,. 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 1609) 987-2300 August 4, 1989 The market continues to confound its skeptics. The major averages went on posting new bull-markeLhighs..last. week,withtheDowcontinuingto approachitsatime,highof. 2722.42, .the comparable benchmark having been exceeded by the Standard and Poor's 500 a couple of weeks ago. As we have been noting in this space, few signs of internal weakness seem to be manifesting themselves, and the path of least resistance continues upward. It may properly be asked why this should be so. The flip rejoinder is more buyers than sellers. While not entirely true (for each buyer there must be a seller), that response is, at least figuratively, correct. The direct cause of rising prices. market technicians are happy to aver, is the supply/demand equation—a fact insufficiently recognized by those required to invent reasons for market direction. It is true, however, that supply and demand Ultimately rise, at least in part, from perceptions and expectations held by market participants and that these perceptions tend to center around the fundamental factors usually cited as cause for the market's behavior. We discussed one such factor in this space last week—the relatively conservative valuation still being placed on corporate profits despite the market's sharp advance. The S III P 500, we noted, currently stands at just over thirteen times trailing-12-month earnings, a figure whiCh, while not in the bargain range, is hardly excessive based on historical standards. We hear analysts loudly bewailing the fact that bargains exist no longer. a cry not unusual two years into a bull market. The S & P pie belies this plea, although the bargains are probably not to be found among the obvious market leaders of the past couple of years. It IS. of course, the common expectation that earnings may flatten andlor decline over the next twelve months. If this is so. the present modest valuation provides a cushion, and it is worth recalling that earnings and pIe ratios tend to move in opposite directions, mitigating the effect of changes in current earnings on stock prices. Indeed, built into current investor perception is the paradox that the prospect of a slowdown in earnings growth is buIlish—such a prospect enabling the Federal Reserve to allay its primary – – —-concern—rega-rding.,nflationand—-to—pTovide—the–monetaTystimuiusnecessarytocushionan-economic— downturn. giving flesh to that current buzzword, the soft landing. There exists evidence that the Fed may have initiated a policy of monetary ease both in its own affirmations and the behavior of interest rates. Treasury Bills. yielding over 9 as recently as March, now afford a return of well under 8. and the fall in long bond yields has exceeded 200 basis points. Plunging interest rates. the perception of monetary ease, and the prospect of only a moderate business slowdown have, in short, provided an atmosphere conducive to rising stock prices. While the major precept for conduct during a bull market is to relax and enjoy it, the money manager is required by his profession to be a worrier, to consider what might go wrong in an apparently optimistic scenario. One cause for concern would be evidence of mounting deflationary pressure. sugJ!f'sting that the Fed's current prescription for monetary ease might not constitute strong enougl medicine to be effective against the prospective slowdown. Interest rates, as we n;tbO above, have fallen, but there appears. so far, to have been relatively little expansion of the money supply, raising the classical fears about the limitations of monetary policy in producing expansion, fears embodied by the axiom that it is impossible to push on a string. Numerous Cassandras have noted the potential instability inherent in the possible effect of a protracted recession on increasingly leveraged corporate balance sheets. There exists. in other words, the possibility that the soft-landing cushion might ,, pulled out from under financial markets. As is