FINANCIAL NEWS FOR THE ALTHOUGH every one familiar with come public through the death of several of even the rudiments of general finance America's richest men, does not disclose, exis well aware that United States Government cept in the single case of Joseph Pulitzer, bonds are wholly unrelated to the subject of any holdings of Government bonds. The private investment, nevertheless the interest reason for this state of things is clear and and curiosity which private investors take in explicit, but the fact remains that small inthese securities are at all times remarkable. vestors time and again ask about United Financial editors of newspapers and maga- States bonds before reluctantly turning elsezines often receive letters from persons in where to others. remote localities wanting to know if Gov Government bonds are secured by nothing ernment obligations are not the safest bonds but a people's honor, but in the case of naobtainable. Often the recipients are aston- ticns like England, France, Germany, and ished at the frank tone of these letters. "I the United States that is a very great deal. am willing to content myself with only 2 or There is something impressive and solid 3 per cent.," they say in substance, "if only I about an entire country's obligation to pay. can be sure of absolute safety.". Confidence of investors in this particular na"Will you please tell me if United States tion's honor is strongly fortified by a more Government bonds are considered safe," prosaic but certainly important safeguard, writes a woman from Colorado; "what in- namely, that the country is more than able terest they pay; whether I could sell them at to meet its obligations because of its unima bank at any time, and where I can get paired resources, financial, agricultural, and them." industrial. The United States also has a There come periods when nearly all forms peculiar distinction in that it pays off its of investment fall under a cloud. A long debts when they come due, unlike several series of failures and bankruptcies caused by other great nations. Economists debate the over-expansion and a lack of working capital question whether it was wise for the United undermine faith in nearly all securities, just States to pay off its huge Civil War debt so as at times banks come under suspicion, and soon, instead of leaving part of the burden hoarding of money results. The mental at- to future generations. Recovery from detitude of investors is shown by such remarks pression would have been more rapid had as: "How can I tell what is safe?" "Per- not this huge debt been paid, but on the haps I would be better off if I spent my sav- other hand the country's credit was greatly ings for an automobile, and then I would at enhanced by its prompt action. Then, too, least get some return for my money." At nearly everyone knows that a Government such times men and women begin to ask bond is about the only kind of security upon about Government bonds, only to be told which a bank will lend up to practically its that it would be foolish to buy securities returning so little in the way of income. for the better class of railroad and municipal bonds the variation was from twice to four times as great. full value. In time of panic no other security will so nearly hold its own. In 1893 The United States of America has out- and 1907 the average extreme fluctuation of standing about $1,142,000,000 of bonds and Governments was 5 and 5.7 points, while only some $212,000,000 of these are owned by investors. Large numbers of those classed as investors are really banks and institutions, so it cannot be said that the individual has Of $1,142,449,470 United States bonds, much stake in his country's funded debt. $642,327,050 bear only 2 per cent. interest. The force of this statement is made even These have sold as high as 1091⁄2, and until stronger when we realize that many indi- recently never fell below 100. On a strict viduals who own United States bonds lend investment basis they are worth around 70, them to banks and thus receive interest in ad- roughly speaking. The high prices which dition to what the Government pays. A have prevailed for all United States bonds careful analysis of several great estates, the have, of course, been due to the fact that the detailed holdings of which have recently be- great bulk of these issues have been owned or borrowed by national banks to use as legal an investment in which the public will have security for note issues or for deposits of absolute confidence at all times and which Government money. For many weeks head- will be available to all persons in small delines on the financial page, and even on nominations. Only a war of great magnithe front pages, of newspapers, told of lit- tude could seriously depress its value. tle else than the decline in Government is sues. TEMPORARY INVESTMENT This decline finds its explanation in certain provisions of the Owen-Glass Cur- The Government bond situation is unrency bill, designed to reduce the use of questionably interesting at this juncture, but these bonds for currency purposes. Perhaps most people with money do not own these by the time this article is printed dispute bonds, cannot afford to buy them, and ought over this subject will have been adjusted. not to buy them. The opinion expressed in The questions involved are related to bank- this column a month ago that the highest ing, broad public policy and politics. They class of railroad mortgage bonds had reached have little directly to do with private invest- bargain prices does not require any amendment, although