TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 October 6, 1988 1- , — -Our record for nPMnno is not one of 'which' we are y prou'ci'. 'We recall sitting by a New Hampshire lake in mid-August, 1982, scribbling in longhand our somewhat confused impressions of the birth of the new bull market. We also remember finding ourselves in the middle of the Antarctic Ocean, deciphering the surprise onset of the mid-1984 market drop from the once-a-day one-sentence bulletins which reached us via satellite There have. it seems to us, been more than the expected number of market turning points where we have found ourselves miles away from the charts, computer terminal, and quote machine which would have helped us to assess what was going on. For once, however, we have managed to get it right. For the last three weeks. as we were enjoying pasta and Chianti in Italy, the market turned in as close an approximation to doing absolutely nothing as we could possibly have hoped for. The Dow, at 2068 on the Friday we left, had moved all of 2 above that on the day of our return, without having been at significantly different levels at any time in the interim. True, the normal seasonal pattern for September reversed itself (as had the summer-rally pattern before it), and the month produced a modest advance of 4, but there was certainly nothing in the European edition of The Wall Street Journal, which we perused each day, to cause any feelings of guilt at being away from the office. Now that we are back. however, it becomes necessary to assess this behavior which is, of course, nothing more than a continuation of the excruciating dullness which has prevailed since last spring. As a summary, although it cannot be really said that the market is acting well, it is possible, we think, at least to make the statement that it is not acting all that badly. A couple of bright spots, admittedly minor, onno to have T. A fn ,nontho 10, -,. ,,,. in our absence. The Dow .C 0 oLnew I, 'Ipost-crash s, and seems to have a .. at Ia;t the possibility of a test of the high. The Dow Utilities, after their ,vv.uvc gyrations of August, when the world became momentarily convinced that interest rates were going back to 20, has consolidated into a reasonably positive sort of a pattern which could, given a breakout a couple of points above current levels suggest an equivalent upside movea The more-widely-followed averages—The Dow Industrials and the S & P—find themselves in overhead supply and probably need a few weeks of consolidation. after which it should be possible to make a better assessment of near-term prospects. Meanwhile, it is worthwhile recalling the assorted stUdies we produced over last summer. which suggested that protracted dull periods, while having no significance whatsoever for the short term, generally were the precursors of higher market levels over the longer term, the longer term. be it remembered. being six months to a year out. Not all indicators, of course, are on the plus side. The breadth divergence, which has existed since March. continues. There have, however. been protracted periods in the past. 1947 – 1949 for example, when breadth has acted poorly during a period of base formation, the sort of period in which we would contend that we now find ourselves. An inspection of individual chart patterns, in addition. buttresses the conclusion that we are now seeing precisely such a period. The trouble with finding oneself in the midst of such a process is that it is usually absolutely impossible to tell when that process is likely to complete itself. We will shortly find ourselves celebrating, if that is the right word, the first anniversary of the October 19 market crash. There have. in the past, been base formation periods which have extended for close to three years. The logical expectation for the market at the moment. then. appears to be more of the same. We said above that the market was not acting well—but also not acting badly. The part about not acting well arises from the total absence of any indication that the broad-based averages are about to leave the trading range in which they have spent 1988 or that the soporific pattern of trading activity is likely to change very much. However. as this sort of thing goes on, it becomes more and more unlikely that it is a period of distribution and more and more likely that we are undergoing a reaccumulation phase in preparation for an ultimate upside move. a move, however. which may not occur before a painfully long wait. Dow Jones Industrials (12 00) 2131.40 S & P 500 0200) 