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–. – -;rC;'7.-' ,. .c…,'.,. Wolsn.noffI110n &GOOd o'';''''''''' ..'/ , 1 ; /utJ7ten.c c;/cpn'&ed , J-I 1'- – , NEW YORK 5, N Y PHILADELPHIA 2, PA lOS ANGELES I J, CALIF. SAN FRANCISCO 4, CALIF , ';, 35 Wall Street , .' DIGlIY 4414) , ,If , 1420 Walnut Street PENNYPACKER 5-5977 550 South Spring Street MADISON '321 265 Montgomery Street SUTTER )1700 ,; TABELL'S MARKET LETTER ,' ' I . K tiThe old adage that sometimes one can't see the forest for the trees ;'also applies to security investment and speculation. Quite often one gets soZ engrossed in the near term movement of the averages or in the sudden rise or; fall of an isolated security that he loses sight, of the broad overall pat- ' , tern. Perhaps a review of my thoughts on the probable outlook for security';, , .' prices over the longer term based on my interpretation of technical market ;,, ;.',action and a discussion of the prudent policy to follow under such probable i ' ,circumstances, is in order. I, .' It has been my belief for a conSiderable period of time, and it is , '–still my belief, that we are in a long term war and postwar upward cycle in I '.prices similar to that of 1914 to 1929. I believe the advance started in 1942 '',from 95 in the DOW-Jones industrial average and is still headed upward. The ,. i,',aWdovraldn War I advance l ce started from as a ted for relative fif ly teen low years. Considering that th level of stock prices, and e present after ten ' I .Iyears of a low level of business and economic conditions, it appears reason. ',iable to expect that the present long term advance may last somewhat longer . than the 1914-1929 market. I project it forward to apprOXimately 1960-1962. i) ' ;It, also appears reasonable to expect that the 1929 high of 386 will be sub,t n(\stantially surpassed. An advance of only 48 from present levels would bring' 'the industrials to the 1929 highs. '.I does not appear to be an unreason- , able expectation over a period of1'rgFit years. OfnJ-( IS .c!tPi;().' j Quite obviously such an advance will not be in a straight TIne. Long ;,',term upward cycles of this nature usually consist of five phases. The firs ,-phase is a broad advance from a depression level with the entire market paJL. ;,'ticipating – investment stocks, secondary stocks, marginal stocks and als r-' ; . the very speculative issues. This phase occurred from 1942 to 1946 with an ;. , advance over 125 from 95 to 213. The second phase is a sharp correction ofc' t. the overspeculation. This occurred in late 1946 when the market dropped 25' in six months from 2131 to 16011, but with many overexploited speculative si..' , , tuations suffering declines of' from 60 to 80. After a long period of con-, ', !' solidation, the third phase started in June, 1949. The third phase generally is an advance more moderate than the first advancing phase. The better grade'' ; securities and special situations are featured while the lower grade stocks.. ;usually partiCipate to only a minor extent. ,This has beeyof the presep,l; '21Jf!1J'J,–; rise. The average has advanced '9 from 160 to the Septe5il high of f; but the leaders have been the better grade institutional type issues. (' j, There has been very little overspeculation with the possible exception of ,; ; the Canadian oil stocks and possibly some rather high grade overinvestment ;c.' r in excellent quality growth stocks that has forced prices up to twenty or ''. , . thirty times earnings and yields down to 2 to 3. The fourth phase is a i corrective phase of relatively moderate proportions in line with the rela- ; . . tively moderate previous advance. After a decline and a period of con'.–'J ,tion, the fifth and final phase begins. This phase usually lasts for a con- ' siderable period of time with. a heavy volume of trading and broad market par j;icipation similar to-but on a more moderate scale-the 1924 to 1929 period.';; – I believe we have either reached the end of the third phase at the ;,. ,'September high of 277 or we are very close to the high. The advance from the' , June, 1949 low has lasted for three years and we must now not only ask our-;''ll !selves the question how high can the market go from this level, but also v , the question how low can it golfo I can see the possibility (but not the prpll, ,ability)of 285-300 in the industrial average. That is slightly more than 10, above present levels. I can also see the possibility of a decline to 235 aniJ,. ; even the possibility of a decline to 200. That is slightly less than 13 in.; – the first case and slightly more than 25 in the second case 0 Obviously, the' ;,. odds are not as favorable as in 1948 when I envisioned a possible 50 ad- C ;; vance as To against a possible 10 drop. the longer term investor, this shOUld cause no particular co . ncer n 0' , i ' Holdings of sound, good quality dividend paying issues should be retained -' , (, particularly when bought at considerable lower price levels Holdings should;. ' be upgraded,however, with a good percentage of funds in defensive issues btt,1.' k';, a 100 invested position should be cates higher price levels and good maintained as the longer term trend indi;',. grade issues should continue dividend pay';' ments at approximately present rates. The individual concerned primarily wih ;' capital appreciation over a six months period rather than income,however, .' I. ' / I !!r'',;P, VQ..1…….'..r..c. '-l!,iLIe1'iill!jL'tLJlI!not 0 EDMYt.N.2I fW'I upon In orma Ion IIl1ev, a'J1rIb(IIiltmJa'sI.tI!!f!.,I!l)I.!.!.!1.E.!d.hlimd&h'ov!l'kUl&f.rso'lnq uy or sell materllt' rei ab II but not neceulflly complete, is not ;1UMlinteed any 1 securlttes From time to tim, Wahton, Hoffman & GoodWin may be..ltM,epreda'AtI,MM' Jldme05dttef of to Information on'l' It foredose independent IS btlsed inqulf). t952',I,;,, ',.';'.','' . ',',' .8c'GOODWIN .' '.,\jl!1,/VlUM9,r,;8,O) f''' . . ''WALS'l'ON;'lIOFF1I!AN Z Zrl'