Latest Research

The Major Trend Index remains in “neutral,” but it appears the correction lows may have been seen around 1120, DJIA. Our “Early Warning” work remains constructive.

Two of our specialized evaluation tools are examined. The Royal Blue Index relative valuation work indicates the higher P/E quality growth issues are now undervalued compared to institutional low P/E favorites. But our Growth Vs. Cyclical timing studies seems to be telling us a major move into these quality growth issues still might be somewhat premature.

We have just updated three of our quantitatively screened sectors, “Consumer High Growth Stocks,” “The Growth Bargain Basket” and the “Undervalued & Unloved.” A great number of new stocks have qualified. This section describes the screens, presents the past performance and lists the additions and deletions for each.

T-Bonds broke the August 1983 lows, but municipals and corporates seem to be holding. Pessimism is rampant. Investors should consider buying T-Bonds now. The biggest risk may now be not owning bonds. Positive action on the deficit could kick off a large rally.

The February 23 memo advised clients of new tactical move into a package of major airlines, a 6 to 12-month tactical play. The sharp 23% decline in Airlines since Jan. 20 is viewed as a rare second opportunity to buy an industry in the midst of a profit surge at pre-recognition levels.

Our Major Trend Index is down to Neutral temporarily, but we think the market is now in final washout phase of the long complex correction dating back to late June 1983. Our guess at this time is the late February lows will hold.

The mega merger mania may be about over. Our model scored big with Getty and now Gulf. We cashed in half of the 4% Gulf position at 69 on January 29 and have just sold the rest at 71. $80? Well maybe, but why be greedy? The party may be about over.

Our “High Tech Thirty” index on Feb. 23 was down 45% from the June 1983 peak. That, coincidentally was the target set by us in summer 1983. The worst might be over for these battered and beaten stocks. A few are starting to look interesting.

The biggest financial burden may not be the skyrocketing costs of plants under construction. The eventual costs of decommissioning the now operating plants may be even greater.

This strategy move was discussed last issue. Here are details, including 63 bank stocks that survived our screens. Also, our initial eight selections. This is damn difficult research, but more is coming soon.

The bond market has come back down in our 12% (T-bonds) buying zone. We would buy Zeros and Long T-bonds. A short-term clear break to new lows would not surprise us, but our minimum 1984 Long T-bond target is 10.5%, maybe lower if significant action is taken on deficit.

Financially sound regional banks that may, in coming years, be swept up in the now emerging consolidation trend may have significant performance potential. In addition, they should experience a profit surge when interest rates come down. We think potential downside risk with these stocks may also be less than the market.

Our Major Trend Index says it’s still a cyclical bull market. The market is now in final washout phase of the long complex correction dating back to late June 1983. Expect to see lows momentarily, followed by powerful upswing carrying to new market highs by summer.

Does it make sense to buy the traditional “defensive” stocks in the later stages of a bull market? If upside potential is viewed as only 20%-25%, it may not make much sense at all. However, we think risk can be reduced without giving up much potential reward.

If a manager has the freedom to buy bonds, there does not seem to be much reason to buy interest sensitive equities as a strategy unless there are other positive factors. Tables in this section demonstrate why. However, if you can’t buy bonds the next best thing is buying high yield top quality utilities with minimal nuclear exposure, as close to a bond proxy as you can get.

After drifting lower in December, the bond market drifted higher in January. Corporates turned in the best showing, with two-point gains fairly typical. Municipals were up 1 1/2 points while Long T-bonds moved up about a point. Yields declined 20 to 40 basis points, depending on the type of security.

Frivolous flights of foolishness and fantasy that come remarkably close to reality. First a review of some old foolish fantasy forecasts that came true, or close to being true in the last year. Then, as is our annual tradition, we once again put our forecasting reputation on the line with a new set of prognostications. Not for the more serious readers.

We think the cyclical bull market is still on track even though our Major Trend Index did drift down into Neutral territory in the last two weeks of December. An Interim Update concerning this will be sent out January 9 when the first calculation of the new year is made. We suspect the Index has moved back up into Positive territory this first week of 1984.

It’s now 1984 and thermal pollution time – our annual economic and market outlook. Actually, this (unlike our New Year’s Day Brunch) is a relatively harmless tradition. It is only harmful should investors take it as seriously as do some of the prognosticators.

The bond market remains in our buying zone. We expect last summer’s lows to hold, and very soon, a sharp upward move in bond prices.