FINANCIAL DEPARTMENT All 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 investment securities should be addressed to Individual Income Tax Return Blanks for Incomes in Excess of $3,000 HE TREASURY DEPARTMENT has approved the blank form for Income Tax returns on individual incomes in excess of $3,000. A copy of this blank (Form 1040) may be obtained at our offices. A representative of the Internal Revenue Bureau is located in the office of The National City Company and is co-operating with the experts in our War Tax Department. This Department will be glad to aid you in making your income tax return and in clearing up your income tax problems. correspondent Our various There will be no charge for this The War Tax Department supplements the various departments in this Company The National City Company National City Bank Building New York SAN FRANCISCO, CAL Railway Exchange Bldg. Hoge Building LONDON, E. C. 2 ENG. Acceptances A SAVE THE SAVINGS BANKS READER has sent us the following letter, which we reprint with our comment thereon: I am putting most of my current savings into United States Government, bonds, but I have $1,000 in the savings bank, and I want to get it earning more. Will you kindly suggest a few issues suitable for this small investment? I have offered to me two $500 bonds to return about 6 per cent. I am getting only 4 per cent from the savings bank. Generally speaking, we do not recommend the withdrawal of funds from savings banks for the purchase of investment securities. The great savings banks of the country are institutions conducted without profit for the purpose of enabling people of small means to invest their savings at a fair rate of interest with absolute security. Savings banks perform a great function in the country. The funds deposited in them are invested by the trustees with great care under rigid State laws for the protection of depositors. About $5,500,000,000 is now on deposit in American savings banks-an amount equal to the entire stock of money in the country. But the savings banks do not hold the money intrusted to them by their depositors. If they held the money idle in their vaults, it would be earning nothing, and therefore the banks could pay no interest to their depositors. All of these savings banks funds, excepting a very small amount of till money, are invested in high-grade bonds, mortgages, and loans. In other words, the small savings of millions of people are through the savings banks mobilized to finance a very considerable proportion of the capital needs of the country. This $1,000 that you have in the savings bank may now be loaned to a wheat farmer in the Mississippi Valley, or may be loaned to a railway that has used it for the building of new tracks. All the savings banks deposits are at work in the country producing wealth. Your interest from the bank is your share of this wealth production, turned over to you in payment for the use of your capital. it If you withdraw your funds from the savings bank, the bank will probably not be obliged to sell any of its securities to get the money. for you, because some other individual will be making a deposit while you are withdrawing yours. But if a great many people, like yourself, decided that they preferred to do their own investing in securities rather than have it done by the savings banks trustees, the result would be that the savings banks would be obliged to sell securities to get the funds to pay depositors, and it might be that the very securities sold would be the securities bought by the depositors. It must be plain to any one who stops to consider the function of savings banks that any wholesale withdrawal of deposits would force a heavy liquidation in our markets of the high-grade securities now in the vaults of the banks. At a time like this, when the financial markets of the world are burdened with an unprecedented volume of securities for the prosecution of the war, it is unthinkable that the savings banks should be obliged to force more securities on the markets. Of course the Government would not allow such a thing to happen. The Secretary of the Treasury would consider it a paramount duty to keep savings bank credit as sound as the credit of the Government itself. A number of inquiries from Outlook readers have been received the last few months 66 seeking advice on the exchange of savings ment. We do not believe that money should be taken out of the savings banks to be loaned to the Government. The credit of the Government is more likely to be disturbed than aided by such a course. Over and over again it must be reiterated that the need of the Government now is for current savings. The war cannot be financed by the sale of securities by one citizen to another. This does not increase the wealth of the country by a single cent. New wealth can come only from new production, and the billions that we must put at the service of the Government to bring the war to a victorious end must come out of our current production and our current savings. QUESTIONS AND ANSWERS Q. A circular of the Company was mailed to me by a firm of investing bankers who are members of the New York Stock Exchange. It describes certain 7 per cent gold notes, issued in 1917 and maturing in 1920. With each $1,000 note is a stock option warrant entitling the holder to buy within a certain period 25 shares of stock at $45 a share. I cannot understand why this concern should try to float the stock at $45 when it is being sold on the exchange at $30. A. The convertible bond is an excellent medium for providing new capital for a corporation. It is, in fact, an option to purchase before the end of a stated time the stock of the corporation at a stated price, usually fixed at a point considerably higher than the market valuation when the bond is issued. If the corporation prospers and the market value of the stock rises above the conversion price during the period, then the privilege becomes of value to the bondholder. For example, in the case of the corporation you mention, if during the period during which the bond can be converted into stock at $45 a share, the stock rises, say, to $60 a share, the