New Britain herald., 1921-09-24
NOW IS TIME ID
 BUY IN ON BONDS
BabSOn, Financial Expert, Sees
 Danger in "Callable" Issues

Business today is dragging on bottom-our index figure standing now at 75 points below normal com pared with 100 points above a few months ago. This means that we are in the sixth period of the Busi- ness Cycle. and that a period of lower money and higher bond prices is at hand
 "You havo an opportunity here thht will not be equaled in tho in- vostmont field for several years to come. Buy all tho long time bonds you can carry, right now
 Bonds Are Cheap Now.
 When interest rates are low bonds are high priced so that they yield only tho current rate of inter- est. Likewise, when interest rates are high, as at present, bonds arc cheap. so that they yield a high rate of in- terest. When interest rates are low. as they were a few years ago, one should buy short time bonds because it Is not advisable to tic ones money up for a long time at q small return. Today, however, when interest rates are high, the shrewdest investors are buying as long term bonds as they can possibly get. Rockefeller. Nor gan. Mcllen. and the other rich men of the country are seeking long term investments and buying not only bonds that pay a high rate of inter est but bonds that do not become due for twenty or thirty years.
 Recently I have been hunting such good issues for some very careful in- vcstors and have been surprised to find that most of the new issues have ''caIlable' features. Many of these is sues are callable at any time or after five years. at par or a small premium. The bonds have a great big six. seven. or even eight per cent of them and the date when due. twenty or thirty years hence. is in great big type. This gives an investor to understand that he will get the high rate of interest for twenty or thiry years. Careful examination of bond, however. shows that in very small type is a statement that the Company. if 1t desires. can redeem the bond at par with n small premium at any.s ime or after n few years. Don't Buy CaIiabie Issues
 Investors should watch for these |callable features when they buy bonds. They are simply a heads I win tails you lose" proposition in favor of the companies. If we should get into 'anothcr war and interest rates remain cd high. or if the company. should have hard luck. then it would pay the investor for twenty or thirty years But if interest rates should go down as they probably will. and the company Is prosperous, as tho investor of course hopes it will bc. then 1t vii simply call the bonds and leave the investor to take a lower rate of interest for the balance of the time. Thus the big six. seven or eight per cent and the twenty or thirty years does not mean any thing.
 Investors who have trouble in flnd- ing new high rate long term issues with reasonable and fair callable fea- lures should revert to their old friends he three. four or five per cent bonds that were put out years ago when money rates were low. When com panics could borrow for three, four or five per cent they made tho bonds just as long term as possible. and they didn't bother to put In any clauses In fine print. For instance, the Northern Pacific h. K. Co. three per cent bonds do not become due until the year 2000, while most of tho good railroad bonds were out for periods Of fifty years. As these bonds can now be bought nt q discount so as to yield six, seven, or eight per cent even, they should not he forgotten, A t10o0 3 1-2 per cent bond nt fifty. which means 1t can be
 bought for $500 is a better Investmen than q per cent 5000 bond at par" tAll rights strictly reserved).