273.63 Cumulativ Index (0106/88) 3920.38 ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL INC. Nostatement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, dlrecttyer Indlrectty, an offeror the solicitation of an offer to buyer sell any secUrity referred to or mentioned The matter IS presented merely ior the convenience of the subscriber While we beheve the sources of our information to be reliable, we In no way represent or guarantee the accuracy Ihereof nor of the statements made herein Any acllOn to be taken by the subScriber should be based On hiS own Investrgatlon and InformallOn Delafle!d, Harvey, Tabetllnc , as a corporatIOn and ItS officers or employees, may now have, or may later take, poSItions or trades In respect to any securrbes 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, Tabeff fnc , which IS registered wrlh the SEC as an Investment advrsor, may grve adVice to Its Investment advlsory and other customers Independently 01 any statements made In thiS or In any other Issue Further Informahon on any seCUrity menllOned herein IS available on request

\ TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 967-2300 October 14, 1988 -.I t-is -inter-esting-how -muoh-last-week typified-the' past- marketyear. -Wehad-;-first. of-8l—-'- —l- Wednesday's 30-point decline which, like 80 many of the year's moves, was in anticipation of trade-deficit figures which were not to be published until Thursday morning. The actual release of numbers slightly worse than most expectations produced a modest Thursday recovery. (Better figures, as was the case with the unemployment release of a fortnight ago, would probably have resulted in a recovery of the entire loss.) The decline, of course, followed Monday's move to a new post-crash high in the Dow, a pesk which may have set records for unimpressiveness. A high was posted, to date at least, on only one day. it was the first new high since July, and it occurred on a day when both the Transportation and Utility Averages were down and more stocks declined than advanced. Yet this again was typical of the year's action. Next week will see the first anniversary of October 19, 1987. From that low to Monday's peak, the Dow is ahead some 24.17. However, the new highs made have been conspicuosly few and widely spaced. Two days after the crash, the DJIA had recovered from 1738.74 to 2027.85. That remained the best level attained until the string of three new peaks in early January, the last being at 2051.89. Next occurred four peaks in March, the last at 2087.37, which incidentally was accompanied by a breadth peak not achieved since. There followed three new highs in April, achieving 2110.08 on April 12th, four more in June and July, reaching 2158.61 on July 5th, and finally the new peak at 2158.96 this week. This makes for a total of only 17 days on which a new high has been scored out of 250 trading days through yesterday. In this halfhearted rise, breadth reached its peak on March 17, 143 trading days ago and has been diverging ever since. It cannot be emphasized too strongly how unusual this action is. To demonstrate this, it is necesSary, first of ill, to dispose of the notion that it ill constitutes a rilly within an ongoing bear market. This can be done fairly easily. We have pointed out many times that history strongly suggests that the bear-market is a largely mythical beast. The longest such rilly has been anywhere near a8 long 8S a year. If the year is not a bear market, it is something else, but, analyzed in buH market terms it looks strange indeed. The following table includes every major market low since 1942 and shows the highest point the Dow had reached in its first year and the percentage advance scored to that point. The final figure in the table is the number of days during that first year when a new peak was achieved. Bull Market Start Highest Point in 1st Year No. of Date DJIA Date DJIA Advance New Highs 4/28/42 98.95 4/6/43 136.93 38.38 67 10/9/46 163.12 7/24/47 186.85 14.55 21 6/13/49 161.60 6/12/50 228.38 41.32 89 9/14/53 225.49 9/14/54 351.78 56.01 92 10/22/57 419.79 10/17/58 546.38 30.16 53 6/26/62 535.76 5/31/63 726.96 35.69 58 10/7/66 744.32 9/25/67 943.08 26.70 46 5/26/70 631.16 4/28/71 950.82 50.65 63 12/6/74 577.60 7/15/75 881.81 52.67 48 2/28/78 742.12 9/8/78 907.74 22.32 32 8/12/82 776.92 6/16/83 1248.30 60.67 46 7/24/84 1086.57 7/19/85 1359.54 25.12 32 10/19/87 1738.74 10/10/88 2158.96 24.17 17 Contrasted with its predecessors, the present advance looks pretty anemic. It involves the smillest number of new highs on record and the third smillest percentage advance. It is also One of three advances in which a breadth divergence materialized in the first year, the other two being 1946 and-1966;- Wh.j! recentactlon'most resembles;-of course, is that following the low of 1946 or possibly of February, 1978. In both of these cases, the advances were small, and new highs Were widely spaced. What the two periods had in common was that they both constituted, reilly, not bull markets but base formations leading up to a later advance. 