The Washington herald., 1913-11-26
MAKE PAYMENTS
FROM Earnings
Need Of Stoppage Of Old
Method of Capitalizing Bet
terments by Bond Issues.
IT Is TIME FOR A CHANGE
Bulls Rampant and Advance Values
on Sight Of Lawson's
Red Flag.
IT Is TIME FOR A CHANGE
Bx A. FLEMING.

BY L. A. FLEMING.
One fact stands boldly out in the lime,
light of prudence and intensified by the
fast public-sensing Of the fact that there
must be something new in methods Of
financing of corporations and railroads
The long custom Of capitalizing i'm
provements in properties by an issue Of
bonds must give way to the safe and sant
method of making betterments. exten.
sions, and improvements from the earn
ings Of a property.
For years shareholders have beer
among the first to urge the capitalization
of improvements ana betterments, thai
they might have a chance to buy bonds
upon which there was a premium anC
thereby make little surplus cash.
Foolishly? Certainly, For each dollar
OF bonds issued was just 100 cents ahead
of every dollar of your stock rights
Following this custom, the railroads and
industrial companies kept 1t up until
they created such a volume of securities
that in this day Of grace and hating pros
perity, they have stood up in front OF
them like mountains of collateral. on
which frequently deferred and default
ruinous prices.
1t was so easy to sell big block OF
bonds-easier still to sell a wad of short
term notes, but the paying of process
has so far been attended only by refund
ing operations. ...--..
II one could keep on refunding con-
tinually, each time with a little added in
ducement, 1t might not be so bad, but
settlement time rolls around. one day
=
.ceivership is the alternative.
OF course the sinking fund forms a
curtailment pocket, too frequently neg
lected. Proper curtailment during the
life of a bond or note prepares the way
fer its final payment at maturity.
II this method of improvements from
earnings had been adopted very early in
our Industrial and rail development, 1t is
perhaps true that progress would have
been slow and that improvements would
net have kept pace with the necessities.
Habits were formed easily and custom
is hard to change.
But time has been or soon will be
called. Difficulty in floating railroad and
industrial bonds except at fat commits
sions and tempting reductions to the men
holding the big money bags, has caused
much trouble. or course the exciting is
snes will, to large degree, be cared for.
lf5 Is pleasant to contemplate what a
spiendid stock market we would have but
for the mountain Of bonded securities
ahead of the stocks.
Make beginning.
1t cannot be accomplished in a minute.
But IL is up to corporations to begin the
new methcd. to stop piling bonds ahead
of stocks, which can only be done on the
vote Of the stockholders.
BY doing It stockholders are depreciat-
ing their equity by just that much.
1T is not fair tc the stockholders to
have earnings diverted to property i'm
provement," is the general reply.
It matters not now whether IL is fair
OF not. 1t is in your interest to upbuild
your company that your own stocks may
increase in regular value.
Take any railroad in the country, stag
geripg under a lean of bonds. short term
notes, second series issues of bonds, A,
=, c, d, and perhaps further down the
alphabet. Remove the burden and the
price would jump by leaps and bounds.
What has happened cannot be stopped.
Big companies may for some years longer
finance themselves by bonds and short
notes but it certainly looks from exist
ing conditions today as though the pledg-
ing of revenues for years to come in
municipalities would some day have to
stop; that the continued capitalization of
a few miles of gas pipe. or tAe putting
down OF an extra half mile of street
railway track, should be paid from the
earnings of the corporation. even if it
lessened the dividend distribution, the
reward to the shareholders coming in
the lessened precedence on assets, the
lower fixed charges payments and the
satisfaction that comes from conserva-
lively managed corporations.
Il will take centuries, perhaps, to
Iiduidate bond issues now in existence,
but each year it is getting harder to
sell new securities. The change may
not be SO long coming.
Wall street.
The bull was given more rope yester-
day. He took il.
Tom Lawson's advertisement proved a
red flag to his majesty and the shorts
were given a run in for their money.
All of the time that dullness and sag
ging have been going on, it has been
stated that fear of action in Mexico was
the chiefest reason Now when there
are signs of something doing, even to the
landing of marines, the Mexican situa-
ton looks better.
But as stated heretofore Mexico counts
but little. It's the trust policy, the Con-
gressional probe, and the Department
of Justice griddIe that is causing the
halt
Yesterdays strength seemed to be
nothing more than a direct result Of Mr..
Lawson's advertisenfents-in papers, with
end in view to break Steel shares. Ana
Wall Street answered back and scared
the shorts with a show Of strength.
Average gains were 1a1h points, with
many minor stocks showing one-haf
point rallies The low was the opening
price, and the closings were within one
fourth point OF the high.
Steel. the butt Of Lawsonitis, rose H
10 56h; Union Pacific, IL; Reading, IL;
southern Pacific, is; Copper, TX; Smelt-
er. a point; Republic Iron and Steel pfd.,
a point; Chesapeake and Ohio, IL, and
the entire list almost without exception
from 1zalh points.
MerEenthaIer's october Earnings.
Mergenthaler, during October. received
orders for ISS machines, as. compared
with Ill In October, 1872 Orders at the
end of the month on the books for III
machines.
The months business totaled S62S, 996.1i
as compared with $i3o,e5S4S last year in
the same month.
The net earnings of the company for
october were $271. OILS as compared with
S253097 In October, 1872
Sales were 1853 machines, as compared
with Il5 in 1872, October.
The earnings were a fraction under 8
per cent
Local Securities.
In the aggregate a fairly good days
business was transacted in Washington