Wall Street Week with Louis Rukeyser; 1116; George Lindsay's Opinion

Wall Street Week. Brought to you by a grant from the Martin Marietta corporation and by this and other public television stations produced Friday October 16. Your host for Wall Street Week You guys are our panelists are Frank Kapilow Gail Dudack and Carter Randall. Tonight's special guest is George Lindsay technical consultant Ernst and company. Good evening I'm Louis Rukeyser This is Wall Street Week. Welcome back. Well this was the week when Wall Street got much of what it had been asking for and then decided quite characteristically that it didn't like it. The economy is simmering down as requested. Industrial production took its worst fall in more than a year. Business inventories are rising ominously and the housing industry's trade association said its members were

virtually out of business. All that cheerful information beautifully paved the way for what Wall Street allegedly has been yearning for a tumbling prime interest rate. Most major banks took that key rate down to 18 percent which while still astronomical by historical standards happens to be the lowest it's been nearly half a year. Why then outside of downright perverseness to the stock market reverse a sharp two week upturn and go down for days out of five. Was it merely digesting its gains as they say. No was it making a ruder noise. Well two things seem to be preoccupying the lads and lasses. First they weren't all that sure that interest rates really were coming down for long. Henry Kaufman made his usual doomsday noises and some short term interest rates did buck the downward trend. Second the traders discovered to their apparent horror that this slower economy for which they had

been pleading also meant lower corporate earnings. Well what do you know about that. With reports like that 22 percent drop in net income at IBM Not to mention a 29 percent profit for all it. Wall Street's own Merrill Lynch. Many investors seem to decide that this recession thing wasn't all that was cracked up to be the economy to be sure continued to be a mixed perhaps mixed up bag. Domestic cars moved at the slowest pace since 1957 for example but overall retail sales managed an anemic gain and earnings actually improved in some scattered areas including entertainment and banking often thought of as being much the same thing. Three major banks Chase Manhattan Bankers Trust and Security Pacific reported strong third quarter performances or as they say in the business. Prime time if any of this leave you confused just hang on for

one more week. The Joint Economic Committee of Congress has scheduled hearings to decide once and for all whether we're in a recession. I can't wait to hear. Or you might prefer a slightly longer frame of reference. In that case my guest tonight should be just your man since way back in 1969 he offered a 12 year forecast for the stock market. And tonight we'll be checking it out. But first let's try a five day report on what's actually been happening in Wall Street. And as the Dow Jones Industrial Average indicates the market was shaky with Wednesday the worst day in six weeks and what some saw is just a necessary correction after a forty nine point gain in the previous two weeks. The Dow gave back 21 points to close at eight hundred fifty one point sixty nine and it was more of the same for the broader composite indexes of the New York and American stock exchanges and the over-the-counter market.

Also giving back a bit where are Elves whose technical market index went down a notch to only A-plus to reading which is supposed to mean just the vaguest of bullish tendencies and those elves sure know a thing or two about being vague. Nothing vague about the gold market though. After all that excitement caused by the Sadat assassination traders apparently concluded that well War Three was not about to erupt. And so the medal lost close to 8 bucks an ounce to close around 440. The dollar Meanwhile strengthened against all these cross currents. Thank you Al are we now heading for that one grand washout that so many people have been waiting for. We're heading for a test of the of the old loves and my thinking is will probably end up in the eight twenty eight fifteen zone and we'll stop there and that may be a sufficient test for most technicians and it will go up again. Is the market really dominated by these technicians. Careful we have one here tonight

negative. No but they do they do seem to have an effect on turning points in a market and I'm not one to buy a stock that has a bad technical pattern. We want everything going for ourselves. Are you a closet technician as a technician. Yeah I guess every once in a while like a mound take a look at my charts. So that's what you want to do is see the market go down to 15 or 20 not go any lower. At that point you're courageously step in to buy some stock. Well we've been nibbling at some stock stock groups all day long because a lot of the stocks will not correct with the market. Most of the number of good stocks have already had their correction. So you've got to play it as you see and the way I see it is some of the better stocks have already had their correction and you you nibble away whether you nibble these days. Well one of the areas today believe it or not are in the building stocks. They've been battered they've been torn apart by high interest rates by the disassembling of the structure of the entire industry and I would be looking at building stocks I still have electric utility stocks. My target list I'd be