often the case, the exact opposite risk also exists, that the required level of monetary ease might reignite inflationary pressures. Those pressures have quietly been building. the l2-month rise in the CPI as of May being the highest since 1982. The expectation of a hyperinflation seems, it must be admitted, to be clearly absent in the marketplace. As our colleague, Ken Tower, noted this week, gold and commodity prices, presumably sensitive to inflation prospects, have been totally unable to get out of their own way. The market's technical strength, therefore, is based on the expectation of achieving a relatively modest correction in the economy, perhaps, in the process, stemming the recent short-term rise in the rate of price change. Any evidence of failure to achieve these goals could provide early warning signs, caIling into question the viability of the current bull market. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (1208) S & P 500 (1200) Cumulative Index (8/3/89) 2651.18 344.47 4831.80 AWTebh No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed 10 be, directly or Indirectly, an offer or the solICitatIOn of an offer to buy or sell any secUrity 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 Ihe subSCriber should be based on hiS own trwestlgatlon and information Delafield, Harvey, Tabellinc , as a corporation and Its officers or employees, may now have, or may laler lake, posilions or trades In respect to any securliles mentioned In thiS or any future Issue, and such poSItIOn may be dlHerenl from any views now or hereafter expressed In thiS or any other Issue Delaheld Harvey, Tabell Inc, which IS regIstered With the SEC as an Investment advisor, may gIVe adVice 10 ItS Investment adVISOry and olher customers mdependently of any statements made In thiS or In any other Issue Further informatIon on any security 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 1609) 987-2300 -. — — – – -……. . . .–T1———Aitl1, 1989' —-….-.— — …-.,;;- – The stock-market story that made headlines this week was the Thursday move of the Dow Jones Industrial Average above 2700 and its momentary flirtation with a new, all-time high—actually consummated as we go to press. Since most other major averages have long ago achieved such highs. this action was hardly earthshaking. If one is seeking truly unusual behavior in a market average, the history of the week1s trading in the Dow Jones Transportation Average is worth a glance. That indicator closed. a week ago, at a level of exactly 1250. Monday's close was 1344.06, a 94.06-point, 7.52 advance. On Tuesday, the Average moved further ahead to 1355.80, making the two-day advance 8.46, and Wednesday's trading took it to a close of 1406.29, making the total three-day advance 12.5. (Another modest advance was achieved on Thursday.) All of the above figures, if not records. were, at least. in record-setting territory. Almost all of this. of course, was due to the action of one stock, UAL Corporation. which became the object of a takeover bid or—in today1s charming language—was put into play. The construction of the Dow Jones Averages is such that, to arrive at the Transportation average. one adds up the prices of the 20 stocks therein and divides by 0.703. Thus, each move of one point in a component is sufficient to produce a 1.42-point move in the indicator itself. Thus, the vast bulk of the Transportation index1s rise can be accounted for by the fact that UAL, which closed at 164 1/2 a week ago, attained closing prices of 210 3/4 on Monday, 19 1/4 on Tuesday, and 243 718 on Wednesday. We will return to this point later,. But first a quick look at the action of the Transportation Average in an historical context. The 7.52 move in that index on Monday is, by far, the largest in the history of the Average since 1949, as far back as our computerized data bank goes. The two-day move to Tuesday has been exceeded only twice in those forty years, and the three-day, 12 112 move, only once—at the 1987 bottom. Looking at the Dow Jones Industnals, for