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rich men grow richer, and how few small investors profit in the long run by buying and selling securities for gain, it must be evident that there is a constant flow of the earnings of the toiler into the pockets of the few, largely because, as illustrated by the old simile " like a flock of sheep," the "public" sells at low prices and buys at high, and the wise ones, having confidence in the future, go contrary to the majority, and harvest the crops of other people's planting. The advice once given by a merchant of broad experience to a young man who thought, during 1893, that the commercial world had no bright future, " never to sell the United States short" was most sound. That young man held on to his goods and chattels and saw values exceed what they even had been before.

By a little study of prices ranging long enough to cover both years of prosperity and depression, some notion of relatively high and low security-values may be had. This done, the time to sell, if sell one must, is when the high level seems to be reached; then put the money in a bank and wait until the swing towards low prices and the wait may be a long one - is well accomplished, and thus the time to buy is at hand. But buy the highest grade, standard investments, for even the most conservative stocks and bonds will then be found at cheap figures.

The mere fact that one has money to invest is no argument for so doing at the moment, even to buy the best the market affords. Ruling prices should be considered. No merchant would stock up to the limit of his financial capacity if he considered prices exorbitantly high; he would leave the money in his bank and wait. Why should not the investor do the same?

Standard investments are mentioned in the second paragraph preceding; and what such investments are is a subject to ponder on; a subject which State legislators are constantly considering in order to enact laws to safeguard the investment of savings bank and trust funds. A person who feels wise enough to divide all investments into two classes: standard or safe and questionable or speculative, is, indeed, possessed of self-confidence. Still some general advice can be given which will help one to reach a fair conclusion.

A man blessed with a moderate property sufficient for the welfare of his family, in case of his decease, provided the principal should suffer no shrinkage, gave his wife this advicehe had made her his executrix under his will, and it would devolve upon her to manage his property if she outlived him buy no security not sanctioned by law as a legal investment for Massachusetts savings banks." Of course, this anticipated no less conservative laws regulating the investment of the funds of such institutions than at the

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time the advice was given, but, perhaps, on the whole, no better reading of the future could have been undertaken, and no better advice given in so few words. In general, the laws regulating the investments of savings banks, as now in force, in such other States as New York and Connecticut, and, to a large extent, Maine, Vermont, and New Hampshire, may be used as guides in the selecting of securities.

Now, many will say: "But I can't live on such small interest returns as this kind of securities affords." Quite right, but neither can they afford to lose any of their capital. High interest rates beget loss of principal. This should be a motto and hung as conspicuously in the household of those of limited means, as other mottos once so common in the New England home. To get with safety better than 34% to 4% interest return one must either be a shrewd, wellposted person in financial matters, or rely upon the advice of some one who is.

Misplaced confidence has been ruinous to the small fortunes of thousands. Undoubtedly there are numerous bonds of Southern and Western municipalities as well as bonds of public service corporations, which present a minimum of risk, paying from 41% to 5%, but buy such only of bankers of long experience and good established reputations, and who are known to follow carefully rules and customs which years of practice have fixed as proper. It is partially from an attempt to explain such rules, so that one may select with intelligence, that the contents of this book are offered to the reader.

Again: let the careful thinker consider if there are not certain investments based upon the needs of this nation of great resources which must, in the very nature of things, be sound. Who was it that once said " a man will see a fly on a barn door and miss the door? " Look at a map of the United States; do not get too near it; one, by so doing, sometimes sees the name of a small village, but does not see county or State names, which are in large letters. Consider this map from a broad and general standpoint; grasp, in your mind's eye, the enormous traffic of this country; the big arteries of transportation. It would seem that the bonds and many stocks of these large railroad lines must be reasonably safe, for these big systems carry commerce from ocean to ocean, bringing the products of the West to the Eastern marts, and, also, in vast quantities for shipment to the European markets. They, likewise, transport the manufactures of the East to the West as well as to the steamship lines, largely controlled by these same railways, which pass them on to the Asiatic countries. Such immense traffic as this must furnish the basis for sound investment if anything can. Unquestionably, there are almost countless small investments, here and there, which are safe and very profitable in interest return, but it is the belief on the part of so many that they have found just such a security which leads them astray. Better follow well-established rules and not be tempted by the wayside. No one may gainsay that there are not many gold and copper mines which are good, very good, but how often does the outsider get a chance to buy such a security at a legitimate price? When found to be beyond reasonable risk they are high in price. Certainly, they pay more than 34% or 4%, but it takes an expert to pick out the good ones among the multitude of mining issues for the benefit of the kind of investor referred to here. It is customary for reputable banking houses, handling mining securities, to first have the properties examined by competent engineers and other well-known experts. When this has been done, they have gone as far as possible for the protection of the purchaser, for no one can see into the ground beyond the property already developed. There is the ever prevalent element of risk in investments of this class.

