The Financial Department is prepared to furnish information regarding standard investment securities, but cannot undertake to advise the purchase of any specific security. It will give to inquirers facts of record or information resulting from expert investigation, and a nominal charge of one dollar per inquiry will be made for this special service. All letters of inquiry should be addressed to THE OUTLOOK FINANCIAL DEPARTMENT, 381 Fourth Avenue, New York. WHY BOTHER WITH SPECULATIONS? T HE writer of this article recently received a call from a man selling stock in a newly organized phonograph company. Now stock in a phonograph company may be an extremely good investment, for some phonograph companies have been enormously successful and made large profits for their stockholders. In fact, the salesman for the new company dwelt largely on this fact, and described in glowing terms the rise of the value of one company's stock from fifty cents a share to many hundreds of dollars. All of which is perfectly true; but what does it prove? It is obviously absurd to think that because one concern has been highly successful all other concerns in the same business will fare as well. The same line of reasoning would attempt to establish with equal justification that because J. P. Morgan became a millionaire banker all other bankers will also become millionaires. In the case of the phonograph company the fact that similar concerns have been successful may in reality be a negative argument; the older company has established itself, its product is proved and widely known, and these two circumstances may make it exceptionally difficult for a newly organized rival to compete. The more Guaranty Service Travelers Checks Letters of Credit "For to admire and to see, For to behold this world so wide." -Kipling. MERICANS abroad will find the service awaiting them at our various European Offices most helpful in solving numerous travel problems. This service is completely at the disposal of holders of Guaranty Travelers Checks and Letters of Credit. A Guaranty Letter of Credit, issued in dollars, sterling, or francs, enables you to draw large or small sums as required, in the money of the country in which you are traveling. Guaranty Travelers Checks, in amounts of $10, $20, $50, and $100, are ideal for day-to-day expenses. If lost, their value can be recovered. At banks throughout the country. Ask your bank, or write to us, for booklet, "Guaranty Service to Travelers." field, the harder it may be for a new company in that field to become recognized. It is an accepted fact, however, that whenever a concern becomes immensely prosperous and makes big profits capital is attracted to the same kind of enterprise. Witness the mining and oil industries. Goldfield, Cobalt, Texas, Mexico, Oklahoma-all of them drew capital in their direction, and all of them had their successes. Also, they had their failures, probably in the proportion of at least ten to one. The demand for oil, sugar, automobiles, and candy, to mention only a few of the kinds of companies which have been successful of late years, has attracted large amounts of capital. In their wake follow too the stock promoter, the "wild-catter," and the swindler. These men opportunists and optimists; they bubble over with enthusiasm and confidence; they promise certain profits, tell how they are letting you in on the ground floor, that this is the opportunity of a lifetime, and almost always that the opportunity will be gone unless it is seized at once. are When a salesman It is all nonsense. tells you that a stock is going up in a week, or two weeks, or a month, or whatever the time may be, ask yourself this question: "If the stock really is going to advance so soon, why should this fellow sell it to me when by holding it just a little while longer he can get these profits for himself?" The phonograph stock offered the writer had a par value of $1 a share, and the salesman was offering it at $2. A share of stock may look cheap at $2, but one should bear in mind that in a case like this it is an advance of one hundred per cent over par, the equivalent of United States Steel, say, at $200 a share. Now this particular salesman was new at the game, and when he stated that "soon" they were going to put the price up to $3 a share and he was asked who "they" were, he was somewhat stumped. "Why, I don't know," he said; "the company, I guess." A stock whose advance in price is the result merely of action by the officials or directors of the company does not, on the face of it, indicate that it is justified. Another question to ask stock salesmen is where the market for their stock is located; in other words, if you should buy a block of it and should want to sell a short time later, where would you find a purchaser? Ask him what he himself or his company would bid for it. The statement that a thing is worth what you can sell it for may not apply to heirlooms and objects which have a sentimental value, but it does apply pertinently to stocks and bonds. Always assure yourself before you buy that there is some one who will buy from you. The safest rule is, "Use your common sense." One of the surest signs of worthless stock is calling attention to the large profits made by similar companies. Others are the promise of enormous dividends, the ridiculing of savings banks and Wall Street, the offer of a limited number of shares to one person, the statement that the offer must be accepted at once or your chance Probably