New-York tribune., 1922-01-22


bone OF the great majority of Amcri-
can investors investments, and up to
1910 had carried prestige which no
other form of investment in private en-
terprise had carried. Following the
panic Of 1907-'08 it was the sale of
s40,0o0,000 Pennsylvania consolidated
bonds that marked the return of con-
hdence Of investors, and except for the
entirely new factor of foreign govern
ment bonds and our own Liberties il
would have been railroad bonds that
conservative investors should have
turned to in 1920 and 1921.
AS matter of fact railroad bonds
have had black eye. Many a letter
received by the Investment Information
department of The Tribune contains
the sentence, "I do not want any more
railroad bonds" There have been, how
ever, railroad bonds that, throughout
the period of high money, of public
distrust, of railroad managers on the
ono side and of the fairness Of gov
errment regulation of railroads on the
other, have sold at a price not much
below that Of the Liberties that are
subject to taxation.
Safety
Safety of interest and principal in a
railroad bond depends, in the first
place, on the earning power of the
property; secondly, on the mortgage
security of the bond; thirdly, on the
equities which stand between the bond
and default; and fourthly, but by no
means lastly, on the strategic position
of the holders of the bonds. By this
is meant, roughly, the pressure which
could be brought to bear on reorganiza- :
tion managers should the road get into
difficulties to compel them to protect
hondholdcrs' interests.
Nine out of ten people who go to
investment bankers seeking security
INTO which to put their money say that
they want safety above all other con-
s.derations. Comparatively few are
single minded in the search after such
safety. There are q large number Of
railroad bonds which are at present
selling to yield only about per cent.
There are, however, comparatively few
that will pass all of the tests that
would occur to canny bond buyer.
Without attempting dogmatically to
state the exact number of bonds of rail-
roads that would pass all Of the sever
est tests, roughly, there are some sew
enteen different issues which might be
rated as having as high degree of
safety as can be obtained in railroad
bonds, when consideration is given not
only to the present but to the probable
position Of the bonds at maturity. All
of the seventeen bonds named are Sc
cured by first mortgage on nearly or
more than thousand miles of main
line essential railroad, having a diver
siied traffic of such character as to
warrant the belief that there is little
likelihood of any other form of trans
portation being susceptible of substi-
tuition for that of railroad transporta-
ton.
All Of the companies have high credit
since all of the bonds have large equi-
ties back Of them. Many other bonds
might be, for one reason or another, a
better purchase for given individual
in a given case. Any bond man will
be able to think up dozen or more
bonds that he would have included in
this list which have been omitted, and
no attempt can be made to justify all
of the omissions, although some typical
examples will be cited and the reasons
given why they we're omitted Other
bonds not measuring up to these rigid
standards are attractive too to those
who can afford to take more or less
slight risks.
The Highest Grade
In alphabetical order the gilt edged
rail bonds are:
Atchison, Topeka & Sante Fe general
As due 1895. selling to yield 4.55 to ma
turity, secured by an absolutely first
mortgage on the greater part of the
main line Of the Sante Fe, running