Viewing Month: August 1986

Tabell’s Market Letter – August 01, 1986

Tabell’s Market Letter – August 01, 1986

Tabell's Market Letter - August 01, 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 August I, 1986 1 – -'We-v01ced-!1i-Opiion 1astekth-atheDbw—was-pro)5abl.fl.n tRe process of fest1rig-lt- KpriI.'May — -'I – lows. and this week's action seemed to confirm that thesls. A spIke down to 1741.56, modestly below the May low. occured on Wednesday before the market rallied in the afternoon. The subsequent followthrough was unimpressIve, as has tended to be the case. Meanwhile. upside leadership continues to narrow. We noted last week that the best acting stocks, since the market began its decline early thIS month, have tended to be the disinflation-hedge issues. which have shown superior relative strength all year. However. in this group some stocks are beginning to peel off and correct quite sharply. as the follOWIng tables show. HIGH SINCE HIGH FO HIGH SINCE HIGH FO NAf'lE– 1gAT2IORP I/11B6 7/30/86 'CHANGE 15gg ;55 t NAME BEEsUALTY 1/1186 7/30/86 7.CHANGE igg g 8 AMERICAN ElECTJC PW AMERICAN HOME f'F.OD 30.00 29.63 -1,3 92.38 86.)8 -6.5 AHHAN50N HF CO AMERICAN CAflTAL liND 28.75 24.88 5,75 -10.4 !4.5 -!. ARCHER DANIELS I1II1LAN1 ASSOCIATED !IF.Y GOOls BALTiMORE GAS I EL BORDEN INC BRISTOL MYERS CO CPC INTEF.NATIONAL CAMPBELL SOUF CO CAF.TEF. HAWLEY HALE CENTF.AL I SOUTHWEST COCA COLA CO COMMONWEALTH EIIJSON CONAGRA INC. CON lISON CO Nf lNC DART I. AFT INC. DAYlON HU11SON CORP 20.25 66.63 36.25 51.00 86.50 74.00 66.50 38.50 34.75 44.8B 35.75 62.00 50.50 o5.BE' 58.50 19.13 60.00 34.75 46.2 76.88 68.2; 64.00 36.00 34.50 39.75 31.13 57.75 49.63 61.!5 46.25 -10.!i -9.9 -4.1 -9. -10 -1.8 -b.6 -6.5 -0.7 -11.4 -12.9 -6.1 -1.7 -7.0 -20.0 AMERICAN EXPRESS AMEF.ICAN GENEF.AL COF.F AMER INTERNATIONAL BANK BOSTON COF.P BANAHEF.ICA BANKM'IEF.ICAN F.EALlY INV BANKEF.S TF.UST NY COF.r BAF.NETT BNK Of rLA BENEFICIAL COF.F CIGNA CNA FINANCIAL CORF CAFITAL HOLVING COEf CHASE HANH(ITTAN COF.F CHEMICAL NEW YDF.t CHURES TF. 70.13 44.38 141.00 40.63 18.75 34.25 51.BB 60.3L ;S5 77.25 75.00 39.75 49.75 56.25 78.13 59.75 40.88 135.25 38.75 13.31 32.00 46.BB 56.00 48.25 61.!i0 56.75 33.00 38.75 44.50 71.63 -14.8 -7.1 -4.1 -4.6 -29.0 -6.6 -9.6 -7.2 -12 7 -20.4 -24. -14.8 -22.1 -20.9 -8,; DEHOIT EllISON CO 19.38 17.38 -10!' CITICORP 6.1. ,; 53 80 -15.!. DOHINION RESOUF.CES 49.S 47.88 -!.8 CONTIENTAL COF.F 55 00 44.38 -19.3 DUt-.E rOWEF. CO 49.50 48.50 -!.O EDWI'F.IIS G f. SONS 31.00 2'5.00 -19.4 FPL GROUf INC 35.75 34.75 -2.5 fINANCIAL COf\F MF.IC 17.25 8. -50.0 FElRAHI) DEPT STORE 89.75 82.75 -7.B rIf\ST ,OSTON COF.F 62.75 47.25 -24.7 GENEF.AL CINEh 59.00 45.!J0 -22.9 FIF.ST CHICAGO COF.P 34.88 29.50 -15,11 GENEf\AI. MIllS INC 89.00 86.75 -2. 