The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1912-12-14
CHICAGO GRAIN MARKET.
THE WAY OF THE
BIG BOND MARKET

(CopynSht, 1917. b. c. NJ. Kegs, New 1orEJ
One day in November a man IN New
York called up his broker and said that
he wanted TO sell half q million dollars
worth OF a weu-known railroad bond.
He said that he would put no limit on
the price at which 1t could be sold but
would leave it 20 the broker.
That Is a pretty severe test OF bond
market, particularly at a time when bonds
are weak as a general thing and when
the whole market Is disturbed moro or
less and when money rates are very high.
SO that the institutions and banks which
would normally be looking for large
blocks OF bonds like this are calling in
their loans instead OF putting them out
The broker hesitated to express an op!n-
ion as TO what he could do, but said he
would do his best. These bonds were
sold in I'VE blocks, three Of which were
for 100000 each. They broke the price
exactly onc-quarter OF point, and the
very next sale after these blocks were
disposed OF there was a sale az the same
price at which the first Of this 5000
item was disposed Of
That is what = real bond market means.
1t means that any one who owns that
particular bond can get his money prac-
t!calIy on demand. or at least on twenty
four hours notice. II these bonds had
been an inactive issue. no matter how
good they may be in quality. and had
been offered in the market in an over
whelming amount like this for tmmedt-
ste sale, there Is no telling what the
price received would have been. Every
now and again a close observer Of the
market sees sudden little Collapses in
the price of perfectly good bonds and
wonders how they happen This incident.
reported directly from the market, should
help to answer the question.
II a man, or an institution, is handling
funds that may be subject TO sudden de-
mands, or that II may he convenient 10
turn over in a hurry. there is little doubt
that the, first thing he ought to consider
is the question Of marketability. 1t Is
fatal to have money tied up, II that
money really ought TO be liquid. Busl-
ness firms which have a certain amount
Of free money for six months every year
and are then called upon to finance large
enterprises for which they need that
money, should never put It into anything
that has not this kind OF a market. They
should study matter of finance at least
deeply enough to select perhaps five or
six securities that are OF this broad mar
ket character, and that have that gen.
eral reputation. Any intelligent broker
can tell you offhand the names of some
of these securities and can furnish you
reports of the weekly transactions in
them for a year back. so that you may
judge for yourself Just how they act
when any given amount OF bonds IS for
sale. When you find that out you are in
a position to go ahead and put this kind
of money into bonds or notes with about
as much confidence as you would put It
into a bank.
Perhaps the worst sinners in this re-
spect are the country banks themselves.
1t is rather astonishing TO find that in
spite OF the lessons OF the past ten years,
the men in charge Of the country banks
OF the country. as a whole, are putting
a larger and larger proportion Of these
funds into securities that could not be
sold quickly. The tendency has not
reached proportions that are dangerous,
and it is probable that the common sense
OF the country will prevent any excess
in this direction, but It Is not amiss at
this time to reiterate the first principle
OF sound banking. which is that a bank
OF deposit subject to immediate demands
for money on deposit should never put
any very large proportion OF Its funds
into any form of investment that cannot
be converted into cash on a. relatively
short notice.