attracted to certain regional banks and some of the technology stocks. President says you want to put our house in order you say that means building stuff. You bet. But Amanda I assume you were not the technician he was talking about. What do you as a good fundamentalists think of this market's action. Well I think the market is reflecting the facts whether they know it in Washington they have to have meetings about it or not we're in a recession and that means slower economic activity rising unemployment and it means lower sales and earnings based on a real basis for corporations in the market is saying with sluggish earnings and high interest rates available from the bond market in money market funds what's the incentive to buy stocks have only now. I also think there are areas that investors should should be in for instance growth areas like crime crime crime the crime on which side. Well you're on the side of the companies that are fighting crime. Oh a company like science or magic for instance is a crime fighting equipment company. I think you have

to be in areas like cable television Time Incorporated is the leader there. Well you don't worry about economic cycles with stuff like that that's that's what I'm saying. So you're being cautious in general but you'll be picking up selected areas that you think will stand up at this period. That's right and it's not time for the cyclical stock in my opinion. The ones that are tied to the general economy that's right already go do that I assume you with the panel technician to whom Frank was alluding. What do you think of his technical analysis tonight. I think he's a good closet technician who I think is doing a right I tend to agree I think the market looks like it's going to test that low here and it should be a good test I would expect to be successful and we will have a rally from that low. What makes you think that. Why do you say it's going to go down there and be successful. What are the factors. Well a number of things. One of the things you look at as a technician is extremes when you get some extremes in your numbers. You know that you're in a trend that's unsustainable and that happened on September 28. We saw a lot of

extremes that is the volume that came in and the number of stocks that went to new lows were very high. The Dow had lost 100 points in that last four week period. Unsustainable move. So you know you're you're at a point where you're looking at a decent buying opportunity at least for the intermediate term. But why do we have to get out untested since you all know it so successfully Why can't you just go. It's probably I think that there's a market psychology starts to take a role because very rarely do markets move up without a test. In markets the stocks will move up and people will get fearful and there's profit taking. And that creates a weakness near-term. And so you have a test solicitor who flunked the test without a 780 then change evidence. No you see I think that what's going on now is is you really have to focus in on stocks not the Dow if the Dow were to break that in there is where I may disagree from from Frank. If the Dow to break that low of a 24 slightly or whatever. I don't think that that would change my opinion was just seeing too many extremes right here

anyway. I think the market will still reverse everything in moderation. Yes. In any event panelists It's time now to rush to the aid of our viewers. Frank Caprio and Paul Mackenzie of Washington D.C. is aware that many big companies now have dividend reinvestment programs under which the company's stockholders can buy more shares without paying brokerage commissions. He wonders whether it will be possible to buy a single share in these companies and then get many more commission free. He says the brokers he's asked about this possible maneuver seem to as he put it. So I the conversation away from this topic can be expected the answer is yes he can do this. Well we're talking about the dividend reinvestment plan is a good way for an investor to increase his or her holdings in a company's stock by reinvesting the dividend without commissions and you also get the benefits of dollar cost averaging. And what happens is each quarter instead of taking the dividend you allow the company to buy additional shares of stock. A lot of companies also have the provision that you can put up additional cash up to anywhere from

$10 for some companies per quarter to $1000 per quarter. So theoretically one share of stock could get you some additional shares if you can see and without commissions and it's pretty nice. There is an additional factor Lou a new tax law that should be called a point and that is. Beginning January 1 investors uncertain utility stocks almost all of the electric utilities can get the benefits of a tax reduction of seven hundred fifty dollars of their dividends if they reinvest in the common stock of the utility using the dividend reinvestment plan. It's a good idea. Car rental. Earl send Vega of Portland Oregon has noted the recent controversy over interior secretary James Watts plans to free millions of acres of public lands for energy exploration and for some other forms of development. He wonders which companies are likely to profit most from this policy change. Well it certainly is controversial but it is really an expansion of already developed plans is not really a new policy the government owns 22 percent of the land of the lower 48 states. That's a lot of