1ST INTEF.STATE IlANCORr 67.38 61.50 -8.7 GERBER PRODUCTS CO ).63 42./5 -25.8 rIF.ST PlNNA COf 9.;-; 7.b3 -21.8 1-r—-Mo-C-OfP,—,…f;i55c–1'i!)7!!—'l!——l!I..,-mNbHn1—-;.c,rg-..-rg—2-,—— HOUSTON IND. KELLOGG CO. LILLY ELI f. CO 34.e8 58.75 83.50 34.88 54.00 76.88 0.0 -8.1 -7.1 GF.EAT WESTEN FIN JOHN HANCOC INC SEC HOUSEHOU' INT'l INC. 48.2 17.!5 117.00 44 00 16.7 42.13 -8.8 -2.9 -10.4 LIMITED INC. LOWEb HAY ltEfT STOF.ES MEF.CANTILE STORES LO MERGt-. 1 CO INC MIDDLE SOUTH UTIL NIAGARA MOHAWK FOWE NOF.THEF.tl STATES HIE OHIO HilSON CO PACIFIC GAS 1 ELEC PEPSICO INC PFIZER INC PHILADELPHIA ELECT PHIUF HOPRIS INC PILLSBURY CO PUB 5ERV INDIANA PUPLIC SERV E & G OUAKER OATS CO F.ALSTON fUF.INA CO REYNOLDS J INIS SARA LEE COF.F SCHERING FLOUGH INC SHITHLINE DECKMAN STHI\N CALIF EDISON SOUTHEF.N CO 34.25 41.0 44.11 117.00 10ll.8 14.38 25.50 38,00 20.75 2;.75 35,62 7.88 2!.88 76.88 82.38 13.50 44.25 84.7!i 77.00 55.13 7.1,6! 8B.00 105,38 35.88 26.13 30.63 30.00 36.50 106.50 106.00 13.00 23.00 38.00 20.00 2;,25 31,75 66,00 22.7 72.00 75.00 13.00 42.88 8!.00 71.2 2.7; 68.63 BJ,OO 9! 00 33,00 24.75 -10.6 -27,7 -17.3 -9.0 -0.4 -9.6 -9.8 D.O -2.6 -1.9 -10.4 -9.4 -0.; -b.3 -9,0 -3.7 -3.1 -3.2 -7.5 -4.3 -6.6 -5.7 -11.7 -!.4 -5.3 HUTTON E,F. 6f\OUF INHF.CAFITAL INC S!;'C INTEF.FIRSl Ol.F JEFFEF.50N FILOT COf LEHHAN CUF LINCOLN NATIONAL COF.F LOMAS & NETTLETON H!(, !1ANUFACTUF.CS HANO'JEF. HASS I1UTUAL INC INV Hf.LLON MEF.F.ILL LYNCH MONT60MEF.Y SH. INC SEC MONY MOf\lGAGE INVST HOF.GAN JF CO NCNfI t-IOl\THWE5T BANCOF.F FAINE WEflBEF. TES COMHEFCE BANt-. TF.ANSAHEI\lU. COhf' TF.AVEl.EF.S CORf' rfl-CONTINENTAL CORF U S FIG COF.FOATION USLIFE CORF WELLS FAf.GO HTG SAFEeO 44.13 !4.50 10.63 40.50 16.5 62.75 34.00 57.75 13.75 72,;0 43.3 23.13 9 88 90,,18 5.;( 40.50 44.75 28.88 40.13 !l,O 30.63 46 75 49.50 28 50 60.63 36.50 !3.88 5.18 .14.;0 15.7 ;3.8 32.13 44.25 12.38 ,9.15 34.00 22,13 0,50 87,88 48.25 38.;0 34.l3 17.5 35.13 4.-; JO.38 39.13 42.75 26 62 56.00 -17,3 -2.6 -491 -14.8 -3.1 -14.9 -5,; -23.4 -2.7 -17.' -!!.1 -4 .1 -J.8 -3.3 -13 1 -49 -!3.7 -40.3 -12.; -3.9 -0.8 -16,3 -13.6 '6.6 -76 SOUIBII COflP STERLING lI\UG INC SYNTEX 1'1.50 49.88 72.75 116.50 48.'0 67..' -4.1 -2,8 -7. ST PAUL AVERAGE 54.06 41.75 -!.8 -13,13 TEXAS UTILITIES CO TOYS-F.