Viewing Month: July 1989

Tabell’s Market Letter – July 07, 1989

Tabell’s Market Letter – July 07, 1989

Tabell's Market Letter - July 07, 1989
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'tILiilIBUE n.. n.. s LiilIRl 1E'tI n..1E'tI'tI1E1Rl 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEM8ER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 1609) 987-2300 July 7, 1989 1-1' We .tried,-Jastweek..-to-make–the point–that-historically i-the-process-of-top formaUen -generally –'—I–. requires a fair amount of time. Thus, we contended, even if the current market is beginning Buch a process, it should not be immediately vulnerable. 1987 J however, was an exception to this rule, and a major question is to what degree that experience is applicable today. We can illustrate the speed of the top formation two years ago by tracing, purely as an example, the price history of one stock, General Electric. 50 '10 10' The just eight weeks prior to the crash. The various patterns at right trace out the history of trading for GE as it developed over those fateful two months. The first five columns, leading to the stock's high at 66 are the same as the right-hand five columns on the chart above. Two 0,0 weeks after the high, on September 1, a small top had formed indicating a possible 58, only a couple of points below the then-current price. A week later, 50 on September 8, the downside objective of that top had been reached. Three and a half weeks passed, and (,,0 it seemed possible, despite rather serious signs of general market weakness, that a new base for General Electric might be forming. This was on Friday, 50 October 2, two weeks prior to the break. As the stock pulled back during the following week, the pattern began to look a bit more ominous. 40 However, it was not until Wednesday of the following week, October 14, that it became apparent that a serious top was completed. This was precisely three trading days before October 19. The stock, as indicated at bottom, plunged to a low of 40 on the morning of October 20, violating major support in the process. The final pattern shown is not from two years ago. It is the pattern that exists today, and the similarity to September, 1987 is obvious. The question, of course, is whether history is about to repeat itself. The- current two-point chart on GE at left shows, we think, how the patterns differ. General Electric's most recent rally represents a breakout from a protracted base ormation following the sharp 1987 correction rather than the end of a nine-year uncorrected rise. Support just under 50 is a great deal more formidable than was the case two years ago, and the ultimate upside objectives for the stock are much higher. It seems likely, In other words, that the GE chart should be interpreted conventionally—as having a minor top suggesting a decline into strong support where the stock would be a buy. This coincides with our present opinion on the general market ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) 2486.15 S & P 500 (1200) 322.20 Cumulative Index (7/6/89) 4631. 78 No statement or expressIOn of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or Indirectly, an offer or the soliCitatIOn of an offer 10 buy or sell any security referred to or menhoned The mailer IS presented merely for the convemence of the subscriber While we believe the sources 01 our Intormalloo to be retlable, we In no way represent or guarantee the accuracy thereof nor 01 the statements made herein Any acllOn to betaken by the subscriber should be based on hiS own Invesllgatlon and Information Delafield, Harvey, Tabell Inc, as a corporallon and tIs officers or employees, may now have, or may later take, posrtlons or trades In respecllo any secun\les mentIOned In \hIS or any future Issue, and such posrtlon may be different from any views now or hereafter expressed In thIS or any other Issue Delafield, Harvey, Tabel1lnc , which IS registered WIth the SEC as an Investment adVisor, may give adVIce to Its Investment adVISOry and other customers Independently of any statements made 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 14, 1989

