Viewing Month: February 1986

Tabell’s Market Letter – February 07, 1986

Tabell’s Market Letter – February 07, 1986

Tabell's Market Letter - February 07, 1986
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'1TJ.iU.1!l1E D.. D.. ' S J.iU.1Rl&E'1T D..1E'1T'U'lElRl 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 February 7, 1986 Readers of this letter are, by this time, well aware of our general feeling regarding the current stock market. We recognize, along with most of the rest of the financial community, that the Dow -…. ——- ,has doubledover 3-l/2 years- and –that-the -cuJ!-I!ent..,cycle J Ht .1east .,in terms–9f conventional interpretation . has reacheds mature-phase. Despite this, 'we have recommended a continuedpositive attitude toward common stocks, pointing out that the sort of deterioration which the conventional wisdom would expect at this stage has simply not materialized. We will try, this week, to illustrate this point graphically using the point-and-figure charts which we regard as the most useful historical summary of price action. The chart at left above, an historical artifact, is a shining example of the sort of pattern which is conspicious by its absence today. On a 5-point-unit basis J it traces the history of Xerox in the early 1970's, with the last posting being in November, 1973. No chart expertise is required to see —-thatthe .. distributiona1p-attern…between–150–and—lO.!..is–m-assivehe-stocktof- course,–was …at-46—a—-year later and below 28 at its 1982 low. Many stocks today—Borden is an exarnple–appear fully exploited, but what is totally absent, as its chart shows, is any sort of distributional top. Such a formation would require time. (The Xerox top took over a year to build). Furthermore, a typical occurrence in recent markets has been for potential distributional patterns to turn into continuation bases. PillSbury, during late 1985, formed a pattern which could have been interpreted as a triple top. The recent upside breakout casts doubt on this and now suggests a further extension of the upside move. Rather than massive top formations, a large number of stocks today possess patterns something like that of Alcoa, shown at left. Its major feature is a recent upside breakout from a massive accumulation base between 30 and 39, suggesting that the stock could be in the early stages of an important upward move. This sort of formation is typical of a large number of basic-industry stocks. Top formations are currently, it must be admitted, not totally absent, but where they exist, 8S in the energy sector. the patterns are similar to that of Amoco at right. The stock did, indeed, form a top at 70-60 and the downside objective is 48. However, It has already declined from 70 to a low of 53 1/8 and is approaching an area of strong support from its 1982-1983 trading suggesting that the bulk of downside action has already been seen. The fact that most individual patterns today can be typified by one of the four latter examples rather than by the sort of pattern Xerox and so many other stocks exhibited 15 years ago suggests that no serious market weakness is imminent until distributional patterns build further. Dow-Jones Industrials (1200 p.m.) 1592.43 S & P Composite (1200 p.m.) 209.33 Cumulative Index (2/6/86) 2764.16 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. AWTke No statement or epresslon 01 opinIon or any other mailer herem contaIned IS or IS to be deemed to be, directly or Indirectly, an offer or the soliCitation 01 an offer 10 buy or sell any security referred 10 or mentioned The mailer IS presented merely for the convenience of the subscriber While we believe the sources of our information to be reliable, we In no way represent or guarantee the accuracy thereof nor 0/ Ihe statements made herem Any action to be laken by the subscnber should be based on hiS own Invesllgatlon and Information Oela/leld, Harvey, Tabell Inc, as a corporation and Its ofheers or employees, may now have, or may later take, poSitions or trades In respect to any securities menlloned In thiS or any future Issue, and such pOSition may be different from any views now or hereaHer expressed In thiS or any other Issue Delafield Harvey label! Inc which IS registered With the SEC as an IOvestmen\ adVisor, may give advice to Its mvestment adVISOry and other customers mdependently of any statements made mlhlS or In any other Issue Further information on any security mentioned herein IS available on reQuest i

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Tabell’s Market Letter – February 14, 1986

