Viewing Month: February 1992

Tabell’s Market Letter – February 07, 1992

Tabell’s Market Letter – February 07, 1992

Tabell's Market Letter - February 07, 1992
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TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON. NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC 16091987-2300 February 7, 1992 At the start of major upswings, it is common to find oneself wondering whether stock prices are going to continue rising forever. Of course, they never do it is a farily obvious truism that the initial phase of any market rise is the most dynamic one, barely managed a new shining high on Tuesday of this week, and it was joined by everybodys favorite new indicator, the NASDAQ Composite. The S&P 500, however, has not managed a new high since it reached 420.77 back on January 15, and it was actually down all of 2.85 last Friday, at 408.79. On Tuesdays rally, it could do no better than recover less than half the ground lost. Breadth figures, likewise, have been les ebullient since mid-January. We noted at the time that the last seven trading days of 1991 each saw more than 1000 NYSE advancing issues. This particular threshold was in fact attained on 16 of the 23 trading days between December 12th and January 15th. Since then, over 16 trading days, there have been only two such occasions. The new high list has also become somewhat smaller in the current stage of the rally. The final two days of last year saw well over three hundred new 52-week highs being posted. This declined to 200 in mid-January, and Wednesday of this week produced only 151 new peaks. The size of the daily new-high table may be less interesting at this point than its composition. During the initial surge from the December lows, that list tended to be comprised of familiar and deservedly well-loved names. One got the impression that portfolio managers, awed by Mr. Greenspans Christmas present, felt the compulsion to be instantly invested and, pending a search for new names, simply utilized the old ones. Six examples of stocks that may have been the beneficiaries of this approach are shown in the table at right. For the most apart they reached their peaks in early to mid-January, decline by a minor but not insignificant amount and have since, much as has been the case with the S&P 500, recovered only a small part of their losses. Among the actual 151 occupants of the new peak list were a number of less-than-familiar names. There was, for example, Chrysler (perhaps as a Japan-bashing play), Goodyear, Maytag, and Bank of Boston, which would have been, just over a year ago, a candidate for the new-low rather than for the new-high list. Also present were a number of home building issues, apparently on the theory that the combination of cheap money and the Presidents new-found fondness for passive losses would prove irresistible. It is, from a technical point of view, still far too early to suggest tat any sort of permanent shift in market leadership has occurred. Many of last years institutional favorites have already broken out of small tops and reached their downside objectives. In the case of those that have not yet done so, the existing portential distribution areas do not, for the most part, suggest any more than minor corrections. once bitten, twice shy is a reasonably good aphorism to recall when considering these issues. At many times in their long advances, which, for most of them, span the entire decade of the 1980s, it has been tempting to suggest that they were relatively fully priced and that a change in leadership might be imminent. In each case, after a period of nothing worse than sideways action, they returned to their familiar position on the list of new highs. There exists no evidence at the moment that they will not once more do so. Of course, such a process does not go on forever. The sort of pattern exhibited by the consumer-growth stocks used to be called, as veterans of the 1950s and 1960s will remember, a stairstep pattern, a series of uptrends interspersed with lateral movements Many of the investment paragons of the day produced such charts. Only, of course, the names were different. At that time, the stocks being thought of as growth issues included Dow Chemical, International Paper, and Rohm and Haas. Later the growth tag got hung on the so-called nifty fifty, such as Avon Products, Eastman Kodak, and Xerox. Market patterns both change and remain the same. Meanwhile, as we noted above, one must recall, while the skyrocket phase of bull markets tends to be of short duration, such markets historically possess a long and rewarding life. Likewise, shifts in market leadership occur and will almost certainly occur again. There generally exists, however, plenty of time for those leadership shifts to manifest themselves. Anthony W. Tabell, CMT Delafield, Harvey, Tabell 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 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 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, Tabell Inc. as a corporation and its officers or employees, may now have, or may later take, positions or trades in respect to 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. Delafield, Harvey, Tabell Inc., 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. Stock; January High; Subsequent Low; Recent Coca Cola; 83 3/8; 71 1/8; 79 1/8 Home Depot ; 71 7/8; 60 3/4; 65 1/8 Johnson and Johnson 117 3/8; 102 1/4 ; 107 1/8 Merck ; 169 3/4 ; 149; 156 1/4 Philip Morris; 82 1/2 ; 75 ; 78 1/2 Wal-Mart Stores; 59 1/8 ; 53 3/4 ; 54 3/4