Tabell’s Market Letter – July 14, 1989

Tabell's Market Letter - July 14, 1989
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, '1rIBHE IL.IL.'S IiUiI R CIE'1r IL.IEVVIER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 July 14, 1989 -I— -The-last 'two-issuesoftlfislet'terslfiii'ea-a-cdmmontheme,–Ifffilweoel(ourrdei's' ———I indulgence in allowing us to enlarge upon that theme in one more issue. The theme is the relevance of the 1987 market crash to the current market outlook. We do not think it quixotic to say that the market analyst's attitude toward the 1987 break should probably constitute the most important factor in determining how he views the stock market at this juncture. The point is—if only we can safely ignore the experience of two years ago—that there exists at the moment only one logical market posture and that is an unreservedly bullish one. We noted two weeks ago the fact that we are, in mid-July, 1989, lucky enough to know precisely i , ,, where we stand in market-cycle terms. On October 19, 1987, the Dow bottomed at 1738.74. Yesterday, it closed at 2538.31 without having seen any appreciable sort of correction in I , between. That, children, is called a bull market. We were in it at last night's close, and there is absolutely nothing that the market can do from here on out to change that fact. The bull market in question has, moreover, advanced precisely 45.99 over 21 months—438 trading days to be exact. Now. since bull markets, happily. are not a new phenomenon. having occurred regularly in the past, we are entitled to ask whether either of these figures is, in i,, I ! i , historical terms. excessive. There have been cycle upswings in the past which have topped out before they had risen as much as 46—a couple in recent history. The 1966-1968 advance was only 32 and that of I 1978-1981. 38. The vast majority of earlier bull markets, however, has exhibited rises far greater than the present one to date. Advances greater than 100 have not been uncommon, and increases in the 60-80 range have tended to be more or less the norm. The most elementary I I sort of historical analysis would suggest that the expectation that the market will equal or exceed the 1987 high on the current upswing is not any sort of off-the-wall opinion. It is I simply the normal expectation. 11 I–;–,SNg.!…….houlc!..-there, based on this kind of analysis. be anY-Kreat worry about the market's-,-1 -topping out any time soon. There have been only two bull markets since the 1930's which lasted less than 438 trading days. One was the baby bull market of 1938, whose very name implies its uniqueness. The other is 1982-1983, and this one is the subject of technical hairsplitting concerning it was In fact, a single bull cycle or part of a larger one. There have, it must be admitted, been major-cycle rises which peaked after not a great deal more than 438 trading days. 1974-1976 was 452 days long and 1966-1968, 518. On the other hand, the advance of 1957-1961 lasted over 1,000 trading days and that of 1942-1946, 1211. By these standards, we could still be sailing along into new high territory in 1991. The final point that we made two weeks ago was that, even if one chooses to take the view that we are at or close to a major peak, there should be no immediate cause for concern. Market tops, we tried to point out with historical statistics, generally are relatively slow to form and provide the assiduous analyst with some advance warning of an impending break. The market, we pointed out, once having made a high, generally tends to remain close to that high for what is often a fairly lengthy period of time. All the lessons of history, then, argue in favor of an aggressive attitude toward common stocks. All of the above would be true where it not for the experience of two years ago, which we tried to summarize last week by tracing the action of a single stock over a three-month period. We were, in August, 1987, in the throes of a bull market, superficially not unlike the present one. Only minor top formations were present. Within a few weeks, those tops had assumed major proportions, and, less than three months later, well over one-third of the total market value of U.S. equities had gone down the drain. Thus, the question of the relevance of 1987 for today. Could important tops be formed with such speed again There had, of course, been nothing precisely like August-October, 1987 for 58 years and, if such occurrences are that rare, we can undOUbtedly forget about them and focus on the Bort of market statistics-cited above. If, on ,the other hand, the crash means that a fundamental change in market structure has taken place, our attitude at the present time should be a great deal more cautious. We once likened investment policy in a bull market to driving a car at night. It is necessary to be vigilant in observing what may occur within range of the headlights and fruitless to fret over what lies beyond their range. Such is probably the proper attitude at the moment—possibly with a bit of extra vigilance inspired by the events of 21 months ago. Dow Jones Industrials (1200) S & P 500 (12 00) Cumulative Index (7/13/89) AWTebh 2521.05 330.01 4710.57 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. No statement or expression 01 opinion or any other matter herein contained IS, or IS to be deemed to be, dlrectlyor mdlrectly, an offer orthe solicrtallon of an offer to buyor sell any secunty referred to or mentioned The matter IS presented merely for the convenience of the subscnber While we beheve the sources of our information to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subSCriber should be based on hiS own Investigation and Information Delafield, Harvey, Tabelllnc, as a corporallon and liS oHlcers or employees, may now have, or may later take, posilions or trades In respect to any securllies mentioned In thiS or any future Issue, and such position may be different from any views now or hereafter 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 ItS mvestment adVISOry and other customers Independently 01 any slatements made 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 21, 1989