1946-1949, of course, constituted a trading range with a 20 percent range between high and low. The last year has been, in many ways, a carbon copy of that range which, it must be remembered. lasted for two years and nine months. 1978 eventuilly produced a modest bull market with an overall 38 advance, but not until its initial low was tested two years later on Silver Thursday. The week's new high certainly does not alter our conclusion that we are somewhere in a 1987-198 period of base formation. ANTHONY W. TAB ELL DELAFIELD, HARVEY. TAB ELL INC. Dow Jones Industrials (1200) 2140.11 S & P 500 (1200) 276.65 Cumulative Index 00/13/88) 3933.09 AWTlt No statement or expression of opInion or any other matter herein contained 15, or IS to be deemed to be, dlreC1ly or Indirectly, an offer or the solicrtallon of an offer to buy or sell any secunty referred to or mentioned The matter IS presented merely for the convenience of the subSCriber While we beheve the sources of our Information to be rehable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subscnber should be based on hiS own Inves\tgatlOn and InformatIOn Delafield, Harvey, Tabellinc ,as a corporation and Its offICers or employees, may now have, or may later take, poSitions or trades In respect 10 any securriles mentioned In thiS or any future Issue, and such posllton 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 lvestmenl adVISOry and other customers mdependentiy of any statements made In Ihls or m any other Issue Further mlormal!On on any secu1J1y mentioned herein IS available On request

———————————————————————- – \ TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (6091 967-2300 . Th ereappears -t(,.'exlst—an–almDs tUniVersarli-u-m.a-n-u–r–g'e,..Otoc'tCobeelero2ra1t,e-1a9i8li8li'ver-s-aries-with-t'h-e——t result that both print and electronic media launched this week into veritabie orgIes of comment on October 19, 1987. At the risk of being accused of total lack of originality, we intend to indulge in our own modest celebration of that birthday. beginning our observations with the question—Why Isn't the Dow at 1500. We do not think that query is anywhere near as far off the wall as It may seem. When we were called upon to comment about the crash five days after its occurrence, the only relevant standard for comparison seemed to be 1929. We said at the time. Monday's 500-point drop in the Dow took it down 22.61, almost twice the 12.82 of October 28, 1929. The 26.17 fall over Friday and Monday was a two-day record, bettering the October 28-29, 1929 drop, 26 to 23. Only one 1929 mark appears intact. The entire drop from September 3 of that year through November 13 took the average down 47.87 in 56 trading days. The fall from August 25 through October 19 of this year has been, so far, only 36.15. That latter mark, of course, stIll remains intact, October 19 (or the intra-day low of October 20) having turned out to be the low of the 1987 crash. What is more important, however, is that the aftermath has turned out to be quite different. Following its November low, the 1929 market rallied for SIX months, recovenng half its loss. By the end of the next six months, however, that rally had been totally erased. Three days prior to the first anniversary of the low, on November 10, 1930, the Dow sold at 171.60, 13 below the year-earlier bottom and 55 below the 1929 high. The former measurement, if duplicated today, would have the average at 1550. Instead, the DJIA, yesterday, achieved a new post-crash high. While there is some justification for questioning that strength on a short-term basis. the technical pattern minimally suggests that we are somewhere in a reaccumulation process of uncertain length which 1.1W1I.'.IUltimately-lead.to new highs.HAlthough thdefinitionof ultimately. in ths case. rema.ins I-1 uncertaiTi-;-n is hkely to Involve a shorter–period thanihe–25 years required for the 1929 high to be bettered. The obvious answer for the dIffering market patterns lies in the widely disparate fundamentals. By November. 