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Tabell’s Market Letter – February 14, 1992

Tabell’s Market Letter – February 14, 1992

Tabell's Market Letter - February 14, 1992
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TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 February 14, 1992 Almost two months into 1992, the continued stock market rally has, indeed, provided us with a dramatic start to the . new year. A start that has left those concerned with the severity of the recession, levels of interest rates, and the dollar decline on world currency markets wondering what has happened. It is certainly logical to expect this rally can continue. The results to date of the seasonal tendency of the stock market to stage a year-end rally would support this assumption. So far the advance of the DJIA from the December 10th low of 2863.82 has been an impressive 14.42, taking place in just 44 trading days, while the OTC lodustrials bas advanced an even more impressive 22.48 for the same period. The continuation of the extent of the advance into February coupled with the magnitude of the advance argues well for higher levels in the stock market for this year. Also, this being a presidential election year, the election-year pattern has demonstrated a mildly bullish tendency, with history suggesting tbe market rising in the second half of the presidential year. If the investor is willing to make the assumption that an ongoing bull market is in place, the performance of small stocks, from a technical point of view, should he an important element of this continued advance and is to be monitored closely. In order to show the improved relative action of small stocks verses large stocks we bave computed a ratio using as a proxy the OTC lodustrials and the S&P 500. The action of the two averages themselves is shown by tbe thick and thin lines at the bottom of the chart, while the upper line plots the ratio. The relative performance of small stocks verses large stocks should basically he viewed with a long-term perspective. As can be seen from the above chart using hindsight, one did significantly better owning small stocks from tbe 1974 low through mid-1983. From mid-1983 to late-1990 investing in the large issues which make up the S&P 500 bad been the place to be. However, since late-1990 the OTC IndustriallS&P 500 ratio in the upper part of the chart bas sbown a marked change technically, reflecting the positive relative strength in the OTC lodustrials issues (small) verses the S&P 500 issues (large). – This positive change has in fact become 1I!.0rep!,,l)ur.ed in recent months.1t is alsolhe…fullt—- —protracted period of time since mid-1983 thst the small stocks measured agalnst large stocks ha-;; -ciwly beeii the relative performance leaders. Because small stocks tend to display more stock market volatility in an up market than do large stocks it would not be unlikely for the improvement in the above ratio to continue. However, if we assume the cycle, that has kept the above ratio in a clearly defined downtrend since mid-1983, has been reversed in late-1990 (small stocks are acting relatively better than large stocks), it now becomes equally important to identify any deterioration in the small stock sector. As we know, conversely, volatility of small stocks in down market can decline more sharply. Dow Jones Industrials (1200) 3241.95 S&P 500 (1200) 412.45 Cumulative lodex (12/27/91) 7314.62 Robert J. Simpkins, Jr. Delafield, Harvey, Tabellloc. RJSaa 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 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 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, Tabell Inc. as a corporation and its officers or employees, may now have, or may later take, positions or trades in respect to 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. Delafield, Harvey, Tabell Inc., 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 – February 21, 1992

