The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1924-03-30
| INVESTMENT IN
| BONDS THOUGHT
| SAFEST OF ALL.

Without detracting in. the slightest
from that sterling investment, the high.
class mortgage, It can be said that high:
grade bonds are the best form OF In
vestment yet devised. Personal consid.
erations may make life insurance OF
home ownership the most desirable in
vestment for certain individuals, but
judged on investment merits alone,
believe II can be substantiated thai
first-class municipal bonds and under
lying mortgage bonds Of weli-managet
businesses are the premier of all In
vestment securities.
A goo dbond is an obligation that
rests, not on mere land value alone, but
on land value, on business values, on
the proved integrity and ability OF
honest men who have demonstrated by
their business careers that they are su-
perior in business achievements. In
addition, a good bond is "built" by
these same business men of proved In
tegrity, and built with the counsel and
guidance of investment bankers who
bring their experience and the expert
engineers and other experts into build
ing a bond that 1t shall be as safe
and sound as 1t Is possible to make
any form of human wealth.
When an established enterprise needs
money, 1t has generally three sources of
capital. 1t may borrow from banks
for current needs, for quick or work.
ing capital. 1t may issue stock that
is sold to obtain fixed capital. Or 1t
may issue bonds for the same pur-
pose. Let US say that the enterprise is
wholly excellent and worthy. 1t decides
to obtain capital by bond issue be-
cause that will be less expensive to the
stockholders. Its directors accordingly
consult an established, reputable in
vestment banking house. The first
thing the investment banking house
considers is the honesty and Integrity
Of the men in charge of the enter
prise; next, their ability and expert
ence. If they satisfy the investment
bankers severe examination, the bust
ness itself, its past record, its future
opportunities; In fact, its whole internal
and external aspect and its relation
to every other business and calling.
the state and federal governments are
painstakingly considered.
If all those considerations pass In
spection and IL the property and bust
ness are sufficient to secure payment
OF the bonds and interest, then the
bonds are issued. The investment bank
er buys them and proceeds to sell them
to his customers. He Is a merchant
Bonds are his stock in trade. To sue
coed he must handle only good goods
at small margin of profit II he is
greedy or unfair he kills his business
Obviously the investment bankers &C.
cupy o commanding position, as a
whole, but their power IL very rigidly
and narrowly limited. If one invest
ment banker sought to exact too much
profit on bond issue, the borrowing
company would go to some other invest
ment banker. Or, II an investment
hankaF nffnrad
rate. Of interest to attract more Gus.
toners and to meet the unreasoning
and impossible demands of the mil.
lions who foolishly seek investments
paying. TO- IL end 10 per cent or more
he at once damages the bonds and
the business that must pay them. Nc
business can pay more than current
rates OF interest," If 1t trys to, 1t al
once starts a tain of reactions thai
are sure to bring disaster. To get
the money to pay outrageous interest
rates the business must economic in
some other plRce-empIoy cheap. inef-
ficient help. cut wages or cheapen its
product. The result Is quickly appar-
enL IN loss OF business, in strikes or
decreased production.
The investment banker Ia aa1ar IN
get bonds that pay as high Interest as
Is safe. The higher the Interest on q
sate Dono the more quickly he can sell
the bond; But he cannot afford TO
rate and thus damaging the honS hmsi-
ness: He cannot let the investing nub-
lie hold up the borrowing business
Both would lose IL he did. He cannot
permit the borrowing business to beat
down the investing public, because in
yestors would cease investing IL he
did. he occupies commanding posi-
l.
the coundest and fairest business nrac.
tice. e - ~