Writing on the Wall...Street
Charles II. Stahl
The US unemployment figure reached 6 per cent, matching a three year record, and layoffs continue to increase. It is our contention that the recession will be most pronounced during the first quarter of 1975, and that the economy will" be back on an expanding course by the second half of 1975, which is precisely what the rising stock market is anticipating. We believe that the Dow Jones Industrial Average made a bottom at 584.56, and that once it closes over 673.50, all the chartists and technicians will acknowledge that the market has completed a classical reverse head and shoulder formation.• The prime rate declined from 12 per cent to 1034 per cent, and a further easing of the money supply is expected to follow. It usually takes from six to eighteen months from the time of relaxation of monetary restraint until the economy begins to expand; therefore, despite the current economic bad news, stock prices will be trending up.
The British stock Market dropped about 60 per cent from its peak, and the Dow Jones Industrial Average about 52 per cent; it is high time that the capitalist world should start bidding up the prices of Us companies in the stock markets, to prevent OPEC countries from purchasing our industries at bargain prices. The Arab bid for IBM may have been a trial balloon, but already the small island of Jamaica, which is exporting bauxite, and not oil, has purchased blocks of shares in Kaiser Aluminium and Reynolds Aluminium at very low prices. With oil prices being now four times what they were only a few years ago, and stocks priced at about half of what they were at their peak, those who prepared themselves for the end of the world and dumped stocks and cash to purchase gold and gold coins would do themselves, their country and the western democracies a great favour by switching from the yellow metal into equities again.
The current upside move in the price of gold, in anticipation of legalised trading and ownership by Americans, on whom everybody else hopes to unload, is probably the terminal run; we expect that whatever the peak in the price of gold between now and the first quarter of 1975, it Will stand for many years unchallenged.
Charles Stahl is President of Economic News Agency and publisher of Green's Commodity Market Comments
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