Tabell’s Market Letter – February 21, 1992

Tabell's Market Letter - February 21, 1992
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TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY OB5435209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 9872300 February 21, 1992 It is our custom to warn readers at the outset when the subject matter of thIS letter is about to turn somewhat —– csctenc.- ,V/e-are-duly a!..nouI!.ing-.-.-therefore,thttoday topicwill.;;,.bemil1t;tlrujanism. Those jntereste!i splely in 9! .. .- practical matters may aim this edition at the nearest wastebasket and return next week. . – . What prompts this excursion is a recent hospital stay which afforded us the opportunity to read the book which critics left and right are assuring us constitutes required reading for all intelligent Americans. That tome is The End of History and the lAst Man by Francis Fukuyama. (It replaces last year's similarly required reading, Alan Bloom's The Qosing of the Amencan Mind.) Mr. Fukuyama can be characterized as a secular millenarian, which means, quite simply, that he believes in progress. His time frame for that progress, however, exceeds in length even what those of us who comment on financial markets are accustomed to call the very long term. That time frame is, indeed, the entire span of human history. As his title implies, Fukuyama believes that history is not necessarily a permanent process but one which has been (and is) moving toward an end. That end is political and essentially consists of the emergence of classical liberal democracy as the societal organization for most, if not all, of the world's peoples. This argument is, to say the least, provocative and, rrl911 additionally, complex, based, as it is, on, among a number liberal Democracies Worldwide of other things, Hegelian dialectic. Occasionally, however, he treads on ground familiar to the market technician and Year Number uses trends and projections to prove his case. For example, 1790 3 we found the table at the right, taken from the book, to be persuasIve. It shows the number of democratic governments 1848 5 extant in the world in various years between 1790 (when 1900 13 there were only the United States, France and Switzerland) Oa;)d 1990This1s-the'end.that-FuJc.yamabelieves-history is-.- .1f-…1-'9…1.. ..9….,f-.2,-'5—lI''I' reaching. Now what is the world does all of this have to do with the stock market Well, perhaps more than a little. 1940 1960 13 36 The salient feature of Fukuyama's world view is a profound optimism. He takes his stance against current conventional thought in the book's very first sentence, which is, The 1975 1990 30 61 20th century, it is safe to say, has made all of us into deep historical pessimists. All of us, for the purpose of this exercise, can be taken to include market technicians, who are, when one thinks about it, occupationally committed to a pessimistic, or at least a cynical, world view. Our bible is Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds, which is, at bottom, the chronicle of repeated and inevitable human folly in lusting after a millennium. Our pitiful species has brought forth John Law, the South Sea Bubble, the Holland Tulip Bulb Mania, and the stock market of the 1920's. Much more seriously, it has, in the political arena, produced Naziism and Communism. History, the pessimist would offer, suggests no progress but repetitive aberrant behavior. In light of its current action, one can accuse the equity market of paying more attention to Fukuyama than Mackay. In its present optimism, it is willing to value existing equities at record levels in relation to earning power and, at the same time, voraciously devour just about every new issue that Wall Street is able to churn out. Our readers are aware of our view that the burning investment question of the day is whether that optimism can be justified. It is just conceivable that the rationale for such a justification may lie in Fukuyama's political scenario of emerging worldwide democracy. The major 'world event predicted by absolutely no one half a decade ago is the collapse of Communism. In many ways it seems we remain unable to come to grips with this phenomenon. What will a world without a cold war and where vast new markets hunger for the fruits of Western prosperity be like It may, indeed, be millennial. Whether this sort of optimism constitutes a partial justification for the market's being where It is is a question which the market analyst will need to address, employing, in the process, techniques a good deal more prosaic than Fukuyama's magisterial historical sweep. However, any justification for looking into the 21st century with unbridled optimism must be of more than passing interest to the stockmarket observer. ANTHONY W TABELL, CMT DELAFffiLD,HARVEY,TABELL Dow Jones Industrials (1200) 3281.53 Standard & Poor's 500 (1200) 413.07 Cumulative Index (2/21/92) 7350.31 AWT'aa 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 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 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, Tabell Inc. as a corporation and its officers or employees, may now have, or may later take, positions or trades in respect to 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. Delafield, Harvey, Tabell Inc., 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 – February 28, 1992

