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CONTENTS

50

IV. THE BANKING HOUSE AS AN AID TO INVESTORS. 61

V. THE BUSINESS OF THE INVESTMENT BANKER. 72

VI. THE RELIABLE INVESTMENT BANKER..

83

VII. PUBLIC OBLIGATIONS—MUNICIPAL BONDS PRE-

FERRED...

93

VIII. HIGH-YIELD MUNICIPAL BONDS..

108

IX. THE AMERICAN RAILWAY INDUSTRY.

115

X. RAILWAY LABOR AND RAILWAY INVESTMENT. 123

XI. “A REASONABLE RETURN UPON THE VALUE OF THE

PROPERTY DEVOTED TO THE PUBLIC SERVICE" .. 134

XII. THE SECURITIES OF PUBLIC-SERVICE CORPORATIONS 142

XIII. THE INVESTMENT-BANKER AND THE PUBLIC-UTIL-

ITY COMPANY..

154

XIV. THE PUBLIC-SERVICE CORPORATION AND THE CITY 163

XV. THE PUBLIC-SERVICE COMMISSION AND THE IN-

VESTOR.

177

XVI. FARM MORTGAGES.

185

XVII. THE MORTGAGE BANK.

197

XVIII. INDUSTRIAL BONDS AND RAILROAD BONDS COM-

PARED.

206

XIX. TIMBER BONDS..

222

XX. INDUSTRIAL PREFERRED STOCK.

232

XXI. THE DISSOLUTION OF THE TRUSTS.

244

XXII. THE INVESTOR AND GOLD SUPPLY..

261

XXIII. PRICE MOVEMENTS SINCE 1865...

268

XXIV. INVESTOR AND THE FUTURE OF PRICES.

275

9

THE
CAREFUL INVESTOR

I

THE CHANCES OF A LAMB IN THE STOCK

MARKET

COMPLAINTS of the extreme dulness in business are rife in all stock brokerage houses. The "public" is not buying stocks. Brokers are reduced to the expedient of preying upon one another. Meantime expenses continue, and there is no relief in sight. “For this condition," said a veteran broker, “the muck-raking magazines are responsible. They have denounced Wall Street and Wall Street methods so persistently and with such violence that the people have come to look on the term 'Banker and Broker' with suspicion. They do not want to trust brokers with their money. They feel that they will not be treated fairly. They do not believe that the Wall Street game is honest.”

"Is it honest?” he was asked. “Are the people correct in their opinions? What about this criticism of the financial game? Do you believe there is anything in it?"

Well," he replied, “I'll tell you my own opinion. The magazines are right.

There's nothing in the game for the people except excitement, worry, and loss. If a man sticks to the stock-market game long enough, he will lose. While he is playing it, unless he is careful, he will be made the victim of some trick of manipulation which will take his money away from him, without even giving him a run for it. Of course, it's my living. I like the business. I try to be fair to my customers; I know I am honest with them; but sometimes, when I stop to think, I'm sorry for them. They haven't a chance."

Such candor is unusual and refreshing. Read the solemn editorials in the newspapers when it is proposed to abolish or restrict the stock exchange. Note the indignation with which any such proposals are received. “Without the stock exchanges and the brokers," we are assured, “business could not be carried on." It is admitted that there are abuses. Foolish men speculate to their ruin. Occasionally a broker turns rogue, makes a dishonest failure because he speculated for his own account with the money of his customers. But these are only incidents. They furnish no reason, it is said, to overthrow a great and beneficent institution, or even to hamper or seriously interfere with its operations. Through the stock exchanges capital is mobilized, brought together in great masses for railroads and subways. The buying and selling of the brokers for their customers and for themselves establishes the values of stock and bonds. The stock exchange discounts future events. If the corn crop is threatened by drought, down go the prices of Western railroad stocks. Is a trust threatened with attack? The stock exchange knows before any one else, and the ticker tells the story. Without the stock exchange, the banks could not make loans on collateral with any safety, since they would have difficulty in finding a quick market in case it became necessary to sell.

These are strong statements. They have high authority to support them. They are not to be questioned without the production of strong evidence that they are overdrawn. Certainly, they will not be questioned here. While, however, we may recognize the stock

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