RAILROAD STOCKS MAIN TREND OR MAJOR SWINGS

The Railroad Curve is based on the Dow Jones’ 20 Railroad Stock Averages published by the Wall Street Journal. The issues used in these Averages are as follows; - Atchison, Atlantic Coast, B. & 0, Canadian Pacific, Ches. & Ohio; Rock Island, Del. Lackawanna&. Western, Erie, Illinois Central, Louisville & Nashville, N.Y. Cen­tral, New Haven, Norfolk & Western, Northern Pacific, Pennsylvania,Pere Marquette, Southern Pacific, Southern Railway, Texas & Pacific, and Union Pacific.

From the low in June 1921, to the high in November 1928, these Railroad Averages advanced nearly 80 points. They have made the highest price in history, getting above the extreme high level recorded in 1906. The fact that they advanced into new territory in the latter part of 1928 shows the possibility of many rails, which are in strong position going higher during 1929. But the fact that during prosperous times the railroads have been unable to earn an average of 6% on their capitalization does not make them very attractive from a speculative standpoint. Only those, which have merit and show large earnings, will have very big advances during 1929.

The fluctuations between extreme high and extreme low during 1929 are not likely to be less than 20 points and the average may be as high as 30 to 35 points, which means that many high - priced stocks will fluctuate 50 to 75 points between extreme high and low.

The Rails as a rule follow the forecast trend better than the Industrials because they represent only one group of stocks while the Industrials represent fifteen or twenty different groups. The Dow Jones’ 20 Railroad Stock Averages are representative of the railroad group and most of the railroads will follow Curve #1 very closely, therefore it is not necessary to give Curve #2 this year.

Railroad Curve #1, you will notice on page #2, runs down from January 2nd and bottom is indicated around the 5th to 7th. Top for the month of January is indicated around the 15th and after this date the main trend is down, prices working lower and reaching first bottom around March 9th to 11th and second bottom around March 28th to 29th. Accumulation should take place around this time and a bull campaign should start. First top is indicated around May 3rd to 4th; then a decline, followed by an advance with second top, possibly a little higher, around June 3rd. Then another decline and irregular market, reaching low level around June 28th and 29th. After that prices will work higher until around July 15th; then decline to the 22nd, followed by an advance to around August 8th to 9th, when final top on rails should be made for another big decline. After this top, prices will work lower from every rally. A big decline is indicated for September; another sharp decline in October, reaching bottom around the 23rd to 24th; then a rally running to around November 21st to 2nd followed by a decline to December 24th, when the 20 Rails will reach the lowest price of the year.

The following Rails are in the strongest position and should have the greatest advances at the times when the bull campaigns are indica

	Atlantic Coast Line Bangor & Aroostook Brooklyn Man. Transit Chicago Gt. Western C.M. & St. Paul Com. C.M. & St. Paul Pfd.	Del. Lackawanna & W. Erie Gt. Northern Pfd. Hudson & Manhattan Kansas City Southern Mo. Kansas & Texas	Missouri Pacific New Haven Northern Pacific Seaboard Air Line Wabash Common Western Maryland
	The Railroad stocks given below are those, which are in the weakest technical position; have had advances and show distribution. They will be the best short sales on rallies during the times that the Forecast indicates declines.
	Atchison Baltimore & Ohio Canadian Pacific Chesapeake & Ohio Rock Island Delaware & Hudson	Lehigh Valley Louisville & Nash. N.Y. Central Norfolk & Western Pere Marquette Texas Pacific Union Pacifi	AtchisoPittsburgh & W. Va Reading St. Louis & San Fran St. Louis & S.W Southern Pacific Southern Railway

