New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-10-02

Heie die many CiaSSeS VI -HNSoN
monts, bat sufficient to this discussion
are bonds in the non-tcchnical sense OF
the word. AS used here bond means
an engraved piece of paper stating
that it is one Of series issued under
an agreement between the company
issuing the bond and a trustee, usu-
ally bank or trust company
In buying a bond the average in
vestor demands safety Of principal, as
surance OF regular payment Of interest,
often marketability and almost invar-
ably "the highest possible income CON
sistcnt with safety This overworked
general and meaningless phrase is the
rock on which investment ships most
often are wrecked. The phrase is
meaningless, because safety in the
sense that it $ used here is & variable
between wide extremes. To the
experienced investment banker safety
means as great number OF safeguards
about the provision CT money to pay
off the bond when due and the pro-
vision Of money to pay interest cou-
unsophi person with an itch to
get rich over night absolute safety
means something that sounds good to
ne
Safety of Principal
Safety Of principal may be safe
guarded By the assignment to the trus-
zee. through a mortgage, Of assets
which under any circumstances that are
al -. Wi! lo col n IL,
for at least the full face value of the
bonds secured by the mortgage. 1t may.
on the other hand, be safeguarded by
the earning capacity of the company
over and above any fixed charges which
Il may have, and as great a likelihood
as possible that this earning power will
continue over the period OF years dur
ing which the bonds run Uninterrupt-
ed payment of interest is assured pri-
maliiy by the earning power Of the
company.
The more important facts which an
Investor should inform himself about
in regard TO . bond are the exact name
of the bond, the dase OF issue. the date
on which the principal is due, the form
IN which the principal is TO be paid.
the place where payable, the dates on
which interest - payable and the char
acter OF the currency in which it IS
payable, and where. He should also
knew the total amount authorized by
the indenturo, which is the technical
name for the agreement between The
trustee and the company issuing the
bonds. the amount OF bonds actually
issued. spoken Of as the amount cut
standing, and the purposes to which
the money to be obtained by the COM
pany through the sale of the bonds is
TO be devoted.
Then there are the restrictions upon
the issue and sale of additional bonds
under this irdenture and the form in
which the bonds come. which includes
both the denomination OF the bonds,
that is, 500, $1,000 pieces, etc, end
the question of whether the bond is a
coupon on which both interest and
principal are payable TO the holder; a
registered bonds on which both prin-
clpal and interest arc payable By check
TO specified individual only; or reg
lstered bond with coupons, making the
principal amount Of the bond payable
to a specified person only, but the in
terest payable to whoever presents the
coupon. He should know, too. what
provision is made in the indenture for
sinking fund. either 10 redeem the
bonds periodically or to provide a fund
for the payment of the principal when
It becomes due: what provisions there
are for calling or redeeming the bond
before it becomes due; and finally.
whether the bond is convertible al the
option of the holder into some other
securities. Although this catalogue
does not exhaust the possible technical
features OF various kinds OF bonds
tax provisions, for instance. it covers
the principal points about which the
investor should inform himself.
These points, however. are merely
technical details, and the fundamental
question of safety Of the bond is not
touched: To judge of the safety of the
bonds the investor should first inform
himself about the nature Of the bust
ness Of the company, the credit stand
ing OF this particular company. its as