The Washington herald., 1914-04-04
RUBBING ELBOWS
WITH TROUBLE

Copyright. 1914. by c. VI. Kegs New York.
| A private investor who seems TO have
had more than his share of bad luck in
the last few years. tells how narrowly he
escaped no less than four serious losses
during that time. and how II feels to be-
come involved in a railroad receivership,
live through it and come out a little bet
| ter of than when he went in
This man has a banker who seems to
like to skate along the edges Of thin
| ice. Most Of the bonds and other securi-
! ties that the investor buys are good
solid. quiet investment bonds. but every
now and again his banker recommends
| TO him some security which is what he
calls a business proposition. These Sc
Curities are generally bonds that are SELL
ing at very low prices on account of
some impending trouble in the corpora
tion that issues them. The banker al
ways makes 1t clear to the buyer that
he is not buying gilt-edge securities. but
that he is buying into possible receiver
ship or other miX-up of some sort.
The first venture of this kind that was
made by this investor was some years
ago when his banker suggested casually
one day that he thought that the old
bonds of the Seaboard and of the West
ern Maryland were pretty good things
for a business man to buy. They were
both selling between 30 and 80 cents on
the dollar. The investor became curious
as to how the conservative banking house
would figure on such bonds He was
told Immediately that the conservative
banker would not advise them for widows
and orphans. and would not advise any
body to buy them with any large pro-
NaI 11.
but that bankers themselves and other
professional buyers considered that they
would be good securities when the trouble
had passed by and bought them with an
eye-to-business profits rather than in
vestment income. After some discussion
in the matter. the investor bought a
small amount OF each of these two bonds.
When the era of trouble passed, both
bonds came through the receiverships
without default and became pretty strong
middle class investment securities.
Ever since that episode. the banker has
been in the habit of recommending small
amounts of good bonds that seemed TO be
on the verge of trouble. Last year the
investor paid sixty-three cents on the
dollar for bonds of a hig Southwestern
railroad that seemed almost certain to
collapse. II went into receivership. It
is still there. but those bonds are now
selling at seventy-six cents on the dol
lar. At about the same time he bought
some other bonds of another big railroad
system which seemed weak: and these
show him loss of about ten per cent
today. He does not seem to worry much
about such matters as that. for he is of
the opinion that when trouble really does
come, IL IL does come. his bonds will be
better.
The only thing that bothers him at the
present time is that there are too many
securities to choose from in this class.
There are about half A dozen railroads
and at least a dozen well known COM
panies of other classes whose bonds look
like bargains; but when they multiply so
fast, and the class grows so big, there
arises a perfectly proper question wheth-
er thcy are really bargains or whether
they are merely evidences os 4 general
weakening which may result in general
losses The investor. therefore, while he
is not at all nervous about what he has.