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· AN legitimate questions from Outlook readers about investment securities will be answered either by personal letter or in these pages. The Outlook cannot, of course, undertake to guarantee against loss resulting from any specific investment. Therefore it will not advise the purchase of any specific security. But it will give to inquirers facts of record or information resulting from expert investigation, leaving the responsibility for final decision to the investor. And it will admit to its pages only those financial advertisements which after thorough expert scrutiny are believed to be worthy of confidence. All letters of inquiry regarding investnient securities should be addressed to
THE OUTLOOK FINANCIAL DEPARTMENT, 381 Fourth Avenue, New York
Income Tax Primer
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100 Questions and Answers
on the Income Tax Law
upon request for tax literature Z-66.
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424 California Street
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GOVERNMENT CONTROL AND RAILWAY FINANCE
TN The Outlook of December 12, an
swering inquiries from many readers as to the wisdom of purchasing standard
rail way shares, we gave a list of twelve such shares that could be purchased for $1,000 at the prices of December 1. It was pointed out that these shares would probably sell lower, but nevertheless were cheap and ought to appeal to the investor willing to take a considerable speculative risk. In commenting on the financial situation of the carriers, we said :
This great investment in rail transportation-a twelfth of our National wealth-is so large a part of the foundation of our National finance and National security that its safeguarding at a time like this becomes a matter of vital National concern. The Government by reason of its control of railway rates under the Act to Regulate Commerce, its control of railway labor under the decision of the Supreme Court in the Adamson Act case, its control of commodity prices under the emergency authority granted the President, and its control of the money market through the Treasury Department, holds the railways in the hollow of its hand.
Adequate inland transport is as necessary to-day as an army in the trenches; sound railway credit is the foundation of war finance. The Government has complete power to maintain both, and there is every reason to believe that it will maintain them.
If this reasoning is sound, then the securities of American railways, now selling at the lowest prices in many years, present an attractive opportunity to the investor who is willing to assume a considerable risk in the hope of making a considerable profit.
A fortnight later the Government, as a war measure, took over the operation of the railways of the country, and the President appointed as Director-General of Railways the Secretary of the Treasury, Mr. William Gibbs McAdoo. The President in his proclamation recommended that the Government guarantee to the carriers a net operating income equal to the average of the three years ended June 30, 1917. If Congress puts the President's plan into law, the apparent result will be to provide during the war the same rates of interest and dividends that the carriers were paying in 1917. It may be expected, therefore, that the standard railway shares listed in The Outlook will continue paying their regular dividends.
Because of uncertainty as to what terms the Government will propose in taking over the railways, their securities continued to decline during December, and on the day after Christmas they touched the lowest prices of the year. The President's proclamation was issued that evening, and on the following morning there was an extraordin nary rise in the market. The twelve different shares that could be purchased at the beginning of December for $1,000 declined to $910 on December 26 and advanced to $1,031 following the announcement from Washington. At the closing prices of the year these twelve shares could be purchased for $1,015.
We give the list of companies, with the prices on December 1, December 26, and December 29:
Dec. 1. Dec. 26. Dec. 29. Atchison...
$83 $75% $814 St. Paul preferred.
77% Chesapeake and Ohio.
4244 51% Great Northern....
8014 89% Illinois Central............
861 93 Louisville and Nashville..
112 New York ('entral....
71% Norfolk and Western.. 103
101% Nortbern Pacific.......
42 Southern Pacific........ 81
83% Union Pacifio...
111 10231 114 Totals........... $1,000 $910 $1,010
While it is too early to state definitely the final form of guarantee of earnings that Congress will approve, it may be assumed for the present that each company will be entitled to receive the average net operating income as outlined by the President. This is very similar to the plan followed in England from the beginning of the war.
But investors who now purchase railway securities on the strength of the proposed Government guarantee must take into consideration the earning power of these companies after the war. It may be that the temporary war measure will become a permanent method of controlling the railways. If the Government does retain permanent control of the railways, then the question naturally arises as to what will be the afterwar bargain with the security-holders. It might be better or worse than the proposed war guarantee. This investors must bear in mind.
But if after the war the Government turns these properties back to their owners to be operated under pre-war conditions, what will be the earning power of the
individual companies and what will be the . market worth of their securities? In these columns we have more than once expressed the opinion that the Government, through its great power of regulation, will see to it that railway property and railway credit are maintained in the future. But there are some uncertainties that investors must take account of.
The most perplexing problem, in our opinion, is that of labor. The carriers are taken over by the Government with a staff of more than 1,600,000 employees. On the trains there are 300,000 engineers, firemen, conductors, and trainmen—represented by the four railway Brotherhoods. In addition there are 1,300,000 other employeesdespatchers, telegraphers, machinists, carpenters, accountants, clerks, track workers, etc.