Tabell’s Market Letter – July 21, 1989

Tabell's Market Letter - July 21, 1989
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, eN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (6091987-2300 1 – – – – – – r.Tlll)lll11-nlarket 'con tinued;1it-'1east'th1'ough-ye-stel'da July 21, 1989 wltll-th,,-Do-w J clllesIhTI u s t r uf l – — – – — I Average breaching the 2600 barrIer and the S & P Composite attaining an all-time hIgh, before pulling back In program-related trading later in the afternoon. We have devoted the last three issues of this letter to an exposition of why this turn of events should not be all that surprising. We would like, this week, to examine a couple of other trends Which also continue unabated and Which antedate the 21-month-old bull market. The chart at left traces the ratio of Standard & Poor's Capital Goods Index to its Consumer Goods Index from 1968 to date. As the chart clearly shows, this ratio can be represented by a line WhICh has been heading due southeast since December, 1980. At that point, the Capital Goods Index was at 157.4 It has managed to eke out an advance to 281.3 this month, a 78 tise over an 8 1/2-year period. Over the same timespan, the advance in the Consumer Goods Index has been 341. There were a couple of short periods—the first year of the 1982 bull market and the tail end of the rise to August, 1987—durmg which capital goods issues briefly exhibited superior performance. In both cases the improvement fizzled out and most recently, since the end of 1988, the consumer measure has risen 23 while capital goods have barely a 10 advance. The ratio is The chart at rIght shows the Dow Jones Industrials and the NASDAQ Over-The-Counter Industrial Average together with, at bottom, the ratio of those two indicators. Like the Capital Goodsl Consumer Goods ratio, this one has been declining for some time, in this case since mid-1983. At that point, topping some five months before the Dow, the OTC Index embarked on a precipitous bear market whue the DJIA was undergoing a ..elatively mild correction. Throughout the entire 1984-1987 upswing, the performance of OTC issues was distinctly ij ! g M M inferior to that of the higher-grade issues in the Dow, and the same has been true from mid-1988 to date, the ratio now being at the lowest level since the 1987 bottom. We have thus, undergone a protracted period. one spanning two major market cycles. during which leadership has clearly centered on a specific area—consumer-oriented, high-grade, defensive issues. What is interesting is that there exists no current indication of an immediate change in this leadership taking place. Since major leadership shifts often take place during the transition between bull and bear markets, it is quite possible that those stocks …which…-have led the parade so far will continue to do so for the remainder oLthe – ' – upswing. ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL INC. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (7/20/89) 2580.61 333.89 4729.81 AWTebh No statement or expression of opInion or any other matter herem contained IS, or IS to be deemed to be, directly or Indirectly, an offer or the soliCitation of an offer to buy or sell any securrty referred to or mentioned The matter IS presented merely for the convenience of the subscriber While we believe the sources of our mformatlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any acllon to be taken by the subscriber should be based on hiS own Investigation and InformatIon Delafield, Harvey, Tabell Inc , as a corporation and lIs officers or employees, may now have, or may later take, positions or trades In respect to any secuntles mentioned In thiS or any future Issue, and such position may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabellinc , which IS registered with the SEC as an Investment adVisor, may give adVice to Its mvestment adVIsory and Dlher customers mdependenlty any statements made In thIS or many olher ISSue Further mforma\lon on any securrty menboned herem IS available on request

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Tabell’s Market Letter – July 28, 1989