which we have history back to 1926, there have been only 14 larger one-day moves, 24 two-day ones, and 14 three-day instances. With the exception of 1987, all of these cases took placepriorJo..J.19AO…Thus.theweek!s….action-,-in-,-the…..transpor..ts—can-be'8aid–tobea,——I–I modern -record. Yet the cause of all this, the 28 UAL rise, was hardly unique. It was, in fact, just another in a series of takeover-related moves. A scan of our data bank reveals that, looking only at NYSE stocks selling over 20, there have been over 100 one-day moves of greater than 25 since 1982. The left-hand column of the table below lists the 20 most recent such moves and the right-hand column shows the 20 largest. a.OSIHQ P!I1IIOUS I'RCElf( – – – – – -STOCK DOll PRlc a.OSE CWGE a.OSIHQ P!I1IIOUS I'RCElf( – — – – -sm DOll PRlc a.OSE CHAHG UHCIlW AtIII 7 1989 210.750 164.500 28.12 BIIEFICIAL COR!' 111.22 1!SO 71.000 -44.!iOO 61,04 SIlUIIB CW JIJ. 27 1989 112.500 87. 28.21 ICAII STAIIDARI IIIC JAIl 27 1988 58.875 Je.oOO 5MJ llARllIH LABS JIlL 17 1989 33.500 25.250 32.17 PROlIUCTS IIS I CHElUCAI. JIJ. 10 1989 Jl.025 25.125 25.87 IIIRCII1IRT BRA( .lO'J!JIII IUAAI milo IIFG I 18 1997 I 9 1988 .6.625 SJ.750 Jo.sOO , 52.,7 SO,J5 Tl/lIHe JJII 7 1989 170.000 126.000 J4.92 CHVCW AtIII 14 1997 J9.25O 26.125 50.24 CITIWIS I SD1ITlIERH CIl.DIAN COI'IPAHY INC. IIURl.IHGTOH RfS01JRCS 'AA Jl 1m .S7S 26.750 34.11 fJJ 1 1989 7G.125 49.125 2.75 fJJ &1989 49.12'5 J9.25O 25.1& EmJtIRYIHS 8!HK TmS JROC1(1jAI SP 25 1997 711.000 52.250 428 JAM 161m 45.000 JO, 48.76 SP 11 1997 58.m 39.250 48.73 TmS ESTl!Jt CIlW PWSEYLID CflCAGO POCIFlC R J RHABISCO JAIl II 1989 HOU 16 1988 OCT 2 1988 OCT 20 1988 5.ooo .J7'S S6.625 n.25O JO.25O Jl. 4J.J7'S Sl.87S .a.76 2.17 JO.Sl 38.26 J!R;\AlDF.TTlHlHEe. . P!llSB1IRl co SAIIIIIIS !SSOClATE5 OCT 18 1988 OCT 27 1!SO lET 4 1988 JUH 27 1!SO 88.250 29.&25 57.000 SO.SOO 60.125 20.250 J9.ooo 3.750 … 78 46.30 46.15 45.J2 !RAFT lHC. lEST PRWJUTS PlllSBUIIl co OCT 18 1988 88.250 6G.125 46.78 OCT 10 1988 26.875 2'J.75O 29.52 OCT 4 1988 S7.000 39.000 46.15 UJCKT STIlR6 lHe 1lJfOX lHC IIIIIIRE IICCOIIIIACII RfS lIAR 22 19811 .750 32.250 4.91 ..ftJM B 1983 4J. 29.815 4.n FE! Z 1988 34.500 lJ.875 H.SO CO SP 13 1988 SI.25O J9.S00 29.75 SPECT1!A-PItl'lICS )flo 26 1997 3.000 2J.&25 43.92 INSllCO CIlW 111AiI lHe 1llllRA1 01110 ItFIl CAU'.'T Co AtIII J 1988 MY 18 1988 MI 9 1988 ' lJ 1988 2.250 &8.875 SJ.75O 45.375 21.250 50.&25 Jj.7S0 31.875 28.24 J;.os 50.Jj 42.l5 RElO1W1 ICAl ….;I 25 1997 IMOO 42.250 43.20 AffUEi DOTA R&AJtH HOV 18 198 JI.5oo 22.000 .3.18 – CILEIWt COIi'RIJT IHe. CERTAIII !lEI PRODUCT fJJ 14 1989 70.12'i 49.125 42.75 FEB 2S 1988 5.125 JI.&25 2.49 , As the table clearly shows. the UAL rise is hardly unusual. There have been four similar cases in the past month and nine in 1989. It is. in addition. hardly the largest. having been significantly topped by all the moves shown in the right-hand column,. The extent to which takeover-related moves have provided the fuel for the current bull market is a proper subject for a future letter. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials 0200) S P 500 (1200) Cumulative Index (8110189) 2718.13 349.69 4897.72 AWTebh No statement or expression 01 opinion or any other matter herein contamed IS, or IS to bedeemed to be, directly or mdlrectly, an offeror the soliCitation of an offer 10 buy or set! any security referred 10 or menlloned The matter IS presented merety for the convenience of the subSCriber While we beheve the sources of our mlormatlon to be rehable, we m no way represent or guarantee Ihe accuracy thereof nor olthe statements made herein Any action to be taken by the subscriber should be basad on hiS own Investigation and Inlormahon Delalleld. Harvey. Tabelllnc, as a corporation and Its officers or employees. may now have, or may later take, POSitionS or trades In respect to any seCUrities mentIOned m thiS or any luture Issue, and such posl\!on may be different from any views now or hereafter expressed m thiS or any other Issue