Inside The Stock Market ...trends, cross-currents, and outlook

The stock market is maybe half or two thirds of the way through a secular bull move beginning in 1974. The cyclical bull market exploding in the summer of 1982 is still healthy according to our Major Trend Index, but for the first time in nine years is no longer “undervalued.” Shorter-term, an intermediate term correction is expected almost any time.

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An Analysis of Recent Social Security “Reform” – An act of fiscal responsibility this was not. Revenues were increased, but benefits were also significantly increased as shown in this fairly detailed review. Wilson Foods and Dick the Butcher – The legal eagles at Wilson Foods are using Federal bankruptcy laws to break a contract and, in the process, carving out a new low in union-management relations.

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All bull markets since 1896 are examined and compared with the current specimen in terms of cumulative month by month gains. In terms of dynamics, this is an exceptional market, but hardly unprecedented. Also, all the long sustained uninterrupted uptrends of the past (like those in the 1950’s) are examined. Is this another one of those? We don’t think so. The current specimen has gone too far too fast.

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The stock market is about half way through a secular bull move beginning in 1974. The cyclical bull market exploding in the summer of 1982 is still healthy according to our Major Trend Index. However, the intermediate term correction looks like it’s finally here.

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“How to Beat the Stock Market?” In a bubbling high-tech market, a strong dose of low P/E enforcement is good for the soul. So, in mid-March, my wife and I had dinner with good friend, David Dreman. “Inflation Watch – Time for Some Caution?” Today, with most inflation measures under 4%, we are approaching what has historically been an environment of moderate inflation, perhaps even price stability.

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We think the stock market, probably powered by an oil stock rebound, may run another 5%-10% before the long-anticipated correction becomes reality.

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Comments on current farm conditions, inflation measures, DJIA 1982 earnings calculations, “Whoops” bonds, California script, and Minnesota’s new oil field.

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In Search of Excellence, a new book on outstanding corporate managements is all the rage. But, as the authors indicate, it is not an investment book. We have extensively tested the past investment results achieved investing in companies with “best-management” reputations. It is not good.

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Science & Technology and Inflation Hedge (natural resource) stocks led the market in January. Near term rise in some commodity prices does not indicate high inflation returning. Longer-term measures still at comfortably low levels and most trending down. Don’t panic.

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Fearless Forecasts, our Annual feature of whimsical, but sometimes accurate prediction of coming events. Not for stuffy or squeamish readers.

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1983 Economic and Market Predictions: Economy has bottomed. Rebound to be somewhat stronger than most expect, with earnings up 20%-25% from 1982 depressed levels. Unemployment and T-Bond rates seen at 8.5% and stock market as high as 1250. Last year’s predictions reviewed.

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All systems again “go” for stock market. Major Trend Index remains Positive by comfortable margin. Short-term looks good too, maybe 1150 before another pause.

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A critical review of this publication’s 1981-1982 work…..the good and the bad, significant and insignificant.

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Some very preliminary signs inflation deceleration may be slowing, and CPI is now probably understating current levels of inflation. In 1983 two versions of CPI will be reported with CPI-U substituting rental factor for mortgage rates and home prices. However, COLAs and Social Security will remain tied to the old version.

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Steve Leuthold’s December 7th speech at a joint seminar sponsored by the New York Society of Security Analysts and the Market Technicians Association. Who says oil and water don’t mix?

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The most significant development since the last issue has been the renewed massive downside pressure on the oil stocks. Is it time to finally start bottom fishing in oils?

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The market is again exploding on the upside, about to make a new high. Twenty-three years of on-line market experience provides no operational guidelines for a market like this, even though the amplitude of the move and the volume relative to shares listed is not unprecedented.

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“The Analyst Looks at Baseball” - Several analytical approaches are applied, combining team payrolls, runs scored, games won and attendance in an effort to determine who are the best and worst baseball teams.….”Don’t Always Underestimate the Banks” - Soon banks will be offering their own money market funds. Existing money market funds say they are not worried about the competition. They should be.

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A new nationally distributed newspaper has been born, USA Today. This big gamble might just pay off for Gannett. It is refreshing indeed to see a corporation make a big bet on a high-risk long-term investment, especially in this age of corporate timidity and financial mechanics. Also, Irving Kristol’s remarks at the Western Pension Conference.

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In September the stock market moved sideways, and just as it seemed the underpinnings would finally crack, just as it seemed our expected correction was about to begin, an explosion occurred, on the up side, not the down side.

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