The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1913-10-10
BANKERS ADVISE CLIENTS TO FIGHT SHY
OF ALL RAILROAD STOCK INVESTMENTS

rise within few years is a statement
which, is usually explained by the asser-
tion that railway managers are talking
Tor effect. Bankers however, do not
talk in this way for effect, for they only
discuss the matter among themselves
They have been for some time discussing
the situation as it actually exists 1t is
OF such character that no banker feels
justified in advising customers or clients
to invest at present in the stocks of
American railroad companies. If there
could be testimony taken showing the ex-
tent to which this advice has been given
that testimony would demonstrate that
the great majority of reputable and re-
sponsible bankers not only in New York.
but elsewhere in the country, are advis-
ing their friends not to invest In railroad
stocks.
They do approve of Investments in good
railroad bonds, but they say that until
there be change in the attitude of the
interstate commerce commission and of
legislators toward the American railroads
they cannot in fairness advise their GUS
toners to buy railroad stocks.
What the Reason Is
The reason for this anxiety on the part
of bankers with respect to the railroad
situation is to be found in the unques-
toned accuracy of the figures recently
compiled which show the relation of the
gross income of American railroads to
the net revenue. These figures demon
strate that there is increasing discrep-
ancy between the total or gross revenue
gained by the railroads and the part
which remains after deductng the cost
of maintaining and operating the rail-
ways. Bankers say that this cannot &c
on for any considerable length of time
without imperilling the credit of the rail-
fnu 1c IL ,,r,k liz - 1,t,f
the thought is in their minds that sta
tistlcs of this kind may point to newt
able bankruptcy by and by. The Official
figures show that in the year 1911 the net
corporate income for American railroads
that Is to say, the income available fol
improvements dividends and surplus-was
20 per cent less than the like income in
the year 1910, although the operating reve-
nue. was somewhat larger. In the yea,
1912 the gross revenue from operation was
per. cent larger than in 1910 but the mel
income was Is per cent less than the
similar income of 1910.
In other words, the records now in the
possession of the interstate commerce
commission show that there. has been O
steady decrease in net income instead OF
increase, and that. too, in three years OF
the. greatest volume of transportation the
railroads of the United States have ever
had
The Railway Business association
whose name is somewhat misleacing. is
made up of several hundred of the leading
firms and corporations In the United
States. whose business Is chiefly manu-.
featuring equipment needed by the rail.
roads OF the country. No one whose vo.
ca ton is the operation and management
of railroads is a member of this associ;,-
ton. The aggregate of employees who re-
GIVE wages or salaries from members OF
this association is several hundred thou.
sand. Many millions of capital are repre-
scented This association has seen tit K
rcrcrt publicly that If in the three years
OF tn, greatest volume of transportation
which the railway companies OF tho Unite
States have ever known, and which yield
ed the largest gross revenue from opera
ton, there is actual loss Of net inco'ne
such as the figures for these years dis
close, then ito what verge of bank
ruptcy will the American railroads bs
brought should there be lean years oi
business wher three great years show re-
suits Of this kind?"
What the Effect Is
1t is the possible effect of this situation
with which American bankers and finan-
ciers are chiefly concerned. They have
observed that new railroad building has
practically ceased in the United States
This is due to two causes-flrsr, capital
Is at aid tc make new commitments c.
this kind, and second the inanciers CT
the United States do not feel justified
In attempting to find capital which is to
be employed in the construction OF rev
railroads. Yet there are immense areas
of land in the United States very fertile
some of ii especially adapted to cattis
raising. scme to the production Of grains,
which lie idle because of lack OF trans
poi tation The state of Texas should
be cobwebhed with railroads. But no new
capital is venturing railroad construction