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INDUSTRIAL STOCKS MAIN TREND OR MAJOR SWING

The Industrial Curve this year is based on the Dow Jones' 30 Industrial Stock Averages. Previously the Dow Jones' Averages, which are published by the Wall Street Journal, were based on 20 industrial stocks, but in the latter part of 1928, they changed from 20 to 30 and our Curve is based on the 30 Industrial Stocks. The stocks now used in these Averages are: Allied Chemical, Am.Can, Am.Smelting, Am Sugar, Am.Tobacco B, Atlantic Refining. Bethlehem Steel, Chrysler, Gen. Electric, Gen. Motors, Gen. Ry, Signal, Goodrich, Int. Harvester, Int. Nickel, Nash Motors, Mack Trucks, North American, Paramount, Postum, Radio, Sears Roebuck, Standard Oil of N. J., Texas Corp. Texas Gulf, Union Carbide, U.S. Steel, Victor Tk., Westinghouse, Woolworth, Wright Aero.

From the low level in August 1921, to the high level in November 1928, the 20 Industrial Stocks recorded an advance of about 230 points, the greatest advance in history. The fact that these Averages advanced nearly 100 points during 1928 is unparalleled in history. This year is like 1906, 1916, and 1919, when such violent fluctuations were witnessed and large volume of trading took place, only to be followed the year after by a panicky decline.

The minimum between extreme high and extreme low during 1929 for the 30 Industrial stocks will not be less than 50 points and the maximum fluctuation may be as much as 90 to 100 points. This means that many of the high-priced stocks will fluctuate 150 to 200 points between extreme high and extreme low prices. The lower priced stocks will move in a narrower range and will not make as much as the minimum between extreme high and low.

Most of the Dow Jones’ 30 Industrial Stocks will follow Curve #1 very closely. The high point for most of these stocks will be reached around January 12th. After that time, prices should gradually work lower and the trend should be down until around March 28th to 29th, when bottom will be reached for another bull campaign. Many stocks will reach bottom around March 14th to 15th and remain in a narrow trading range until the bull campaign starts in April. When the advance gets under way, some stocks will reach top for the year in May, others in June and some of the others, which are behind the market, will reach final high in August as shown by Curve #1 and Curve #2. A large majority of stocks will not go any higher than the highs reached in the month of July. After July and early August, the main trend will be down and some sharp declines will take place, prices working lower and reaching first bottom around September 27th to 28th. From this level follows a fair - sized rally and a trading market running into the early part of November. After that, the big bear campaign will get under way and stocks continue to work lower, reaching extreme low level for the year around December 23rd to 24th.

There are now over 1500 stocks listed on the New York Stock Exchange and often in one day over 800 different issues are traded in. Therefore, the 30 Industrials and 20 Rails do not always represent the main trend or curve of the market and many stocks will run in opposition to this trend. That is why I am giving you Curve #1 and Curve #2 on Industrial stocks.

Industrial Curve #2 represents the stocks which are in strong position and many of which are not included in the Dow Jones’ 30 Industrials. Many of these stocks have declined during 1928 and have been accumulating. They will advance while other stocks decline. Curve #2 indicates low around January 2nd fol­lowed by an advance up to January 31st; a decline to February 7th and high of next rally around February 15th. Then prices will work lower, making bottom around March 11th. Watch the stocks that make bottom at this time, as they will be the ones to lead the advance. After the low in March, this Curve continues to work higher with only moderate reactions until high is reached around May 17th to 18th. From this top a bigger decline will take place. The last low is indicated around June 22nd. From this level the stocks, which are in strong position and behind the market will gradually work higher, some of them reaching top during July while others will not reach final top until August 14th to 15th. After this top is reached heavy liquidation will start and prices will work lower from every rally. First decline culminates around September 30th; then a rally making top on October 2nd, followed by a decline to October 24th; then a final top around November 2nd to 4th, followed by a big decline, reaching bottom around December 18th to 20th; then a rally to the end of the year.

