Tabell’s Market Letter – May 11, 1951

, –,-, a l s t O l l . H o f f r n a l l Goodwlon!.J',-',;I;b'''4l'i,I\'Ii.,.,lr''l'j'l' ,,'.,-r-',-, ri1; ' .l l,T, '. 'c.'.. &'&J4;t.e-;d o/eo 'c.''-.''..'''' ,''',–,-', '-'C,'-'–'I','',,,,(2-/-'.., J , I.' fi'1;i NEW YORK 5, N, y, PHILADELPHIA 2, PA LOS ANGELES 13, CALIF, SAN FRANCISCO 4, CALIF, f tiVJ, W;; 35 Wall Street DIGBY 44141 1420 Walnut Street PENNYPACKER 5S977 550 South Spring Street MADISON '232 265 Montgomery Street SUTTER 12700 f!J!. v TABELL'S MARKET LEnER 0 t\'i 8I,' itliff! o;;,;,', This weekend I am leaving on a four-week trip to visit the Calif1'i ;'' ornia, Oregon and Washington offices of my firm. During that period, my e,' q letter will continue to be issued although it will be written on the West iifi. I,ICoast . ;j, Virc';; op i n It . ht be appropriate at this time to restate my general marketi;', I i For the longer term my thoughts have changed but little from my I' I; orecast of 1948. At that time, I stated that the stock market appeared to ;5 i;,; be in a long uptrend similar to the war and post-war period of 1914 to 1929'-; r' The present uptrend started in 1942 and, if the same time span were used, fit, ', would continue to 1957. Such long term moves obviously have their inter- '! , ruptions. Usually they consist of five phases – three of advance and two t, fi'';. of decline. The first phase was the advance from 95 L1 the Dow-Jones in- p',If dustrials in June 1942 to 213 in May 1946. The next phase was the decline r,' from 213 to 160. This low point was tested each year from 1946 to 1949 , ,;. In my 1948 forecast I expressed the opinion that the next advancing phase ;; (; w0uld carry from a low of 160 to about the 250 level with 5 leeway either ;, ti side. The advance would be followed by a decline to about the 200 leveL ,c J, After that, tnere would' be the final dynamic advance phase that would carrI.; ,;; the average well above the 1929 high of 386 to probably 450 or higher. I;;; seet,';,;J no reason to change the broad outllne of this patter1. '-1';C ;; l'tHLPLeDt aQ,;l1ill.j,so,iU-lIlY-2pJ,,lIliQJ;;,,near.,ingitsendc.Whetl1ec; 1 ;'\ / ti) wut hnhegerteihdneidcr tuatshbter-i'Iraeal'siaTnwas piwllriTmlaf'lrnladylrT-sys.o!mgsole1mw1eXhwalht.2'aBa'tb-olallvc5te9ivs,elafi'sl;t.ie;wFee,JekthiIeSPiar0t.noYgphti-ogefrhm2'6o-1ftt-.rglfOeJ-f.l,lo.i2ri3iss l Ct, ';!;''ii on,ed,–ll),-lll(()Ri, the markeis, only.n…E!ieearlY3tagesofform- ln a dJs.1L-r,i'!111tlR!aU0jl,.rCr5ayrequire conlderbletimeMandl!ide , ,fYuctuations in a broad twenty-flve-point'range in the.. industrialav,erage r; bore-TnetQJlJ-compieted,–The downside-GilpEcat1Oris of such a pattern h,i ; it! I!;, ; are not-predictable until the formation is more complete but, in my opinio., ,', the decline will be relatively mild as compared with the 1946 or 1937 de- ;'.; I cline, both as to price and as to time. The 1942-1946 advance lasted four ( -' years and was 123. The 1949-1951 market has advanced 67 in a two-year (,' ,; period. The next decline will most likely be about in the same ratio \';;1e;-, -' compared to the 1946 decline of 25. That would mean a decline of about ;, , 15 or 20, or about forty or fifty pOints to approximately 225-215, Of K ,', course, a broadening of the top may occur later but that appears to be all (7 ' that r but, is indicated at the moment. The duration of such a move is guessHork as a guess, I would say it would occupy a time period of six months f/ , ' to a year. ;' , ' This does not mean that all securities will decline 15. Many, ', stocks have had little price advance during the past two years and are not ', ;' overbought. Their decline would be comparatively moderate. There are other i.,' 'I issnes that could even advance moderately during such a period of re-ad- ,' ',' justment. The most vulnerable issues would be those that have advanced iI ;;; sharply from the 1949 lows and are in need of consclidation and re-accumu- ;',,- ,' lation at Imler levels. 'c\ 't'o the longer term investor such a decline as ewisaged should ' ;' be of no great significance and hardly warrants disturbing sound holdingc. l' ,'; New funds, however, should be invested only in defensive-type issues. For ;;/, those interested in intermediate term capital gains of six months or so, ,\CI ;'';, the pattern has much greater significance. While some tssues may work ; ,( ', temporarily higher, it would appear that most will be lower six months ', ,, from now and, therefore, the greater part of funds should be liquid await- ' J ing buying opportunities. For the short term tradel', it would appear that , . the market is no longer a one-way street and a great 6eal more caution is , ;,'c, necessary ..\ /,,' ,,1',' ,',i; May 11, 1951 EDMUND W. TABELL WALSTON, HOFFMAN & GOODWIN , Closing Averages Dow-Jones Industrials Doy/-Jones Rails -. ,, ' ' .7' Thh mlmot.lldum is not to b. conshUld III an offlr or solIcitation of offlrs to buy or sell any Slcur,tiu from tlml to time Walston. Hoffman & Goodwin may havi .n Inflrut j sam. or all of the slcuritils mlntlOld hlrlin Thl foreqoinq materIal h.ll been preparld by us as a matter of informaholl only It is basld , ', upon information belllvid rillabil but of IIlcessarily compllte. is not ;ua,anteed .!IS accur..t. or filial, and is IIOt i'ellded to foreclose Indlpendlnt inqUiry , , '!';'-'! ;'\,,'J((I) ;K-';,',; -;t,,, , ,N ,. -,', , ', , –' ''–,,' ;-; '' – ,' – ,' , -;.- ','.,, ' ,-' i'- ',;'-