holder of the convertible bond has the privilege of conversion into stock at a cost to him of $45 and selling the stock on the market for $60, thus making a profit of $15 a share. In recent years convertible bonds have been a popular and desirable form of corporation financing, especially in providing new railway capital. Among the railway companies that now have convertible bonds outstanding are Atchison, Atlantic Coast Line, Baltimore and Ohio, Chesapeake and Ohio, St. Paul, Erie, New York Central, New Haven, Norfolk and Western, and Southern Pacific. When Mr. Harriman was building up his Pacific system, he used the convertible bond with great success, and the purchasers made handsome profits. The convertible bond is a desirable method of providing new capital for a growing corporation because it facilitates the raising of capital when there is no adequate market for new stock; while at the same time it makes it possible to put the company's financing on a sounder basis later on, by reducing the debt and increasing the capital if the growth of business during the period of conversion advances the market ESTABLISHED 1865 |||||||||| ESTABLISHED 1865 Seasoned Public Utility Bonds Netting 6% First mortgage on modern hydroelectric property. Cash cost of se curity three times loan. Net earnings four times interest. Issued with ap proval of a State Railroad Commission. Company supplies power to industries of vast im portance in times of peace as well as war. Send for Circular No. 1004Z. Peabody, Houghteling & Co. (ESTABLISHED 1865) 10 South La Salle Street Chicago, Ill. ESTABLISHED 1865 ESTABLISHED 1865 Questions and Answers (Continued) It is always desirable to finance a com- We discussed in these columns several months ago the dangerous growth of railway debt as compared with capital in the form of stock. A railway with a large proportion of debt has a very narrow margin of safety in periods of thin earnings. Nearly all the railway bankruptcies of recent years have been of companies that were unable to sell stock and were forced to issue an abnormally large proportion of bonds. When earnings fell off, these companies were unable to meet their obligations to their creditors or bondholders, and were forced into receivership. The convertible bond is a means of bridging a company over a period in which it cannot provide needed capital requirements by the sale of new stock, and gives it the opportunity later on, if earnings sufficiently expand, to readjust its financing on a sounder basis. Q. I own the following railway stocks: 10 shares Mil., St. Paul & S. S. Marie, costing $741⁄4 98 96 86 10 shares Atch. Top. & Santa Fé, costing.. A. We presume the "Soo" stock is not these columns in a discussion of Govern- Founded A.D. 1858 CONLIN'S 1918 Income and Federal TAX REPORTS Tells individuals, partners, fiduciaries, and corporations how best to prepare 1918 tax reports for the income tax, excess profits, capital stock, stamp and every other Federal tax. It answers every question and tells precisely what to do in your particular case. The only complete, up-to-date, authoritative book covering all Federal taxes. Includes the laws, amendments, treasury decisions and regulations to Feb. 1, 1918 and the combined advice of five recognized experts. 704 pages. $3.00 per copy. Save time, energy and At your bookseller or from PRENTICE-HALL, INC. Publishers 70 Fifth Ave., New York we can certainly anticipate a rise in the market value of these stocks when peace is in sight. As to the further investment of $1,000 that you are now considering, we think you would do well to diversify your purchases of securities. You have the choice of highgrade farm and real estate mortgages, of underlying railway bonds of undoubted stability, seasoned public utility bonds, and short-term corporation and Government securities. Any of the large financial institutions advertising in The Outlook will be glad to give you a selected list of securities of these various descriptions. We suppose that you are putting some of your savings in the Government War Savings Stamps. We know of no better investment. They return about 4 per cent and are easily converted at any time into cash. We think that every investor who is accumulating savings ought to put a certain portion of his savings at the disposal While a long war would mean a further of the Government by the purchase of War Saving Stamps. These can be bought decline in the market quotations of these stocks, we believe that the dividends are as at post-offices, banks, and retail stores well assured as any corporation dividends; | throughout the country. THE CHILDREN OF THE CHURCH A recent "Knoll Paper" on "The Children of the Church" has brought us the following response. We are glad to receive it and to give it to our readers, because it furnishes a concrete illustration of one way in which the Church can fulfill its unfulfilled duty of ministering to its children. As the welfare of children, materially and spiritually, has always been of interest to me, your "Knoll Paper" on "The Children of the Church," in the issue of The Outlook for January 16, struck a sympathetic chord, and I agree with you that as a general rule the children are not given the consideration due them in the average church. However, there is an exception to this rule in our little city of Glens Falls, Christ Church (Methodist Episcopal), whose pastor is the Rev. Charles O. Judkins. In addition to our Bible school [held every Sunday afternoon], Dr. Judkins holds two special church services for the children each week: junior church at 6:30 Sunday evenings for young people from the ages of twelve to twenty, and child's church for the little ones from eight to twelve, which meets each Thursday afternoon at 4:15. At each of these services there is preached a specially prepared sermon. Many young people outside of Christ Church take advantage of the junior church, which proves its value and shows that it is appreciated. As to our Bible school, we have a very well-equipped building for the purpose, with separate class-rooms for each class of the senior and intermediate departments, these rooms being provided