The 300,000 trainmen in 1917 received by Act of Congress an increase in wages amounting to about $60,000,000 a year. Toward the end of the year they presented demands for further increases in wages amounting to approximately forty per cent. One of the first problems before the Director-General of Railways is the settlement of the Brotherhood demands. The present pay-roll of the trainmen is about ent pay-roll of the $450,000,000 a year, or an average of $1,500.
What, then, would happen to the 1,300,000 other employees? Their pay-roll now is $1,500,000,000 - a year, or an average of $800. It would seem that these less well paid employees are in greater need of an advance in wages to meet the high cost of living than the well-paid trainmen. If the fifteen per cent bonus were granted the trainmen, it is plain that there would be an urgent demand from the other employees for a similar advance. This would raise their average from $800 to $920, and would increase their total pay-roll by nearly $160,000,000.
If the Government gives the railway workers a war bonus of as much as fifteen per cent, the pay-roll will be increased by upwards of $225,000,000 for the period of the war. With Government guarantees of net earnings, such a large increase in the labor cost would have to be met in considerable measure out of the Government Treasury.
That this is not without precedent is seen by the English experience. Since England took over her railways there have been three
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ALWAYS WORTH PAR
A An ideal war time in70 vestment based on an
industry never overdone. Price regulation and taxation do not depreciate the security.
Write for our Booklet “12” MARKHAM & MAY CO., Milwaukee, Wis.
Government Control and Railway Finance
(Continued) successive war bonuses given to the railway workers, amounting to 15 shillings a week for each man. This is equivalent to about $190 a year. The same bonus for American railway workers would aggregate $300,000,000.
During the war the bonus to the English railway men is being paid by the Government, because the earnings of the companies are insufficient to meet this burden. If American railway workers receive a war bonus, the same method of meeting the cost would be followed here under the Government guarantee.
But what would happen after the war if these companies were turned back to their owners? If freight and passenger rates are not raised by the Government to take care of increased labor costs, the carriers after the war would find themselves burdened with very high operating costs and rates inadequate to meet them. A $300,000,000 increase in cost of labor would be equivalent to the total amount now paid in dividends by all American railways. It must be plain, therefore, that if the new DirectorGeneral of Railways does not provide for higher operating costs during the war by raising railway rates, the carriers after the war will find themselves in a very precarious condition, unless, as many experts believe it will, the present Government operation of railways becomes permanent.
It might be argued that large advances in wages given as a war bonus to meet the high cost of living could be taken away after the war when living costs came down again. But any one who has studied the recent history of railway labor can realize what a difficult problem the earriers would have to face if they attempted after the war to reduce wages to a pre-war basis.
The after-war values of railway shares, therefore, are in the melting-pot. The only assurance investors hare is the confidence that the Government-whether it takes over the railways permanently or turns them back to their shareholders-will deal fairly with the owners and maintain railway credit as & matter of National safety
Some politicians and pubheists believe that any large increases in the cost of labor and material under Government operation during the war will be absorbed br the operating economies that will result from united management. But ne assuranee for this can be found in the history of government control of railways in foreign countries The universal experience bas been that government control is not as economical as it is in the best privately managed rail ways. But the additional expense of Gore erument railways, which would be met by taxation, may be justified by the wider and more unitoru service rendered the puble.
The big item in railway operation is labor. Nearly two-thirds of the cost of operation is the pay-roll, and Government operation of puble utilities here an abroad almost invariably increases the labor cost. When the wages of 1.600.000 workers are tixed by sungle Government authority is plain that the political management of both the emplovues ant the finances of the railways must be of the highest character Political ni partisan bureauery bus tot be tolerated. Investors in furmuing their uiguient of the present value of tailway
eurities hus bear this in mim, ami must for their own protection, if tor tu bugüer Tuotive, to their are in insisting upon clean skitfcient political uiministration.
The Kansas Fields have shown wonderful developments
in 1917 We have prepared a booklet giving much information on this subject with list of the principal companies operating in that State.
If interested we shail be glad
to send this on application. A. D. CONVERSE & CO. 5 Nassau Street
Commercial Trust Bldg. New York
Free Booklets for Investors
Many of the investment bankers pablish booklets and literature for the information of prospective investors. The following is a list of booklets which may be obtained by writing to the investinent houses issuing them, mentioning The Outlook, or by writing direct to the Financial Extitor of The Outlook :
- Bom Topics "-Issue No. 0-2. I H. Biesmore & Co., L:1 Brom way, Vew York
The Kansas Cil Fields. 1 D. Converse & Cem lasu St, Now York. Danforth Farm Mortgages List Vo. J. A. G. Danforth Co., Washington. Di.
