New-York tribune., 1921-05-22
widow Timid A,sout Canadian Nor.heru

Questien--I have mado several ohanKss
n n investments on the strength OF and con
,ltuence IN your sdptee, believing that the
mere fars Of your association with a aatty
newspaper OF the high standing az The
Arfnone must In itself be high guaranty
m your ability and Judgment. Quite re-
eentiN, acting oppa Sous frequent recon ).
mendattan of the Canadian Northern per
VNnt gold bond OF 1880 | pnrcha sed two of
these bonds, immediately following my
purchase, was told hy "a member Of one
W the highest class bend houses, who did
not know of my purchase, that these bonds
are only probably safe Tor a few years'
because or the Canadian government guar
snty, From another source was informed
,tnat any road which is unable TO stand
upon Its owh merits and TO which the gov
ern'nent must come in rescue, cannot he
called safe, Ss | ann a widow. dependent
upon a modest Income this news has caused
fne some uneasiness, Among my holdings
pafchased ten wears ago, many bus,ds
OF she telephone tissues, all subsidiary. as |
now md, to the American Telephone Com
ganN. These include. 55 shares America n
Ielephone and Telegraph stock. $4,000 New
Eng land Telephone rs, $4,000 southern Bell
Telephone 5s. $1,000 American Telephone
snd telegraph collateral As. 1920. As ifnow
view This investment made on the recon-
mendation of reliable brokers. il seems de
piorahae that SO much of my capital should
nave been placed in the different issues OF
one on, Sinsle monopoly as is the American
Ielepbone and Telegraph Company Re
GENTLY decided 20 dispose of the Amerjcan N
Ielephone and Telegraph "a. purchased at
SS and invest In a bond selling af Yhout
tho Same price of a longer maturity hut
Was told that these IL held to Io9S Viii
oring bonus, and in all present probability
are tntrinsicaliy safe and a desirable in
vescment also hold 100 shares Sloss-
sneiheid Steel and Iron preferred, pur-
this stock Mrs. e. s. Va
Answer-It might be interesting to
ask your friend in the bond house
whether the majority of railroads in
the United States we're able to "stand
on their ewn feet" during government
control. The fact that they were not
able to do so made no difference in
the governments guaranty nor the
investors security. The government,
OF course, made good. The Canadian
government guarantees both principal
and interest of these bonds by indorse-
ment. In our oninion. failure to pay
Interest or failure 60 pay the principal
when 1T becomes due in 1910 would
constitute a repudiation of govern
ment credit comparable to that of
refusal to pay Canadian government
bond interest or principal. While we
agree with you in theory that itF is
safer to have your investment divers-
fled among different classes of secur-
ties, we dc not think that you need to
worry about your American Telephone
and Telegraph bonds. The bonds due
1929 recently sold about 70. In July,
1929, you will receive 81 600 for your
bond. In other words. the bonds will
appreciate in value between now and
1929 by about 81 points. Taking this
fact into consideration, your bonds
yield you, if you hold them till ma
turity, about tx per cent. Put it an
other way: If you should sell ysur
bonds now at 79 to get the same yield
you would have to buy something else
that gave yop 712 per cent till ma
turity. We ehink that the American
Telephone and Telegraph As are as safe
bond as you would be likely to find
to yield Tx per cent. We consider the
Sloss- Sheffield Steel and Iron preferred
stock a good investment. 1t is true
that the company recently passed its
common dividend, but this was the
conservative thing to do: The Z per
cent dividend on the preferred appears
to be we'll protected.