Perth Amboy evening news., 1922-05-03
TROUBLES OF RAILROADS
TOLD OF BY HASklN
Ietter hy Fredcric y. Haskin

"a group of railroads and a group
of Industrial corporations. me ne-
ures produced by this study throw
valuable light on the relative posi-
lions of these two important pusi-
ness groups. .
The mar in the street who works
for a salary sometimes has diiiculty
in thinking of money is fiananciers IN
dustrialists and economists think OF
il. The fact is that money in n
large business sense is a commooity
Just as potatoes, shoes, wheat OF
steel are commodities. Its price n
availability are determined by the
laws of supply and demand Just as
in the case of other goods. Money
| has a price as much as cigars. Inc
price of money is expressed as IN
terest. In reality, 1t is rent. a
given amount of rent is paid for
the use of money for a year. Ihe
rent is high or low in accordance
with the abundance or scarcity OF
idle money and also in accordance
with the relative risk involved or
losing it or getting it back at the
| end of the lease. If a man is sure
he will get his money back, he Will
rent it for a lower figure. Many
men are willing TO u a slight RISK
in order to earn the higher rent
for the use of their money which a
| risky investment pays. NO one Is
! willing to run very much OF a FISK.
Capital, that is money. is the most
timid commodity in the world.
Now DIR. Muller has studied a group
of railroads and a group of indus
trial companies 0 the ten yea
period from 1911 to 1920 inclusive,
to ascertain which group pays the
best yield.
One thing which governs the
safety of an investment is the amount
of money already advanced on the
security offered.
Much Money In Roads
DIR. Muller's figures show that Tor
this ten year period more money
already had been invested in the
railroads than in the industrials. By
industrials is meant manufacturing
enterprises and the like. These fig
Tres show that for the ten years.
approximately half of the value of
the railroads vas mortgaged. The
figures for the mortgaged portion
range from 53.05 per cent in .131l
to 47.OS per CEN in 1920. The sur
plus, hat is, profits, for this group
range from 7.SS per cent in 1911 to
L t.b6 per cent Ill ls-Vs ia
that the railroads progressively got
into better financial shape. More
of their property was free OF debt
and they had larger SURPRISES at the
end of the ten year period than at
its beginning.
However, the Industrial group was
not nearly so heavily mortgaged at
any time during the period as the
railroads. The funded debt, that IL.
the mortgages already on the indus
trials, is 1911 was only 1880. By
1920 it had declined to 11.69 per
cent. Also, their surplus increased,
ranging from Is per cent in 1911 to
32.14 per cent in 1920!
But the railroads constitute an ABB
solutely essential public utility. They
carry the mails, they convey the
public about its business, they trans
port the freight of the nation. The
railroads must endure. The govern
ment would not let them go out of
business under any consideration.
They constitute a permanent fixture
In the community.
Industrial corporations do not
have this absolute solidity. Great
| companies sometimes fail dismally,
no matter how strong they appear,
and smaller ones grow up and be-
come a new generation of great
ones. Industrials are changing; rail-
roads are less so. This means that
the security of the industrial stock
or bond is not so firmly based as
! the security of the railroad obliga-
ton. Therefore. although on the
surface it appears that the relatively
low debt and large surplus of the
industrials would make them always
preferred when compared with the
more heavily encountered railroads
the greater solidity of railroad en-
terprises must be set against this.
Industrials Pay Better
The people who are willing to
take a chance on the Industrial Sc
curities, many of which are almost
as solid as the Treasury, get higher
returns. In 1911, people who rented
their money to the railroads goi
S4,S3 a year for each 500. People
who rented their money to indus
trials got $3.50. In 1920 the rail-
roads paid s4.03 rem a e for
money, while the industrials paid
1880. These are DR.. Mullers
figures.
He points out that the ten year
/ period has resulted in overcoming tt
some degree the equality of tbs
ieompetition ten years ago and tina