Tabell’s Market Letter – February 14, 1986

Tabell's Market Letter - February 14, 1986
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS,INC (609) 987-2300 February 14, 1986 It is not difficult to detect, in the writings of many of our colleagues these days, a certain note of disbelief. This note stems from the perception that the market ought, at this 1-,. stage .of the.,.game,to.go ,down, -or, .atthe.vel'-y least ,–stop–going -up . It haso-been -pointed- outr– – . for example, that- the four years, 1982-1985, have all been rising ones and that, at no time in recent history, has the market advanced five years in a row. , We must confess that we are sympathetic to this point of view, having ourselves repeatedly made the same point in more complicated form, usually drawing on references to the repetitive pattern of the four-year cycle. Cycle theory tells us unequivocably that there ought to be a bear market of some proportions some time during 1986. The market, however, being perverse, has refused, in the first month-and-a-half of the new year, to give any indication of wanting to do what all experience tells us it ought to be doing. There does exist, however, an example of five consecutive advancing years. They are the years 1924-1928. They fall within a period which, interestingly enough, causes some difficulty for students of the four-year cycle, and we intend to open, here, a rather large can of worms by suggesting that a look at the 1920's may perhaps, in the 1980's, be relevant. On August 24, 1921, the Dow closed at 63.90. This was a recognizable bear-market low. The interpretive problem is that no comparably obvious low occurred for more than eight years, until November, 1929. Cycle theory tells us that two cycles should have been completed during that period, but making the division is difficult. Our own solution has been to recognize a bear market as having occurred between March and October of 1923. However, of this, more later. From that August, 1921 low, the Dow rose 64.91 over the next nineteen months reaching 105.38 in March of 1923. Fifteen of the nineteen months in question saw new highs scored. Between August 12, 1982 and November 29, 1983, interestingly enough, the average rose from 776.92 to 1287.20, a 65.68 rise with new highs being posted in thirteen of the 1 fifteenmonthsiny.olyed. '- There followed, in both cases, a hiatus. In the -1920's, sixteen-months passed before a new high was seen. The low was reached in October, 1923, 18.62 below the March peak. Following November, 1983, a new peak was not achieved until January, 1985, a gap of thirteen months. At the July, 1984 low, the Dow had posted a 15.59 decline. Since it is recent history, we are well aware that the average has now moved up over 50 from that July low, with eleven of the fourteen months since January, 1985 having seen new peaks. This has caused a certain amount of incredulity. There may have existed a comparable degree of incredulity following the first new high in August of 1924. However, the market continued to advance for eighteen months, to February, 1926, achieving an 86.76 rise in the process. It is worth noting that a comparable advance from the July, 1984 low would take the Dow over 2000. February, 1926, however, was, as we know, by no means the end. Nothing more than, by the standards of the day, a modest irregularity characterized 1926 and early 1927. The culmination was a thirty-month rise which brought the Dow to two and a half times its early-1926 peak, with new highs occurring in twenty-four of the thirty months. The aftermath to that, of course, is well known. We draw attention to the uncanny stock market resemblance between the post-1921 and post-1982 periods for a reason. The stock market, after all, moves in response to its environment and there exist, in our view—and in the view of a number of qualified observers— a number of similarities between the economic environment of the 1920's and 1980's. We intend, in future issues of this letter, to elaborate on some of them. There also exist significant differences in the two environments, and they will be worth examining. No attempt will be made here even to remotely suggest the inevitability of, a 1927-29 type of final blowoff and a similar consequent collapse. History exists, however, to teach lessons, and it is certainly worth making the effort to ascertain what current lessons, if any, the decade of the 1920's may provide. ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL lNC. Dow Jones Industrials (1200 p.m.) S & P Composite (12 00 p.m.) Cumulative Index (2/13/86) 1647.82 209.33 2815.10 AWT it NO s!alemem or erpresslon of Opinion or any other matter herem contamed IS, or IS 10 be deemed 10 be, dlrectty or Indirectly. an offer Of Ihesohcltatlon of an cfter \0 buy or sell any secunly referred toor mentioned The matter IS presented merely for lhe convenience 01 the subsCriber While we believe the sources of our Intormallon to be reliable, we In noway represent or guarantee the accuracy thereal nor of the statements made herein Anv action to be talen by the subSCriber shoutd be based on his own investigation and Information Delafield, Harvey, Tabell Inc, as a corporation and Its officers or employees may now have, or may later take, POSitions or trades In respect to any secufllies mentioned In this or any lulure Issue, and such POSition may be dl1!erem from any views nowOl hereafter epressed In thiS or any other Issue Delafield, Harvey, Tabell Inc, which IS registered With the SECas an InYestment adVisor, may give adYlceto ItS rnvestment adYlsory and other customers mdependently 01 any statements made m thiS or In any other Issue Furthellnformatlon on any seculliy mentioned herein IS available on reQuest