Tabell’s Market Letter – February 28, 1992

Tabell's Market Letter - February 28, 1992
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TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609 987-2300 February 28, 1992 iiiaWe co;trast..f iu letter last wthtimi.;';;d pessi;;;Wic view70numai\-n-ature-' The-former oelief iSthat learns from history, and, therefore, as time goes on, progress takes place. The less sanguine view of human character holds tht we simply go on repeating the same old mistakes. We have now reached the approximate 20th anniversa,, of one. of the financial community's monumental mistakes. This was the theory of one-decision, growth-stock investment, which saw Its heyday around 1972. On April 14, 1972, we selected in this letter six typical growth favorites of the Price Current Percent day, using them as examples of the market's Stock 4/14/72 Price Change tendency to project and discount future earnings growth. The six issues along with Avon Products. 124 48 -61 their two-decade-ago prices adjusted for stock splits, their current price, and approximate percentage change are shown in the table at Eastman Kodak IBM 54 45 -17 80 88 10 right. A number of points need to be made. The most crucial is that the six names were Polaroid Sears Roebuck 58 30 67 43 -26 -55 not selected today in order to prove a point. Xerox 145 79 -46 They were chosen 20 years ago on the grounds of their being archetypes of the favored institutional investment vehicles of the day, the flagship holdings for conventional conservatively managed portfolios We do not think anyone who recalls the early —1970'5 witl-q'UitiDlewllhour choice. (We are pertecfly\vilhng toi'djnir thiit7'a-nhe time. we mlgh(Have1h'Osen olher issuesoTCthe—'— same basis. for example a pharmaceutical stock such as Merck whose adjusted 1972 high was 16. However, we will go With the picks actuaJJy made at the time.) The end result, in any case, is that we have here six issues selected 20 years ago by the consensus view of the best and the brightest minds on Wall Street as the best available long-term investment opportunities. Over the intervening period, a great deal of water has passed under the bridge. The Gross National Product has increased fivefold. The market value of listed stocks on the New York Stock Exchange has risen from 791 billion to over 3400 billion. The total return for the average stock ha. hoen in the vicinity of II percent compounded annually, which, over 20 years, works Ollt to growth of 700 percent. The Dow lones Industrial Average has tripled Concurrently, of six issues universally thought to be most attractive by the investment management comtnunitY.,,fi,'e hove derlined ill price Ol'er 20 years, and the sixth (IBM) is essentially lmrlmnged Now first of all. we hasten to point out that we did not. in any way, suggest in April. 1972—almost one thousand issues of this leiter ago—that the six issues chosen were likely to decline in price Indeed. we pecifically refused to pronounce any salt or judgement on the investment merits of the six isc;ues involved. We did have a number of things to say. at Ih1t time and in a lalcl scrieo;; of lettcre;. ahout the one-decision thesis, and we intend to reiterate some of them Meanwhile. it IS worth asking olllselves What, specifically, went wrong The universal attribute of these companies, looked at from the vantage point of the early 1970's, was that they had demonstrated, over the pnor couple of decades, superior, consistent, and above-average earnings growth. IBM from 1955 to the laic 1960's had grown at a better-than-20-percent compounded rate. Xerox had. since 1955, increased its earnings by approximately 15,000 percent Moreover, the growth had, in most cases, been steady. The six stocks had never turned in a down year and very few down quarters All this was interrupted by the lecession of the early 1970's, when, for the first time, earnings dropped off somewhat. (In the case of IB!v1, they only flattened). However, and we think this is important, e.1mings growth once again resumed, and all six companies went on to earnings peaks in the early 1980's. It was at that point, a decade later, that rising EPS figures ceased, and the typical performance for the latest ten years has featured flat or falling earnings. The market, however, anticipated the companies' diminished prospects for the 1980's some eight years in advance. Why, at this point. are we recalling our observations of 20 years ago It is because) if one believes that we go on repeating the same old mistakes, it is worth asking whether today's professionals are or are not repeating the abysmal error of their predecessors–not with the same stocks, of course, but with a new set of names which has become as sacrosanct today as the six in question were two decades ago. We intend to explore this question in future letters Dow Jones Industrials (1200) Standard & Poor's 500 (1200) Cumulative Index (2/28/92) AWT.aa 3284.88 415.15 7391.37 ANTHONY W. TAIlEtL, CMT DELAFIELD, HARVEY, TABELL 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 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 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, Tabell Inc. as a corporation and its officers or employees, may now have, or may later take, positions or trades in respect to 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. Delafield, Harvey, Tabell Inc., 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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