The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1899-05-09
- WIND

''The president of a large downtown
bank recently stated that one of
the very largest manufacturers in this
country, who has not entered into any
combination told him that in his judg-
ment not only all the common stock of
most of the recent Industrial combina-
tions represented wind, but that 80
per cent of the preferred stock also
represented wind. He thought that if
rs Per cent of the preferred stocks rep
resented values it was an outside esti-
mate.
ut is generally conceded that the
common stock of newly incorporated
trusts represents the cost of printing
the certificates, plus a sum to repre-
sent the estimated Notwithstanding
capacity of the company beyond such
earnings as are pledged for dividends
on bonds or preferred stock.
Were stock certificates representa-
tive of intrinsic value, of the cost of
the plants, or based ON the proved
earning power of the company, they
ments because OF the manipulation they
are subject to by professional Wall
street operators. The one great object
of the promoter and the banker is to
unload the stock of the company on
the unsuspecting public. Playing with
such stocks is ore risky than playine
poker. New York Grocer
The object in issuing preferred stock
in these corporations Is to induce per-
sons 10 invest money in the belief that
the preferred stsock represents actual
values, and, for that reason, must have
a higher value than the common
stock But, as the Grocer says, even
the preferred stock may be full of
wind
There is no deception in issuing any
amount of stock provided it is hon
estly issued upon true statement of
facts. Wind" is a confusing word.
The promoters of the industrial stocks
as a rule, especially in manufacturing
plants, dishonesty represent the cost
of the plant. A concern may have ac-
tually invested $500, 900 in an iron fur
mace and its appliances, but owing to
ignorance and mismanagement it can
be duplicated for 100000 There is,
therefore, dishonesty in estimating it's
cash value at 100000. The difference
is wind" In the organization of the
American Oil Company which con-
trogled the cotton seed oil CT the South
the estimates of the cash investments
in oil mills was often three hundred
per cent above the actual cash values.
But the cost of plant is by no
means in many cases, the value of the
plant. A patent may have no cash
value in itself but may have a great
commercial value when utilized by a
skillful and Intelligent scheme.
A patent is monopoly granted by
the state, and only the income derived
from its use can fix it's value.
So that the nominal value of a
stock is, like the value of a patent,
after all, determined by its earning
power during a season Of years. The
Western Union Telegraph Company
has a capital of 100000 900. It's plant
could probably be replaced at a cost Ct
$35 600, 900 or less, but it has an earn
ing capacity of six per cent on its cap
itai, which has hardly varied during
many years and its capacity for earn
ing this dividend is generally accept
ed. While there may be 100000, 900 of
wind in the stock, it is nevertheless
a good investment. A stock that is full
of wind" that is, represents no cash,
may be better investment than
stock representing cash. The good
will of a business for which no cash
is paid may represent large earning
power, but it would not be reasonable
to call it wind For a steady and
consistent earning power is the impor-
tant thing, and is a better measure OF
value than cash paid in.