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Tabell’s Market Letter – February 21, 1986

Tabell’s Market Letter – February 21, 1986

Tabell's Market Letter - February 21, 1986
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – February 21, 1986 We devoted this space last week to a discussion of the uncanny similarity between the stock market's behavior over the past 3t years and its action during the early 1920's. We pointed out that the 19-month period August, 1921-Marcll, 1923 and the 15 months between August, 1982 and '-Novel11oer, '9.83 S1lW almost-;dentical5'TIses'in -the Dow-Jonesindustrial Average,.–eEach-ef-thesc ….,……..-1 rises was followed by an interval 16 months in 1923-1924 and 13 months inI983-1984, during which no new high was scored, the 1923 experience involving an 18.6 decline and the 1983-1984 instance producing a 15.6 drop. In both cases, these intervening mild corrections were followed by sur- prising and steady rises to new all-time,peaks. By February, 1926, an 87 rise from the October, 1923 low had been posted. As of this week, the Dow had advanced 55 from its bottom of July, 1984. We thus have two benchmark dates—August 24, 1921 and August 12, 1982,–61 years, almost to the day, apart. These dates were followed by long periods of market behavior exhibiting a sur- prising degree of similarity. What is also interesting is the similarity of the general economic environment on those two dates. An observer looking backward in 1921 would, as in 1982, have observed a quarter-century of rampant inflation having reached or just reaching its peak. He would also have seen an historic peak in interest rates scored a few months before. The following years, both in the 1920's and 1980's, would see interest rates drop sharply from those historic highs. In 1921, the Wholesale Price Index had peaked a year before, after rising 233 from 1896 to 1920. Between 1955 and 1981, the same Index had advanced 234. Consumer prices, likewise, rose in both periods, although it must be noted that the rise in the CPI in the years preceding 1982 was twice as great as that in the early part of this century. Despite the fact that the current inflation has been more severe, the price rises leading up to 1920 were probably just as alarming, having accelerated sharply in the latter stages of their advance. The seven years 1913-1920, before, during and after World War I, saw a doubling of consumer prices, something the recent economy has failed to duplicate in so short a time. In both eras, the stock market's rise was accompanied by a noticeable lessening of inflationary pressures, although that dimunition is a great deal more abrupt in the earlier period. Average consumer-price levels in 1921 were 10 lower than 1920, and the Wholesale Price Index declined an -1-I …asilt.uounding3J.Thereensued eigears..Qf..generally. stable to, decreasing prices.–1ntJle–p.r,-,en,-,t 1 case, we are aware, of course, that price inflation has continued after 1982, but at -i consTderably more moderate rate. However, by 1985, the Producer Price Index actually showed a mild year-to- year decline, a trend which is likely to continue in 1986. The levels of interest rates in 1920 and in 1981 were very different, but the historic patterns, although differing in extent, were quite similar. Long-term Government bond yields averaged 5.32 in 1920, and Treasury Bills returned 5.42. The corresponding figures in 1981 were 12.87 and 14.08. In both cases, however, interest rates were at cyclical peaks. After falling steadily from the Civil War to 