with tables and chairs; and forty minutes is given to the study of the lesson. We also have a primary department and a kindergarten, which latter is in charge of a regularly trained kindergarten teacher. We have a graded school governed by a grading commission, and we are using the Constructive Bible Studies as outlined by the University of Chicago Press. Great care is taken by the grading commission in the selection of teachers, with the result that we have an efficient body of men and women for the work. One of the rules provides men teachers for the boys and women for the girls. Dr. Judkins not only realizes the need of special church services for the children, but also feels the need of a better knowledge of the Bible among the adults; and, with that end in view, he has a men's class and a women's class for the modern critical constructive study of the Bible, on different evenings of each week. The attendance at the men's classes averages ninety and at the women's over a hundred. We are peculiarly blessed in having for our clergyman a man with a vision. L. CAROLINE MAYER. Glens Falls, New York. Are You An Investor? During the past year the Financial Editor of The Outlook has helped hundreds of Outlook readers to solve intelligently their particular investment problems. Perhaps you are contemplating a shifting of your fresh funds to present holdings or have fresh 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 The Outlook Company, 381 Fourth Avenue, New York Warning! This year YOU must pay an Income Tax Don't feel that the new income tax does not apply to you-you may be pretty sure it does. Single persons with incomes of $83.33 or more a month ($1,000 or more a year) and married persons with incomes of $166.66 or more a month ($2,000 or more a year) must file a statement of this income with the Government. It is only the income above $1,000 and $2,000 which is taxed. This statement must be filed on a form which the Internal Revenue Representative in your community has. To locate him, ask your employer, the Postmaster, or any Banker. Get the necessary form at once. Your statement must be filed before March first and you must not neglect it-for two reasons: First it is your patriotic duty in helping to win the war. Second: there are severe penalties to be visited upon you if you do. This announcement is published by The Outlook to help the Government collect these taxes— and thus aid in winning the war. Winter Sports Each season adds many to the list of winter sports enthusiasts. For lovers of skiing, snow-shoeing, tobogganing, skating, and the like, the list of resorts to choose from, where these sports may be found, grows yearly and now includes Rocky Mountain National Park in Colorado; Yosemite National Park in California; Mount Hood in Oregon; and resorts in New England, Pennsylvania, and Canada. We shall be glad to send Outlook readers information about these resorts without charge. TRAVEL AND RECREATION BUREAU THE OUTLOOK COMPANY, 381 FOURTH AVE., N. Y. BY THE WAY A letter from an American soldier in France speaks appreciatively of the good things received at Christmas from the home folks: "One fellow got four mince pies; others fruit cake, etc. I myself have received two packages now, one with cigarettes, candy, socks, jam, handkerchiefs, and lots of things a sight for sore eyes over here. To-day I got a can of candy-fudge in it, real nut fudge. That was a good treat, too. The night before Christmas I went down by the river and slept in a bed for the first time since August. We built a fire in the fireplace and toasted crackers, ate nuts, dates, candy, etc. Christmas Day they gave us a fine dinner at the mess. I am not making any special plans, but just looking for the chance to get back to that little family, which has increased by one since my departure-another little girl. We think if we could get enough of the U. S. boys over here it would not take long to end this war." How do you pronounce cantonment? Some people call it can-tonment, some canton-ment, and some can-toon-ment. The first is preferred by the Century Dictionary, the second by the Oxford English Dictionary, and the third by the Standard Dictionary. The last-named authority, however, has an advisory committee of eminent orthoepists, to whom words of disputed pronunciation are submitted, and a large majority of these have voted in favor of can-ton-ment. Can-toon-ment is said to be the favorite pronunciation in India. An old spelling of the word is "cantoonment." Cleanliness is near to self-veneration as well as to godliness. A trained nurse tells in a recent book an incident illustrative of this fact. A neglected boy of nineteen had met with an accident and come to the hospital. The nurse had thoroughly washed and combed his hair and subjected hands and nails to cleansing and manicuring to which they were entire strangers. The boy was delighted. He felt his hair and looked at his hands a hundred times a day. When some friends came in to see him, he exclaimed, like a child with a new toy, "Look at me hair! Look at me hands! Ain't it great !" The English Government, according to the "Railway Age," has granted another war bonus to railway workers the fifth since the beginning of the war. The new bonus amounts to six shillings a week, bringing the total increase since February, 1915, to twenty-one shillings a week (about $5.25). " "James Murray, a seaman on Commodore Perry's flagship on the voyage that opened Japan to the world, died yesterday at his home in Brooklyn." So passed away the fourth "last survivor of the Perry expedition who has come to the attention of this department since the publication in The Outlook of January 2 of the portrait of William H. Hardy, who at the time was supposed to be the only surviving member of the famous expedition. That trip to Japan seems to have had a remarkable influence in conferring longevity upon the fortunate sailors who accompanied Commodore Perry. Tolstoy and Turgenev, famous Russian novelists, were contemporaries and friends, but on one occasion they had a serious falling out. As gathered from a recent biography, this is the story of their quarrel: |