New-York tribune., 1920-11-27
St. Paul Bonds Well Secured

rsN;C. U;uesuon-A few weeks ago. you said in
yspay waasss to = question that the Chicago, Mil
operating rather badly Of late To one
sas such as l.. not thoroughly familiar with
..,nanc.ai affairs the fact that the road Is
operating rather badly makes the In
ssestrnsnt IN its securities a matter Of
vo',r vouD'tua ~. wisdom. and yet have in mind
Pau! general As as a good buy. II the
road Is operating month after month at
honHh0;ya = nsSVy delis.t. what assurance has the
~ po'iun noIuer that the interest Will be paid Z?
IS It, in your Judgment. better for the in
sSestor who can III afford 70 lose any OF
vs. ats capita TO pay the seventy odd dollars
ezra per $1,000 bond and buy such issues
as as Northern Pacific zs Atchison general
~ ana securities OF similar grade p
A&swer-Your question is an inter
estihg one. We wonder why it has not
oeen asked before. The Tribune re-
celves large number Of inquiries as
lolio"s: please name five or six bonds
ylelolng per cent which are absolute
" safe and which may be placed in
ones strong box and forgotten" Our
answer IS, 1t cannot be done. Why are
hl'ed States government bonds the
pest bonds to purchase? Because thew
are The bonds which fill the wants of
the INVESTORS above referred to, EXCEPT
that United States government bonds
do not yield 8 per cent But so MANY
purchasers OF securities want high
yields with "absolute safety" that they
40 not stop to consider that the higher
.ne income return the greater the risk,
as q general rule. Perhaps The Trib-
une leans toward safety in its advice to
investors. There is o good reason for
such policy we believe. No one
should purchase securities and forget
them, as the expression goes. It is
every ones duty to keep in touch with
affairs at all times. Conditions are
forever changing. What was q good
security few years ago may now
nave fallen into the semi-speculative
class. The Chicago, milwaukee, & St.
Haul railroad was at one time one of
inc very prosperous carriers of the
country 1t built Its Western exten-
sion at great cost, and subsequently its
operating ratio has risen enormously,
Inc common stock, which paid Z per
cent for many years, and sold as high
as $ZoU share, no longer pays dvi-
dends;. Indeed, the preferred issue.
considered at one time prime Sc
curlty, has not paid a dividend since
!Sl!. In consequence of this it's
Junior lien bonds have fallen consid-
erably in price, but the property il a
very valuable one to-day. nevertheless.
Inc general mortgage bonds are an
absolute first lien on 6,525 miles of
road and second lien on 2371 miles.
The prior liens amount to less than
S42,O0000 This places the general
mortgage in very strong position.
In our opinion. no matter what may
transpire. these bonds are entitled to
a high rating. 1t must be borne in
mind that the results Of operation of
the St. Paul for the last two years
should not be taken as criterion. for
under government control most Of the
roads showed poor results Under its
own management and with increase
rates the road will, in our opinion
show far better results. And yet, as
you say, if the investor will fortify
himself by purchasing only those is
sues which are so we'll secured that
there can be little doubt about their
security he >will have no cause for
worry. His income will be smaller but
his principal will be safe.