subject, we resolutely refuse to issue a forecast since, in our view, the degree of certainty would be so low as to approach being nil. Now in line with the distinction discussed above, even the foregoing statement could constitute an investment-policy tool. Since the level of the ultimate low is uncertain, it may be argued, Why not simply remain invested in cash equivalents, which are currently providing record real rates of return In answer to this argument, a number of other quaSi-forecasts must be trotted out. One of these' is that we do not forecast disaster. There are those commentators who, re- calling that Ruth is remembered for home runs while his strikeouts are forgotten, tend toward a compulsion to swing for the fences. Currently, most of the brothers of this lodge are com- peting to see who can cite the lowest downside objective for the Dow. By contrast, our own analysis of individual stock patterns suggests that the risk of common-stock ownership at the moment is relatively low, and certainly unlikely to be greater than the risk normally attendant upon such ownership. Secondly, as we have repeatedly suggested, we think the current market cycle relatively mature, so that any low posted is likely to be scored soon — in our own view well before the end of 1982. Finally, as we attempted to suggest last week, on a — —long-term basis the market's internal – —- technical -.- co..ndi-tion is one of being —- rather deeply oversold. Given the above facts, it is only necessary to combine them with the demonstrable fact that the most generous returns afforded by equities are those which are earned shortly after major-cycle upside turning points. This, in our view, argues persuasively in favor of an investment policy increasingly tilted toward common stocks. AWTrs Dow-Jones Industrials (12 00 p. m.) 796.52 S & P Composite (1200 p.m. 107.73 Cumulative Index (7/1/82 1078.27 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL No statement or expreulon of opinion or any other matter here,n contained IS, or IS to be deemed to be, directly or indirectly, on offer or the sollc.lollon of on offer 10 buy or sell any security referred to or mentioned The motter 15 presented merely for Ihe convenience of the subSCriber Whde He believe the sourct's of our Informa han 10 be rehable, we In no way represeflt or guarantee the accurocy Inurea! nor of the &lolemenl5 mude herem Any cctlon to be token by the subscriber hould be bosed on hiS own IIweshgotlon and Informanan Janney Montgomery Scott, nc, as ( corporation, ond liS orflcers or employees, may now /love, or may later fake, poSitions or trodes In respect to any securities mentioned In thl or any future Issue, and such pOSition moy be different from any vIews now or hereafter expressed In thIS or any other Iue Janney Montgomery Scott, Inc, whICh 1 regIstered with the SEC as on Investment adVIsor, may gIve adVICe to Its Investment adVIsory and othel customers Independently of any statemenls mode 11'1 thIS or In any other Issue further InformatIon on any security mentIoned herem IS available on request