Below is a list of stocks in strong position, which should follow closely Industrial Curve #2. They will be the best stocks to buy on reactions:

	Ajax Rubber Amerada Am. Agri. Ch. Am. Beet Sug. Am. Bosch Mag Am. Brake Sh.. Am. Ship & Com. Am. Steel Fdy. Am. Sugar Am. Woolen Anaconda Armour A Assd. Dry Gds. Austin Nichols Barnsdall A Beechnut Bethlehem St. Booth F. Briggs Cal. & Hecla Central Alloy Cerro de Pasco Chandler Clev Chile Copper Congoleum Cons. Textile Sun Oil:p Am. & For. Pr.	Cont. Baking A Cont. Motors Cuban Am. Sug. Curtiss Aero. Davison Chem. Dome Mines Fisk Rubber Foundation Glidden Goodrich Goodyear Granby Gt. Nor. Ore Gt. West. Sug. Hupp Indian Ref. Inspiration Int. Comb. Eng. Int. Mar. Pfd. Jones Tea Kelsey Hayes Kennecott Kresge S.S. Lago Oil Loews Loft Elec. Storage	Lee Rubber Lehn & Fink Louisiana Oil Mack Trucks Magma Marland Mex. Seab. Mid-Cont. P. Nat. Pr & Lt. Nevada Cons. N.Y. Airbrake Otis Steel Packard Panhandle Pan Pete B Park Utah Pathe Ex A Phillips P. Pillsbury Fl. Reo Motors Republic Iron Reynolds Spg. Royal Dutch Shell Union Simms Pete Sinclair Oi Maracaibo	So. Porto Rico Sug. Spicer Mfg S.O. of Calif S.O. of N.J S.O. of N.Y Tennessee Cop Texas Corp Texas Pac. C. & O Texas Gulf Sul Transcont. Oil U.S. Rubber U.S. Smelt Va. Car. Chem Ward Banking B Warner Pictures Westinghouse Elec White Eagle White Motors Willys Overland Wilson & Co Worth Pump Wright Aero Yellow Truck Producers & Ref Elec. Pr & Lt. Mallinson Superior Oil
	The stocks given in the list below are the ones, which have been distributed and are the best to sell short around the dates indicated for the top on Curve #1. These stocks will have the greatest decline, especially in the early part of the year and again from August to December when a big bear campaign is indicated.

Allis Chalmers Allied Chemical American Can Am. Intern’l Am. Linseed Am. Locomotive Am. Radiator Am. Smelting A.M. Byers

Chrysler Coca Cola Cont. Can Corn Products Dupont Sears Roebuck Gen. Motors Hudson Motors Houston Oil

Int. Harvester Kroger Mathieson Al Mont. Ward Reynolds “B” Sears Roebuck Shattuck F.G. Stewart Warner Studebaker

Timken Tobacco Products Union Carbide U.S. Ind. Alcohol U.S. Steel Vanadium Victor Talking Woolworth

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WHAT WILL CAUSE THE NEXT DEPRESSION IN BUSINESS AND DECLINE IN STOCKS?

PROSPERITY! The great wave of prosperity, which this country has experienced during the past few years, has been in many ways responsible to the stock market. The great increase in the value of stocks has increased the borrowing power of various companies and has permitted expansion and even inflation. The pendulum has swung so far in one direction that many people have forgotten that it can ever swing back in the other direction, but one extreme always follows another and it will not fail at this time. Stocks, like water, always seek their level.

The great earnings of many large corporations during the past year cannot be expected to continue. Over confidence is just as bad as extreme pessimism. It is just as easy for a big man to make a mistake, as it is a little man. In my judgment many of the wisest speculators who have made large fortunes out of this bull campaign will overstay their market and be caught just the same as they have in the past. Then when the decline gets under way and they try to liquidate in a bear market, they will bring about a real smash in prices. It is one thing to mark stocks up to dizzy heights and quite another thing to be able to sell all of them near top prices. As stocks decline, forced selling both by pools and the public always comes into the market and causes prices to go lower than they naturally would if there had not been over speculation. The public never has been considered good leaders in a bull market. The fact that they are now in the market in greater numbers than ever before makes the technical position of the market more dangerous.