land and offshore land. There will be more exploration and development for oil and gas in those areas. Hard to say who will benefit. Of course the major oil companies will. But I think probably the safest bet is that it is the seismic companies companies like geo source or geophysical field survey or did you con. And of course the oil service companies too. It's a long term proposition not a not a way to make a quick buck. Seismic company isn't showing up and shaking around a little bit. Yeah do that Stuart Baldwin of Cambridge Massachusetts has read that some of the small executive charter airline companies are reaping the benefits of reduced flights by the major carriers as a result of the air controllers strike. One of the best companies to invest in I guess if I would take a flyer in this area. That's Here's a great idea dear Luke I think the question is are the charter companies really benefiting and I think in truth the answer is No. With the air controllers strike has really

done as is restricted air space that is the number of flights across the border being restricted and they're being in airlines charters commuters are all being hurt. I would think that if you want to take a flier I would go wing it with a few of the regionals that are not under these restrictions or at least so far have not been constricted and the only two that come to mind here are Piedmont and Air Florida. And a footnote that I was not able to really find or think of any charter companies that are traded publicly we can operate in a crash. OK. Now if some of your investments have been grounded lately and you've been a victim of blue sky promotions let's try to help you into the depths that you feel airmail your money questions along to us here at Wall Street Week Owings Mills Maryland 2 1 1 1 7 that's Wall Street Week. Owings Mills Maryland 2 1 1 1 7. Now before we meet tonight's special guest let's take a look at an exceptionally bold 12 year

forecast he made back in 1969 and see how accurate it's turned out to be. Despite many forecasts during the 1960s that the Dow Jones Industrial Average would soar incredibly during the next decade. George Lindsay quite remarkably correctly foresaw not a doomsday collapse but an overall flat performance with the Dow winding up notably close to where it began. Not all the details were correct of course but some of those long ago forecasts were extraordinarily like his prediction in 1969 that the Dow this year would trade between eight hundred seventy and a thousand. Along the way is the Dow's actual performance indicates he had the essential trend right for the first five years after which the oil embargo and Watergate helped send the market down just when he had thought it would be peaking. Since then his performance has been more on even though he often did have the direction

right. And all in all he wound up much closer to the mark than the outright bulls or bears. Can he do it again. What does he think about the next 12 years. For some answers let's woman now and me tonight special guest George Lindsey for. Joining While come we're delighted to have you here. Glad to be here. Please. Join Lindsay has been writing market letters since 1951. And in that 30 years he has developed a wide reputation as a pioneer in various forms of technical analysis as well as an especially courageous Wong range forecaster. Since 1975 his crystal ball has resided at Ernst and company. George what have you got for us in the next 12 years. Well I haven't drawn my next 12 year forecast yet. I have ideas for the next two or three. Well that's just very short

range for yeah I'd be delighted to hear that first I think the next major a terrific bull market. Will not be new Until about. 1985. But in the meantime we're going to have a ordinary bull market. George what were you up to in 69 other than a wild guess how can anyone really make a 12 year. I don't remember my motives honestly. But I must have had some motive. What went into your calculations. Well I have six or seven timing theories. And one of them can be very slightly simply stated. There is usually a high. About 12 about 15 years after every major row. The other is there is usually an important

low about 12 years and a few months after every important. Well by that standard since we had our biggest low at the end of 74 why aren't you predicting this big bull market in 89. 8. You should see the culmination of my bull market to. What how about right now about what we do Monday morning. I think the decline of the past weight will continue a little bit. But I do not think it will be a thorough test of the law made on. September 28. A third test implies a new law. I think the Dow will probably hold somewhere around. 20 or 25. One of the many things that you have said that is often quoted by those who follow your work is time is more important than price would you get plain with that means.

The length of time in the market are more nearly uniform the number of points the average goes up or down. Now suppose there were three lows in the Dow Jones Average. One is five points above the other one of seven points below the other. I can tell. I can forgotten to consider any one of those three. On the basis of my time theory. But those who have our price can consider only one of them. Well is it time now for us to have made our bottom in this move the bottom that we have just made. Was Too Good To Be The merely the bottom of an intermediate setback. But I don't think it was quite good enough to be the start of a major bull market. Technically I think we're in a bear market.

I hate to mention the word bear market but you must remember that all major bear markets have two sometimes three very strong rallies. Which. Are suitable for traders. I define a trader as anyone who buys a stock to hold for two days to six months. I'm a little confused you said we're in a bear market but earlier you said we were going to be in a bull market. When and when do we get out of the bear market into the bull market. The end of the bear market. The earliest I can count is about. August 26 1982. It might be a little later. When we go lower than we've been between now and then probably. But I'm not one of these 600 boys. I think 750 to 70 is more like.

