Evening journal. [volume] (Wilmington, Del.) 1888-1932, 1910-08-05
DRAWS LESSONS
FROM THIS CITY
Golfers Points Out PreCau-
tons That Bond Buyers
Should Take

A routine financial news item a
short time ago announced that n.
W. Harris and Company. bond-dealers
Of New York, had refused 10 accent
100000 of bonds of Wilmington, Del,
purchased recently. says Golfers
Weekly Relying upon the report OF
their attorneys, N. W. Harris and
Company. decided that the bonds are
not legal-the Superior Court Of
Delaware has declared the last mu-
nicipal election in Wilmington illegal,
because a bill governing city elections
in Delaware was not enrolled on the
journal OF the Legislature as having
been passed. As a consequence, Sc
curities authorized by city officials
holding Office under this defective act
are, technically, worthless.
This Is a concrete illustration OF
one of the pitfalls that must be
avoided by the buyer OF municipal
bonds. Few private purchasers would
have discovered the flaw-indeed. the
city itself might have gone on igno-
rant that It had issued bonds Of no
legal worth and have redeemed them
in due time. But the chances would
be against that. Ten years from now
Wilmingtons opinion OF the present
de facto officials and their acts may
be so bad that the city could repudiate
all obligations they incurred and oon-
clude that such action was righteous
and laudable. That wouldn't help
the innocent bond buyer.
Closer and closer grows the scru-
tiny of investment propositions by the
dealers OF standing. Out Of thirty
| who offered their securities to a well
known bond-house, only three stood
/ the "ilre test"-and their bonds were
/ offered to the public backed by the
assurance that the bond-house be-
lieved them sound. As a matter OF
fact, the bond market Is so inactive
at this time that buyers not only de.
mand perfect security, but also !
higher return on their investment
than ever before. One result. o.
course, has been the tempting of Ger
tain dealers to overlook minor flaw,
"a the integrity of securities tina
promise a satisfactory income return
To Offset the appeal Of the more %
less inscriptions dealer, recent warn
ings put out by half dozen or so o
the best houses have considered. Her,
are some OF the important warming
as to street railway and electric ligh
bonds:
!. Buy bonds only Of establishes
and profit-earning properties.
2. Find out about the management
lis 1t experienced and competent?
3. Is the property we'll maintained
4. Do the mortgages securing thi
bond issue properly restrict the is
suance OF future issues?
5. Does the franchise extend be
yond the date OF maturity OF tn
bonds? If not. be sure that the re
placement value OF the property ex
ceeds the bonded debt.
6. Be sure that net earnings appli
cable to fixed charges are equal to a
least one and half times the amour
Of interest on the bonds.
Another series of pitfalls as to II
rigation bonds have been indicated:
l. Inscriptions manipulation q
properties and misrepresentation {
values.
2. The paralleling of properties 0
the playing Of one enterprise agains
another by the promoters.
3. The payment out of earnings q
unwarranted dividends. and the rot
hery of the property of money whsc
should go TO maintenance
4. Hostile legislation or the chanc
of adverse court decisions in thos
states where sentiment against com
| binations Of capital is strong.