Buver's Guide to Good Investment." Peter Bone Mortgage Co., L Gaswold St. Det it. Viell.
Wisconsin "airy Parm Vorrer-Booklet e Marsmann May 'ompany, Vilwaukee, Wis.
Fin Morphy Real Estate Seral Votus. Isest Uen6 L es 1 Vervangile Toast Company We Louis
- Par a vent Suggestions - ironiar X-18. loun Muur l'un it Breway. New York.
Ineume Tax Portuer. 13-300. Variumi Cits Company. Va i sy Bank Buiding Vess Ivek Fin Murray Boa Estate Bonds ironine la
Passeny. Sivureceiing Co., Il Sota La We x. Tough Il.
THE POWER OF THE
PEANUT BY ROBERT H. MOULTON The boll-weevil, as a blessing in disguise, has redeemed the South from the disgrace of being a one-crop country. Cotton is no longer autocrat. He has been dethroned by the weevil, and must now take his place as merely one of a democracy, or perhaps an oligarchy, of crops, among which the once humble peanut is. rising to unwonted prominence.
In 1908 we raised twelve million dollars' worth of peanuts. A conservative valuation of this year's crop is sixty million dollars. Texas alone has two hundred thousand acres. What is to be done with all these millions of bushels ? Surely they are not all to be sold on the street corners to our boys for five cents a bag! By no means. In the first place, the product is of high food value-higher even than wheat. The oil is a better lard substitute than cottonseed oil. It brings a higher price per gallon, and can be made in the very same mills by the same machinery that used to turn out cottonseed oil.
And who would ever think of a peanut in connection with our munition plants? They seem as far apart as the North and South Poles. Yet the peanut, in the shape of
nitroglycerine, may sleep in the submarine the peanut. The experimenters are raising torpedo which is to destroy a great battle- the latter on the demonstration farms and ship, or it may send a half-ton projectile are producing better results every season. flying forth from the mouth of a gun.
So surprising has been the success of the We now find that the meal mixed with experiments that the planters have begun white flour makes a palatable and highly to look for the dark side of the silver lining. nutritious bread, and that it may be used The price of peanut products has gone up for crackers and cakes. Peanut buttti can with all its companion foodstuffs. Will it take the place of cow's butter; and peanut come crashing down at the end of the war? meal, which is a by-product of the oil, How much danger is there from over-promakes the best of stock food. ,
duction? In addition to the direct profits, the pea- According to one of our peanut experts, nuts leave the land better off than when there is little danger of surfeiting the they were planted. For, like many of their world with peanut oil and cake, because cousins in the bean family, they gather and the food value is such that there is a unideposit nitrogen in the soil.
versal market for them. The South abounds . In 1914 the United States imported in sandy soil that will produce little cotton 44,549,789 pounds of peanuts and 1,332,108 or grain. If the peanut could submit specigallons of peanut oil from Marseilles, fications, it would ask for just such soil. Delft, Hamburg, and other ports. The nuts Vast tracts where pine forests have stood brought $1,899,237, and the oil, which was may be made useful and valuable by plantvalued at $915,939, went mostly into the ing them with peanuts. The cottonseed manufacture of butterine and other lard mills have a capacity far beyond the availsubstitutes.
able supply of their raw material, and have On the strength of these things the mill therefore lain with cold furnaces for a large men experimented with peanuts. The re- part of the year. But now that the machinsults were so successful that the acreage inery of these mills, with slight adjustments Texas increased more than 1,000 per cent that cost very little, can be turned into from 1915 to 1916. In that State the peanuts peanut-oil plants as they stand, they will and cotton, acre for acre, as far as the value naturally welcome a new industry that will of the crops is concerned, are now running extend figures on the credit side of the neck and neck, with the chances in favor of ledger.
Are You An
Investor ? During the past year the Financial Editor of The Outlook has helped hundreds of Outlook readers intelligently to solve their particular investment problems. Perhaps you are contemplating a shifting of your present holdings or have fresh funds to invest. In either case we shall be glad to give you specific information on any securities in which you may be interested. This service is entirely free to Outlook readers.
The Outlook Financial Department
circulars descriptive of these bonds.
DERAL BOND & MORTGAGE CO.
“ Detroit's First Mortguge House"
90L Griswold Street
LA BIG BROTHER FOR THE
BY J. F. KANE During a recent visit at a district court in New York the writer counted five applicants rejected within a short period, due to their complete ignorance of the simple information required of an applicant for
citizenship in this country. Reg. Trade-Mark
The judge, in a most sympathetic manner, asked questions in each case that should have been answered by any school child who had studied even the rudiments of geography and civics. One intelligentlooking man, well dressed, and apparently the right kind to be welcomed in this country, was unable to state what body makes
the laws for the Nation. He must have Lot No. 1.-Over one hundred designs, mostly startled the judge, as he did the bystanders, from our regular stock.
when he admitted he did not know anything
of the present conflict in Europe and was Napkins—$3.00, 3.65, 4.00, 4.50, 5.25, 6.00 up to 42.50 per not at all interested in the outcome. His dozen.
native country is fighting for its life on the Table Cloths
side of the Allies.
