General Outlook for 1929

This year occurs in a cycle, which shows the ending of the bull market and the beginning of a prolonged bear campaign. The present bull market campaign has lasted longer than any previous campaign in the history of this country. The fact that it has run longer and prices have advanced to such abnormal heights means that when the decline sets in, it must be in proportion to the advance. The year 1929 will witness some sharp, severe panicky declines in many high priced stocks.

The history of the stock market has always been that it discounts prosperity and that in doing so prices always advance too far. In other words, the stock market runs too far ahead of prosperity and the first decline is only a readjustment back to what stocks should sell according to their merit and investment return. Then, when business depression sets in and earnings start to show a falling off, stock prices continue to go lower, discounting unfavourable business conditions.

But such groups of stocks as the oils, sugars, rubbers and some of the agricultural stocks, which have been depressed and declined while other stocks advanced, will record much higher prices in 1929. New and popular industries will continue to prosper, such as, radio, airplane, chemical and electrical concerns. This is the electrical age. People take quickly to new inventions, especially those which provide for the convenience and comfort of living. This will increase the earnings of concerns manufacturing new electrical appliances.

Many stocks will be distributed and will work lower while the stocks in strong position work higher. With such a varied list of stocks representing so many industries in different parts of the country, it is not reasonable to suppose that they would follow the same trend by any means.

More and more business is getting into the lines of mass production, mergers and consolidation. The big companies are get­ting the business while the smaller companies find it harder to get business enough to return a fair amount on their capital stock.

During the early part of the year, business conditions will not be up to general hopes and expectations. In the spring and summer, business will improve and the outlook generally will be cheerful. But again in the fall of the year, depression will set in and unfavourable business conditions will cause big declines in stocks. Money rates will be high the greater part of the year.

During the year 1928, the public has entered the stock mar­ket on the largest scale ever known in history. Foreigners have bought our stocks more than at any time since or prior to the outbreak of the World War. The American public is no longer making safe investments in stocks. They have the gambling fever and are buying everything regardless of price, simply buying on hope that stocks will continue to go up. This is a dangerous situation and has always resulted in a big decline. There will be no exception in this case.

The man who makes money buying stocks in 1929 will have to use greater discrimination than ever before in selecting the right stocks to buy. When once stocks have reached final top and start on the way down, they will continue to work lower and rallies will get smaller. Those who hold on and hope will have big losses. The markets will move over a very wide range and sharp, severe de­clines will be followed by quick rallies. It will be necessary most of the time for a trader to be very nimble and change position quickly in order to take advantage of the opportunities as they develop in an active market.