The Washington times., 1922-04-14
aAsH#Rr aAsH#Rr DUSIN NESS AND FINAN CE
BONDS AND
INVESTMENTS
BY MUNROE ROBERTS.
Copyright. isaa, by Cosmopolitan News

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NEW YORK. April 14,--It is sig
nificant that American investors.
most Of whom are skillful and sue
cessful in their usual business pur-
suits, and In the acquisition OF a
modest surplus, are either unable
or unwilling to apply the same
measure of discretion In the selec-
tion OF their investments that they
do In the conduct of their business
or vocational affairs. Having by
proverbial industry and thrift ac-
auired a few extra dollars which
for a time they cherish as a safe
guard against the rigors of possible
hard times, incapacity or loss of
employment, too large a proportion
of our American people have been
compelled TO go through the har-
rowing experiences of having their
lifetime savings swept away In a
twinkling because of ignorance or
indiscretion. either In the selection
of their securities, or In that Of the
Investment" organization through
which they were purchasing on a
partial payment" basis. The for
mcr could have been remedied by
soliciting the advice of a reputable
banker or investment expert who IL
ever ready TO contribute his service
to aid an investor In this manner.
The latter has proved to be one of
the most prolific sources of ill-got-
ten gains for the crooks that are
always ready to prey upon their
fellow man. II
In judging Investments there are
three important yard sticks by
which TO measure the desirabtlity
of an investment security offered
for subscription to the American
investment public. They are:
A-Security.
B-Income basis, or yieiu.
C-Marketability.
BY far the most important OF these
is the first. for II any doubt arises IN
the mind of an investor concerning
the intrinsic value behind a mort
gage bond or OF the ability of a corpo-
ration, a municipality or or govern
ment to make good on it's promise
TO pay" all other considerations af-
fecting the desirability of a security
Immediately vanish and IL becomes to
that investor nothing more than a
scrap OF paper"
Unfortunately, not through fraudu-
bonds which were considered high
grade at the time of their issuance
have become entirely worthless be-
fore their due dates and neither prin-
cipai nor interest payments have
been made. This is one OF the conse-
quences of unforeseen Developments
In economic and business conditions
which transforms a prosperous busi-
ness organization or corporation into
a failure, with no means to meet the
obligations II has contracted. In
many cases signs of approaching dis
aster are made known prior to the
actual culmination of that event, and
investors who are in touch with gen
eral conditions have ample oppor.
tunity to unload their holdings Of
questionable value to invest in Sc
curities of higher rating.
II is generally conceded that
bonds issued by governments (espe-
cially your own governmeno are
entitled to the highest rating and
that following closely in order are
those of municipalities and State
and county organizations. The
highest grade Of railroad or corpo-
ration security is not the one which
depends for it's liquidation upon the
business success of the corporation
involved. but that which has be-
hind it some actual physical prop
erty, such as a railway line or an
office building in a desirable locs-
ton, the sale of which will hqui-
date the bonds In case of failure
of the business. Those who wish
to enter into limited partnership
with a successful corporation must
do so through the purchase of it's
stock rather than it's bonds.
While It is highly desirable 10
secure as large a yield as possible
on the funds which are invested in
bonds and other high class securi-
ties. IT is a mistake to regard the
matter of yield as paramount and
to sacrifice other factors therefor.
AS a matter of fact, investment ex-
perts find that the income yield is
in the inverse ratio 10 the safety Of
the underlying bond. A bond issue
that offers IL to 1s per cent SHOULD
for that very reason be regarded
with suspicion, for no business or
ganization can afford to pay such a
high rate for the loan OF capital
funds. especially II II be in the
borrowing Glass;" II often hap
pens that a bond that was issued
on a 8 per cent basis declines in
market price to such an extent that
the current yield is IL to Is per
cent. This is a dangerous sign 70
the wise investor who without diff
ficulty can discern finan cial embsr-
rassment in the company whose
name is signed on the dotted line.
There are . number OF bonds on the
listed market of the New York
Stock Exchange which are at pres
ent In this semi.speculative position,
but which, because of the recent
financial Improvement of the coun-
try in general and of the issuing
corporations in particular, are now
being acquired by investors who
consider themselves conservative
and discriminating in the selection
of Investments. Most of these is
sues are railroad bonds and some
Of them have advanced from 40 to
100 per cent In market value during
the past year.
Investment yields are determined.
aside from safety OF principal, al
most exclusively by conditions in the
money market, and advance and de-
cline with the rise and fall of bor.
rowing rates for money. A year ago
the per cent coupon for Industrial
and foreign government bonds was