Delafield. Harvey. Tabet! Inc, which IS registered wrth the SEC as an mvestment adVISor, may give adVice to rts Investment adVISOry and other customers Independenlly of any statements made m thiS or In any other Issue Further Information on any secUrity 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 (609) 987-2300 – August 18, 1989 As the market has sailed merrily ahead over the past 22 months, a number of observers—including, -admittedly, ourseleslfave1!lp-reSsed – reservations regarding-thepaucity-of-dailynew highs.,–Just – – recently, on August I, almost two years into the advance, NYSE stocks managed to achieve a bull-market record by posting 306 52-week, daily new highs. In comparison, we may recall that, in October, 1982, two months into the advance which began in August of that year, 653 daily new highs were posted, and, during the next five years, numbers in the 400 to 600 range were not at all uncommon. The table below attempts to provide some perspective by Showing some relevant figures for new highs for the past eight bull markets including the current one to date. For each of the markets studied, the starting low, the eventual high, the percentage advance, and the length in trading days is shown. A number of additional figures are then calculated for the first, second, and third 200-day periods of each bull market. These include the highest daily figure during the 200-day period for new highs and the highest figure for those highs expressed as a percentage of issues traded (smoothed by a 10-day moving average). Also shown are the high for the Dow reached during the 200-day period, and the percentage of the ultimate advance completed at that high. . 6/26/62 10/ 7/66 5/'26/70 1!/ 6174 12817B B/12/82 7124/87 10119/87 21 9/66 ——– -1-2-1–3-/-6-8 –1-/-1-1-1-7-3 –9-/2-1–1-7-6 –V-2-7–/B–l 11129/83 ——– –8-1-2-5-1-8-7 –8-/1–0-/8–9 Low 535.76 70101.32 631.16 577 .60 701.12 776.92 1086.57 1738.74 Huh r. Adv NUlliber of !Iays 995.15 86 913 985.21 1051.70 1014.79 1024.05 1287.20 2722.-42 2712.63 32 67 76 38 66 151 56 518 665 5 798 39 780 458 -D—-1—2-0-0 Peak New Hulhs Peak. New Hlh 184 10.07 229 12.72 298 11.65 393 11.12 284 9.26 653 18.28 3\ ; 100( 3 52 1.81 DJIA H1Sh 706.03 909.63 899.10 S81.81 907.74 1232.59 1299.l6 2J58.61 Advance COtlP, -n,—-'0–'–'0–0- 37 69 64 70 59 89 13 43 Pea, Ne. H13hs 121 251 237 451 174 498 229 PeaI-, New HIgh 6.22 11 .19 10.71 101.11 6.75 16.08 6.05 DJIA Huh 787.78 943.08 950.82 1011.02 893.901 1697.71 2463.89 Advance Camp. 0 0101-600 ———– Pea!-, Ne. Hlhs 55 160 83 76 269 9' 54 224 37 74 332 PeaI-, New HUlh X 10.301 8.99 9.58 11.77 DJIA Hl!lh 991.71 973.51 915.10 1955.57 Advance COIIP. 77 81 61 52 To End Peak New HIghs 157 PeaI-, New Hl!lh Z 10.10 272 13.48 103 4.61 195 278 5.013 10.29 306 9.80 258 7.75 306 10.56 A few observations may be adduced. The first is that the 1982-1987 period appears to be exceptional as opposed to the two decades preceding it. During the five bull markets of those decades, the peak figures for new highs as a percent of issues traded—the fairest way of comparing the statistics over time—tended mostly to be in the 9-12 range. By those standards, the 10.56 level, which represents the high for this market so far, does not appear all that anemic. Markets that score most of their advance in their early phases also tend to produce concentrated peaks in new highs. In the present case, the rise has been fairly gradual. ThIS was also the case in 1962-1966, where only 37 of the eventual advance was completed in the first 200 trading days and just over half of the rise occurred in the first 400. Interestingly, never during the course of that ad vance were over 200 daily new highs achieved. Finally. it must be noted that the shape of the previous bear market has a great deal to do WIth the new high-figures for- thesubsequent upswing. As we all know, the two-month bear market of August-October. 