Evening star., 1933-01-29
!|DEFLAT|ON IN BOND
| MARKET EXTENSIVE
Many Iss Are Now Selma
at Extremely Low
Valuations.
Special Dispatch to The Star.

opeCldl DlSpdICH 10 nc ctdI
NEW YORK, January 2s-For those
who have the speculative flare and are
willing to take what may be considered
extreme risks, there are numerous bonds
and preferred stocks now at prices
rendering rensationally high returns on
the capital invested. This Is not to
recommend any Of the bonds dealt with
in this dispatch, but to point out the
extreme effects Of a long period Of de.
fation In prices and the increasing
amount Of investor tuspicion Of securi.
ties because Of their low market valu-
ations.
Examples Cited.
Take the case Of the Allegheny Cor
poraticn per cent debentures Of 1850,
whose next coupon is due April !. This,
1t is understood, will be paid. These
bonds are quoted under 10, at which
price the direct yield on them is so
per cent. In other words the bonds
are selling in the market at only twice
the annual amount recoverable in in
tNtSot, o~ouAlAllS llldL llllS ulCeIeSL CCTl-
tnues to be paid Another bond Of
the Van Sweringen system is the Mis-.
souri, Pacific 512S, which are quoted at
8, or a yield of 70 per cent. In both
OF these BONDS the buyer obviously takes
the maximum risk for his principal.
though it might be mentioned that
the 5l2 per cent bonds Of the Wabash
Railroad, in default, are only selling q
point lower than the Missouri Pacific
5l2s.
The Missouri Pacific general As,
better secured issue than the 5l2s, are
quoted around 8, to yield As per cent.
Denver 81 Rio Grande Western SIS, on
which the coupon is due February !.
have recently sold at about IL. or q
return Of over 40 per cent Last year
Chicago & Eastern Illinois refunding
IS dropped to about this same price
level prior to the payment Of the semi
annual interest. Later they rallied so
per cent IN market value and then lest
all Of their gain.
In the list of industrial bonds we find
International Paper IS under Is, or a
return Of 40 per cent, with no evidence
OF default in prospect The Der
cent bonds of the Postal Telegraph q
Cable Co., are selling at %, with a yield
on them slightly higher than their
market price. There are several bonds
OF amusement companies that are still
paying their interest and on which the
returns range from so to 70 per cent.
It would be bold trader who would
risk his capital in them.
Other Issues.
Going into a section Of the bond
market that mas a somewhat higher
rating than that just described. the
speculator may find there, In relation
to the 10 per cent return on industrial
stocks that is regarded as reasonable in
these times, a field for high Yields with
reasonable risk This would include
issues like Erie Railroad refunding IS,
which return 19 per cent; Rock Island
refunding As, due next year, on which
the income is 16 per cent; Baltimore d
Ohia refunding IS, returning Is per
cent; Illinois Central 4s4s, better than
13 per cent; Great Northern rs. about
IL per cent; New York Central 4l2s,
approximately 10 per cent, and the same
on Western Union 6i2s; IS per cent On
American g. Foreign Power debenture
SIS, whose interest is being covered sew
eral times, and Is per cent yield on
Southern Railway general IS.
Last year the position Of German dol
lar bonds, as to price and yield, was
relatively the same as that existing to.
day for American corporation issues II
was then possible for the speculator to
obtain about rs TO IS per cent yield
on German Government loans, as well
as on the best Of the German public
utilities. The sequel Of this period Of
sharply debated prices was recovery
OF market valuations Of from 200 to $50
per cent. 1t would be too much to sug-
Hka Af iott t1va
would occur in those American loans
that today are quoted in the very low
price areas.
tCopyright. 1880