the status of one of the ment, except that there has been a very slight largest and most important security issues in upward movement in the last few weeks. the world is the subject of acrimonious de- Since the August issue appeared numbers of bate on the part of high Government officials banking firms have called graphic attention and bankers. Perhaps daring operators of to the same condition of affairs. the plunging type are inclined to sell Gov- But there are always persons who prefer ernments short, but the Stock Exchange to wait. There are always those who befrowns upon such practices. Generally lieve that even the best of stocks will go lowspeaking, no ordinary investor, in his senses, er. To such and to those who for business would buy Governments with their status so or personal reasons do not want to tie up unsettled, although if it were not for this their funds for long there are exceptional disturbance many other securities are now opportunities presented in the one-year note so lacking in confidence that it is just the issues of the Northern Pacific and Southern time when Government bonds should most Pacific railroad companies. These notes are attract the timid. For such are content with to be had to yield slightly above 6 per cent. the smallest return provided the principal is In one case the notes are followed by $248,secure beyond all question. 000,000 of stock paying 7 per cent., and in Fortunate, both from a banking and in- the other by $272,672,405 of stock paying 6 vestment point of view, will be the day when per cent. That other opportunities of a simUnited States bonds are stripped of all arti- ilar nature may soon be afforded is not imficial support. For when they once sink in probable. Anyone who questions the safety price to yield, say, between 32 and 4.10 of these investments had better place his savper cent. (no human being can now figure ings in an old stocking and stop reading the their exact selling price), then there will be financial news columns. TYPICAL INQUIRIES AND ANSWERS No. 475. A TIME TO SATISFY DISCRIMINATING INVESTMENT TASTE I have eight or ten thousand dollars I think I would like to put into good bonds. I would like to have my money pay me 5 per cent., if I can feel secure about the principal. Can you suggest the kind of bonds for me. I know a good many men who sell bonds, but they all have special issues. What do you think of American Can 5 per cent. bonds? the highest order-can be had to net all the way from 42 to 5 per cent. Take, for example, the recent issue of Chicago, Milwaukee & St. Paul 42's-bonds that are legal investments for savings banks and trustees in New York State; they are obtainable at a little under par, to net a fraction over 41⁄2 per cent. A sound investment issue of the short-term variety, namely, the Pennsylvania The American Can 5's are debentures of good 32's of 1915, are selling on a basis of better than quality, as industrial issues of that type go, but 434 per cent. And bonds like the Rock Island we do not believe they can be considered strictly Railway refunding 4's-another legal issue in conservative investments. A part of the funds of New York State-are on a better than a 5 per a business man might go into them to help raise cent. basis. With a surplus of the size you menthe average of the net income on the entire invest- tion, we do not presume you will want to confine ment. Present opportunities in the markets are yourself to railroad or industrial securities. A such as to make it possible to satisfy the most division of the money among them and high-grade discriminating investment taste and at the same public utility bonds would give you a first-class time afford an income averaging around 5 per arrangement. The best of the latter type are responsible investment banking houses. We note for which year the results indicated a margin that you have been inclined to be skeptical about of safety for the preferred dividends which was buying bonds from anyone who had special issues by no means characteristic of a strictly investment to sell, but when you come to investigate, you will stock. During the following year the showing find that that is the only way you can get a de- was better, but left a good deal of room for imsirable selection of public utility issues. Very, provement. No later figures are available on very few such bonds find their way onto the which to judge the company's present position, exchanges or into the general markets. And there and we should consider it prudent to wait until are a good many banking firms in dealing with it is known how business has run during the last which we do not believe you would be justified in year of operation before making further commitfeeling any doubt as to the fairness of the treat- ments in the stock. One point to consider in conment accorded you. nection with a proposition of this nature is that the product of manufacture is more in the nature of a luxury, and on that account scarcely to be expected to have the stable market that would be characteristic of a commodity entering into the daily use of the general consuming public. No. 476. A SUGGESTION ABOUT WESTERN INVESTMENTS I Can you advise me as to the best investment for $2000 to give me the most semi-annual income. want it to be sure, so I can feel at ease, but if the income is sufficient I do not care how the principal is No. 478. A CRITICISM OF ONE WOMAN'S Will you please tell me whether United States Steel commion would be a safe investment for a few hundred dollars; or Chesapeake & Ohio. They are both low in a woman to invest