1987 was unique in its shortness, and this made It difficult for the present advance to post large numbers of new peaks in the early stages, since the August, 1987 highs were still being used as a standard for comparison. Most of the other advances followed bear markets that lasted around a year and a half, and levels achieved at the top of the preVIOUS upswing were not taken into account when computing new highs. In addition, it must be noted that only since 1984 have new-high figures been computed on a 52-week basis. Prior to that time they included periods ranging from three to fifteen months. Although the effect of this varies. in many cases it has caused reported new high figures in the early stages of past bull markets to be higher than they probably would have been had they been calculated on today's basis. In the light of all this, current figures for new, 52-week highs, while not stellar, are probably not as bad as they have often been made out to be. ANTHONY W. TABELL Dow Jones Industrials (12 00) 2684.18 DELAFIELD, HARVEY, TABELL INC. S & P 500 (1200) 344.50 Cumulative Index (8118189) 4860.10 No statement or expression of 0p'lon or any ether matter herein contained IS, or IS to be deemed io be, directly or Indlrec1ly, an oHer orihe soliCitation of an oHerto buy Of sell any secunty referred to or mentIOned The matter IS presented merely for the convenience of the subscnber While we beheve the sources of our InformaliOn 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 subSCriber should be based on hiS own Investigation and Information Delafield, Harvey, Tabelllnc, as a corporation and Its officers or employees, may now have, or may later take. POSItiOns or trades In respec1to any secuntles mentioned In thiS or any future Issue, and such posr\ion may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabe!llnc , which IS registered With the SEC as an Investment adVisor, may give adVIce to Its Investment adVISOry and other customers Independently of any statements made In thiS or In any other ISSue Further information on any securrty mentioned herein IS available on request

T Lii.\ IBHEIL.IL.' S IilflI Lii.\!PI l e T IL.IETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 16091 9B7-2300 – -The4)ow;-finally;-joineU-the-otheraveragesltrhewallAtilung.FuslUt g2l5i,re1ff9i8t9Ory7'!ii'iiIt1ie'OOViou's–,….I…,…… question at' the moment is how far the bull market may carry. In this connection, we were intrigued by the sub-headline of an article on the front page of the Sunday New York Times business section. It read, Will the Dow hit 5000 by 1993. Investigation revealed, however, that the article did not get to interesting topics like the future of the Dow until near the end. Instead, it consisted of an interview with three eminent economists, discussing—pardonably—economics. These three gentlemen, A. Gary Shilling, Albert M. Wojnilower, and Edward E. Yardeni, interestingly enough, held widely differing views. Mr. Shilling is forecasting a recession, ultimately producing long-term Treasury-Bond yields of 4 to 5. Mr. Wojnilower says. flThere is not going to be a recession. and My forecast is that long-term interest rates will go up again. Mr. Yardeni forecasts the best of all possible worlds. no recession and slightly lower bond yields. Long-term readers of this letter will be aware that we have some skepticism about the relevance of all of this, having the usual technician's bias in the belief that the market tends to forecast the economy rather than the other way around. There is even some agreement from the economics profession itself on this subject, since the National Bureau of Economic Research includes the S 81 P 500 in its series of leading economic indicators. The gentlemen in the Times interview, however, disagree. Mr. Wojnilower contends, flVery rarely do the securities markets tell you anything useful about the economic outlook. 