Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1919-11-03

THE VALUE OF WAR BONDS.
By FREDRRICK ]. HASKM.
Especial Correspondence Of The ArguD.
Washington, D. c., Nov. Every day some
scores Of people from TAMPA or Tacema, from
Providence or Pueblo, or from some other
paint on the big map OF the most prosperous
nation on earth, writa letters to tho treasury
department. 1t washington and aak advice -
to safe Investments for the moneys tha1 are
accomplishing in their pockets.
That department does not want to put IT.
self in the position Of unduly pushing its own
wares. but 1t has = lot Of condolences IN the
government securities that are kicking about.
and really feels that m opportunity to proht
on an Investment in those securities is aheut
as good thing as one should want prop
erly pushed treasury ofacials Will reveal
situation which makes it look o. though an
investor might 60 far and fare worse than by
purchasing government bonds.
In all there are 10 varieties Of war bends
on the market. The government has none OF
them for sale. They are already seld They
are row owned by the people. Tho geTefn-
ment makes no profit by their rise or fall.
1t has got to pay interest on them at par and
has got to retire them at maturity. 1t to all
the same to the goverRpent II they sell at
ninety or Q hundred and twenty.
The first Liberty bends issued drew0th
levest rate of interest. They were three and
q half bonds. Strange to say, Of all the issues
this ID the one that Is today bringing the hishs
est price These threes and half are nov
selling above par. The reason for thla ID
that they are exempt from income tax Rich
folks whose surplus income goes largely into
the Golfers Of Uncle Sam, buy these bonds
and are allowed to keep the whole three ana
half per cent They are good buy for the
rich folks, but they would be the werst buy
| in the lot for a poor man who Is not paying q
| high rate of income tax.
1 It is peculiar that the fourth Liberty loan
issue. which pays four and quarter per cent
interest. sells way below par. 1t il the cheap
est of the government securities on the mar
ket 1t sells around ninety -four. It is not
exempt from income tax, and so is not 30 coed
for the rich man. 1t is fiHe however. for the
poor man. 1t ia worth more than ninety -four.
The reason it is cheap is largely due to the
fact that there is SO much of 1t. It was the
big ISSUE There is six billion dollars Werth
Of it. There is always a certain per eeHt Of
bondholders who are forced to sell for one
reason or another. OF . big issue there are
more holders who put their bonds on the Nar-
and the price is run dawn. The fourth Liberty
loan four and a quarter, at the present price,
pays Att per cent on the investment.
The bankers fayorite Of the Liberty bonds
Is the third four and quarter. These bonds
mature in ten years. They are selling little
below par. The interest is good and the early
maturity insures profit on the buy. At the
present market price they figure to Yield 4.S7
| on the money put into them.
| Then there are the second feurs and 9
quarter. They are the buy of them all that
just now yields the highest return on tho in
gestment. They sell around ninety-fouF. The
government has the privilege Of retiring them
in 1897 and probably will do SO. This means
THAT there will be profit Of 6 cents on each
] dOI1or This added tn tho intoraHt that nil
be collected in the meantime means that these
government bends are today SIS per cent
Investment, which is mighty good for the bonds
Of the government which Is the most anan-
I rially sound Of airy in the world.
But there is a speculative element in the
purchase Of government bonds. Before the
war, for instance, this government was able
to sell Its bonds at par when they bore Interest
Fat the rate OF three per cent. When nation 4,
at war, no matter how strong 1t may be, its
securities will not sell as readily as in times
of peace. 1t must Offer higher rates of interest
The United States offered those rates Of in
terest. 1t sold most Of Its bonds around foul
and half 1t will continue to pay that foul
and half until their maturity, which will b.
ten. twenty and thirty years.
| II it is granted that, after we have returned
to normal conditions the rate OF interest tn,
government will have to pay will be AZ higf
as three and half per cent, there will still
time loans. 1t can hardly fail to be true thS
the prices OF these bonds will rise in the 0per
market. One of these Liberty loan bonds car
sell at 100 and yet yield three per cent re
turn on the investment Those wise In Fl
nance believe that 1870 will be about the nor
NAL price of the best of these bonds two o.
three years from now. If one buys at ninety
five today and sells at 1870 three years from
now he will have cleared $25 on each hundret
dollar bond. In the meantime he will hayl
secured interest on his Investment.
The financial authorities cite the facts o
history In the Civil war government six pe
lcent bonds were issued and sold at eighty
three At the end of the war they went to lis
land finally reached 126. In the Spanish Amer
iican war three per cent bonds we're sold a
par, and in a year had gone TO no. British
consuls have always been cheap when Engian,
was at war, and high in times of peace. Ger
man bonds sold at seventy-eigh during TIL
Franco Prussian war, despite the fact tina
Germany was winning all the time, and wen
to ninety eight seon after peace wss restored
II the financial experience OF nations Il
wars of the past are indications Of what ma
be expected, our issues should gain 20 point
in the next few years. =.