in? price. Is Southern Railway preferred a good stock for We do not know of any surer way to provide a steady income than to take out an annuity in some strong life insurance company, but we are wonIn answering questions about investment matdering if you are aware that such investment is ters, and particularly in cases where stocks of more adapted to the requirements of people who this kind are involved, we like to know a great have no one dependent upon them, or no one for deal more about the prospective purchaser's cirwhose future it seems necessary or desirable to cumstances than you tell us in your brief commake provision. You understand, of course, that munication. As a general proposition, however, upon the death of the annuitant the principal of we should not consider these stocks as proper the investment disappears entirely. As an alter- securities for a woman to put money into. Among native to that method of investment, we might the three issues mentioned, the choice seems to us suggest some plan like the division of your money to lie between Southern Railway preferred and between a first-class mortgage in one of the West- United States Steel common. But even these are ern or Pacific Coast States and a high-grade pub- stocks which fluctuate .pretty widely in market lic-service corporation bond secured on property value, and which have characteristics making situated within the State of California. On the them more suited to people who have fairly large mortgage investment you should be able, without resources, and who are in position to keep in more a great deal of difficulty, to obtain as much as 6 per cent. income, and you might, by careful selection, get as much as seven with a high degree of safety. On the public utility bond investment, the income would run from 5 to 54 or 51⁄2 per cent., and if you selected some such security as we have suggested you would be exempt from the payment of the personal property tax on your investment in the State. If these suggestions appeal to you, it would be advisable for you to get in direct touch with some of the responsible mortgage dealers and investment banking houses making a specialty of public-service corporation securities. No. 477. AMERICAN PIANO PREFerred I have owned a few shares of American Piano stock for about three years, and have not failed to receive promptly the stipulated dividends. The annual state ments indicate a solvent condition for the company, but the stock is now offered at a low figure. I am tempted to buy five or six shares more, but realize that there must be some reason for the low price. Will you please enlighten me on this and inform me whether the chances are in favor or against the stock ultimately going to par. Should I buy, it would be for income purposes. Nevertheless, I should prefer to leave the money in the savings bank rather than risk the principal for an increase in interest. or less close touch all the time with developments in the affairs of the issuing companies and with general conditions affecting security prices. No. 479. MARKETABILITY OF SMALL- I should like to have you tell me how readily small bonds may be sold. What little money I have to make a start with is now in a savings bank, and, of course, is readily available. I do not want to invest my money in anything where it would not be available, without loss in, say, a month or two. In other words, are these small bonds readily salable, and would I be able in a short time to sell $1000 or $2000 worth without sacrifice? Small bonds may be very much more readily sold now than formerly, but it looks as though there would have to be a still more comprehensive development of the small-investment account before they will enjoy as satisfactory a market as those which are issued in standard denominations of $1000. But practically everything would depend upon the kind of bonds you bought. For instance, if you were to put your money into $500 bonds like the Pennsylvania convertible 32's of 1915, the chances are that you would be able to sell at a satisfactory price at The weakness in the market for these shares short notice on any business day of the year; that has been more or less marked during the whereas, if you put your money into some small last few months is to a considerable extent at- and relatively little known public service corporatributable to the generally unsatisfactory market tion issue, you might not be able to find a satis conditions prevailing, not only for stocks of all factory market for days, or perhaps weeks, at a kinds, but even for seasoned bonds. But it is time. This situation prevails, of course, in the also, to some extent, a reflection of a less satis- market for $1000 bonds, but it is not as noticeable factory showing of earnings made by the issuing there as in the market for small-denomination Arrangements in Cleveland and Pittsburgh 403 The Age of Oil. 449 454 BY LEWIS R. FREEMAN Japan and the Land Question. 420 August Bebel: His Character and Career.. 495 502 Efficiency Methods in the Publishing Busi Celebrating American-Japanese Friendship 420 The New Books.. Financial News for the Investor. 510 TERMS:-Issued monthly, 25 cents a number, $3.00 a year in advance in the United States, Porto Rico, Hawaii, Cuba, Canada, Mexico and the Philippines. Elsewhere, $4.00. Entered as Second Class matter at the Post Office Department, Ottawa, Canada. Subscribers may remit to us by post-office or express money orders, or by bank checks, drafts, or registered letters. Money in letters is sent at sender's risk. 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