Detroit evening times. (Detroit, Mich) 1921-1958, 1941-03-21
By HUGH S. JOHNSON

A PROSPECTUS for an invest
"A ment security-as neat a
bit of selling argument as any
have ever seen after several
years close experience with such
literature - came to my desk
yesterday. 1t was signed by
Henry Morgenthau Jr., and is
issued by The United States
treasury. 1t tells all about United
States savings bonds and is
complete with a self-addressed
order blank. All you have to do
is sign, enclose a check, seal
and mail.
These bonds aren't new. They
were first tried in 1885. The at
tractive blurb already they have
become the most widely held
single security in America"
They are said to be for small
investors" Corporations and
business associations can't have
them but any individual can buy
$4,000 worth, or less down to
S1S.75-which is not so small in
my book.
They don't render much in
come-and the tract doesn't say
they do. In barnyard figuring it
is l 1-3 per cent per annum,
but S18.75 invested now will be
S25 10 years from now, which
is a gain of $625, and, while the
following isn't the way bankers
figure interest, that roughly is
3 1-3 per cent per annum on
your S18.75. That is so because
interest on your S1S.75 is not
paid to you. 1t is compounded
semi-annually.
THERE are not many gilt-edge
l. investments available so flex-
ible as TO figure so high a rate.
If you don't need the income in
the meantime and can afford to
put these securities in the box
and forget them-or let the gov
eminent hold them for you
while it is theoretically a low
rate of interest, it is practically
f as good as you can get, consid-
+ ering all the other advantages
of this remarkably flexible Sc
curity-the income from which,
by the way, is exempt from state
and local taxes to the extent of
other United States bonds.
The danger of buying the av-
erage long-term fixed income
bond in market threatened
with initiation is that the buying
power of the small fixed income
may go down tragically as the
cost of living rises and with it
f will go down the price of the
bond. You can then escape far
greater loss only by selling at
much less than you paid.
Not many bonds could offer
you an escape from this, but
these Treasury Bonds do. The
government will redeem them at
any time for what you paid for
them plus interest, after one
year, at l 1-3 per cent or. if the
redemption is after tn years.
at interest of 2 % per cent for
the later years. That is as good
protection against initiation as
Yea could have in a bond Since
/ lew strong banks pay as much
on deposits, these bonds are
lot better than leaving the
money in a bank.
+ THERE are some other attrac-
4 tive features. You can use
the bonds to purchase a kind of
annuity on an instalment plan.
+ For example. if you invest SIS
a month in these bonds for 10
years and don't redeem, you are
entitled to 500 month for the
next 10 years. Your $1,000 in
vestment over 20 years at SIS
a month becomes $4,000. or in
creases so per cent in 20 years.
Lesser monthly investments re-
turn the same percentages of
benefit. The actuarial calcula-
ton OF the interest rate in this
is too complex to discuss here,
but it is good sound deal
backed by the credit of the
United States.
There are many variations and
differing options on this and
other features of these bonds
that make excellent insurance
against old age or provision for
the future education of children
or care of invalids. They can
be registered in the name of two
people to be the property of the
survivor and thus become a
modified kind of insurance policy
probably free from death
duties, although this is not GER
! tain.
+ IT ISN'T the business of any
L column to turn itself into an
investment sales-plugging adj
/ vertisement, but l had never
studied these bonds before and
their ingenuity fascinated me.
There are two good reasons why
this column is perfectly kosher
on this score. One is that the
security here is the nation. The
other is that this is part of the
+ COVE rnm ent's war-financing
/ plaza vital element of national
defense. In the protection which
these bonds offer the investor,
they are far better than any
i liberty loan. war savings stamp,
or other financing of World
War /.
The best recommendation I
can write for them is that / am