1930. we were just embarking on an economic cataclysm, the awfullness of which the market was just beginning to antICipate. The worst case apparent on the current horizon is a nebulous recession which forecasters keep pushing further into the future. Our readers are aware that we have, in this space, discussed 1929 at great length, notably in a series of letters during 1986. We have always tned to stress our view that the 1929 crash and the subsequent depression were two separate events only partially related. This view led logically to the conclUSIOn that 1929 market behavior might be repeated (as it was in 1987) without a 1930-32-type aftermath (which at the moment appears unlikely). There are many reasons why we are lucky enough. in 1988. to find ourselves in this position, and one probable one is that we have learned a few things. There occurred, shortly after the first anniversary of the 1929 crash, an event that turned out to be symbolic—the failure of the Bank of the United States. This was the first in what was to be an ongoing string of bank failures whiCh produced one of the enduring images of the Depression era, the long lines of depositors queued up to withdraw their savings from banks. The creation of the Federal Deposit Insurance Corporation (and later the Federal Home Loan Bank) has prevented the repetition of the crisis of confidence engendered by the 19301s phenomenon of bank runs. removing one pressure toward the monetary contraction which accompanied the Great Depression. Before we begin to sound too much like Pollyanna. It should be noted that the relief is still only symptomatic. The irrepressible urge of the banking industry to loan money to those unable to repay continues, and we are just now. in our examination of the Texas situation, beginning to realize that the current policy has a cost, albeit that that cost is a small price to pay for the benefits gained. . . The current market, moreover. driven as it is by takeovers, raises at least a few echoes of the banking practices of the 1920's. Consider, for example. the fact that the upcoming Philip Morris absorption of Kraft will be financed by some 10 billion of debt. Although the ultimate Obligor IS different, it is hard to see this practice as anything other than the extension of stock market credit. a process which. when indulged In excessively in the past. has been known to lead to grIef. That. however. is a subject for another letter. Dow Jones Industrials 02 '00) 2174.61 S & P 500 02 00) 281.37 Cumulative Index (0120188) 3974.05 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. AWTebh No statement or expression 01 OpIniOn or any other matter herein contained IS, or IS to be deemed 10 be, directly or Indirectly, an offeror the soliCitation of an offerlo buy or sell any security referred to or menlloned The matter IS presenled merely for the convenience of the subscnber While we believe the sources of our information to be reliable, we m no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subscnber should be based on hiS own Investigation and mformatlon Delafield, Harvey, Tabell Inc , as a corporatton and Its officers or employees, may now have, or may later take, poSitions or trades m respect to any securliles mentioned m thiS or any future Issue, and such positiOn may be drlferent from any views now or hereafter expressed m thiS or any other Issue Delafield Harvey, Tabellinc , which IS registered With the SEC as an mveslmen1 adVisor, may give adVice to ItS Investment adVISOry and other customers Independently 01 any statements made In thiS or In any other Issue FUrlher Information on any security mentioned herem IS avallabte on request

TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – October 28, 1988 This letter has always had a fondness for trying to discover expected events that fail to occurT simply-because-sut!hfailures-tend -to'beIM-sidel'l–noticed-than-actual-happeningS—Arn,.,-..,..–t.,..