Evening star., 1926-10-28
MEN AND MONEY
BY NJ. S. Rukeyser
(Copyright. I926.b

Labels are a delusive guide to the
investment merits of investment Sc
curities.
High-sounding phrases, including
the expression first mortgage, some
times cover up structural weaknesses
in bonds. Although good first mort
gage real estate bonds are among the
best investments available, many haz-
ardous issues, cloaked in the name of
safety, have been created in recent
years. The time has come for extra
ordinary discrimination in the selec-
ton of issues.
AS a result of the boom in real es-
tate construction, the sale Of real es-
tate securities has increased 1900 per
cent since 1914-from $50,000,000 a
year to more than $750,000,000. Tea
per cent of the total investable cap
ital placed in new securities of any
kind in the last full calendar year
flowed into the real estate bond
market
In emphasizing the need of care on
the part Of investors, l presented the
advice two days ago of an able invest
ment banker, who specializeS in the
creation of real estate bonds. Today
I present the views of an outsider-H.
]. kenner, manager of the Better
Business Bureau of New York City,
who warns against evils which have
crept into the business.
Both the financial world and the in
vesting public are alert now to ills
which have for number of years af-
fected the creation and distribution of
real estate mortgage bonds.
1.-The public is alarmed, even, and
has, temporarily at least, reduced It's
purchases. This is due largely to re-
cent disclosures resulting from G. L.
Miller & Co. failure which revealed
that company's practices. The Milles
had attained a volume of
sales approXimating $15,000,000 an
nually, and was a large user of adver-
tising space in national mediums in
which 1t featured the slogan, No in.
vestor ever lost a dollar in Miller
bonds!' The advertising also claimed
four distinguishing marks for Miller
bonds Independent appraisals. bank
certif1cation, moderate size loans and
full interest. Investigation has indi-
Gated that the claim for Independent
and moderate sized loans
could not be Substantfated in all in.
stances.
Popular belief attributed to all real
estate mortgage bonds about the
same safety as the mortgage of the
individual homeowner or other bor-
rover on real estate whose experience
has been gained in financing his own
needs with hometown bankers or
loan associations. Skillful advertising
promoted sales easily by repetition of
the safety theme, yet the average pur-
chaser was unaware of the large ele-
ment of speculative risk often pos
sessed by the bonds so advertised.
THE term bond, unless qualified,
has always implied to the public
lien on physical prop
erty with large equity serving as a
margin OF safety for holders of such
bonds should default of interest pay
ments make foreclosure necessary.
But when the meaning of this term
was stretched by realty bond under
writer's to cover issues which included
second mortgage risks, and some
times left no appreciable equity, the
danger line was crossed
MI. kenner's views are amplified in
the Industrial Digest, published to-
day.
The public sometimes goes to ex-
tremes, and it would be unfortunate,
indeed, If knowledge of abuses upon
the part of certain houses would lead
to public strike against real estate
issues in general When in doubt con-
,erning particular issue the investor
should ask his banker, the nearest
Better Business Bureau or the finan.
,ial editor of his newspaper. First
up to tWO-thirdS of the |
genuine value of we'll selected real
state possess a high degree of invest |
nent merit. Real estate, though sub
ect to fluctuations in market worth, |
1oes not go out of fashion. 1t does
not deplete itself like mine. It has
not, in most instances, a limitation
If earning power by public regulation
bodies like the public utilities and the |
'ailrOads.
Mr.. Kenner is an outstanding ex-
ample of a new profession which has
sprung up since the rise of the small |
INVESTOR. His role as the head of a
ION -prof1t-making organization, which |
S supported by voluntary contribu |
ions of reputable business men and !
is to protect consumers of |
merchandise and buyers of securities
rom exploitation by unscrupulous
,endors
Mr.. Kenner was secretary of the |
first Better Business Bureau in the |
country, which was started in Mime
lpolis in 1911. The desire to elevate
The general tone of business is the
faming ambition of this crusader in
he realm of practical affairs. With
IN indomitable courage, this slender
bundle of energy and workable ideal