The new range of the final low. August 26 1982. How do you pick the day like that. And can you tell me precisely what time Eastern are you know about 7 right now that is the count for the middle section. The standard time span ends which appeared in the encyclopedia of stock market techniques. But you're thinking the exact day of a low or a high is usually done by the count from the middle section. Your predictions are so specific and so long range that I think the remarkable thing is not that you're sometimes wrong but that you have a right. I think you're absolutely incredible. I like you know I meet some of my 12th year forecasters starting with Frank George. Given your preciseness What does an investor do now. Should an investor be buying stocks. What stocks to buy or should they be waiting with their menu

list and be ready to present your investor should do nothing but a trader. OK trader may start buying. I think. This little dip we're having now should be over by about a 20 second or 23rd of October. We love it. And if the market is lower then than it is now you should by all means start by George. I know you follow and track a price of gold which is not yet actually stocks. First of all how do you do that since there isn't that much of a history of it at least in this country. And secondly what are your predictions for the price of gold. Well I don't. Make very definite predictions about gold I thought they were new. Gold stocks and gold bullion were due to react. But I don't think I'll go down very far and neither do I think I'll ever go back to 800 ever.

Church do you use the same method in selecting individual stocks do you use the same timing method or are there other methods in individual stocks and what stocks do you like. I chiefly rely on relative strength in picking stocks. But it must be a good stock. It must be a stock chart pattern I like and. It must show relative strength. I prefer relative strength only for a number of weeks. A stock that is showing relative strength for months and months might be through for the time being. Do you have some names for us. Yes. The best acting stock I watch now was Western Union. And I would certainly buy it if it went down to twenty six and a half to 27 range. But it seems not to want to react at all. Ha ha into the stock I recommended a over a year ago and that is equally

strong. After the split. That's remarkable first block to maintain somewhat strength after a split. Among the lower priced rocks I like Bridget tronics. I buy that in the 16 17 range. Southall incorporation which runs a. Series of. Food Shops comedians food shops through the south. Should be bought between twenty eight and twenty eight and a half. Mountain fuel supply is a nice moving stock for its price. I buy that in the 34 35. No those are all my definite selections for the present. George Well of course not endorsing your list and I point out that even a heavy hitter like you can strike out sometimes I want to take you to the other side you said earlier you didn't like to say we're in a bear market. Well

the stock market lets you make money both ways. They have a device called short sales where you can sell stocks are going to go down. Do you have any candidates for short sales. Not right here no because I expect three rallies. There's three rallies. One should start the 22nd of October and I do have high indicated for November 24th. Then a dip. And then I December 20 for. A rally after Christmas and I hire about me some of the 30 years of 30 first that might embrace either the second or the first rally. Then I think they'll be with us in January and I look for a peculiar. Market in February. March and early April perhaps. They'll be another rally at that time ending

probably early in April. Now usually in a bear market the first rally is the strongest and goes to the highest level. In this case I just have a suspicion. That the March April peak will be the highest of the three. Want to put a number on. But where is it we might get. I think the Dow can get to the nine forty five 950 range by that. And you're just ending the year pretty strongly how high would you expect it to be then. Bout. 9 20 that's that resistance area that all John isn't talking about. Now you said that August 26 of next year we're going to we're going to start this new bull market. Yes. And I guess on how high that one may go. I think it will start as a gradual bull market somewhat like the bull market of the 50s

1958. It won't be the dynamic kind of bull market. Such as we had 28 or 29. No that will if that's coming at all it will come in 1985 or 1988. I can't wait. Thanks very much George Lindsey a man who is two stock market specifics what Hercules west of tearing down buildings. Thanks to our panel and I hope you'll be back with us again next week when my guest will be one of the top commodities analysts in the business Paul sawing off a prolific and widely hated writer in the field will give us his views on what lies ahead for commodities. So do join us and decide if there should be a commodity or two in your futures. Meanwhile there's been Wall Street Week on Louis Rukeyser tonight to Wall Street Week With Louis Rukeyser has been brought to you by a grant from the Martin Marietta corporation. And by they sent others. Television stations.

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