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If the temptation to buy mining investments of any kind is allowed to influence one, bear one very important point in mind, viz., that a mine is ever consuming itself, - so, likewise, are such properties as oil wells, quarries, etc., some future time the product must cease altogether, or the mine reach a depth too great for economical production. The shares of a mine, therefore, should not be valued entirely by dividends. A sufficient allowance should always be made for the exhausting of the mine's resources. In case of a bonded debt upon a mining property, the investor should be sure that there is a sufficient sinking fund set aside for the payment of this indebtedness, which sinking fund should be ample to allow for the reduction in the mine's value, for the reasons given above. In relation to mining, it is probably true that " more money has been put into the ground than has been taken out of it."

Do not be argued into buying a mining security based on the location of the mine being near another similar property of established value.

Let not the fact that a security can be bought at a discount less than its face value alone entice you to a purchase. That in itself is no argument to buy. It should warn one even to a more careful scrutiny of the property back of the investment. It is a well-known fact that the suicidal policy of buying only at a discount wrecked one savings bank.

Do not judge the value of shares by one dividend or by an increase in the dividend rate. The value of shares based on dividend rates can only be ascertained by a period long enough to test the corporation's dividend paying ability through good times and bad. A corporation which has been, for a term of years, returning 4% per annum to its stockholders and selling at $100, enjoysextraordinary good business which, for the time, warrants the increase of the semi-annual dividend rate from 2% to 24%, equal to 5% yearly. Speculators seize this opportunity to force the price of the stock to 125, at which price the increased dividend rate still only equals 4% return upon the investment. There is no certainty that 5% can be maintained, nevertheless up has gone ne the stock, and investors buy it more greedily at 125, yielding 4%, than they did at 100, yielding 4%. It will take twenty-five years of the dividend increase to return the market value increase of the stock. Perhaps that is hardly a fair way of putting it, but it may cause people to hesitate before acting according to the belief that one swallow makes a summer. Stocks are forced up or down in the market upon the least excuse, and those close to the scene of action make money at the expense of those who allow themselves to be influenced by surface appearances, and who do not probe to the bottom for real conditions.

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When an industrial business, which has been conducted as a partnership, is changed to an incorporated company, and the public is invited to buy its securities, the intending investor should ask himself: Why, if the business was such a good one, did the old firm wish to let the public into its profits?" All kinds of plausible answers can be given to such questions, and in many cases the incorporation is justified. As a rule, however, such methods of financing industrial concerns are best justified where many firms or corporations, or both together, in the same line of business, are united under one management to reduce competition and expense. It is the capitalization of a single firm which is more to be guarded against. Even in the consolidation of several "industrials," it is essential to consider if the business is dependent for its success upon the continued management of some, or the greater part, of the original owners. If so, it is necessary, if such a management is retained, that its ownership in the stock of the new company is sufficient to continue its interest to make the company a success, or some plan adopted to insure as good or better management of the whole as the integral parts had formerly. In this connection, the reader will do well to turn to the subject "Industrial Securities."

The question often arises as to the advisability of investing money for a long or a short time. The best method to pursue depends very largely upon the financial condition existing at the time of the investment. During the early part of this year (1907) corporations found difficulty in selling new issues of bonds at normal prices. Consequently, they issued high rate notes running from one to three years, with the expectation that when they fell due the condition of the market would be such as to permit the refunding of these notes by the issue of long time low rate bonds in their stead. Other bonds of the same corporations were selling upon the market at extremely low figures. Yet what did the public do? Instead of buying the bonds, they bought the notes in preference, thereby enabling the corporations to profit out of the expected advance in the bonds to be issued later, rather than themselves seizing the opportunity with similar bonds then on the market. There was great hesitation on the part of the investors buying bonds at the then low figures; but when they have advanced to a price sufficient to warrant the issuing of bonds to refund the note issues, then will they be readily purchased, showing again that the public acts contrary to good judgment.

Some financiers doubt, however, if the corporations are judging the future accurately in the maturity of their notes, reckoning on refunding at a more opportune moment; but that matters not in this case, as it is the principle that it is desired to illustrate.

From the above it is very easy to deduce this rule: Buy short time securities when prices are high and the net return consequently small, and buy long time securities when prices are low and the net return high. This is all based upon everything else being equal; that is, the safety of the security being supposed to be satisfactory.

Why do so many people buy a stock in some little known company with so little investigation? Such a person would not buy a small partnership interest in a business of long established reputation in his own neighbourhood; one which he had every reason to believe prosperous, without the most minute investigation. But how does it differ from the other? The stock represents, to all practical purposes, his partnership in the incorporated company. Is there some hypnotic influence in the names "stocks" and "bonds?" Or is it the distance which lends enchantment? The "prophet is not without honour save in his own country," and so, perhaps, the investor believes not in his local industries, and, perforce, must seek afar for an outlet for his money, buying on the faith of some newspaper advertisement. By all this it is not meant that the seeker for an interest-bearing security should not make distant investments. Far from it, but either he should deal with a firm of untarnished and long-established reputation for fair dealings, or place his money near home in properties concerning which he has some certain knowledge. Choosing neither of these methods, then let him investigate with as great care as would the deacon in a horse trade.

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