The mirror., 1916-12-21

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recorded for the protection of the
bond holders as against creditors,
in which the entire assets of the
company are charged with the
total amount of the mortgage in
debtedness, as we'll as with the
annual interest on the total bond
issue. Frequently in addition to
this, as bonds are usually given for
a definite period, the same as real
estate mortgages, a sinking fund"
is established to provide for the
redemption of the bond issue at
maturity. the annual interest there
on being usually provided for out
of the profits of the company.
A bond issue, therefore. is moth
ing more nor less than a mortgage
on the real assets of a company
it's stock-in- trade, goodwill, realty,
accounts receivable, ETC., and ex-
actly corresponds, in the case of
company, to a real estate mort
gage, in the case of real estate. 1t
is, therefore, the highest form of
investment which a company
affords and consequently is the
safest.
But bonds are not alone confined
to incorporated companies. There
are what are known as municipal
and other debentures, which are in
reality bonds and are frequently
called bonds. These are issued by
municipalities as means of bor-
rowing money, and they always
constitute a mortgage on the reve-
nues and assets of the municipality.
Inasmuch as in most countries
municipalities seldom repudiate
their debts and are always in a po-
sition to pay their way, this kind
of an investment security is looked
upon as the most gilt-edge security
available, even more so than rail.
road bonds, as in the latter case,
as we have seen so often in this
country, these quasi-public COM
panies very frequently are
wrecked by the cupidity of certain
individuals, and although the bond
holder is in a better position than
the ordinary stock holder, yet in
many cases he has been badly
nipped.
We often see British consuls
quoted, and it is fact that the
tone of the entire London financial
situation is more or less indicated
by the variation in price of these
securities, as we'll as by the rise
and fall Of the Bank of England's
rate of discount. These consuls
are nothing more nor less than
mortgage debentures, or bonds,
the security of which is dependent
on the solvency of Great Britain.
So also we have United States
bonds which are secured by the
revenues and assets of the entire
United States.
Bonds, therefore, or mortgage
debentures, are in all cases instru-
ments constituting first claim on
the entire assets of the individual
company or municipality issuing,
and either in themselves are first
mortgage or their position is Sc
cured by formal trust mortgage
giving them such priority.
Thus we see that common stock,
preferred stock and bonds are the
three different kinds of securities
which are peculiar to the incorpor-
ated company, and they constitute
the commodities which are dealt in
on the New York Stock Exchange.
Very infrequently a large cor
poration, such as a railroad COM
pany, will need large sum of
money for a temporary purpose;
or perhaps, as has been the case
during the present war, some for
eign government will want a quick
loan, and in these cases they issue
'notes"-practically the same as
an ordinary promissory note which