The CENTURY FINANCIAL DEPARTMENT THE purpose of this department is to help CENTURY readers to avoid investments in which they are likely to lose money, or in which the risks involved are greater than the circumstances surrounding the investment would justify the individual in taking; and to assist them in the choice of sound investments that meet their requirements. It is hoped that inquiry will be made regarding securities and dealers before funds are invested rather than afterwards. Questions will not be answered in regard to purely speculative operations. Return postage should accompany each inquiry. In addition to this Readers' Service, THE CENTURY will publish in this part of the magazine each month the announcements of reliable banking or brokerage houses that it can recommend. No house will be permitted to use these pages until it has been carefully investigated, and every effort will be made to accept only the offerings of safe securities and the announcements of responsible and reliable houses. Address all communications to READERS' FINANCIAL SERVICE DEPARTMENT, THE CENTURY MAGAZINE, 353 Fourth Avenue, New York, N. Y. Investment Questions and Answers Bonds for a Widow VIRGINIA.-Q. I have some money belonging to a widow which I wish to invest, safety of principal being my first consideration. Do you think Liberty bonds will be selling cheaper by summer and therefore I can get a higher rate of interest by waiting until then to buy? Would you also recommend to me some state and city bonds which are regarded as legal investments for guardians and savings banks in the State of Massachusetts? A. Among the list of bonds legal for savings banks and trust funds of Massachusetts you can make excellent investments for a widow. Liberty bonds will be fine for a portion of this fund and we doubt if they will sell much if any lower. Along with these Liberty bonds you could include bonds of the States of Illinois, Michigan, New York, Pennsylvania, Delaware, and many others, and city bonds such as those of Baltimore, Buffalo, Cleveland, Detroit, Jersey City, Kansas City, Seattle, San Francisco and Philadelphia. In the railroad list you could buy such bonds as Atchison, Topeka & Santa Fé general mortgage 4s, due 1995, or Transcontinental Short Line first 4s, due 1958, of the same road; Great Northern first refunding 4s, due 1961; Illinois Bonds for a Service Man FLORIDA.-Q. I should like to ask you to recommend an investment for $1000 which I shall have available shortly. I should like a long term bond with as high an interest yield as possible. I can afford to take some slight risk and will expect to hold it for some years. I should prefer a domestic issue. A. How would the St. Louis-San Francisco prior lien 4 per cent. bonds, due 1950, now selling at 68, suit you? This is a well secured second grade railroad bond that seems to us suitable for your purpose. Another bond of approximately the same grade but of earlier maturity is the Chicago, Rock Island & Pacific refunding 4s, due 1934, at 77. The earlier maturity helps to account for this higher price. In the industrial field a bond like the Adams Express Company 4s, due 1948, at 75, or the American Smelting & Refining 5s, due 1947, at 88, and in the public utility field such bonds as Pacific Gas & Electric first and refunding non-callable 6 per cent. bonds, due 1941, around par, would seem to us to be suitable for your purpose. Central refunding 4s, due 1955; Louisville & Nashville A Teacher's Savings Canadian Bonds MISSOURI.Q. Please give me your opinion on the City of Calgary Bonds described in enclosed circular. A. The City of Calgary 6 per cent. bonds, due 1951 and 1971, about which you inquired seem to us to be entitled to a good investment rating. But the price at which they are offered seems a little high when compared with the outstanding issues of that city which are now quoted in the case of the 5s, due 1945, on a 6.30 per cent. basis, and the 5s, due 1933, on a 6 per cent. basis. Other Canadian bonds recently offered with which you might compare these are the Province of Ontario 15 year 6s, due 1935, to yield 6.60 per cent. and the City of Toronto 6s, due 1925 to 1951, on a 6.93 per cent. basis for early maturities down to a 6.07 per cent. basis for the 1951 maturity. Personally the writer would rather have City of Toronto bonds than those of Calgary. KENTUCKY. Q. I should greatly appreciate your advice in regard to a safe investment. I am a school teacher and do not want to lose my savings. I am tempted to buy some Great Northern preferred stock, and some Northern Pacific. Do you advise it? Also, will I make more if I sell my Liberty bonds now, and invest the money in these stocks, or if I borrow the money at 6 per cent. and keep the Government bonds a little longer? If you do not think well of either of these, what do you recommend? 4. We think you would make a mistake to sell your Liberty bonds at this time or borrow money to buy stocks at any time. We believe Liberty bonds will go above par and as they are the safest investment in the world we would suggest that you hold on to them. Great Northern and Northern Pacific stocks do not look particularly attractive as investments at the present time because of the poor earnings of those roads. Stocks that seem more suitable for your purpose are issues like Atchison, Topeka & Santa Fé common on which 17 per cent. was earned last year and American Tel. & Tel. paying 9 per cent. and earning a consistent margin above it. "I guess-" OO OFTEN a guess on investments means Tas as a on as little as a guess on the weather. A carefully selected investment must be based on a study of facts-not guesses. Our representatives who talk with an average of 3000 banks a day are welcome because they are offering securities which have been bought on facts, not guesses. Select your investments as carefully as your banker selects his. We invite you to get in touch with our nearest office. Write for Current List. The National City Company National City Bank Building, New York Offices in more than 50 leading cities throughout the World INVESTMENT & BANKING JUST By JOHN K. BARNES The Fall of the Modern Bucket Shop UST a year ago this month a warning was here given to CENTURY readers who were investing or contemplating investment on the partial payment plan. They were advised to investigate