-US 3;.25 34.4! 33.25 31.88 -5.7 -7.4 UF'JOHN CO WAF.NEF.-LAHBERT CO 103.75 63.13 87.00 -16.1 58.88 -6.7 WRIGLEY j'l; JF. CO ZAYR CORr PRICE CO. 46.50 43.88 5S.71 43.75 36.00 40.50 -5.9 -17.9 -27.4 AVERAGE -8.0 The left-hand list above conSIsts of S & P 500 Issues m the Food. Drug. Retail. Tobacco and Electric Utility categories. showing theIr 1986 highs, their highs as of Wednesday, and the percentage change. The average-decline is 8 verses 6.8 for the S & P, relatively good performance since each stock is being measured against its yearly high. 33 of the 67 stocks have declined less than the S & P. However, Financial components of the 500. leaders through mId-summer. have shown considerably poorer recent action. The average decline for these stocks (brokerage issues are included). as shown by the right hand list. IS 13.8. Also only 19 of the 58 issues have performed better than the average. Clearly, It seems to us, thIS process of narrowing leadership must be reversed if current price levels are to be supported. AWTvfl Dow Jones Industrials S & P 500 Cumulative Index (July 31, 1986) 1777.56 236.62 3008.08 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL, INC. No statement or expression of opinion or any olhe' maIler tmrem contained IS or IS 10 be deemed 10 be directlY or mdlrectly an oller or tne sollc.tatlon of an oller to buy or sell any secunly referred 10 or mentioned The maller IS preented merely for tl'1o convenience of Ine SUbscriber While we beltee Ihe sources of our mformatlon to be reliable we In noway representor guarantee the accuracy hercol nor of !he statements made herem Any aCIlon to be taken by the subSCriber should be based on hiS own Investigation and mformal10n Delafield, Harvey, Tabell Inc, as a corporation and lIS officers or employees may now have, or may later take positions or \fades m respect to any seCUrities mentioned m thiS or anv future Issue, and such pOSI\lon may be different Irom a'ly views now or hereafter expressed m thiS Of any othellssue Delafteld Harvey Tabell Inc \,h.ch Is registered With Ihe SECas an mvestmenl adVisor may give advice to Its ,nvestment adVisory and olher customers mdependenHy 01 any slalements made rn thiS or In any other ISSue Further Information on any securrty mentioned herem IS available on request -.