– instructive example'can be found in the ;eries on daily and weekly NYSE new highs. What is more important about these numbers is that they have increased hardly at all in recent weeks. To see why this is significant, it is necessary to know how the new high figures reported in the financial press are computed. For each week, they cover the prior 52 weeks pius the current one (current week-to-date in the case of the daily figures). This means that the numbers reported starting this Monday were the first that did not include the week of October 19 – 23, 1987. This is the culmination of a ten-week process during which the stock ranges on which new-high and new-low statistics are based have been losing the figures for the 1987 crash. First Week Last Week Week's High vs. Avg. Daily Weekly Week Ended DJ!A High Week Ended DJIA High Gain First Week New Highs New Highs Aug 28, 1987 2746.65 Aug 26, 1988 2027.36 -719.29 9 26 Sep 4, 1987 2695.47 Sep 2, 1988 2064.72 37.36 -630.75 9 30 Sep 11, 1987 2625.96 Sep 9, 1988 2088.73 24.01 -537.23 19 28 Sep 18, 1987 2634.57 Sep 16, 1988 2113.26 24.53 -521.31 17 55 Sep 25, 1987 2603.95 Sep 23, 1988 2103.31 – 9.95 -500.64 23 74 Oct 2, 1987 2662.37 Sep 30, 1988 2140.29 36.98 -522.08 21 68 Oct 9, 1987 2658.78 Oct 7, 1988 2157.72 17.43 -501.06 32 98 Oct 16, 1987 2528.39 Oct 14, 1988 2167.85 10.13 -360.54 33 116 Oct 23, 1987 2164.16 Oct 21, 1988 2193.28 25.43 29.12 53 151 Oct 30, 1987 2049.07 Oct 28, 1988 2195.06 1.78 145.99 49 — 'Through Thursday, October 27, 1988 The table above shows, for the past ten weeks, the dates of the first week and of the last week included -I—;';Do'iw';-;isshown. in the new-high-and-low It can be seen that the count. For perIOd-has each of these generally been weeks, the in a rising one, t reai-gdhafy-oh(Itghh-eforratshe-t—t–I nine weeks posting an advance4 The column of interest is the one which subtracts the Dow high in the first week in the period from that of the last week. For most of the period, that earlier figure exceeded the later one by more than 500 points. Under these conditions, it was highly unlikely that great numbers of new highs would be taking place. However, with the removal of the crash weeks, this spread has reversed over the past fortnight. and this week's high is significantly above the figure of a year ago. The normal expectation, therefore, would have called for an explosion of new highs. This totally failed to occur. The average number of daily new highs and weekly new highs for this week expanded but remained at an historically low level. One can gain some insight into the weakness of these figures by comparing them with past history. Differences in the method of computation make comparison somewhat inexact, but as recently as 1984 (when the computation was the same), the number of daily new highs reached 309 six months after the market's low. In October, 1982, the series record was set with 653 new peaks. For 1988, so far, the peak has been 72, attained a week ago. As the table at right shows, the figures for the ASE and NASDAQ have been even more anemic. The average number of daily new highs for the former exchange has hardly expanded at all since August, and the high figure for the OTe market was actually reached over a month ago. We think these figures reinforce what has AMEX New Highs OTC New Highs Week Ended Avg. Daily Weekly Avg. Daily Weekly Aug 26, 1988 7 16 45 108 Sep 2, 1988 13 18 62 134 Sep 9, 1988 9 22 83 163 Sep 16, 1988 11 25 82 202 Sep 23, 1988 10 30 91 232 Sep 30, 1988 14 42 76 208 Oct 7, 1988 12 36 79 218 Oct 14, 1988 11 36 66 188 Oct 21, 1988 18 53 89 263 Oct 28, 1988 12 65 — been this letter's basic thesis for some time—that the current market, by most measures, lacks the vitality characteristic of the normal bull market. This suggests in turn that the current. year-old market cycle may consist largely of a trading-range reaccumulation phase. in preparation for a market upswing to begin at a considerably later date. ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) S & P 500 (12 00) Cumulative Index (10/27/88) 2151.85 279.04 3925.24 AWTebh No statement or expressIon of op!mon or any other matter herein contained IS, Of Isio be deemed to be, dlrectty or Ind!rectly, an offer orthe soliCitation 01 an offerlo buy or sell any securrty referred to or mentIoned The mat1er IS presented merely for the convemence of the subSCflber While we beheve the sources of our Informat!on to be reliable, we In no way represent or guarantee the accuracy thereot nor of the Slalemt'11IS made herem Any acllon 10 be taken by the subscnber should be based on hiS own investigatIOn and mformatlon Delafield, Harvey, Tsbell Inc, as a corporallon and ItS officers or employees may now have, or may later take, positions Of trades In respect to any secufltles mentioned In thiS or any future Issue, and such poSlt!on may be different from anyv!ews now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabelllnc, which IS registered With the SEC as an Investment advIsor, may give advice to Its Investment adVISOry and other customers Lndependently of any statements made In thiS or In any other Issue Further information on any secuflty mentIoned herem IS avaltable on requesl