with great care the character and reputation of the houses through which they were doing such buying. Such a warning was printed because many of the houses offering the sale of securities on the partial payment plan were of little reputation and it was believed they were operating as bucket shops. There was good reason to suspect they were not carrying the securities their clients were buying from them, but were betting against their clients that they could buy these securities later, before they had to make delivery of them, at prices lower than the clients were paying. It was pointed out then that if security prices should go steadily upward such houses. would probably fail. That is what has now happened and the New York District Attorney's office is being besieged by people from all walks of life who have been unable to get their securities or their money back from such houses. A campaign to clean out the bucket shop is now under way. These modern bucket shops are a greater evil than the old fashioned kind. In the old days a man went into a bucket shop to take a gamble in stocks on a thin margin of capital. In some cases he even knew that he was simply betting against the house on the future course of the market. He was willing to take the risk, knowing that if he won his bet the house would have to pay him or go out of business, and figuring that he would make a winning and get out before the shop closed up. If he did not know the character of the house, he nevertheless realized that he was speculating. When the inevitable loss occurred he could not complain that he had been much deceived. But the modern bucket shop leads people to believe that they are investing in good stocks on the partial payment plan. The war educated people in the buying of Liberty bonds on the partial payment plan and opened up a great field for this kind of bucket shop. The people who are now losing money because these houses are passing out of existence are a different class from those who gambled in the old bucket shops. They can less afford to lose, and their deception is a greater calamity for they thought they were investing their money. A CENTURY reader recently wrote to ask: "If a brokerage concern sells stocks- five shares Bush Terminal to an individual on the installment plan, receiving several payments therefor as they fall due, and then notifies the purchaser that they will be obliged to suspend business temporarily and to address all communications to them in care of their attorney, giving his name and address, until the company can get into new quarters and resume business, how does that affect the purchaser and how should he act in the premises? Maybe all depends upon the status of the company. How can one find out what this is?" To this the Financial Editor replied: "We would suggest that you make no more payments on your Bush Terminal stock until you have found out what has happened to the brokers to whom you were making these payments. It does not seem that an attorney would have to be called in to represent them just because a brokerage house is moving. If you will tell us who the brokers are we may be able to secure information regarding what is going on." Then the reader sent in the notice he had received from the brokers stating that they were moving their offices and would notify him when they had settled in new quarters when he could continue his payments, and giving the name of the attorney. A telephone call on this attorney brought forth the information that the brokers had failed and that no receiver had been appointed. The reader was at once advised to take the case to the District Attorney's office and to get a lawyer to try to locate some assets of the brokers to attach. He was told that it looked as though he had been dealing with a bucket shop and that those operating it had decided it was time to go out of business. This concern was located on Wall Street. It was apparently one of the fly-by-night concerns that infest the Wall Street district. It was listed in the last telephone directory but not in one of (Continued on second page following) BONDED FIRST MORTGAGES Safety of your investment doubly assured when you invest in our First Mortgage Bonds. One of the largest Surety Companies of America guarantees payment to you of all principal and interest. Investigate this doubly safe investment. Write for free illustrated book and complete information. LEONARD & BRANIFF Bond Dept. M-2, Oklahoma City, Okla. INVESTMENT AND BANKING (Continued) five months before, and will not be listed in the next one. It probably adopted the partial payment method because that gives about a year before a house has to make delivery of any securities. That is the reason the fakers and crooks in every line have flocked into the partial payment business. Now that official investigation is making it warm for them, they are flocking out again. New York Stock Exchange officials have long recognized the harm done by the bucket shops and other fly-by-night brokers to the legitimate operations of Wall Street. The man who loses money through one of these houses, whether it be located on Wall Street or in Southern California, lays it up against Wall Street. Is it any wonder that public opinion is unfavorable to Wall Street? It knows nothing of the constant efforts of the Stock Exchange authorities to prevent houses doing a bucket-shop business from enjoying relation with Exchange firms through which to buy and sell securities listed on the Stock Exchange. It knows little of the difficulties they face. There are eleven hundred members of the New York Stock Exchange and much of the business of the active firms comes from outside houses. President Cromwell, at the annual dinner of the association of Stock Exchange firms, said that more than one Stock Exchange house within recent months had appealed to the Exchange committees to protest against the removal of stock quotation tickers from concerns that were known to the Exchange authorities to be doing an improper business, and he added that he could not believe these appeals were from disinterested motives. Such frankness as this on the part of the President of the Stock Exchange will favorably affect public opinion, and if the plan he proposed at that time of having regular examinations of the affairs (Continued on second page following) |