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Tabell’s Market Letter – August 08, 1986

Tabell’s Market Letter – August 08, 1986

Tabell's Market Letter - August 08, 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) 9B7-2300 It would require a sublime stretch of the imagination to find anything particularly impressive in last week's stock market action. Essentially, it consisted of the market's grasping at a brand new straw—the machinations of the assorted Sheiks of Araby to prevent the price of 011 from faUing into the single-digit range. TheIr agreement to cooperate for two whole months had the market up some twenty pomts at midday Tuesday before it fell back. Wednesday's and Thursday's action demonstrated mild firmness but no particular follow-through. From the technician's pOint of view, the various averages did, indeed, spend the week engaging in some fairly important testing of prior lows, and they emerged from that test wlth a passing grade, although that grade would have to be a great deal closer to a C minus than an A plus. The two previous important closing lows on the Dow were 1735.51 on April 7th and 1758.18 on May 19th. The August 1st close of 1763.64 left those two prior lows intact. Intra-day, the May 19th bottom of 1746.53 has been penetrated twice, on July 30th and on August 4th, but in both cases rallies at the end of the day kept the closing figures intact. The S & P 500 has even managed to act a bit better than the Dow, not having posted a new low since July 15th, whiCh bottom also managed to remain above the April-May figures. This, undoubtedly, is due to that index's Utility component. The action of the S & P 400 has almost exactly paralleled that of the Dow and, indeed involved a modest new closIng low in mid-July. Meanwhile. the averages' third major component, the Transport issues, continued to Sink like a stone, with the DJTA posting a new intra-day bottom of 697.13 on Monday. This constitutes a fairly impressive 17.3 decline since March 31st. The saving grace here, however. may be that the most pessimistic downside objectives for that average's top are begInning to be run out. 670-655 is about the worst downside target that can be read. Breadth action additionally continues to be abysmal. Our breadth index is now down more than was the case in Novemb.!',…!183 , ..which drop presaged the 1983-84,correction andJulLIIlaoexceededits … decline of July-November 1985. one of the deepest declines ever later erased. The divergence from the April 21 breadth high has now lasted 76 days. Some modest grounds for optimism may be found in the following table, Which updates a study published in this space in early July. That study, based on trading through June 30th, three days before the DJIA high, tallied the number of stocks that had made highs in March, April, May – mid-June, and mid-June to the date of the stUdy. We updated the study this week to inclUde trading through August 1, and the results are of moderate interest. DATE OF HIGH NUMBER OF STOCKS 6/30 8/1 -DIF-F March April May I-June 13 June 16-Aug. 5 341 297 301 367 320 -21 247 -50 242 -59 490 123 EXTENT OF DE C LIN E 6/30 8/1 6/30-8/1 24.6 18.8 14.0 4.3 31.3 26.6 24.3 12.6 -8.8 -9.6 -12.0 -8.7 First of all, the number of stocks making highs in the March – June 13 period has dechned by 130, and the highs from June 16 – August 1 surpassed those of June 16 – June 30 by 123 (there were seVen delistings). 198 of the 490 stocks posting recent highs managed to do so after the Dow peak on July 2nd, and it is interesting to note that 93 of those 198 stocks were Utilities, including the vast majority of listed issues in the industry. At first glance, It would seem to be suggesting that market leadership has narrowed even further down to this single market sector. What is interesting. however. is the average decline shown by the four groups of issues on June 30th and then August 1st. The figures are not all that different, as the computed average July declines show. and indeed the declines for the first three groups are about the same. with the stocks that made highs early having declined less during July than those making later peaks. The stocks making recent highs are, as could be expected, an exception. The figures. it seems to us. have at least some suggestion in them of a rotating correction, one where some issues. at least. are close to completing their corrective phase. This could be an indication that the market might complete the corrective process it is now in by using up time, rather than demonstrating further violent action on the downside. This thesis could be confirmed if the lows mentioned above were able to hold. and the market were then. following this test, able to produce a fairly decent rally. AWTvf! Dow Jones Industrials S & P 500 Cumulative Index (August 7, 1986) 1785.71 237.42 3020.34 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL, INC. No stal0ment or expression of opInion or iJny other matter herem contained IS or IS \0 be deemed \0 be directly or indirectly an offer or the soliCitation 01 an offer to buy or sell any security mferred 1001 mentioned The matter IS presented merely tor the convenience o11hesubscnber Whlle …. e believethesDurces of our information 10 be reliable we Inno way represent or guarantee the accuracy therool nor 01 the statements made herem Any action to be taken by the subSCriber should be based on hiS own Investlgallon and Information Delafield, Harvey labell Inc. as a corporation and Its officers or employees, may now hae or may later tare positions or trades In respect 10 any securities mentioned In thiS or any future ISSue, and such pOSition may be dillerenl from any ICWS now or hereafter c,prCsscdlll Ihls or ilny other Isue Delafield Harvey TilbcU Inc whiCh IS registered With Ihe SEC as an Investmenl adVisor may give adlce to Its Investment adlsory and olher customers Independently of any slalements made In thiS or In any olher Issue FUrlher Information on any security mentioned herein IS available on request

