New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1922-08-20
Beginming Investment Plan

Question: have been an interested
reader of The Tribune since Grantfand
some a t,,ne pas ~ sPof,ina hspar,ment Fes
hnanclal pages, particularly the Invest
ment Infornatson columns. trying 80 sasn
SEINE knowledge of finance and stocks and
bonds hope In the near future to start
@iHVesting on small scals In order to
lay foundations on which to build up
llst OF income paying securities for D
rainy day. Tfowager my knowisdge OF
finance ~ absolutely ail have read sew
Tor beginners, but they aIl sesm 20 take
for granted that the reader has SOME sfe-
i,is.1g,y itnowiedge and they start in the
middle OF the sabieet instead OF at the
very beginning. May asis a specimen guess
ton which puzziea me? Choosing the name
OF any bond at random, for instance 81 600
Goodyear Rubber So, does this bond pay
per cent interest regularity III 1t does
way does ANYBODY buy . per- cent or
per cent bond when they can get an
per cent bond OF reliable corporation7
II " doesn't, why is IL called an per cent
n .sn,a, A lao, how is this rate Of interest
mined2 II the answers 10 these appar-
entity en- foolish questions are too lengthy to
deeply indebted II you could furnish ma
with tbs nanlea of some books which
would supply me with these and other
ting large portion of my weakly savings
toward fnstaliment payments on the $50
= Ter cent Morris Plan savings certificates
instead ,tsad or placing them Ia, the sa Wings
bank Do you consider this plan ad-
Nisabi Also. friend has asked me to
buy $3.50 worth Of Carlisle Tire stock.
which he is selfaR for the Business Build
ers, Inc. Will you kindly give me what
iniormation you have regarding this COM
paving dividends and what their prospects
for the future seem to be ?--D. A. NJ
Aaswer--Your questions are far from
being foolish. Under the head of
foolish questions, there is one which
comes to us repeatedly. Prospective
investors are asking continually il
return of per cent and more is con-
sistent with perfect safety. They do
not recognize, as you do, that there
must be some reason why some inves-,
tors accept S per cent and less whepf
they can find securities offering twice
as much. The Goodyear Tire and Rub
Der Company has been paying per
cent regularly ON two issues Of bonds
since they were brought out April l,
1921. People buy S and 6 per cent
bonds in preference to those 8s, which
are at premium bringing the actual
yield down to 6.45 per cent ON the 1871
issue, because they do not care to as
sumo the risk that goes with the high
yielding bond. These per Gent bonds
were issued at time when the COM
pany was IN financial difficulties The
company had a large value of bank
loans ard other obligations to meet
and 1T also was in need of working
capital to keep up with competitors
In short, Goodyear needed new money
badly at a time when it had plenty of
competition in the money market The
company was forced to pay the price
for emergency financing. The element
OF risk partly determines the rate of
interest that a company has to pay
The condition of the money market is
another determining factor. When
these bonds were issued money was
scarce because many corporations ard
foreign governments were in the mar
ket for loans. I'm the mean time many
awkward financial situations have been
Strengthened out and money has be-
come more plentiful. IL the Goodyear
company were doing it's financing now
instead of a year ago it would prob
ably get money for about Z per cent,
probably less. Goodyear did not as
sumo the obligation to pay 8 per cent
interest for twenty years without res
ervations. The company reserves the
right to redeem the bonds at any time
at $40 per S199 bond. We consider
the Morris Plan savings certificates
favorable method of employing your
weekly savings. Tell your friend that
his Carlisle Tire stock is speculative
1t pays no dividend AS for future
prospects, it is new unit in an in
dustry already crowded. AS mat
ter of fact, the stock can be bought
ON the Curb market considerably below
the price at which it is offered by
peddlers.