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The Problem of Freight at Terminals

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ourselves a great deal more good from a brought about an organization of the Northdollars and cents standpoint than can ever west Regional Advisory Board. result if we only sit around and wait for That was the meeting that started things prosperity to come by the rate-cut route. going. I do not know whether I may be

permitted to make this statement or not. It LEGISLATION AND EDUCATION

may be that it is taken out of my small brain,

but I believe that this board, this Regional SIMILAR line of thought came from

Advisory Board, has a double function to Mr. P. A. Lee, Secretary of the perform. It is not only to bring the shipper Farmers-Grain Dealers Asociation of and the carriers together where they can iron Grand Forks:

out their differences and their problems; but

aside from this I believe that, in view of the I was very much interested yesterday in continuous legislation affecting the carriers hearing Mr. Coleman mention a certain over the country, that the board has a mission meeting we had in St. Paul in December, 1922. to perform in letting the public know some I want to tell you, gentlemen, that if ever any of the difficulties that the transportation one went to a meeting seeing red I did. ... companies are up against themselves. We had a condition in North Dakota in the fall of 1922 that I think was almost enough By placing the shipper in the saddle, to make any one see red, and I think it was the railroads seem to have found not only enough to make a Red of almost any man with

the way of settling their operating blood in his veins; and you can also take it problems, which are also the shippers' from me, gentlemen, that the fellows that were at that meeting heard from Pete Lee. problems, but also the way to settle their

political and financial problems. They in fact, he knew that he was so wild that he took one of his directors with him to kind of

have found a kinder and more reasonable keep him down in case he went too far; and

rider than they expected, for it is characthat meeting, I believe, has done more for this teristic of good horsemen to see to it that entire Northwest than anything else, because it their mounts are well cared for.

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Every month in this part of the magazine the World's Work prints
an article on investments and the lessons to be learned therefrom

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ECAUSE of the high interest and failures and losses to investors. For return they give, the good that reason it seems well to call attention record they have enjoyed, and to some words of caution as to this form the effective advertising done of investment that have been uttered

gage field.

by houses selling them, real within the last few months by two men estate mortgage bonds have become a of long experience in the real estate mortpopular form of investment. In fact, they have become so popular with some Mr. Clarence H. Kelsey, Chairman of of our new investors whose experience as the Title Guarantee & Trust Company, bond buyers does not antedate the war New York, in an article in The Journal of that there is danger that some of these Commerce wrote: people may make investment blunders in the buying of them that may result in

There has been a remarkable drift during losses they can ill afford to face.

the past two or three years toward real estate For example, a minister in the Middle mortgage investments. It has now reached West recently wrote this magazine that large and, in some respects, dangerous propor

. . In the zeal to get mortgage inhe had all his money, several thousand

vestments to sell and to offer a high rate of dollars, invested in first mortgage real interest so as to stimulate sales, some of the estate bonds paying from 6 to 8 per dealers are going up very high in the amount cent., that he had about $1,000 to invest of the mortgage loan as compared with the each year and was thinking of putting all value and have to do so to get the rate of inof it in additional 8 per cent. real estate

terest demanded. mortgage bonds.

The investment banking houses seem inUnder the title, “Should I Put All My

clined to go into the business also, but it would

seem as if some of those who do so do not Money in Real Estate Bonds?" on these

realize the difference between a mortgage to pages for November, 1923, it was said:

secure bonds covering an extensive transportaThis magazine has repeatedly cautioned

tion or public utility corporation, where even its readers against houses of little experience

if the bonds are issued for the full cost of the that have rushed into this field since it became

property there is a possiblity of growth in the

traffic or patronage which will still make so popular. So far most of these houses have

them a good investment, and a large mortgage been able to keep on, but their time of test is still ahead. The investor should not deal

on a business or residence building, where limit with them, and should not, at this time par

of income is the rents that can be realized, ticularly, put all his money in real estate

where no expansion in capacity or service can

be expected, and where the sole reliance for mortgage bonds.

payment of principal and interest is the success This latter point needs emphasis. As

of the undertaking within the narrow limits yet the time of test has not arrived.