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Tabell’s Market Letter – August 15, 1986

Tabell’s Market Letter – August 15, 1986

Tabell's Market Letter - August 15, 1986
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T I.ii.\liHEIL.IL.'S I.ii.\IRl l E T D..lETTIEIRl 600 ALEXANDER ROAD. PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE. INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC (609) 9872300 August 15, 1986 1–….,…-1 n…Jig h t-of–recent …mar..ket… ac.tion ,….it.lD.!l-ybe..w.qr.th whil….t9….Sum!!!e.-S-'!II!eof….the-.opJnions …exp r.essed—- in this lett-er in the'past'four moflths'-' .-.- – . . – – .- -.. . On May 23rd, we first noted the deceleration in the astounding rise, which, at that point, had taken the Dow from 1300 to 1850 over an eight-month period. We also noted, the two benchmark peaks that had, by then, formed, the first in early March, and the second in mid-April. We noted that this configuration possessed at least the potential of being a top formation with an ultimate downside objective in the low 1600' s. (It has since, of course. broadened.) Two weeks later, on June 6th. we asserted that the market seemed, on an intermediate-term basis, to have reached an overbought position. The following week. on June 13th, we noted the achievement of yet a third benchmark high in most averages, around the end of May, and, in a fairly detailed discussion of major market in'dicators, pointed out, some of the divergences that were, by then, beginning to develop. We pointed out the poor relative action of the Transportation issues, creating a classic Dow-Theory divergence, and noted that breadth indices had peaked in mid-April and subsequently declined Sharply. By that time, we suggested, it was possible to date the sea-change in market behavior with some degree of precision, the transition having taken place on March 27th, when almost all major averages peaked simultaneously, the high in the case of the Dow having been 1849.74. On July 3rd, which happened to be the day after the Dow made its all-time high, we presented a statistical study noting the narrowing of leadership and suggested that the strength of the averages was masking what appeared to be considerable weakness on the part of individual stocks. The following Monday produced the now-famous 62-point Dow decline in response to predictions with which, in light of the top that had by then formed, we could not find ourselves in serious disagreement. We did, however, at that time, pOint out the fact that shorter-term objectives seemed to be centered around the 1770-1760 area. Also, in the following week's issue, we indicated that the free-fall phase of bear markets seldom occurs immediately after the high is reached. We noted that in 1 – —-sevenofl.-the–ten….cycte–bearma-rket5-since-'-t946 that, following the initial decline, the liiarket-L——-I subsequently returned to within 2 of its previous high within periods ranging from 2 to 14 months. Last week, while reporting the continued long-term deterioration, we cited as yet another mitigating factor some evidence of rotation of leadership on the downside and also pointed out that the two major previous benchmark lows of early April and mid-May were, for the time being at least, successfully tested. As we now know, the Dow reached a low, on August, 1st, of 1763.64 and rallied, in a space of just under two months, to Thursday's close of 1844.91, within 3.3 of the July 2nd high. Now we are not, in all honesty. engaging in the above recital to prove that. in some form or another, we were right on the market. We hope that, in 30 years of market commentary. we have developed the humility which goes with all too often having been absolutely and gloriously wrong. The point we are trying to make is that, over the past 5 months, evidence concerning a plausable market forecast and a resultant appropriate investment policy has gradually been accumulating. What we want to emphasize is that nothing to contradict that chain of evidence has emerged. By the highs of the middle of the week, most averages had reached the upside objectives of the tiny bases the short period since mid-July had allowed them to form. Further basing may indeed take place, and we would not even be surprised by the posting of new highs in some of the major averages, although we would not expect the existing breadth divergence to be erased. We cited last week the evidence for rotating downside leadership rather than the concurrent collapse in many stocks which would produce serious weakness in the averages. In other words, it seems to us, the most optimistic scenario that can be foreseen is that the market might spend some time behaving pretty much the way it has since March, at the high for which month. let it be remembered, the DJIA was about five points away from yesterday's closing figure. Meanwhile the downside potential, if the process that has been going on since last Spring is indeed a distributional top. is a wee bit on the scary side. Formulating investment policy has always been, it seems to us. a matter of weighing risk against reward and we continue, at the moment, to have the feeling that the former is somewhat greater. This Tuesday. as th-e New York Times this morning noted. an anniversary took place–the fOUrth anniversary of the 1982 market bottom–which means that we have seen four extremely rewarding years. Certainly the sort of corrective process which would set the stage for a similar period ought not to be unwelcome. nor should a policy of conserving resources for that future bull market be inappropriate at this time. AWTvf1 Dow Jones Industrials 1846.03 S & P 500 246.14 Cumulative Index (August 14, 1986) 3121. 26 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL, INC. NO slat(lment or expression ot OpiniOn or ar'ly other matler herem contained IS or IS to be deemed to be directly or indirectly, an offer or Ihe sohcltatlor'l of an offer to buy or sell any secunly referred toor mentioned The mailer IS presented merely for the conver'llenceofthe subSCflber While we believe the sources of our information to be rehable, we In noway represent or guarantee the accuracy thmeof nor olthe statements made herein Any action to be taken by the SUbscriber should be based on hiS own investigation and information Delafield, Harvey Tabell Inc, as a Corporation and Its 011 Ice,s Of emplovees may now have or may laler take poSI\lons or trades In respect \0 any securtlles mentioned In thiS or any future Issue, and such position may be different hom any 'Ilews now OJ heleafier (lxpressed In this or any other Issue Delafield Harv(lv Tabell Inc which IS registered With the SEC as an Investment adVisor, may give advice to I\S Investment adVisory and oth(ll customers Independently 01 any statements made In thiS or In any other Issue Further information on anv secuflty mer'ltloned herein IS available on request

