Tabell’s Market Letter – July 26, 1991

TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY OB543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 — — -.-….- July 26, 1991 Monday, July 15 turned out to be one of the more interesting days in recent stock-market history. The morning's newspapers confirmed stories that had emerged the previous Friday afternoon indicating that the Mutual Benefit Life Insurance Co. was about to be seized by New Jersey state insurance regulators. That piece of intelligence was totally overshadowed, however, by the announcement that Chemical Banking Corp. and Manufacturers Hanover Corp. had agreed to merge. This produced a mini-bull-market in bank stocks. Manufacturers Hanover closed the day up 6 1/8 points for a 26.3 gain, and Chemical posted a 2 7/8-point, 12.1 rise. A passel of other bank stocks shot up by 10 or more on the theory that, the ball having begun rolling, they might be part of future mergers. As far as the general market was concerned. it was nothing more than a ho-hum day, typical of the sort of soporific action which has characterized the market since February. The Dow was up ten points. and 996 stocks advanced while 595 declined. Volume was some 20 million shares lower than it had been the previous Friday. We are citing this particular day as one which appears to be perfect example of the mood of the present equity market. The market paid no attention whatsoever to the Mutual Benefit fiasco and ignored the fact that the CHL-MHC merger was at least in part due to serious difficulties with problem loans on the books of both partners. It focused instead on the presumed operating savings to result from the consolidation which. it can be argued. are insignificant compared to the larger issues. Another. not unrelated example of the same sort of thing was cited by Wall Street's resident cynic. Alan Abelson, in the following week's Barron's. He poked a bit of fun at the recent trend in corporate fashion toward announcing large non-recurring writeoffs along with the reQorting ' or Iiivoratile operating resuits;-1te cited the example of-the -AT & T restrucfuringiblY – – amounting to 4 billion. the announcement of which sent the stock up a couple of points. What we are suggesting. of course, is that. despite the occasional pounding taken by companies with disappointing earnings, the market seems inClined, at the moment, to ignore bad news and, at the very least. put a favorable spin on events, the implications of which are, at the very least, mixed. The seizure of the nation's 18th largest health and life insurer might, it seems to us, have been at least the cause of some sober reflection, suggesting, as it does, that the ills of savings & loans and banks may have spread to a whole new area of the financial community, one without an FDIC or FSLlC in place. The market, however, has proved itself again and again to be totally unconcerned with weaknesses in the U.S's financial infrastructure. It believes that, having muddled through third-world loans, junk bonds, and collapsing real estate prices, we will continue to muddle through whatever the future holds in store for us. We are not necessarily being critical of this view. It may J indeed, be the correct one, for the market is seldom wrong. Few market commentators active today actually remember the 1930's, but many of us were taught by those who remembered them, and a total horror at the prospect of credit contraction was instilled in us in those long-ago classrooms. A pessimistic view of credit conditions, therefore, is hardly rare in the financial punditry emanating from oldsters like ourselves. The market, though, seems to be suggesting that we have indeed learned the lesson of the 1930's and that the upside of the current crisis is that insured deposits, for all their cost, have at least forestalled the kind of public panic which characterized the collapse of sixty years ago. Whether the market will prove to be right in this instance we do not pretend to know, and, as market technicians,.wearenot required to worry about it. We remain secure in the bellef that the market itself will give the first clue of any possible change in the high level of investor confidence which seems to permeate it today. ANTHONY W. TABELL DELAFIELD, HARVEY. TABELL INC. Dow Jones Industrials (1200) S & P 500 (12 00) Cumulative Index (7/25/91) 2975.85 381.28 6161.78 No statement or expression of opInion or any other matter herein contained IS, or IS 10 be deemed 10 be, directly or Indirectly, an oHer or the solicltal Ion of an oHer to buy or sell any security referred to or mentioned The matter IS presented merely for the convenience of the subscriber While we believe the sources of our Informalion to be re!lable, we In no way represent or guarantee the accuracy thereof nor 01 the statements made herein Any action to be taken by the subSCriber should be based on hiS own Investlgabon and mformatlon Delafield, Harvey, Tabel1lnc, as a corporation and lIs officers or employees, may now have, or may later take, poSlllons or trades In respect 10 any seCUrities 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 Delafletd, Harvey, Tabellinc , which IS registered With the SEC as an Investment adVisor, may give adVice to Its Investment adVISOry and other customers Independently 01 any statements made In thiS or In any other Issue Further 1n1ormatlon on any security mentioned herem IS available on request