The New York herald., 1920-12-30


investment securities as the
market now offers and so
we say to all, and this
m a n U.S. cra ape
together all the money you
can get without borrowing
and buy investment securi-
ties-and buy them now"
We said in our letter of yes
terday, Many of the safest Sc
curities are selling at the heavi-
est discount. There is a reason
for this, which we will explain
in another letter January end"
This is the explanation:
We have had long period of
abnormally high interest rates.
We used to issue so bonds and
sell them at par. Many of the
bonds being issued now bear an
go rate. Nobody is going to
buy so bond at par if they
can get an equally safe so bond
at par. Many investors are
taking the bonds out of their
safe deposit vaults that they
had carefully selected over a
term OF years and are selling
them for whatever they will
bring and are putting the
proceeds into. tax exempt Sc
curities. The investor who comes
in the highest surtax bracket of
the Federal Income Tax must
pay to the government 73% of
his income. He gets $4,000 in
terest per year on his bond and
the government takes $36.50 of
it, leaving him with $3.50. Now,
if he buys municipal bond
which is tax exempt he gets and
keeps his full $4,000. Stated in
another way, he can get as much
income from a Sl,OO0.00 tax ex-
empt bond as he would get from
$4,000 invested in corpora
tion bonds.
The above is only one of the
many reasons why we say that
perhaps never again will we sec
such investment bargains.
Now as to safety. The public
sees a bond selling at, say, 1920
of its face or par value and says,
why, it cannot be safe" Many
of these bonds are not only safe
but safer than when some big
capitalist after careful investi-
cation bought them at par and
carried them with pride and
satisfaction to his safe deposit
vault. We have shown in the
above example how, if he sold
$4,000 of these bonds for
81, 100000 and bought tax ex-
empt bonds his income would be
no less. In other words, if in
come alone were to be consid-
cred he could sell his corporate
bonds at 279o of their face value
and have just as much income.
Now let us assume, simply
for Illustration, that one block
of bonds were issued on a
hydro-electric power plant built
before the outbreak of the war.
We will assume the plant was
originally bonded for 500 of it's
cost and all of the bonds are
still outstanding. This same
plant could not now be repro
duced for double its original cost,
so these bonds only represent
$3.50 of the reproduction cost of
the property. AS the bonds can
now be bought for 1920 of their
face value it means that the pur-
chase price paid now for the bonds
is only 17.59o of the reproduction
value. The above is only an
example of one type of many
safe investment bargains.
That there are rare bargains
to be had cannot be questioned.
However, there was never great
er need for discrimination in
making purchases. We are con-
fident of being able to get you
safe and profitable investments.
While we solicit your confidence
and patronage, nevertheless our
message stands, Buy, and buy
now, upon either our advice or
upon the advice of any of the
many reputable houses that deal
in investment securities" If you
care to leave it to our Judgment
we will treat it as an honor