Tabell’s Market Letter – November 29, 1968

W—a-l-sItnocn.-&-C–o-. Members NeW' York Stock Exchange and Other Principal Stock and Commodity Exchanges OVER 100 OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER November 29, 1968 FILe The persistent market strength continued most of last week with advances exceeding declines on all four trading days, and the Dow-Jones Industrials posting a net gain of 26.85 points on the week. The strength points up the peril of trying to be overly clever in calling short-term swings within the context of a major bull market. We confess ourselves as guilty as anyone else in this respect, having, over the past fortnight, delivered ourselves of the opinion that the market was overbought and that a correction from the 960 level might ensue. The market remains overbought and the correction will, undoubtedly, take place, but it will be from a higher level, and 960-950 now constitutes a support zone. . Thus the'fOlly' of swiIi'ming against the current – ' The week's market strength was particularly incomprehensible to many in light of the headlines in the daily papers. Money Crisis became, hands-down, the leading candidate for the cliche of the week and, since crises are, by definition, newsworthy, extensive front-page coverage was given to portentous speculation about devaluation of the franc or re valuation of the mark. Only the stock market refused to pay attention to the dire prophesyin and proceeded merrily along its upward path. It is arguable, at least, that the market's response was the most rational one. There is, unfortunately, a pejorative connotation to the word devaluation as if, somehow, in an instantaneous act, a currency was being stripped of its worth. Now the record of nations in maintaining the value of their currency has been a recorded history, and it will get no apology here. This, however, is; e referred to when the terms devaluation or re-valuation are used in . te tOnal money policy. It is, or should be, obvious that if months ago, mubcehdoevf alued in raising terms the pri e. indeed, be devaluing the doll ,i r or anything else – is to be de- –.!s or example, we heard, a few … . us devaluing the dollar. This would, but its effect on the average' citizen who had a moral. A change in lu a currency in relation to another currency, however, has a greater but ,still limlt fect. Were the value of the mark to increase, Volkswagens, which are produced e spending of marks, would become more expensive outside of Germany, or, were the franc to be devalued, Frenchmen, whose earnings are in francs, would have to pay more for imported goods. The effect on the purely domestic portion of either economy would be 'precisely nil. There is a worthwhile lesson here for the United States where total imports constitute only 3. 3 of Gross National Product. In other words, were the dollar's value to change in relation to other currencies, the effect would be con- siderably less than in the average European country where foreign trade is a far more important item. ' Why, then, the atmosphere of crisis There is a villain in this piece,and it was created twenty-four years ago at Bretton Woods. It is an lnternE-.tj.Qnal m.opey system which I– has worked adequately for a quarter of a century, but is now showing its it–is, in a word, a system of fixed exchange rates between currencies where, when the value of a currency declines in the market place, monetary authorities are forced to intervene to main tain its value at a fixed rate. It is generally claimed — without substantiation — that such a system is necessary for orderly trade. What well may come out of the current crisis at- mosphere is a recogmtion that governmental rigging of markets', including the international money market, is likely to be ineffective, and a new Bretton Woods conference which will revise the rules of the international money game. Such a revision may well inv()lve a. greater freedom of exchange rates to seek their own levels. Dow-Jones Ind. 985.08 Dow-Jones Rails 279.28 ANTHONY W. TABELL WALSTON & CO. INC. AWTamb This market letter is published for your convemence and InformatIon And 18 not an offel to sell or n sohcltRtlon to buy Rny seeuntlcs Ihscusaed The m. formfl.tion was obtlllncd from 91!urees we believe to be reliable. but we do not guArantee Its 'lccuracy Walston & Co. Inc and Its otll. er d to employees may have an mterest In or purchase a.nd sell the secuntles referred to belelt'. C s, lree rs. or WNSOI