Another, accompanied by a man who 2 x 2 yds, $4.00, 4.50, 5.25 to 16.00.
may have been a parasite lawyer who for a 2 x 21% yds, $5.00, 5.85, 6.50 to 19.00.
fee of some sort had guaranteed a free 3 yds, $7.25, 7.75, 8.00 to 23.00.
passage through the courts, failed miseryds, $10.00, 13.50, 14.00 to 32.00.
ably on his mental test, but, owing to the 244 yds, $5.25, 7.25, 7.50 to 20.50.
kindness of the Court, was given a second 212 x 212 yds, $6.75, 7.75, 8.00 to 30.00.
opportunity, this time showing an even 22 x 3 yds, $9.75, 10.00, 11.50 to 37.00.
more complete lack of necessary knowledge. 212 x 4 yds, $14.00, 17.00, 19.00 to 49.50.
This man looked in vain to his companion, who finally gave up his appeals to the
Court and took his client away. It did not Lot No. II.-Twenty good designs in fine hand
require a keen observation to see that the
reject was utterly downcast, probably unmade Irish Damask at a saving of more than 25%
able to tell just why he was not admitted. from our regular prices, which are considerably below He had an ardent desire to become a citi
zen, whatever were his motives. He had today's market values.
obtained advice in the wrong place. He
may possibly have paid a fee that was to Napkins—$8.25, 10.00, 11.25 to 36.00 per dozen.
“ guarantee the rest." He gave up, deject
ed, and walked out of the court, possibly Table. Cloths
adding one more to the mass of malcon2 x 2 yds, $6.50, 7.50, 7.75 to 15.00.
tents, Anarchists, and others with grudges x 24 yds, $9.25, 10.25 to 19.00.
against the country. To the onlooker, howyds, $12.50, 12.75 to 23.00.
ever, it seemed that the kindly words of the 274 yds, $9.75, 11.50 to 14.50.
judge should have encouraged him to make 21 x 21 yds, $12.00, 12.25 to 30.00.
another effort at the proper time, and after 212 x 3 yds, $14.50, 15.75 to 37.00.
proper and necessary study.
In the field of business we are seeing 242 x 4 yds, $20.75, 28.75, 31.50.
patriotic and successful effort being made All our regular stock of over five hundred designs by large and small companies and corpora
tions to put into the minds of their emat prices much below the current market prices.
ployees the idea, the intention, to become
citizens of this Republic. Orders by mail given special attention.
The employers profited by assuring themselves of more contented help, and have made a distinct contribution to the country,
not only in the citizens added, but in the Fifth Avenue, 34th and 33d Sts., N. Y.
attempt to introduce into the voting population a body of men who have been encouraged to think for themselves and to have sufficient regard for their new privilege to
make an effort, at least, to avoid the evil NEDERLAND and ROTTERDAM
of group voting and other sacrifices of that Joint Pacific Service (1st, 2nd and 3rd Cabin)
STOPS SNORING. STOPS MOUTH BREATHING YOKOHAMA, (Via Honolulu) Kobe, Nagasaki
SIMPLE DEVICE CO., Middleburg, Va.. Box 14 HONG KONG
The Y. M. C. A., by establishment of SINGAPORE
TANDARD HYMN Sailings from San Francisco Jan. 19, Feb. 2-16, etc.
evening courses, is co-operating in New Single $100 YOKOHAMA (2nd Cabin) $150 R.T. PIRITUAL SONG York with the work done by the Mayor's
TÁVAJ.D.Spreckels&Bros.Co.601 Market St.s.F Just Out. A New Song Book. Sample copy will Committee on Naturalization, by the eve-
demonstrate its value. Examination Copy Board 25c. Cloth 350
The various Chambers of Commerce in THE CHEST WITH WHITE MOUNTAIN. S
larger cities are establishing schools and THE
courses. The "WHITE MOUNTAIN” Refrigerator easily leads
The schools are doing their work. Where all competitors. For years it has ranked first in the North, South, East and West. It is to-day and always has been recognized as America's
can the parent, foreign-born, more readily Greatest Refrigerator. Carried by leading dealers everywhere.
and agreeably obtain the fundamental Send for beautiful "1918" catalogues and booklets.
knowledge of our institutions than from his HOMES
child, provided the knowledge has been imparted to the child in the school? Re