The Washington herald., 1913-02-01
THE WIDESPREAD HABIT
OF LOSING MONEY
(copyrisht lsls, by @. NJ. Keys. New York.l

An enterpr1sing STUDENT Oh INVESTMENT
recently took a list Of estates probated
in and around New York approximating
in all about Slo0OO,OO0 and made this
group of estates the basis of calcula-
ton as to the proportion OF unsound
investments made by the public. He
found that in these estates there was
about x2.OOOOOO worth OF securities that
were worthless, II such an irish state
ment of the case may be permitted.
In other words out of every dollar in
vested by these people 20 cents was lost
by putting 1t into securities that turned
out to be worthless at the time the
estate of the buyer became of record.
lie reacheh many other Interesting con-
clusions from the same data. For IN
stance. 1t transpired that even the presi-
dent OF a big New York CITY bank was
not immune from the get-rich-quick dis
ease; for he, like nearly all the rest.
had a certain amount Of purely wildcat
stock. but the amount was relatively
small as compared with the bulk OF his
estate.
The whole list consisted OF about sew
enty names, and thirty-tour or these
people owned shares in companies about
which their executors were unable TO
obtain any information. This generally
means, of course, that the companies
their stock has no value whatever. 10
sum up. half OF these people invested IN
securities OF this sort, and ~ per cent
of the entire fund was the amount they
invested.
These estates of course. were private
funds. II Is, therefore. quite impossible
to use this basis in order to calculate
how much money Is wasted IN this way:
for there Is no record, so far as any one
nf hn TO
investment in the United States. Banks.
insurance companies. trustees, church
funds. and other Incorporated investors.
are prohibited. as a rule, from buying
any class OF securities that would come
WITHIN the get-rIcn-quIcK cIassIncaIIon.
Therefore, they need not be considered
when one comes TO sum up the extent or
the loss that fails on the investment
world every year through TINS sort OF
investment.
The tinted states government. through
the Post-office Department. once made
public the statement that about one
hundred million dollars mad been stolen
from the people by get-rIch-quIcK oper-
atOrs IN the course OF twelve months.
No satisfactory data, however. accom-
panied this estimate: ana IN an prob
ability IT was htOc more than a rough
guess made by some one IN the Post-
office Department. Men VINO at tnat
time We're engaged IN the task or Cnas-
ing and trying to convict swindlcrs were
perhaps apt to eNaCgerate the extent of
the gct-rich-Quick game
II would not be surprising however
IL in a good year like 1910. the light
fingered gently of the investment world
had managed to sell that much worthless
stock 10 the American public For il
seems to be an unfortunate fact that in
this country. more than in any other
country OF the civilized world. the public
plunges ahead in ventures with its
money without taking even the most
simple measures to find out what il is
buying.
In France. Germany. Holland and
to an extent England. a very much
larger degree Of investment confidence
is placed in bankers than is the case in
this country. Thus when American Sc
Curitics are bought in large quantitits,
by the people OF France. for instance
the buying is done almost altogether
by bankrr=-v The Distribution OF these
securities is carried on almost entirely
on a basis of perfect confidence between
the banker and his client People do
not rush blindly into any sort Of secur-
ity that may be offered for sale no mat
ter how aIluring the proposition may
appear. They want to have confidence
in the man or the firm that is making
the Offering before they put money into
anything
That this habit OF careful selection
Is growing in this country rs one of the
most prominent features Of American
business life. II is becoming more and
more dangerous and more and more i'm
possible for irresponsible promoters to
sell worthless securities to the public.
Nowadays there are thousands of people
throughout the country who, wnen they
receive glittering circulars promising
all sorts Of sudden wealth, send these
circulars on the POst-office Department
at Washington, or turn them over to
the magazine and the newspaper. and
ask them to expose the scheme as we'll
as they can.
Everybody knows however. that when
one destroys an industry like the get
riCh-Quick industry it is necessary to
put something in its place. II. there is
a sum of SOO00,0OO spent by the people
every year in unsound investment. and
We set to work to destroy the business
of selling this uRsound security. some
thing has to be substituted for it. That
is the task of the investment world.
To meet this demand there is now a
serious attempt on the part OF legiti-
mate banking people to create class of
sound securities that can be sold in
small amounts from SO to 500 This is
the genesis. for instance. of the plan
which is now being practiced by great
many corporations of issuing their bonds
in 800 pieces. II is also one reason why
preferred stocks in 500 shares have en-
joyed such a widespread market for the
past three years or so. on the whole,
the efforts made by the legitimate in
vestment world TO interest the class of
money that has always gone into get
rich-quck banking have not so far been
as serious as they might be. although
a good beginning has been made and no
doubt in the course of time many other
steps will be taken in the same dircc-
tion.