Rutland weekly herald. [volume] (Rutland, Vt.) 1859-1877, 1871-03-09
From the New~York independently
Some Questions Answered.

from the New ork Independent
Some Questions Answered,
To the Commercial Editor of the Independent:
Having few thousand dollars that shall not
need in my business, and being naturally desir-
Gus of obtaining an investment which will pro-
duce the greatest income consistent with entire
safety, I am led to ask you the following ques-
lions, which I shall be glad to have you answer,
either privately or through the columns of The
Independent - s-- zr -s
/. Do you think that, as rule, first mortgage
railroad bonds are desirable investment In
what do they differ from first mortgage on ordi-
nary real estate! @
2. notice you recommend Northern Pacific
seven-thirties to investors. Why do you regard
them unusually secure
8. Is the government pledged to the payment
of these Northern Pacific bonds
4. notice they are selling at par. Isn't this
too high? Cannot good railroad securities be
bought cheaper! s..
6. / hold few fve-twenties; do you believe
the government will soon call for their surren-
der
I. What assurance have investors that North
ern Pacific seven-thirties will not hereafter depre-
eiate below the price at which they are now sold,
compelling those who wish to realize on them to
do so at loss
To the above the independent answers !:
I. Thus far the mortgage bonds of Am
eriean railways have proved to be among
the very safest securities. In proportion
to amount, they have probably shown q
smaller percentage of loss in interest and
principal than any other investment that
has been accessible to the people. Such
has been the history of railway securities.
Of course there have been exceptional
cases of mismanagementa and loss but far
oftener imperfect titles, lapsed insurance
policies, and shrinkages of value rendered
real estate mortgages bad Investment
There is living principle underlying a
railway bond, which applies to very few
if any other securities. This
1. Usually the solvency of railroad
depends mainly upon the traffic; and, as a
rule. that traffic steadily increases as the
road grows older and the population along
it's route becomes richer and denser. In
word, the income of railroad land
hence it's debt-paying ability will ordi-
narly keep pace with the growth of popu-
lation.
g. A railroad, once built, rapidly creates
business which is to render it profitable.
1t developes carrying trade which did
not before exist, and which grows much
faster than the tributary population in
creasss in numbers.
3. A railroad usually has back of it a
strong corporation of capitalists and
shrewd, energetic business men, whose
profits, financial standing, commercial
reputation, and official positions depend
upon the solvency and success of the road
with which they are identified. This
powerful combination of private interests
constitutes a living power whose efforts
tend constantly to increase the profitable
ness and soundness of the enterprise In
whose interest they are enlisted.
4. Finally, after railroad Is built,
every dollar expended in making improve
ments and extensions, adding new faoili-
ties for doing business, and in securing
valuable alliances with connecting lines,
adds to the security of its first mortgage
bonds, by augmenting the productiveness
and value of the property on which those
bonds are based. 1t is in this way that
second mortgage may increase the safety
of the fret. With mortgages which rest
upon improved real estate in our midst
the security steadily deteriorates with
time, as the Improvements become less
valuable. Railroads grow better and
more prosperous with age, and furnish a
constantly increasing security for the debt
created in their construction. 1t is for
these reasons that first mortgage bonds
are among the very soundest securities
that can be had.
II The Northern Pacific Railroad has
a threefoid solidity, which renders ii
financially impregnable. 1. 1t has for its
broad and firm foundation real estate
endowment of more than twenty-five
of track-or an unencumbered farm of 800
acres lin addition TO the ordinary and
ample security of the road and its traffic
to secure each $1,000 bond bought by the
public. 2. 1t has awaiting it business
which we believe is certain to render it
self-sustaining from the first, and to give
it large surplus at an early day. 3. 1t
is in the hands of men of known and ae-
knowledged integrity, whose financial
standing, whose business sagacity and
thorough experience, furnish complete
guaranty that economy. energy, and
fidelity will characterize its management.
III. Government does not in form guar
anty the payment of Northern Pacific
seven-thirties but it indirectly insures
their payment by donating unreservedly
to the company sufficient productive lands
to pay them twice over. The belt of
country in which this superb domain is
situated admirably combines the three
elements essential to successful farming
viz a naturally rich soil, mild climate
(the latitude being about two degree be-
low Paris, and six below London,) and
sufficient rainfall.
~. When there is no difference in point
of safety, the comparative market value
of various securities is mainly determined
by their profitableness. In this view
Northern Pacific gold seven-t hirties, sell
ing at par in currency, are by far the
cheapest Investment of which we have
knowledge. Regarded as source of in
come, they are cheaper at par than six
per cent. gold bond at go, and cheaper
than six per cent. currency bond at 74a
In other words, one hundred dollars in
vested III Northern Paeifcs at par will
produce larger income than the same
amount invested in q ak per cent gold
at 80.
Y. We regard it as highly probable |
tnat a large proportion OF the present
holders of government bonds will be COM
PEELED to give them up within compare
lively short time, and accept therefor cash
payment or a new five per cent. bond.
now indicates that the gov.
eminent will soon be able to fund the
bulk of its fve-twenties at a lower rate of
interest. Hence, we have uniformly adj |
vised our subscribers to convert their gov
eminent bonds into some frst-class rail-
road security, having equal safety and
greater permanence and productiveness.
vi. Of course, all securities, even those
Of the United States, are liable to occa-
sional slight fluctuations in current price
the result of outside circumstances, and
not OF any change in real value. But the
same causes which now render Northern
Pacific sauan.fhirfina on a~caption O III " /