Evening star., 1930-06-26
MEXICO PLANNING
TO PAY Off DEBT
Finance Minister Suggests
Method of Liquidating
Foreign Obligations.
BY JOHN F. SINCLAIR.

BY JOHN F. SINCLAIR.
Special Dispatch to The star.
NEW YORK, June 26.-At the lunch
con given by Thomas w. Lamont of the
j. P. Morgan Co. to the international
committee of bankers of Mexico yester-
day Luis Monies de Oca, able finance
minister of Mexico, was the most youth
ful-looking financier present.
Representatives Of American, British,
French, German, Belgium and Swedish
interests sat around the table with
Mexican representatives. The problem
discussed was what should be done
about Mexico's foreign indebtedness?
The Mexican government owes abroad
about $442, 100000 exclusive Of the in
debtedness of her national railroad.
One of Dwight Morrow's big jobs in
Mexico was to work on this problem of
Mexico's foreign obligations. He found
in the scholarly De Oca an expert on
public finance who knew that Mexico
must plan on a "pay-aS-you-go" basis.
While Mexico did make an agree
ment in 1922 and again in 1925 to pay
of its foreign obligations, the economic
depression has prevented the carrying
out of these agreements.
When Finance Minister de Oca, dark,
quiet, small of stature, now 80 and a
bachelor, former professor of economics
at the University of Mexico, took charge
of Mexican finance three years ago he
brought to the Office one of the best
financial brains in Mexico.
Under President Gales he was Mexi-
cal controller of the currency, after
having served as consul at El Paso,
Tex: Paris and Hamburg
He speaks French, German and Eng
ish as well as his native tongue,
Spanish, and is an expert accountant,
having been president of the Associa-
tion of Certified Accountants OF
Mexico.
Today, in addition to the business
depression, the drop in the price of
silver must be reckoned with in the
preparation of any plan to reorganize
Mexicos international obligations.
Is Germany to have a dictator?
Recent events following the resigna-
ton of Paul Molderhauer as German
finance minister last week indicate that
the German republic is at this time
facing financial crisis.
Secretary Melons main criticism of
the resolution introduced in Congress,
designed to prohibit Federal Reserve
banks national banks and State MEM
Der banks of the Federal Reserve sys-
TEN from purchasing German repara-
ton bonds is that to do so would put
the Government directly in the field
DdIk HldudkCtHC4lb.
'oThere is" said the Secretary, mo
more reason for Congress to say that
a national bank should not purchase a
reparation bond than to say that 1t
should not purchase specific railroad
or industrial bonds. It is unsound and
unnecessary"
While the national banking act allows
national banks to buy marketable ooli:
cations in the form of bonds, notes ana
under rocFIIiafiO1S TTGSCrl0e0
by the comptroller of the currency, the
regulations themselves provide: First,
that the issue (to be considered mar
ketable) be of a sufficiently large total
to make marketability possible; and sec
ond, such a public distribution OF the
security must have been provided for or
made in manner to protect or insure
the marketability of the issue.
OF course, under such provisions, Ger
man reparation bonds qualify without
difficulty.
The widespread report that new issues
of German leparation bonds will be sold
In the United States annually brings
from Secretary Mellon this statement:
ct might add for the sake of accuracy
that I know of no provision providing
for the annual sale Of German repara-
ton bonds in the United States."'
Donald r. Hanson, in a recent article,
was explaining that whereas 10 years
ago it required only $500 to purchase
enough United States Steel common
stock to receive a dividend return OF
$500 a year, in the late Summer of
1929 an investor who wanted $500 in
come per annum from United States
Steel would have had to put up $1,000
in order to get 1t.
To secure an income Of $500 from a
, high-grade railroad stock like Santa Fe
- t.vnk IL
ago and Sl6,800 at the height of last
years boom.
But more impressive yet. one could
have got enough stock Of the Consoli-
dated Gas Co. of New York for $500
to pay S700 in dividend income 10 years
ago, which, If bought at the height of
the boom last year, would have cost
$45,500.
How about today? What is a stock
really worth? Ten times its dividends,
or Is. or 20?
Let's see: General Electric, selling
around sos, would seem like q good"
buy to tape reader, who saw it reach
S95 this year But at the present prices,
based on dividends, 1t nets the investor
but $50 per cent annually.
Take United States Steel: Observers,
who have seen it drop 40 points in the
last two months, might call it an ex-
ceIlenC 0uy, but based on dividends 1t
will return the investor at the present
price about $50 per cent annually.
Take Consolidated Gas common, now
around 500 a share for the first time
this year. 1t pays 81 a year and is
earning about $4.75 year. AT 500 it
Is earning just 4 per cent
Take Standard Oil of New jersey
down over 20 points from its high. At
$62 it is returning the investor a shade
over per cent.
These four blue-chip stocks are typi-
cal of many-not all. Special dividends
split-up and warrants help to increase
the returns. But such returns are not
certain.
ITO tape followers, there are many
stocks that look cheap. But until the
'blue-chip' stocks, with seasoned earn
1ngs, are sold on basis to net the in
vestor from 512 to per cent, I'm going
to keep my money in the bank" said an
investor, whose bankroll at the present
time Is counted in seven, perhaps eight
figures.
(Copyrisht, 1890, by the North American
Newspaper Alliance)