The Topeka state journal., 1919-11-04
TOPEKA STATE JOURNAL
INFORM ALTON
BUREAU
FREDERIC J. HA6KIN. Dtyscsn<.
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THE VALUE OF WAR BONDS.
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| THE VALUE OF WAR BONDS.
| Washington, D. c., Oct. s1.7-Every
day some scores of people from Tampa
or Tacoma, from Providence or Pueblo.
or from some other point on the big
map of the most prosperous nation on
earth, write letters Nto the treasury
department at Washington and ask
advice as to safe investments for the
moneys that are accumuiating in their
pockets.
That department does not want to
put itself in the position of unduly
pushing its own wares but it has a lot
, of confidence in the government seeur-
tiles that are kicking about, and real
ly feels thattan opportunity to- prefit
! on an investment in those securities is
about as good thing as one should
want. If properly pushed, treasury Of
ficiais will reveal a situation which
makes It look as tho an investor might
| go far and fare worse than by pur-
chasing government bonds,
In all there are ten varieties of war
bonds on the market. The government
has none of them for sale They are
already sold. They are now owned
by the people. The governfn ent 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 is all the same to the government
If they sell at ninety or hundred and
| twenty. @ssss
The first liberty bonds issued drew
the lowest rate of interest They were
three and half bonds. Strange 10
say, of all the issues this is the one
that is today bringing the highest
| price. These thres and a half are
now selling, above par. The reason for
this is that they are exempt from in
come 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 and
half per cent. They are good buy
for the rich folks. but they would be
the worst buy in the lot for poor
man who is not paying a high rate of
income tax.
1t Is peculiar that the fourth liberty
loan issue, which pays Az per cent
interest, sells way below par. 1t is
ties on the market. It sells around
ninety-four. 1t is not exempt from in
come tax, and so is not so good for the
rich man. 1t is fine, however, for the
poor man. 1t is worth more than
nlpety-four. The reason it is cheap
is largely due to the fact that there is
SO much of-it. 1t was the big issue
There are six billion<dollars wortR of
| 1t. There is always a certain per cent
of bond holders who are forced to sell
for one reason or another. OF a big
issue there are more holders who put
their bonds on the market. The old
law of supply and demand works and
the price is run down. The fourth
4 liberty loan 4 Il lat the present price,
| pays AT per cent on the investment
The bankers favorite of the liberty
bonds is the third 4 ii These bonds
mature in ten years. They are selling
a little below par. The interest is
good and the early maturity insures a
profit on the buy; At the present
/ market price they figure to yield 4.S7
on the money put into them. p
| Then there are the second fours and
! quarter. They areethe buy of them
| all-that just now yield the highest
return on the investment. They sell
around ninety-four. The government
| has the privilege of retiring them in
1927 and will probably do So This
means that there will be a profit of
! 6 cents on each dollar This added to
! the interest that will be collected in
| the meantime means that these gov
ernment bonds are today a SIS per
cent Investment. which is mighty good
for the bonds of the government
which is the most financially sound
of any in the world.
! These Figures are based on the
known fact of the rate of interest
paid on these bonds, and the known
| figures at which they will be retired.
| There is nothing speculative in gov
ernment bonds bought at these figures.
! One knows exactly what his returns
will be.
| But there is a speculative element
| in the purchase of government bonds.
| Before the war, for instance, this gov
| ernment was able to sell its bonds at
par when they bore interest at the rate
| OF per cent. When a nation IS at
war. no matter how strong it may be,
its securities will not sell as readily as
| in times of peace. 1t must offer high
! offered those rates, of interest It sold
! most of it's bonds around four and a
| half. 1t will continue to pay that four
and half until their maturity. which
will be ten, twenty and thirty years.
| If it is granted that, after We have
returned to normal conditions the rate
of interest the government will have
/ to pay will be as high as Y per cent,
there will still be a handsome interest
! premium on these long time loans. 1t
can hardly fail to be true that the
prices of these bonds will rise in the
! open market. One of these liberty
loan bonds can sell at 40 and yet
yield a per cent return on the in
| vestment Those wise in finance be-
lieve that 100 will be about the normal
j price of the best Of these two or
three years from now. If one buys at
! 95 today and sells at r20 three years
from now he will have cleared $25 on
each hundred dollar bond. In the
meantime he will have secured inter-
est on his investment
The financial authorities cite the
| facts of history. In the Civil war gov
| ernment per cent bonds were issued
and sold at IS. At the end of the war
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