Tabell’s Market Letter – April 29, 1983

Tabell’s Market Letter – April 29, 1983

Tabell's Market Letter - April 29, 1983
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. TABELL'S MARKET LETTER 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVHill0N OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – April 29, 1983 We are, to be honest, unable to think of a great many advantages to getting old. One of ! – —-t-he..;-few,such, .,.for-the-st0ekar,ket-obs.er-ver,atc-Ieast ,-is..,a.longerexperiencewithdifferentsorts of market enVironments.. HaVing celebrated, this week, the 29th anriiversary-of 0';1' e'ritrance into the securities business, We have found ourselves perhaps a bit less astounded by the market's be- havior since last August than some of our younger colleagues. When we started our Wall Street career, in the dark ages of 1954, the industry was populated with hoary veterans of 1929, who regularly assured us that The trouble with you kids is that you've never seen a bear market. We find ourselves, today, being able to chide anyone with less than 17 years experience for their lack of understanding of the past seven months on the grounds that they have never seen a bull market. We cite our approach to galloping senility, not simply to appear avuncular, but because we think, at this stage, the point is relevant. We have, in recent issues of this letter, documented the thesis that the market's recent extraordinary strength suggests that we are entering a new super-cycle environment very different from that which prevailed between 1966 and the summer of 1982. We have, we trust, made it clear that there exists precious little evidence at the moment to suggest exactly what the shape of that environment will be. Nevertheless, the last extant ex- ample of a different sort of market environment is the one which prevailed, approximately, between 1949 and 1966. Since we were, ourselves, actively staining our hands with stock-chart ink during a goodly portion of that period, it may be helpful to try to convey some sort of flavor of just what the good old days were actually like. The watershed date, which may, historically, wind up being compared with August 12, 1982, was June 13, 1949. On that day the Dow-Jones Industrial Average closed at 161. 60. It then com- menced an advance which lasted exactly one year throuS'h June 12, 1950. It reached 228.38 for a 41 increase, which compares not unfavorably with the .present 56 rise since last August. To those 'who think that bull markets need corrections, the period is instrUctIve. In that entire one-year period there were five identifiable corrections. The largest one was 2.86, and the longest one lasted for nine days. The longest period of the entire year during which the market failed to post a new high was five weeks in February-March, 1950. This happy state of affairs might have gone on longer were it not for an unusual event — the outbreak of the Korean War. This caused a correction of all of 13 over a relatively short 22- day period. However, four months later the Dow was again at a new high and continued to move on to new peaks regularly for another 15 months, albeit this time interspersed with more frequent and deeper corrections — eight such instances up to January, 1953, the deepest one being 7.81. There then ensued what has come to be called a bear market, largely only because purists like ourselves insist on dividing the market up into four-year cycles. It lasted nine whole months and brought the Dow down 13 once more. After this interruption, the advance resumed, and a year later, in January, 1954, we were again at new highs. The process of achieving new highs continued another 31 years, with seven identifiable short-term corrections in the process, two of which were marginally over 10. After another 14 months of back-and-forth swings in a trading range, the first bear market approaching 20 in magnitude occurred from July to October of 1957. We are talking here, remember, about a period of just over eight years — eight years be- fure the Dow ever posted a decline of greater than 13. It did so only twice, and only two periods of as much as a year went by without the Average posting a new high. The total advance was 222, the equivalent of a move of the Dow to 2500 from the August, 1982 low. It was followed, moreover, by two further major-cycle bull markets, which space does not permit recounting here, but which continued for another nine years. Some individual stock advances during-the -eight-year, 1949-1956 period were truly' spectacu- lar. International Paper moved from 3 3/4 to 40. Aluminum was then considered a growth industry, and Reynolds Metals moved from 1 3/4 to 55, a 3000 rise. Now even in the light of this sort of record, the malet's behavior since August is pretty exceptional, and we wish to take nothing away from it. However, to those of us who are aware from experience what bull markets can really be like, it is slightly less surprising. The major lesson, moreover, afforded by those early years is that exceptional strength, once begun. tends to persist. It is a lesson worth keeping in mind as the market continues to post new highs. AWT rs ANTHONY W. TAB ELL DELAFIELD, HARVEY. TABELL Dow-Jones Industrials (12 00 p. m. ) 1215.17 S & P Composite (1200 p.m.) 162.99 Cumulative Index (4/28/83) 1850.56 NQ slalement or exprenlon of opinion or any other molter herein contained IS, or 15 to be deemed 10 be, directly or indirectly, on offer or the soliCItation of on offer to buy Qf sell any security referred 10 or mentioned The molter IS presented merely for the conventence of the subscriber While we believe the sources of OUf Informo tlon 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 bosed on hiS own Investigation and information Janney Montgomery Scolt, Inc, as a corporotlon, ond liS offuers or employeu, may now have, or may loler toke, POSitions or trodes In respect 10 any seCUrities mentioned In thIS or any futurc Issue, and such pOSition may 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 on ,vestment adVisor, may give advlCc to Its tnve!otmenl advisory and othel customers Independently af any statements mode In thiS or In ony other Issue Further Information on any !ealrlly menlloncd herein IS ovalloble on request

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