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Tabell’s Market Letter – August 22, 1986

Tabell’s Market Letter – August 22, 1986

Tabell's Market Letter - August 22, 1986
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11& ISUE n..n… s Iil1iI&RMIEII n..1EIIIIIER 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – August 22. 1986 Just about the entire media industry has spent the last week or so bombarding its readers hlp with analysis and commentary on the tax reform bill. We are, nonetheless. in our modest-circulation sheet. not embarrassed…..tothrow JrL.9J!..owntwo-cnts \!rt,spcia11y-'jnce !ax polic. and financial market-,s'-. ,I are not unrelated.' Herewith, then. a few comments… — — …. -… .. – .. – -…. .. – It will, first of all, not surprise our readers to know that we agree with the multitudes of our peers who assess the bill 85 one of the most important and far-reaching pieces of legislation to come along In years. One reason and one reason only. is necessary to compel us to that assessment—Iower margmal tax rates—the magic 28. The purists who carp about the effect. equality or logic of this or that feature totally fail, it seems to us to appreciate the importance of the single essential one. Having been life-long commentators on markets, we perforce admire them and cannot help but applaud legIslation which, by allowing each and every American citIzen his own control over the deployment of at least 72 cents of each dollar he earns, returns a huge dose of major economic decision-making to the market place. The retreat from the use of the tax code for economic and social engineering, is, in our view, to be applauded. the major recent results of such attempts having been, as far as we can see. capped oil wells. vacant office buildmgs. and bankrupt farmers. Even the most apparently successful of these tax-manipulation attempts, the 40-year effort to encourage owner-occupied, single-family housing. so politically sacrosanct that it had to be left in the new tax code, is beginning to show a few warts, it having come to the attention of numerous observers that a new generation finds itself unable to afford housing equal to that obtainable by their parents at the same age. Nonetheless, the new bill takes a long step in returning taxation to what should properly be Its single function–revenue raising. Having gotten the above off our chest, we can now return to the specific area we are supposed to know somethmg about and look at those provisions of the new code which specifICally affect the stock market. The first and most obvious of these is caPItal gains, and the purists referred to above are, of course, bemoaning the rise in the rate from 20 to 28. A simple-minded comment on this is that. in our 32 years in the business, we have been subject during most of them to a capital gams rate in the general area of 28 and occaSionally higher. We seem to remember. during those years, some pretty 1I good stock markets. It.is suggested in- various quarters that venture capital will imme(jiately disappear and entrepreneurship cease to eXIst. Bemg personatIy acquaInted wIth a few venture capitalists. we are skeptical of this arguement. Not surprisingly, these gentlemen would prefer to see their profits taxed at 20 (they would prefer 0 even more). but they are, by and large, simply attuned to assuming unusual risk in order to obtain unusual reward. We doubt that they mtend immedIately to transmogrify themselves into investors in government bonds. Our own purist's view IS, of course, that capital gams should not be taxed at all. but the problem WIth tax law has always been in defining precisely what constitutes capital gain. It has never been enough to say simply that it is the profit