INFLATION: The volume of trading on the New York Stock Ex­change during 1928 was the largest in history and at this writing the total sales for the year have exceeded 750,000,000 shares and will approach 900,000,000 by the end of the year. Stock Exchange seats have had the greatest advance in history. Brokers’ loans doubled in 1927 and 1928. Such enormous volume of trading at extreme high levels with feverish markets and wide fluctuations can mean only one thing, - that the pools and insiders have taken advantage of public buying to liquidate stocks and when once they have sold all they have to sell, they will not support the market. With the public so heavily involved in such large numbers and being unable to support the market, when once the decline gets underway, it will be more sharp and severe than ever before. Loans will be called and bankers will make new loans only on the very best security. We will hear of many stocks being thrown out of loans.

Another contributing factor to inflation was our large hold­ing of gold but this has changed materially during 1927 and 1928 when more than half a billion of gold has flowed out to foreign countries and there are no prospects that it will not continue during the next few years.

INSTALMENT BUYING: People are still living beyond their means and instalment buying continues on a large scale. We believe it will yet prove to be the greatest menace to business and to the prosperity of the country. When depression sets in and unemploy­ment increases and people are unable to pay for goods which they have bought on a credit, buying power will be reduced and many companies will not only lose business but will lose money on goods sold on a credit.

AGRICULTURAL SITUATION: Has been so unfavourable during the past few years that the Government has had to devise means to help the farmer and no doubt President Hoover will see that some law is passed to remedy this condition. However, we are in a cycle, which is likely to produce crop failures or a series of small crops for some years to come. This will reduce the purchasing power of the farmer and help to bring about deflation in stocks.

PROSPERITY COMPLEX: The recent wave of seeming prosperity has been due to the psychological effect on people. They have watched stocks go wild in the past three years until they are hypnotized into believing that every concern and everybody is prosperous, but facts do not confirm it. During 1927 about 45% of all concerns making income tax returns showed a loss in business and 1928 will not be much better. It is now a survival of the fittest. The small businesses are failing more every year. Conditions are changing so fast that many old firms are being forced out of business. Electricity and oil are taking the place of coal and wood. Automobiles supplanted the horse, and the railroads, despite the large increase in population and business, have not shown as great earnings as they did 20 years ago. Many industries have not been prosperous for some time. The textile, coal and agricultural industries have suffered. The oil situation has been bad until recently. The rubber industry has been demoralized by low prices. Sugar has been at low levels for the past two years. When people realize that prosperity is not general and confined to only a few lines, and then they will have the “panic complex."

PUBLIC CONFIDENCE: As long as the public believes that everything is all right, they will hold on and hope, but when public buying power has exhaust itself and the largest number of stock gamblers in history lose confidence and all start to sell, it requires no stretch of imagination to picture what will happen. When the time cycle is up, neither Republican, Democrat, nor our good President Hoover can stem the tide. It is a natural law. Action equals reaction in the opposite direction. We see it in the ebb and flow of the tide and we know that from the full bloom of summer follows the dead leaves of winter. Gamblers do not think; they always gamble on hope and that is why they lose. Investors and traders must pause and think, look and listen, and get out of stocks before the great deluge comes.

WAR: Our great prosperity has caused jealousy throughout the world, and as conditions get worse in foreign countries, greed and, jealousy will lead to war. It is the hungry dog that starts the fight. A study of the rise and fall of nations shows that when any country enjoys unusual prosperity for a long period of time, war is one of the main causes of the start of depression. While we hear a lot of talk about peace, the facts show that many of the leading foreign countries as well as our own country, are spending more money preparing for war than ever before in their history. When a man or a country is armed and gets ready to fight, he usually gets what he is ready for.

FOREIGN COMPETITION: Germany is rapidly coming back and competition for trade will be keener in the coming year. Many of the other foreign countries are making desperate efforts to regain their pre - war trade and will make progress along these lines, which will hurt our business.

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