Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1891-07-20
TOO MUCH PROMISED.
New Enterprises That holdOut Rather
Shaky inducements.
DIVIDENDS OF EIGHT PER CENT.
The High Rate of Interest Asked Covers
Many Hidden Risks
ADVICE TO THE WOULD-BE INVESTORS

NEW YORK, July 19-Matthew Marshal
reviews the financial and speculative situa
tion for the iS,na tomorrow as follows:
The launching on the market of numbe,
of new industrial undertakings comes very
opportunely to break the insupportable
dullness which has lately prevailed in
Wall street. 1t makes me think of what
the famous Sexton Brown, of Grace Church,
said one winter when balls and parties the
management of which supplemented his re-
ligious duties, were few, and his collateral
income therefrom was scanty: Nothing is
going on in the way of dancing, but con-
trive to make the funerals lively
For, in certain not invidious sense,
each of these new industrial companies
represents a funeral Its formation marks
the death of an old, well established private
concern and its resurrection as a corpora
tion. Its future lot, like that of individual
mortals, is yeiled from human eyes, and
only time and experience will reveal it
The striking feature to me of the advertise
nerts of these undertakings is the liber-
ality of the terms they offer to investors.
Eight per cent, preferred and cumulative,
seems TO be by common consent the income
which they promise.
Reason for the LiberaIity.
This is due partly, am told, to the law of
New Jersey, under which the companies
are mostly formed, limiting preferred divi-
dendS TO per cent per annum, and partly
TO the fact that the preferred stocks of simi-
lar companies already on the market, such
rs, for example, the American sugar refin-
cries sell at prices which return per cent
and over TO the purchaser. Whatever may
be the reason, the fact remains that both by
the promoters and by the public per cent
Is taken TO be the proper and normal hire
of money when ii is to be invested in indus
trial undertakings like those now presented,
on the best security that they can furnish
This is a phenomenon that merits inyesti-
CATION, not only by those who are disposed
10 put their money into these undertakings,
but by disinterested observers like myself
Why is it, and what does it mean, that
when the Government can borrow at per
cent per annun, municipalities at 8, private
owners Of city real property at from to 8,
and railroad companies in good credit at 8,
the proprietors of these private enterprises
which, if the prospectuses' tell the truth
have long been enormously profitable, and
are TO continue under the same management
as heretofore, cannot procure capital at less
than per cent?
Covering a Hidden Risk.
The first impression produced upon my
mind, as 1t doubtless is upon the minds of
all who have seen for many years the ups
and downs of SPECTATORS, is that this high
rate Of interest is bait covering hidden
risk. 1t brings to remembrance the saying
attributed to the Duke of Wellington,
thigh interest means bad security" and |
am reminded by it of an anecdote of the late |
Stephen Whitney. He had been solicited to |
join in a speculation upon which he figured |
out a clean profit of 100 per cent in few |
months. Mr.. Whitney, not liking either |
the speculation or the speculator who was |
managing it, declined with thanks, saying: |
''AIy dear sir, the thing is too good alto |
gether; my conscience would not allow me |
10 make so much money" |
So, the offer of per cent per aunum for |
the use OF capital implies, at first sight, |
either that the investment is doubtful, or |
that the dividends are unconscionable. At |
the same time l ccncede that these enter |
prises are still comparative novelties, and |
have yet TO win their way to public favor.
The Standard Oil Example.
When, some six or seven years ago, the /
Standard Oil certificates TO the amount of |
SO, 600, 900, were offered on the market they |
brought only 80 cents on 81, although they |
were paying y per cent per annum, and
those who bought them at that price did so
with considerable hesitation Since then |
$40. .000, 600 of pure water has been added to
the $40 600. 600 original capital without re-
ducing the dividend rate, and the whole
$50, COO 900 is now selling at somewhere be-
tween 100 and 170. The steady payment of
dividends Las given the investment a good
reputation, which 1t did not enjoy at the
outset, and the early purchasers of it are
reaping the reward of their audacity.
1t may well be, therefore, that the offer I
OF s per cent on par which is considerably
less than the u per cent on 80 offered by the
Standard Oil Trust, indicates no more than
the amount of temptation necessary to in
duce capitalists to put their money into an
undertaking, good enough in itself, but
which lacks the stamp of approval, attaina-
bic only by career of several wears of sue
cess. Balancing this consideration against /
the distrust aroused by the seemingly ex- |
cessive income promised, each investment
is left TO be judged upon its intrinsic F
merits.
Where the Trouble Arises.
Here is where the difficulty arises. Peo-
pie In general have not the means of form
ing a satisfactory opinion upon a business
In which they themselves have no personal
knowledge, and of which they can learn
nothing except what is told them by per-
sons who have the strongest motive to rep
resent matters as tavorably for themselves |
as possible.
Then, too, comes the further inquiry:
Why, if these various concerns into which
the public are invited to put their money
are as profitable as they are represented to
be, Is II necessary to appeal to the public
for money at all? l can well understand
why partnership composed of many part
ners, and having large and widely-extended
transactions, should be converted into a
A partnership is dissolved by
the death of single member of it, and has
10 be hquidateG and organized over again at
great trouble and expense, with probably
great loss Of capital through the withdrawal
Of the deceased partners share; whereas a
goes on forever, like Tennyson's
brook, and disregards individual catas-
trophies.
Changing to Corporations.
For this reason Tiffany s. Co. w. 81
Sloane, and Park & filford nave been
formed into corporations although no
change has been made in their mode of do
ing business, and so far from asking money
from the public, these stocks are jealousy
kept in the hands of their original MEM
Oers. They have all the capital they want
md do not desire to share their profits with
outsiders But when, in addition to in
itself, firm of long standing
md good reputation offers practically to sell |
,ut at a low price, it is impossible to avoid
he suspicion that there are other reasons
or the step than those which appear on the |
Urface.
Here, again, satisfactory explanation is
possible, and the suspicion L have men
Toned may be completely removed Not
H., : r