there are many today, especially those who contemplate making wills, not fully aware of the intimate personal interest that a progressive trust company takes in all affairs intrusted to it. Furthermore it possesses special facilities not available to other trustees; its financial status is at all times subject to examination by state officials; and, most significant of all, a trust company is permanent. This company, through its modern Trust Department, is unusually well equipped to serve individuals and corporations in all fiduciary capacities. It acts as executor of wills, administrator of estates, trustee under wills and voluntary trusts, guardian of estates of minors and of the insane, conservator of property of aged persons, and as custodian of securities of individuals and organizations. The Old Colony Trust Company offers with its unsurpassed facilities a long and successful experience in every field of fiduciary service. The above is but an outline of the services offered OLD COLONY TRUST COMPANY Member of the Federal Reserve System Publications on Business FINANCIAL DEPARTMENT is gone. (Continued) Suppose it is; there are thousands of other good investments, and many thousands of honest and reputable banks, bankers, and brokers ready to give you advice about them and buy them for you. Don't be misled by the "hurry" argument. Time spent in careful investigation before buying will repay you many times over. There is no investment in the world which in the strictest sense of the term can be called safe. Losses occur in every business; but care can be exercised, and when it comes to buying securities it is only reasonable to keep away from those which are practically worthless at the start and have little or no chance of ever being a success. Granted that nothing in this world is perfect and no stock or bond free from certain risks; yet it is possible to reduce these risks to a minimum. Certainly it is no more than prudent to confine your purchases to those securities which have behind them a record of earnings showing an ample margin for dividends or interest charges, are well secured, are issued by a well-managed company, and are in demand by discriminating investors and can be sold without undue loss if the occasion requires. Plenty of investments are to be had at the present time which meet these requirements. Reputable bankers offer them for sale, and, while they naturally describe them in attractive terms, they stick to the facts as they know them, confine their remarks to the securities they are offering, and do not dwell principally upon other successes. And the statements they make are conservative, for good bankers are among the most conservative of people; promoters and sellers of fake and speculative securities the least so. The degree of conservatism shown is often a good test of whether the security described is worth investigating or not. First-lien bonds of railways and industrial and public utility companies are to be had to yield from 5 to 6 or even a larger per cent. Foreign government bonds are offered to yield 8 per cent and more. Short-term bonds and notes, excellently secured many of them, return from 6 to 8 per cent at present prices. Tax-exempt Government and municipal bonds are selling on a 5 to 6 per cent basis. High-grade preferred stocks can be bought to return from 5% to 7 per cent. What more can any sane person want? The phonograph stock salesman told the writer that he had sold his milkman five hundred shares of his stock. One thousand dollars are what it cost him, hard-earned money probably; and what are his chances of ever getting it back again? Pretty slim, we should say. Suppose that he had put this thousand dollars into Liberty Bonds and been content to get 54 per cent on his investment. Would he be better or worse off ten years from now? There is no question in our minds about it. Of course his phonograph stock may be extremely valuable some day, and, for his sake, we hope it will be. But we wonder if he The A practical study of the financial structure and the financial problems of business corporations, in five volumes, by Arthur Stone Dewing, Assistant Professor of Economics at Harvard University. The high standing of its author as an economist and financier, and his thorough and practical treatment of the subject make this the preeminent work on corporate finance. Dr. Dewing, during his long and active experience with 'representative enterprises, has assisted materially in the formulation of the accepted principles. of modern finance. His years of intensive research have enabled him to complement and illustrate his work with many hundreds of notes and precedents. Guidance in Deciding This work will be.of specific value to everyone who has financial questions to decide or who is concerned in any way with corporate activities. It gives a thorough understanding of all policies and operations of corporate finance, and unmistakable advice in handling particular situations. The five volumes cover, I Corporate Securities, II Promotion, III Administration of Income, IV Expansion, V Failure and Reorganization. Cloth; 953 pages; published 1920. Selected Gospel Hymns A new book just issued. 