Tabell’s Market Letter – July 28, 1989

Tabell's Market Letter - July 28, 1989
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,——————————————————————————————————— TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE. INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 1609) 987-2300 July 28, 1989 This week's action produced yet another burst of market strength, taking most major averages to – -new-bull-market highs.and-producing ,- inthe-process ,-an- alltime-closing–highfor the ,B&,.p500 The burden of this letter's argument over the past month has been that, from a technical' point of view, there is nothing historically unusual about the current market rally. Both in terms of percentage advance and of lapsed time, the marks for the pl'esent upswing have typically been exceeded in prior cycle bull markets, suggesting that there remains. currently, further room on the upside. The same suggestion is supported by basic fundamental valuation statistics. This point has, of course, been made elsewhere, but we think it is worthwhile to cite a few numbers and offer some notes on methodology. We will be using the S & P 500 as an example. Earnings and dividends for the twelve months ended June 30 on the 500 are not yet available, but reasonable estimates, based on three quarters of actual figures are 25.90 of earnings and 10.38 of dividends. At last night's close of 341.99, the 500, therefore, was selling at 13.2 times earmngs to yield 3.04. Note that this statement is based on trailing figures and, except for a single quarter, no estimates are involved. Date of High 5&P 5ubseq.Percent PIE 5&P Percent Yield S&p Percent 500 Low Decllne at Hlgh Equiv Dlff. at High Equiv Diff. Jan 5 53 26.66 22.71 -14.8 11.3 314 -7.6 5.29 212 -37.8 Aug 2 56 49.74 38.98 -21.6 13.9 386 13.6 3.44 325 -4.3 Dec 12 61 72.64 52.32 -28.0 23.8 661 94.5 2.70 414 21.9 Feb 9 66 94.06 73.20 -22.2 19.7 547 61.0 2.83 395 16.3 Nov 28 68 108.37 69.29 -36.1 19.1 531 56.1 2.80 400 17.5 Jan 11 73 120.24 62.28 -48.2 19.4 539 58.6 2.59 432 27.1 5ep 21 76 107.83 86.90 -19.4 13.0 361 6.3 3.49 321 -5.7 Nov 28 80 140.52 102.42 -27.1 9.6 267 -21.5 4.32 259 -23.8 I-I—l\-.'.U9S….s'1-3-3…7-7–2U-92-33-.s23….4—…6….S 0……….9.1-.3-0–;2 53 -4.42-.-.3.Q—–1-f In the table above. We present several figures for the last nine major bull-market highs in the S & P 500. The first four columns show the date of the high, the average at that high, the subsequent low and the percentage decline. The key figures are the price learnings ratio and the yield which existed at each of these market highs. Both of these statistics, to make them comparable with those cited above, are computed using trailing earnings and dividends—those for the quarter ended prior to the high. To the right of the columns for P IE and yield, we show the S & P equivalent. This figure represents a possible value for the first quarter of 1990, using S & P's estimates of 27.79 for 500-stock earnings in 1989 and the index's indicated annual dividend of 11.19. The equivalents show where the S & P would sell were these historical PIE ratios and yields to be duplicated. To the right of the equivalent is shown the percentage change to that price from the current one. The clear implication is that, based on earnings at least, the S III P composite is conservatively valued vis-a-vis past bull-market highs. Only two bull markets, 1953 and 1980, have ended with the 500 at a lower PIE. Were the average, before this advance is over, to trade at 19-23 times earnings, a level which characterized 1961-1973 market highs and was again reached in 1987, it could sell some 60-90 above today's price. When one looks at yield, the historical comparisons are till positive, albeit a little less optimistic. The so-called yield ceiling has been an effective cap for most bull markets. generally cutting off rises when dividend return for the S & P 500 has dropped significantly under 3. As the final column of the table shows, there is room for a modest further advance in price based on current dividend rates, but astronomically higher prices appear unlikely. DiVidends could, of course. rise well beyond 1989's indicated annual rate. Indeed, given the sharp rise in earnings since 1982, the current payout ratio, around 40. is at historically low levels, indeed the lowest it has been in sixty years with the exception of 8 brief period In 1979. There thus appears room for continued improvement in dividends despite a possible slowdown in earnings growth. In any case, just as technical comparisons do not suggest that the advance to date has been excessive. valuation analysIs indicates that. at present levels. the S &; P 500 remains relatively inexpensive. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) 2644.34 S & P 500 (1200) 341.85 Cumulative Index (7/27/89) 4773.78 AWTebh No statement Or expression of opInion or anyother malter herein contained IS, or IS to be deemed to be, directly or Indlreclly, an offer Of the solicrta1lOn of an offer to buy or sell any secUrity referred to or menlloned The matter 15 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 of Ihe statements made herein Any action to be taken by the subSCriber should be based on hiS own Investigation and mformatlon Delal!eld, Harvey, Tabelllnc, as a corporalion and rts officers or employees, may now have, or may later take, poSitions or trades In respect to any secuntles mentioned In thiS or any future ISsue, and such POSfllOTl may be different from any views now or hereafter ex-pressed In thiS or any other Issue Delafield, Harvey, Tabell Inc, which IS regIstered with the SEC as an Inveslmen! adVisor, may give adVice to Its Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further information on any secunly mentioned herein IS available on request

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