The San Francisco call., 1908-05-30

Only those familiar with financial
matters know the exact difference be-
tween stocks and bonds. and In order
to set the public right on the subject
of bonds the question was submitted
TO a prominent San Francisco banker.
BANKS BUY BONDS
What is the difference between
stock and bond? Well. in the first
plasss; bank cannot in justice a0os to IT'S
tors buy stocks, while we can and do
buy bonds with our surplus funds
Savings banks, trust companies. In
surance companies. estates and imam
ciers buy railway bonds.
They do this because bonds are
dednite promise TO pay and they must
in the corporation issuing the bonds
not only lose their stock. but are hable
to the extent of their stock holding
vember. the Eovernment loaned nation
al banks money. taking railway bonds
as security.
SAFETY OF BONDS
Here is an example which will ex-
plain the safety of bond:
"a man owns a lot valued at $1,000
and wants to build a home
He has only $500 cash on hand and
the home is to cost $500
Not having the other Thousand dol
lars necessary. he borrows $1,000 from
bank giving his note. secured by q
mortgage on the house and lot
When improved the property has
If the man fails to pay his interest
on the $1,000 borrowed. the property Is
sold at public sale to raise the money
necessary to repay the bank
Now. the man owning the property
and who borrowed the money corre-
spends TO the stock holder in corpor-
alton, the note secured by the mort
gage corresponds to the bonds. the
bank ioaning the money corresponds
to the bond holder.
"A bond is a mortgage divided into
small parts
BONDS NOT TAXABLE
..Whe.I a corporation wants to bor-
row money it gives a mortgage on It's
property to a trust company to be held
IN trust as security for all the persons
who buy the bonds
to the total amount of The mortgage.
promising TO pay the holder or the
bonds on certain day. with interest
The bond buyer has no taxes to pay.
no assessment can be levied against
him.
The corporation simply owes him
mortgage held in trust by the trust
company
STOCK HOLDERS LIABILITY
when you buy stock you buy an
| interest in a company and your In
1erest shares in the profits or losses
L
has issued bonds you cannot receive
any dividends on your stock until the
interest has been paid to the bond
holders, and further. IL the company
in which YOU are q. stock holder fails
to pay the interest on their bonds the
bond holders step in and take the COM
only lose what you pay for the stock
but you are liable for the debts of the
company to the amount of the stock
you own
Therefore IL is easy TO see why
bonds are safer than stocks as an in
vestment-
BONDS SAFER THAN STOCKS
When business trouble comes il af-
fects the stock and bonds in exactly
opposite and different ways
aThe stock becomes practically
worthless. which shows that stock is
not an investment in the true sense
The bonds then show their strong
which is their safety and security.
The stock is weak and the bond is
strong.
Because the trustee takes the prop
erty of the stock holder and sells ii TO
pay the bond holder.
Buying stock is a business venture
buying bonds is an investment"
NO EXPENSE TO BOND HOLDERS
The banker was then asked what
were the other features which made
bonds SO desirable as form of safe
investment
There is no trouble or bother or ex-
pense OF any kind connected with a
bond Investment.
You do not have any legal work to
look after. or anything OF that kind
The trust company which IS the trus-
tee. does all of that. and at the expense
Of the stock holders.
AS argeneral proposition 81 .0o0, 900
investment Is stronger and safer than
a $1,000 investment
IF you buy 500 bond. which is one
of an issue of $1,000. 900. your $1oo in
vestment partakes of the safety and
high character of-the $1-0o0.o00 invest
ment-
PROTECTS BOND HOLDERS
when mortgage is given to the
trust company to secure bond issue
all the bonds are numbered and the
numbers OF the bonds are stated in the
mortgage. and each bond issued bears
the signature of an officer of the trust
company certifying that the bond Is
one of those authorized By the mort
gage
$50 you always know just what the
total amount of the loan is, and YOU
know definitely just what security is
back of the loan
THE trustee does everything which
Is necessary to secure and protect the
interests Of the bond holders
BETTER THAN MORTGAGES
-One difference between bond and