of its opportunities, and where payment of Until it does, and passes, no one can teli principal and interest will depend upon the

good judgment with which the building was with certainty what bonds and what planned and placed. houses are going to come through without defaults and without failures. The longer Mr. Frank J. Parsons, Vice-President it is delayed the more confident are the of the United States Mortgage and Trust less experienced houses likely to become, Company of New York, speaking before the more secure will buyers of the bonds the savings bank division of the American feel, and the greater may be the defaults Bankers Association at its annual meeting

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Real Estate Mortgage Bonds

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in Chicago, in September, criticized the For the investor, however, the income loans of what he termed "modern Na- test is about the only one he can apply poleons of mortgage finance" on the to these bonds after making sure the ground that they are confined largely to issuing house is of long experience and enterprises conceived by people of a good standing. Very seldom can he speculative turn of mind, whose individual check up on appraisals. He can, howinvestment in the enterprise is slight; that ever, with a lead pencil, quickly arrive they largely disregard the old bases "for at the amount of earnings necessary to appraisal and insist that the test of value cover the annual interest and principal shall be a capitalization of rents at what payments on the bonds. If he adds to may be a high-water level; that construc this the estimated operating expenses for tion funds secured from the sale of bonds the property and then in the case of an prior to the completion of the buildings apartment house) divides by the number are not impounded with a trustee; and of rooms or apartments, which informathat independent corporate trustees are tion he should find in the circular, and not provided for the bond issues.

then divides again by twelve, he will “The foregoing criticisms," he said, arrive at a monthly income figure from are made after giving due credit to the which he may be able to form an opinion very real contributions which have been as to the conservatism of the loan after made of recent years to the art of wise mort- taking into account the character and gage lending. Among these might be men location of the building and the rapidity tioned the provision in large loans for the with which the loan is being amortized, monthly deposit of rents to cover charges, or paid off. He will at least have arrived consistent amortization, the concentra at the approximate minimum to which tion upon new structures and strategic monthly rentals can be reduced and still locations, and greater attention paid to cover charges. If this seems to him the details of arrangement and construc- higher than the property is likely to yield tion." His conclusion for the investor in bad times, not good, then he should not was in these words:

buy the bonds unless he is willing to take "A safe and satisfactory experience for the risk involved. an investor in mortgage loans is perhaps If the rate of amortization of the loan more dependent than any other single is less than 5 per cent. a year, the investor factor upon the integrity, knowledge, and should consider the bonds of earlier long experience of the issuing company.” maturities safer than the later ones, unless And in response to a question regarding it is apparent that the loan is a particuthe “rental basis” for arriving at valua- larly conservative one.

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case tions, Mr. Parsons said: “The serious should he place all his money in high error that I see in so many of these bond interest rate real estate bonds. This issues that are being offered to-day is violates the first principle of diversificathat the houses offering them not only tion. He

tion. He should diversify his loans have not had long experience, but the geographically, and it might be well to last ten years has been a period of un do so as to issuing houses because the interrupted-almost uninterrupted-rent future of these bonds is to a certain extent increases and building cost increases. tied up with the future of the houses. So, if we were ever at the peak of a high He should, however, never buy from any cost situation we are to-day. And to but houses of long experience and high take the rents that obtain to-day and reputation in this field, and when he incapitalize them at a reasonable figure and vests in construction loans he should say 'that is value,' I think is simply know just what additional risks he runs making for trouble.

during the construction period.