271 Hymns and Scripture Readings, selected from the famous MOODY & SANKEY GOSPEL HYMNS1 to 6 INCORPORATE Least cost. Greatest advantages. Cost not affected by amount of IN ARIZONA capital. Transact business and keep books anywhere. Stock made fullpaid and non-assessable by using our forms. Laws, blanks and directions free. Stockholders are exempt from corporate liability. Stoddard Incorporating Co., Box 8-N, Phoenix, Arizona he bought it? The stock pays no dividends, and never has paid any; production is just beginning, and earnings, if indeed there are any at all, cannot amount to very much. The stock is a speculation pure and simple, and if the milkman bought it as a speculation with his eyes wide open we have no quarrel with him, for he is the one to decide whether he can afford the luxury of speculation. But if he thinks he was buying an investment he is either ignorant or foolish. Ignorance is no crime and can be remedied by the exercise of due care and common sense; foolishness is another matter. In our opinion, however, there is little excuse for either. There are many sources from which investment information may be obtained, and there is no reason why the man or woman who needs such information should not get it. And, in conclusion, we ask-when the opportunities for purchasing investment securities are so favorable, why should any one waste his time with speculations? QUESTIONS AND ANSWERS Q. I note that the new issue of $230,000,000 Northern Pacific-Great Northern Railway Companies Joint fifteen-year 6 per cent bonds may be converted into 6 per cent Refunding and Improved Mortgage Bonds of the Northern Pacific Railway Company, or into 7 per cent fifteen-year General Mortgage Bonds of the Great Northern Railway Company. Can you give me some information about these issues? A. A brief description of them is as follows: Northern Pacific Railway Refunding and Improvement Mortgage 6 per cent Bonds, Series B, to be dated July 1, 1921-to mature July 1, 2047-interest payable January 1 and July 1 in the City of New York. Redeemable at the option of the company on and after July 1, 1936, on any interest date, at 110 per cent and accrued interest. Coupon bonds in denominations of $1,000, $500, and $100, registerable as to principal. Fully registered bonds in denominations of $1,000 and authorized multiples thereof. Coupon and registered bonds and the several denominations interchangeable. These bonds will be secured by a direct mortgage or collateral lien on 6,873 miles of road, appurtenances, equipment, securities, terminals, leasehold interests, trackage rights, etc., and all other property of the company hereafter acquired with the proceeds of these bonds. Bonds may be issued under this mortgage for acquisition of property and for equipment, additions, and betterments, becoming subject to the lien of the mortgage for a principal amount equaling the actual cost, except that after the amount of the bonds outstanding shall have reached a sum specified in the mortgage additional bonds may be issued only to the extent of eighty per cent of such cost. The authorized issue is limited to an amount which, together with all outstanding prior debt of the railway company, after deducting therefrom bonds reserved to retire prior debt, shall never at any time exceed three times the amount of capital stock then outstanding. Great Northern Railway Company (Continued) General Mortgage 7 per cent Gold Bonds, Series A, to be dated July 1, 1921 -to mature July 1, 1936-interest payable January 1 and July 1 in the City of New York. These bonds are not to be redeemable by the company before maturity. Coupon bonds in denominations of $1,000, $500, and $100, registerable as to principal. Fully registered bonds in denominations of $1,000 and authorized multiples thereof. Coupon and registered bonds and the several denominations interchangeable. The general mortgage was authorized in March, 1921, and no bonds have as yet been issued under it. The total mileage to be covered (directly or collaterally) by the general mortgage is 7,675 miles, constituting approximately ninety-eight per cent of the total mileage of the Great Northern system, and the company's outstanding mortgage indebtedness (exclusive of the general mortgage bonds issuable in conversion of the joint 621⁄2 per cent bonds) will be at the rate of approximately $21,000 per mile. No more of the underlying mortgage bonds may be issued. There will also be pledged under the general mortgage such shares of Chicago, Burlington, and Quincy stock as are released by reason of conversion of Northern Pacific-Great Northern Joint 62 per cent bonds into Great Northern General Mortgage Bonds. Q. Please tell me something about the 15 year 6 per cent Equipment Trust Gold Certificates of the Grand Trunk Railway of Canada, Series "F," due 1936. A. The total of these certificates authorized and issued is $12,000,000. They are dated February 1, 1921, and issued under the Philadelphia Plan. Title to all equipment-these certificates are issued against new equipment costing $16,000,562-is vested in the trustee for the benefit of the certificate holders. The equipment is leased for rentals equal to the principal and dividends of the certificates together with insurance, taxes, and all other charges. These rentals rank as a railway working expenditure and constitute a claim against earnings prior to both principal and interest of mortgage debt. Semi-annual payments of $400,000, beginning August 1, 1921, are to be used to purchase certificates in the open market, if obtainable, at or under par, but the issue is not callable. The Grand Trunk Railway is the oldest railway system in Canada and is being operated in connection with the Canadian National Railways, the Government-owned system of Canada. |