Tabell’s Market Letter – May 26, 1972

TABELL'S MARKET LETTER ., 909 STATE ROAD. PRINCETON. NEW JERSEY 08540 DIYISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – May 26, 1972 Any attempt to relate political trends to the stock market is an occupation fraught with peril – – Ior tli-efiiatKet'-analysC Perhaps-the hara-esFtasknrtoma-intaln'-one-s'bbjecti vity;Bu'Wami bea-r – markets have, in the past, occurred under both Republican and Democratic administrations, and with a fine impartiality. It is a difficult task for both the analyst and investor to keep his own political views out of a rational assessment of the market situation, to avoid excessive opti- mism when his own party is in power and a tendency to look on the gloomy side of things when it is not. Despite these difficulties, it should remain, nonetheless, part of the investor's task to assess political trends and to try to relate them to possible developments affecting his securities. What has taken place so far in 1972 represents an interesting field for such an exercise. The major news, to begin with, has been the Democratic primaries, and it is obvious from the results of these primaries to date that the two major winners are Senator McGovern and Governor Wallace. Considered in what we have come to accept as conventional political termi- nology, two more dissimilar individuals could hardly be imagined. Political commentators, therefore, have spent a great deal of time trying to find a common bond between them and many of them have located such a bond in calling both populists — Le., the political heirs of William Jennings Bryan and Robert LaFollette. Like most such comparisons, it is probably a bit facile. The sort of .populism that consti- tuted a major political force prior to World War I was agrarian in its roots. And it was directed against an establishment represented by a Wall Street which then possessed power which it dOES I not ;-tha nkful1yretaifjtodoy -rhereaTe7n-oneth-etes s;- tiesthatbindth'e-currenttrend'with ' that of the early years of the century. In an article in Thursday's New York Times, Senator Fred R. Harris of Oklahoma, author of a book about and advocate of the new populism, quotes LaFollete as saying, The issue … is not the tariff or conservation of the currency. It is not the trusts. The supreme issue, involving all the others, is the encroachment of the powerful few upon the rights of the many. Harris goes on to argue that the central issue today is not tax reform, monopoly or the environment but a similar latter-day encroachment. It is not necessary to agree with this sort of thing to realize that it has attracted a following. It will be important to note this fact even if Senator McGovern is nominated and later defeated by President Nixon — an event the stock market (see our letter of January 14) is now apparently forecasting. It is the nature of political processes to respond to positions held by individuals who receive large blocks of votes even if those individuals themselves are defeated. This is why an assessment of the implications of a new populist trend is important to the investor. Two keystones of current populist thinking are impatience with the present tax structure, especially the so-called tax loopholes , and the belief that current income is somehow mal- distributed. It is irrelevant that both these propositions might be refutable. They are still widely held. The investor, therefore, should consider carefully investments which depend for their continued profitability on favorable tax treatment. The current depres sed levels of many oil stocks, as an example, attest to doubts which have already been raised on this score. The investor should also, in his'planning;be prepared to confront-the demise-of-fa-vorable tax-' treatment that he has been receiving. The exemption of estates from capital-gains penalties is one example that readily comes to mind. There are also implications for the investor on the positive side. Any steps toward a redis- tributive incomes policy could obviously aid industries with an interest in higher consumer spending, such as the leisure time industry, and the historic identification of populism with easy money may well have implications for bond prices. These and a host of other implications must be considered if Senator McGovern and Governor Wallace indeed represent the political force that a number of observers tell us they do. Dow-Jones Industrial (1200 P.M.) 970.57 S&P (1200 P.M.) 110.57 AWTmn ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No statement or expression of OpinIon or any other matter herein contOlned IS, or 15 to be deemed to be, directly or mdlrectly, on offer or the solicltotlon of on offer to buy or sell any security referred 10 or mentioned The moiler IS presented merely for the convef'len of the subscriber While we believe the sources of our Informa han 10 be rehable, we In no woy represenl or guarantee the accuracy thereof nor of the statements mude herein Any oOlon 10 be token by Ihe subSCriber should be based on hiS own inVeSTigation and Information Janney Montgomery Scott, Inc, as 0 corporation, and Its officers or employees, may now have, or may later toke, poslhons Of trades m respeo to any securlhes mentioned In thiS or any future Issue, and such poSition mey be dlfferenl from any views now or hereafter expressed In thiS or any other Issue Janney Montgomery Scott, Inc, which IS registered Wllh the SEC as on Investment adVisor, may give adVice 10 lIs Investment adVISory and olhel customers Independently of any statements made In thiS or m any other Issue Further information on any security mentioned herem IS available on request