Market Decline?

Col. Leonard P. Ayres of Cleveland is an admirable prophet. Employing no mysteries or obscure language, he states not only what he thinks of the future, but also why. Thus the reader of his predictions can judge not only his conclusions, but also his methods of arriving at them.

Col.. Ayres believes that the long-continued advance in securities prices will be brought to an end within the next few months. Pointing out that bond prices are now higher than they have been for eight years, and that average industrial stock prices are higher than ever before, the Colonel declares that this situation has resulted from easy credit rather than from high current earnings or brilliant prospects, and that therefore rising interest rates this fall will call a halt to it.

As proof of this view, Col. Ayres has charted since 1890 the average yields on 60 high-grade bonds and the current rates prevailing for 90-day "time money" on security collateral, as well as the average price for industrial stocks. As a rule, he discovers that stock prices have risen during periods when time rates were lower than bond yields, and nave fallen when time rates were higher than yields.

Recently, time rates have been considerably below bond yields, but with a tendency of late months to seek a common level. Col. Ayres believes that in the fall, with heavier commercial demands for money, time rates will rise. And this, he concludes, will result in a decline in both bond and stock prices.