Baraboo weekly news. [volume] (Baraboo, Wis.) 1912-197?, 1922-03-02

The following excellent advice al
to investments is from the Northwes
Farmstead, Minneapolis Minnesota
written by George w. Kelley:
Many Minnesota farmers owl
shares of stock in railroad Maybe
you have some of them yourself. But
; the certificates are worthless papers
! Absolutely worthless? Yes, except az
souvenirs. 49,
But the railroad is still doing bust
ness. Yes, that's true, too. "How
| Gomez"
! BondhoIders Own Road
The stock, several million dollars
worth Of it, was sold to farmers and
others. The road was built, and then
it was bonded (that is, mortgaged)
for about $750,OO0.00. OF course, the
mortgage holders Chat is, the owners
of the bonds) had to have their in.
terest before the stockholders could
receive any returns on their invest
ment. The man who has a mortgage
on his farm has for himself what is
left after the interest is paid.
But the railroad did not pay the
interest. So the bondholders fore
closed on the property and sold it to
satisfy their mortgage, and the stock
holders are out Who wrecked the
railroad is not the question we are
considering. The question is, which
is the better investment, stocks or
bonds? And the history of that rail
road is typical case.
A share of stock is an interest in
Enthusiastically run by someone
else, and very frequently in the in
teret of that someone else.
Stakeholder Comes Last
A bond is note for a certain
amount of money, interest and prin-
cipal payable at a given rate and at
a specified time. Only after the bonds
have been paid can the stakeholder
receive any thing out of the business.
but this business is going to pay
big profits, 10, 20 or 80 per cent,
declares the salesman.
An Economic lmpossibility
When any salesman tells you that,
you can put him down as swindler
right there and then. Why? Well,
let's reason it out. Suppose some
wonderful business should pay 20 per
cent annually. What would happen?
Why, everybody VINO had money to
invest soon would flock into that
business More would go into it un-
til it's earnings were down to the av-
erage rate of return on money in
other lines of business, or maybe be-
low. 1t would boom like the auto
mobile tire business, till we got to
making 10 tires a year for every car.
Then the boom would burst, like a
rim-cut casing. And the bondholders
would take the business, lock, stock
and barrel. There'd be "reorganiza-
tionIs and the stockholders dream
would be over.
There are a multitude of ways of
even a good business But the bond
holder is protected. He gets his mon
ey or he takes the property.
The "Patent" Fake
But this business can't suffer from
competition says the stock sales
man. eve shall have a monopoly. We
own the patents"
Don't fall for that bunk. In the
first place, nine-tenths of the patents
mean practically nothing. They run
only 10 years at best Many of the
patents sold as stockpropositions are
worthless in the first place. Others
have practically expired: And at the
very best, they are not an invest
ment, but q gamble The best COM
panies write them off, as quickly
as possible They are doubtful as
SETS Some fellow is likely to invent
something better tomorrow Then the
value or your patent lis gone.
"Others Make Money"
Others in this line are making mil
lions. See how much the packers are
making-steen million dollars last
year."
Yes, but how much is that on each
dollar of stock? And if Armour or
Swift is paving dividendsv-which
even they don't always do-that is
merely a good reason why you should
buy a share of their stock, not why
you should buy share in new COM
pany which must withstand their full
grown competition.
This is not advice to buy Swifts or
Armour or Wilson stock But if you're
bound to buy packing company stock,
why not buy share in business that
is making millyuns," rather than in
one which is quite as likely to lose
millions? You can buy it any day. It's
as common as sugar or barrel salt
Bonds are Better
But their bonds, secured by mort
cages on the plants, are better as an
investment
Some years ago, large packing
90 % n