1900, long rates had almost doubled between the turn of the century and 1921. They then fell steadily through the late 1940's, and the rise through 1981 constituted the peak of a 35-year cycle. The rising stock markets that occurred in both instances were accompanied by sharply falling interest rates. Between 1920 and 1926, yields on long Governments dropped by 40, and Treasury Bill yields were almost cut in half between 1920 and 1924. Currently, long bond yields have dropped some 30 from their 1981 average, and T-Bill yields are just about half of what they averaged five years ago. In addition to the behavior of inflation and interest rates, other similarities between the two economic environments can be noted. The bull market that started in 1982 has been characterized as a flight of capital from real assets to financial assets, as these assets, both stocks and bonds, began to offer superior returns in a relatively non-inflationary environment, and tangibles which, in the 1970's, had not only kept pace with inflation but left it far behind, became obviously fully priced. The Florida land boom, the lunatic fringe of the real-estate market during the 1920's, began its collapse in 1925, four years into the bull market in stocks and bonds. Not dissimilarly, vacant office buildings are a current feature of many American cities, and the trauma produced by the current adjustment of farmland prices to reality is well known. This has all been taking place, as it did sixty years ago, as the stock and bond markets moved steadily upward. It-is necessary to repeat at this point Qur-caveat of;last week,;-,.- We have been engaged;-here, — in historical analysis, not In prediction. If we are to pursue our historical analogy all the way, we find ourselves currently at a point in time analogous to late 1925 or early 1926. There is nothing in the analogy to suggest that the unique events of 1926-1929 will be duplicated or that their after- math, the Great Depression of the 1930's, will be reproduced. We intend, however. to explore those years further in forthcoming letters and to suggest future pitfalls which the 1920s' experience sug- gests may lay ahead, pitfalls which—it is to be hoped, fortified by historical experience—we may avoid. AWT It Dow-Jones Industrial Average (1200 p.m.) 1686.35 S & P Composite (1200 p.m.) 209.33 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Cumulative Index (2/20/86) 2844.09 No statemenl Of Cllpresslon ot opinion or any other mailer herein contamed Is or IS to be deemed 10 be directly or mdlrectly, an oller or the soliCitation 01 an offer 10 buy or sell any secunty referred toor mentioned The matter IS presented merely for the convenlenceot Ihesubscrlber While we believe the sourcesol our mformahon to be reliable, we In no way represent or guarantee the accuracy thereat nor of the statements made herem Any action to be taken by the subscriber should be based on hiS own investigation and Information Oelafleld, Harvey, Tabelt Inc, as a corporation and Its officers or employees may now have, or may later ta1e, poslhons or trades In respect to any seculIUes mentioned In Ihls or any Iulure Issue, and such pOSition may be dllferent from any I'lews now or herealter e1pressed m thiS or any other Issue Detafletd Harvey Tabetl Inc which IS reglslered With the SEC as an ml'estment adVisor, may gll'e adl'lce 10 Its rnl'estmenl Bdl'lsory and other customers mdependently 01 any statements made In thtS or m any other Issue Further Information on any secUf!ty mentioned herein Is available on request