In no

On this page each month will be printed practical suggestions to investors

' N THE hundreds of investors' letters escaped the attention of many more

which this magazine answers each investors. In many of the investment month there is evidence that some lists sent to the World's Work for readers did not see, or heed, the criticism there are still high interest rate

warnings printed on these pages bonds that are now selling at or near the during the days of low bond prices of 1920 prices at which they can be called by the and 1921 against the purchase of callable issuing companies for redemption. If a

. bonds bearing high interest rates. Nearly mistake was made in buying these bonds every day requests now come for sugges- in the first place, there is no reason why tions of securities in which to invest funds it should be multiplied by holding on to that have come back to people through them. the retirement of 6, 63, 7, and 8 per The investor answers that as high a cent. bonds long before their maturity return cannot be secured by selling these dates.

bonds to-day and investing in some other In the first two months of this year equally good security. But if that be nearly a quarter of a million of bonds true, then it follows that it would be were thus retired. They had practically profitable for the issuing companies to all been sold within the last few years, sell lower interest rate bonds and retire and those who bought them had undoubt- these issues; therefore the investor is not edly looked at their distant maturity likely to get the higher return for long. dates and thought, or hoped, that they Callable bonds do not advance in the were going to get the high interest rates market much above their callable prices, they bore for many years to come. They and why should not investors switch at paid little or no attention to their callable once from securities that are selling near features at a time when they might have their callable prices into securities that made more certain of a high return for a a

will continue to advance if long term longer period.

interest rates keep on declining? Unfortunately, some of these investors, In the case of a Chicago investor who and others too, now want to get as high a sent in his list of forty-three high grade return on their money as they got before bonds in the government, public utility, bond prices advanced from their post-war railroad, and industrial fields, the only depression. If such people would but stop suggestion made to him was that he to realize that Liberty bonds, now selling switch from such issues as Duquesne Light to yield less than 4 per cent., could then 6s due 1949, selling at 1051, callable at be bought to yield 6 per cent., they would 105, and Shawinigan Water & Power 6s have some measure of conception of the due 1950, callable at 105, selling at that great change that has taken place in the price, into bonds that are either noninvestment market and possibly some callable or are selling several points below realization of the danger they would be their callable prices. This same line of running if they attempted to get as high a reasoning should still be applied in the return on their money to-day as they got purchase of new securities to avoid the in 1920 and 1921.

"heads | win, tails you lose" callable But there is another point in connec- features of the issuing companies, in the tion with the callable feature that has a event that interest rates continue downwider application and that seems to have ward.

THE WORLD'S WORKSHOP

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So many of the interesting things in the making of a magazine and the publishing of books never get past the editors' desks that we have decided to devote a few pages every month to sharing some of them with our readers. These include an acquaintance with writers, letters from readers, and a miscellany of other things that may interest others as much as they interest us.—THE EDITORS.

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HE World's Work for the affairs and events. They cover the period
coming months will have arti- from just before the war until the clos-
cles and serials of the highest ing days of that great struggle.
interest for both new and old

readers. Included in the program will be work from the pens of noted And, incidentally, who of the older writers on subjects combining both in readers of the World's Work can forget terest and importance.

that series appearing in this magazine so

some twelve years ago, entitled “The

New Freedom," by Woodrow Wilson? Every well-read person in the English

SSO speaking world by this time knows "The Life and Letters of Walter H. Page," by Of single articles, of all kinds, there Burton J. Hendrick. Since that book is a great wealth and variety for the comwas published the file of letters from Wal- ing months, and more about them will ter Page to President Wilson has come appear in these columns next month. into Mr. Hendrick's hands.

A large staff of editors and contributors Mr. Hendrick is now editing these is busy in all parts of the world. letters, perhaps the finest and most interesting written by Walter Page, and they will appear in early issues of the World's

S. J. Woolf, one of the best-known of WORK, probably starting in the June the artists who are expert in crayon and number. This is an assurance of good line drawings, executed the drawings of reading, not only because Mr. Page has the Personalities this month, and also the been described by many critics as the sketch of President Green of the Ameribest letter writer of his time but also be can Federation of Labor, which is used as cause Mr. Hendrick, who supplies the a frontispiece. background and other material needed for knitting the letters together, won the Pulitzer prize for biography with his work Those who admire the writings of Sir on “The Life and Letters of Walter H. Philip Gibbs—a very large number, inPage."

deed-doubtless will be disappointed These new Page letters reveal, just as that this issue of the World's WORK does the other published letters did, the star not contain a third article in his series on tling uncanniness of the statesman's in- "Tragic Europe." Only Sir Philip can sight into the real background of human be blamed! A third article from him

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