Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-12-15
STOCK PRICE GAIN
ISSEEN BY AYRES
Cleveland Economist Says
Forecast of Starting Point
Is Difficult.
By EDWARD C. STONE.

terested in what Col. Leonard P. Ayres
Of the Cleveland Trust Co. has to say
regarding the financial outlook. In his
latest forecast he discusses bear mar
kets, speculation in business business
in 1880, brokers' loans and the stock
market. Regarding the stock market
he says, in part:
1T seems entirely probably that the
general trend Of stock prices in the COM
ing year will be an advancing one, but
1T is by no means easy to make a
judgment concerning the point from
which a sustained advance will get UNI
der way. The recovery of prices since
the middle of November has been eX-
ceptionally vigorous, but with business
slowing down, and many reports OF re-
duced activity still to come, it may well
be that some of the recent advance will
be Cancelled before a substantial upward
trend Of stock prices becomes estab-
1ished. Stock prices werer genuinely
low in the middle of November, as
judged by almost any reasonable stand
ards, but their percentage Of advance
in the II trading days following the
final break has been as great as that
of any whole year of the preceding
great bull market, and it may prove to
have been over-rapid.
"A fundamentally important fact that
should be kept uppermost in our think
ing is that large part Of the price
advance Of stocks In the bull market of
the past five years was fully justified
by the increased earnings and divi-
dends Of the corporations. In 1924,
when the bull market began, the market
value of the. outstanding common
stocks of 80 of the lss'gest corporations
was q little more than eight times as
much as their net earnings. This is the
relationship known as the price earn
ingS ratio.
Old Time Ratios Restored.
"In 1925 stock prices advanced
rapidly, but so did earnings, and the
price earnings ratio for the same 80
companies in that year was little less
than eight. The earnings had increased
even more rapidly than the prices. For
1926 the ratio was again just under
eight, and once more the progress of
the companies had justified the bull
market In their stocks In 1927, i'll
1928 and In 1929 the exploitation of
the stocks outran the increases in the
earnings until the stocks instead of
selling at eight times the earnings were
being trade in at more than 10 times
the earnings. At the closing prices of
November Is the market value of the
stocks of these same companies was
once more down to just over eight
times the earnings. The speculative
part of the advance had been cancelled,
and stock prices were no longer dis
counting the future, but were reflect
ing the present.
"a similar comment might be made
about the dividend yields of these same
stocks Some three months ago their
rate OF yield was little more than
3 per cent. At the present time it is
5A per cent, which IS just what it was
back in 1924 before the. bull market
Nara All Ia rk0
prices has restored the old-time rela-
tionships between prices, earnings and
dividends.
1.-THE bond market has been advanc-
ing in recent weeks, and there is good
reason to believe that it will continue
to advance as interest rates decline.
It may well be, however, that the dura-
ton and extent Of the advance in bond
prices will prove to be mildly disap-
pointing. Interest rates are declining,
but it does not seem likely that bust.
ness activity will slow down tc such an
extent that idle funds will soon be
seeking investments at low returns
Gold exports are under way. and that
will tend to restrict the fall of inter-
est rates. Meanwhile stocks of I'M
questioned solidity offer better returns
than good bonds"
Bids Asked on Sanitary Bonds.
The Washington Suburban Sanitary
Commission, of which T. Howard
Duckett is chairman, has asked for bids
on $250,000 Washington (Maryland)
Suburban Sanitary District bonds, to
pay "A per cent and run from 80 to
so years.
Sealed bids on these bonds will be
opened at the Office of the Sanitary
Commission in the Tower Building,
Fourteenth and K streets northwest,
this city, on or before 3 O'Clock next
Wednesday afternoon.
The bonds are to be put out in 81 900
denominations, as series ~" the inter-
est to be paid on July / and January
i. The proceeds from the new bonds
will be used in the extension of the
water and sewer systems in the towns
surrounding Washington which make
up the sanitary territory.
The bonds will carry all the exemp-
tons as to taxes Of Maryland municipal
bonds and are guaranteed as to both
principal and interest by Montgomery
and Prince Georges Counties by in
dorsement on each bond. The area OF
the suburban sanitary district is ap-
proximately 81 square miles and sur
rounds the District of Columbia on
three sides.
Local Bonds Active Yesterday.
In the final session for the week Of
the Washington stock market, bonds
drew their full share of attention. Po-
tomac. Electric Cons. SIS recorded a
$1,000 sale at 100 and $4,000 turnover
at 99A.
Washington Gas SIS. Series B, sold to
the extent Of $500 at 1882, while 81 900
series A bonds moved at 1918. WASH
ington Gas SIS sold in $4,000 and $4,000
denominations at 9934. The closing
bond sale was in Anacostia and Po-
tonac Guaranteed SIS at 81.
Capital Traction sold yesterday at
rs in very light turnover, holders evil
IDENTIFY waiting to see what the next
dividend will be-. Potomac Electric 8
per cent preferred moved at Ill, while
10 shares of Washington Railway g.
Electric preferred sold at esq.
Federal-American Co. common came
out at 329s, IS shares of Mergenthaler
Linotype changed hands at lot, 20
more at 107h and 10 shares Of Peoples
Drug Stores preferred sold at lot.
Banker Feted by Associates.
Waldo w. Young, who has been a
teller In the AnacoStia Bank for the
rast five years. was rendered dinner
last evening at the Occidental by his
close associates in the bank, including
the president. Maurice Otterback. Mr.
Young has Just resigned to become bust
ness manager of American University
at a reported substantial salary increase.
The dinner was preceded by theater
party and was followed by the pressn-
tation of q brief case to the retiring
banker MIR. Young came here from
5 Iowa, where he had been in the bank
ing business some 20 years. He as
sunnes his new duties at American Uni
Versity tomorrow.
Burton's Will Object Lesson.