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Tabell’s Market Letter – February 28, 1986

Tabell’s Market Letter – February 28, 1986

Tabell's Market Letter - February 28, 1986
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 February 28, 1986 Our past two letters have focused on what we think are amazing parallels between the econo- mic and stock market environments of the early-middle 1920's and 1980's. We noted that, between . August-,-1921and February, 1926, the-Dow'iTones IndustrialAverage-rose-154,ifrom'63;90 to -162.31 The present market, since August, 1982. has, so far, moved ahead 118 from its low of 776.92. Both markets featured relatively mild but fairly lengthy mid-course interruptions, in 1923-1924 and 1983-1984. Both took place during similar economic environments in which the most conspicuous features were stable price levels following long periods of accelerating inflation and interest rates declining sharply from historic peaks. The post-1986 course of the stock market remains, of course, unknown, while its post-1926 behaviour is, unhappily, a matter of historical record. That record is all too well known, but we should like to devote this issue to examining some aspects of it as a preamble to future dIScussion of what today's similarity to the mid-twenties might be telling us. To begin with, the Dow had, as we noted above, by its February, 1926 high, advanced a bit more than it has to date. An exact duplication of 1921-1926 today would see the index around 2000, a figure, it should be noted, a great deal less spectacular than it seems, involving only an 18 advance from current levels. Following the February, 1926 high, 14 months of what can be described as mild consolidation ensued. The market suffered a sharp pullback in February-March but recovered nicely over the spring and summer, testing and slightly exceeding the February high in August-September. This test was followed by sideways to downward action through the spring of 1927. It is interesting that, based on the extent of the advance so far and the market's overall technical position, a similar scenario for 1986 is not at all implausable. The upside breakout was scored in April, 1927, and it is from this point that the start of the final chapter may be dated. There followed 29 months of advance with no gap of longer than a month between new highs. The Dow ultimately moved to almost two-and-a half tIme its February, 1926 high. An equivilent advance in the late 1980's would have the Dow somewhere between 4000 and 5000 toward the end of the decade. The culmination of all this was, of course, 1929. 1929. We have pronounced what must be considered the ultimate nasty word to those of us -Concern'ldw!thoOfimmctallmirkets. Theyear-;orCourse, poss-es'sescI,,-ep syiiibruicsig'nificance, yetf,-'-I as our readers know, we disagree rather strenuously with the mythology that its mention evokes in the minds of many investors. That mythology suggests that, at some point in 1929, probably on black Thursday, October 24th, a curtain was drawn over the past and all aspects of lIfe in America were immediately and instantaneously transformed, never to be the same again. Our own view is that the stock-market debacle, which lasted for ten weeks, is one phenomenon, a market collapse which certainly differs from a host of others in magnitude but not necessarily in nature. The thirteen years of depression which followed are, in reality, what evoke the shudders which mention of the year 1929 induce today. It is worth rememberingthat, when the Dow, after a 50 drop, reached 198.69 on November 13, 1929, it was still significantly above the high of the 1921-1926 advance we have been discussing. Furthermore, it recovered strongly from that point and, by April, 1930, had regained half of the spectacular loss. It is what happened after that, not the ten weeks of fireworks, that produced the lasting trauma. Between April, 1930 and 1932, the average sunk from just under 300 to 41. This sickening collapse took place, not with spectacular levels of trading, but with ever-decreasing volume, volume which, by the time the process ended two years later, was averaging a half million s hares a day. To the extent the financial world ended, it ended not, as the popular myth would have us believe in 1929 with a bang, but in 1932 with a whimper. What was worse, this dismal performance was eminently justified. As we all know, by 1933 GNP had been cut in half, unemployment was 25 percent, and corporate profits were negatIve. There was, moreover, after 10 years, little improvement. The second major cataclysm of the twentieth century, World War II, was required finally to usher in a new economic era. Our objection to the conventional symbolIsm of 1929, then, is the linkage between the short stock-market collapse of that year and the depression which characterized the 1930's. lI'e are certainly not claiming that the two events were unrelated, and there do indeed exist coimections between the manifestations of the more unattractive aspects of mass behavior of the late 1927-1929 financial markets and the disastrous decade which followed. The point is that it is the decade, not the ten weeks, that left the scars which are, even today, not entIrely healed. It is that experience which, with improved economic knowledge and tools, it is to be hoped the U. S. economy can avoid. ANTHONY W. T ABELL AWT jrh DELAFIELD, HARVEY, TAB ELL IN C. Dow-Jones Industrial Average (12 00 p. m. ) 1706.87 S & P Composite (1200 p.m.) 225.68 Cumulative Index (2/27J86) 2913.14 NO statement or cpre5Slon of opInion or any other matter herein contained IS or IS 10 be deemed to be, directly or Indirectly, an offer or the solicitation of an offer to buy or sell any security referred 10 or mentioned Themaller IS presented merely lor the convenience 01 the subscriber While we believe the sources of our information 10 be reliable, wem no way represent or guarantee the accuracy thereof nor althe statements made herem Any action to be taken by the subSCriber should be based on his own investigation and mlormatlon Delafield, Harvey, labell Inc, as a corporation and Its ollicers or employees, may now have, or may later take poSitions o' trades m respect 10 any securities mentioned In thiS or any future Issue, and such pOSItion may be dll1erent from any views now or herea!ter expressed In thiS or any other Issue Delafield Harvey Tabell Inc which IS registered With the SEC as an Investment adVisor, may gIVe adVice to .ts Investment adVISOry and other customers Independently 01 any statements made In this or In any other Issue Further information on any secunty men\loned herem IS available on request

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