11, and Mr. Shilling noted that The market didn't predict 1929, or the 1980 recession. We hope we will be forgiven for remaining unconvinced. Although the message was certainly not clear, the market remained in a trading range—with nasty shakeouts in fall, 1978 and fall, 1979—for two years prior to the 1980 recession. Furthermore, correctly forecasting that recession would have been of limited usefulness since, starting from the recession's mid-point, the Dow posted a healthy35, yearolong gain. Thestock market admittedly,diLl1ot.o- I lead the economy in 1929, although the severify of that' break has iong been associated with theeventual depth of the 1929-1932 depression. This, of course, is what made similar market action in 1987 so scary. As the most bullish of the three interviewees, it was, unsurprisingly, Mr. Yardeni who looked for the Dow to be at 3000 by year-end and suggested, We are on our way to a 5000 Dow by 1993. We are not ready, at this stage, to disagree with this forecast, but it is interesting to note, in our capacity as market technicians, that such a forecast could have been arrived at via a naive approach, having nothing to do with economics. Readers are familiar with our compilation of the 24 major stock-market cycles which have taken place since the Dow was first computed in 1896. Measured using monthly average prices. these cycles have a mean length of 46 months, measured from low to low (thus the term tlfour-year cyclell ), with the advancing phase averaging 30 months. The average percentage advance for t!le 24 cycles has been 81 and the mean subsequent decline, 28. Overall, the low for each cycle has tended to be 26 above the previous low, and the highs have averaged out to 31 higher than the prior high. Given these figures, all we need to know is that the average price for December, 1987 was 1910.07, and we can arrive at the following scenario. Thirty months from December, 1987 takes us to June, 1990, by which time the Dow, if it advances 81, would be at 3457. A subsequent 28 decline would bring it to 2489, which figure, were it reached 46 months after December, 1987, would be attained in October, 1991. Why not go on Given the projected benchmark low of 2489 in October, 1991, we can then extrapolate a top at 4505 to occur in April, 1994. Now we are certainly not naive enough to offer the above as a forecast, and we have regularly noted the extreme variability of market patterns. Nonetheless, we do not think a composite of the market's behavior over nearly 100 years constitutes nonuseful information. What is interesting is .. the.plausibility of Mr.Yardeni'sforecast in.thelightof-the-..,.. historical record. What could go wrong We are, of course, not total disbelievers in the usefulness of economics, and what bothers us is Mr. Shilling's projected recession or, more properly, the possibility that it might turn into something even more serious than he projects. Were such to be the case, it is of course, our faith that the market would provide us with some prior warning in the form of deteriorating technical action. It is obvious, though, that such deterioration has not manifested itself to date. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (1200) S & P 500 (1200) Cumulative Index (8124189) AWTebh 2740.13 351. 73 4901.15 No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or indirectly, an offer orthe SOlICitation of an offer to buy or sell any security referred to or mentioned The matter IS presented merely lor the convenience of the subSCriber While we beheve the sources of our InformaltOn to be reliable, we In no way represent or guarantee the accuracy thereof nor 01 the statements made herem Any acltOn to betaken by the subSCriber should be based on hIS own Inves\JgallOn and information Delafield, Harvey, Tabelllnc, as a corporation and ItS officers or employees, may now have, or may later take, poSlltOns or trades In respect to any securities menlloned In thIS or any future Issue, and such POSition may be drtferentfrom any views now or hereafter expressed m this or any other Issue Delafield, Harvey, Tabelllnc which IS registered With the SEC as an Investment adVisor, may 91ve advice to Its Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further information on any secunty mentIOned herein IS available on request