The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1905-10-03
Big Figures and Little.

One of the most difficult things in
finance, and needless to say one Of the
most important, is determination Of the
actual value Of a particular security!
So complex are the considerations enter
ing into such a calculation that few
are capable Of speaking authoritative
~. Indeed, it has come to this, that
possession Of the ability closely and
accurately to analyze a railroad or cor
poration report, with reference to all
things entering into it, implies expert
knowledge no less than does the techni-
cal work of the professions. Any or
dinarily intelligent man may figure out
that if a corporation is capitalized at
a certain sum, earns a certain sum, pays
another sum, and has a surplus left, the
amount applicable for dividends will
amount to such percentage of the whole
as will afford a basis for an estimate as
to what the selling value of the securi-
ties should be. But this is only the
simpler part Of it. One wants to know
the likelihood of the maintenance Of a
certain dividend rate, or the probabili-
ties of increase or decrease, and the
final possibilities of an investment.
These are more difficult things to work
out accurately. ~
The average man is likely to be some
what influenced in his Judgment Of a
security by the size of a corporation.
Big figures appeal to men. Any COM
pany with a hundred millions in it's re-
port draws the attention Of the ordi-
nary reader. Yet it is not always the
big companies that represent the great
er intrinsic worth.
Probably the best illustration of this
at the present time may be found in
New York bank stocks. Almost any
non-professional reader would D
that a New York bank, with a capital
Of $25,O00,000 and deposits of almost
$20O, 100000, would rank at the top Of
the list, yet for about 1886 one could
buy a share of stock in that bank, the
nominal value being $500. The stock
of another 1925, 100000 bank, with de-
posts of $3.50, 100000, sells for $2O5, or
less than the stock of some MINNEAPOLIS
banks. But there is another bank in
New York, with a capital Of only $780,
oOo, whose stock, nominally worth 800,
mas long sold at fabulous figures, one
snare going last week at S 4,406, another
at $4,452.50. This is the Chemical Ma
%tional, the aristocrat Of the list. Altho
it has only 100000 in capital, it car
rles $23,OOO,000 deposits, or an immense
line relative to capital, and has a sur
plus Of $1,000, 900. It pays $50 per cent
a year in dividends. Mention is made of
it, only because it affords the most
striking illustration Of the above propo-
sition. .
1t is a good thing to remember that
water always finds it's level, and COM
mercial and financial values are no ex-
ception to this general rule. The mex
perienced man should remember that in
banking, in the railroad world, in life
insurance and other forms Of invest
ment, figures are nothing in themselves,
m a million means no more or less
than a thousand, except as it bears
upon something else. The matter of
determination Of actual value is en-
tlrely one of accurately estimating the
relation of n thing to another, and
a company may be good or bad, or safe
or unsafe, entirely irrespective of it's
capitalization, or the size Of the figures
1t puts into a periodical report.