The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1924-04-24
Mellon URGES
PURCHASER
j. s. NOTES

Government Securities Safest
Sort of Investment For
Small Investor.
By ANDREW w. MELLON,
secretary Of the Treasury of the
United States.
written for Cosmopolitan News
Scrvice.) Liz
Safety Of principal and certainty
or interest payments are funda-
mental tests of an investment Sc.
curity. If these qualities are lack
ing in a, security it cannot be class
ed as an investment regardless of
what its other features may be-.
Failure to apply rigidly these tests
has caused thousands of small in
vestors the loss OF savings. Dazzled
by lNfid schemes of promoters and
pluHgers and promise, of high in
terest rate they fail to give due
weight to- various factors involved,
especially the all important element
Of safety. e@
Fake Stocks Increase.
1t has. been estimated that from
10000 900 to 1000 900 900 are
lost annually by investors, princi.
pally small investors in worthless
and fraudulent securities. Never
before have investors been SO nu-
merous as today. The nation is
prosperous. wages, salaries > and
I earnings are, high, and savings &C.
cumulate rapidly. I During and since
the war hundreds of thousands Of
laborers have entered the investing
class. due in some measure to the
Governments loan and thrift cam
paigns: ITO invest safely, however,
Is lesson which many have not
learned.
United. States Government Sc.
curity are the. nearest approach to
absolute safety. The matter of
risk is, of course, relative and ex.
lists In varying degrees in various
types of investments, but Govern
ment obligations, barring national
calamity, which would affect all
wealth and income alike, afford
complete.ssafety of investment.
d. U. s. Securities Safe.
Safety, in q security is based upon
the ability and Willingness of the
1ssuer, whether Government or
corporation, TO meet its obligations
when due. Ability IN a Government
is a matter of national wealth and
current income, Willingness a mat.
ter of good faith of the people. The
national credit of the United States
Government, measured by these
criteria, could hardly be improved.
Tbs wealth of the people of the
United States is approximately $780,
8Oi,OOO,0OO, or $2,918 per capita.
The current yearly income is per-
haps not less than $65 900 900 900,
or about $3.50 per capita. The total
Indebtedness of the United States is
$21,751 ,OOO, 900, or $194 per capita.
Ample resources, then, protect
the present credit of the Govern
ment and guarantee complete ability
to meet its future obligations.
Ability to redeem promise
divorced from good faith DESTROYS
confidence and ruins credit. The
good faith OF American people to
meet public obligations finds full
expression in our tax system. Re.
CARELESS OF honest differences OF
opinion as to what constitutes the
pest and most equitable system OF
taxation, public sentiment is unani
nous in approving taxes sufficiently
ngn TO pay the legitimate running
expenses of the Government and
debt.
No Risk Involved.
The differences in risk involved
explain the variance of rates Of
interest borne by securities. Gov
erpment security represents tNk
actual price when no risk is in
volved for capital funds in the
open competitive market. The ex
cess OF return on other obligations
measures the degree of risk inner
ent in the former; it is a kind OF
insurance for the risk involved and
Z the greater the risk the higher the
rate.
In addition to the maximum posi-
Ole safety government obligations
possess every other quality essen
tial to the highest grade of invest
ments, such as stability of value
and marketability. Stability Of
value is secondary only to safety
OF principal and certainty of Interest
payments. A security having safety
and stability of price is universally
nCCSptdDlS as COllaLeraI. Banks anC
other institutions offering CONNER
cial loans will make advances ur
to a large percentage of the marked
value OF a stable security Offered
as collateral.
While no security possesses abso
Lutte stability of value in a dynamic
economic system, where the leve
OF interest rates is constantly af
fected by so many elements of SUP
ply and demand, yet government
obligations fluctuate probably with
in a narrower range than any Other
type of security. During the whofe
OF 1928, for example, the tota
= range of, monthly average price OF
AZ per cent Liberty bonds was less
than one per cent while the aver
age monthly range of the highest
grade rails showed a spread ot
more than three per cent from the
high to low.
The fluctuations of Liberty bonds
~