arising from the purchase of an asset at one price and its sale at another price. Such a transaction involving a can of soup by the A &; P has never been regarded as anything but mcome. On the other hand. retention of a financial asset for a protracted period of time has always been thought to be a different breed of cat, for reasons that can be discussed at length. American law has always emphasized a compromISe. the length of time held, as the criterion for duferentiating between capital gams and income, that length most often having been six months. although we recently underwent a short experiment with one year. It is one of those principals that has lasted a long time because it has, more or less, worked, but we would be reluctant to try to contruct a phllosophical arguement for it. In any case. one of the most signifIcant features of the new law is that the time test is going away. Capital gains are synonomous WIth income for holdmg periods rangmg from 30 seconds to inflmty. This will, we think, have some interesting effects. one of which will be more active trading startmg in 1988, an mcrease WhICh will. however. be mitigated by the large entent to which current stock holdings (i. e. pension fund positions) are not taxable in the first place. Short-term, as many analysts have pointed-out, we should see 8 pressure to take profits before the end of 1986. The other major aspect affecting the stock market. of course. is the corporate tax which. overall. will be mcreased to pay for the cuts that the majority of voters will be receiving. We cannot. however, view this WIth alarm. The corporate tax had. in recent years. become an incredible melange, largely due to additional social engineering attempts based on the thought that-the -useful life of an — asset could be legislated. The result was a huge list of major companies paying little or no tax at all made this ObVIOUS. On the other hand. a uniformly-applied 34 tax may make economic sense. The conventIonal wisdom has long bemoaned the low rate of U.S. saVIngs. Many stUdies have suggested that the corporate tax eventUally becomes, in large part, a pass-through and. thus. a consumption tax. It could therefore. provide a savings stimulus more effective than the ones which notably have failed to date. In a political environment. the new law was obviously forced to make trade-offs for the ultimate goal of lower marginal rates. In our view these trade-offs were eminently worth the result. AWTvfl ANTHONY W. TAB ELL DELAFIELD. HARVEY. TABELL. INC. Dow Jones Industrials 1880.76 S & P 500 250.40 CumulatIve Index (August 21. 1986) 3135.62 No statement or eypreSSlon ot Opinion or any other mailer herein contained IS or Is to be deemed to be directly or Indirectly an otfer or the solicllatlon of an offer to buyor sell any security relerred lOOt mentioned The matter IS presented merely lor Ihe convenlonce ollhosubsctlber Whlle ….e believe Ihe sources of our tnformallon 10 be reliable, we In noway represent or guarantee the accuracy thereal no\ 01 the slatements made herein Any action to be taken by tho subscriber should be based on hiS own In..esllgallon and tnformatlon Delafield Harvey, Tabell Inc, as a corporation and liS olflcers or employees may now Ilaye or may lalOr take posljlons or trades In respcct to any securities men\loned In thiS or any future Issue, and such pOSition may be dillcrcnllrom any views nowor Ilelcaller eyprcssed tn 11115 or any other Issue Delafield Har.ey labell Inc whiCh IS registered With the SEC as an Investment adVisor mav give adVICe 10 tis Investment advlsorv and other customers Independently 01 any stalomenls made In thl5 or In any other Issue Further mforma\!on on any security mentioned l1ereln IS avallabte on reQuest

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Tabell’s Market Letter – August 29, 1986

Tabell’s Market Letter – August 29, 1986

Tabell's Market Letter - August 29, 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 August 29, 1986 Two weeks ago in this space, we summarized our view of market developments as they had unfolded since last March. That view was not an optimistic one. We noted that the Dow. since reaching a high of-1821 nonlI1arc.tr-7th–hll'!l'SiIDsequel1tTIipOstedt1iree sligfitl'y'liignerSnort, term ,peakS'7 oni\ priI — 21st, June 6th. and. finally. on July 2nd at 1909.03. We pointed out, however. that these five months of mild upward bias in the major indices had been accompanied by a steady narrowing of leaderhsip with Significantly fewer stocks partIcipating in the market strength as time went on. We presented, we admit, little evidence for the positive view. We noted that the lows of early April and mid-May had been successfully tested. but we felt that most averages were, at that time, approaching short-term upside objectives. In the subsequent two weeks, however. further market strength has indeed emerged. The Dow has progressed to within a hairsbreadth of new high ground, and the Standard and Poor's 500 has actually moved. by an equally miniscule margin, above its July-2nd high. As we attempt to show in the chart below, however, it is difficult to find, in this strength, any great evidence of underlying market improvement. 00 JONeS INDUSTRIRL RvERRGE f rtfrfrtf frtfftfrtlfrflffrLrffffrflffl flf rfrtlftftfrff 'rlfftr lffrfrrrffllfrrri flfffrtffrflfftftfft JEn At the moment, as the chart indicates, we now have the third consecutive occasion since April of a peak in the average remaining unconfirmed by an equivalent peak in our daily breadth index. When we look, for example, at another measure of market leadership, the 10-day average of the difference between new highs and lows. we find that it has steadily deteriorated since March 27th. (The peak. indeed, was in February at 315.) It has, in the past couple of days, -by a miniscule amount but still remains well below its level of April. managed . to exceed its July peak . – — — 'T – -.-…;;… — Now this, of course. is only the picture at the moment. Breadth. and a host of other indicators showing deterioration, could. in future trading sessions. repair themselves, and we would then have to reassess the upside possibilities. Unfortunately. an analysis of individual patterns does not suggest that these possibilities are all that great. The former market leaders. disinflation-hedge issues, indeed could test their former highs but have. by and large, reached long-term objectives. Meanwhile energy issues appear to be the only large group of stocks that are in a position to provide a SignIficant new upside vanguard, and this possibility is by no means certain. While we do not rule out the continuation of modest short-term strength. we think that time, and an accumulation of evidence of internal broadening will be required to before that strength could attain major proportions. AWTvfl Dow Jones Industrials 1905,23 S & P 500 253,78 Cumulative Index (August 28, 1986) 3169,18 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL, INC. No statement or expression 01 opinion or any other malter herem contamed IS or IS\O be deemed to be directly Of Indirectly an offeror the soliCitation of an offer to buy or sell any secufltyreferred toor mentioned lhfol matter IS presented merely for the convenlenceol the subscriber While we beheve Ihe sources of our information to be reliable we In no way represent or guaranteo Ihe accu'acy Ihclco! nOl 01 the sJaJOmenls made helem Any aClron 10 be lalolen by the SubSCflber should be based 011 hIS own mveshgallon and mlorma/ion DeJa/lelc!, HaIVey, label) Inc, as a corporation and Its ollicers or employees may now have or may Jatot lake POSitionS or trades In resPect to any secufltles menltoned In thiS or any future rssue, and such POSition may be dlfferenllrom any views now or hereafter expressed In thiS or any olher Issue Delafield Harvey labell Inc which IS registered With the SEC as an Investment adVisor, may give advice 10 liS Investment adVisory and other customers Independently of any staloments made In this or In any other Issue Further Information on any security mentioned herein IS available on request

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