New-York tribune. [volume], September 27, 1920, Page 13, Image 13

About New-York tribune. [volume] (New York [N.Y.]) 1866-1924

Image provided by: Library of Congress, Washington, DC

                
A FUNDAMENTAL,
and we believe per?
manent, change in public
opinion toward the Rail?
roads is marked by the
passage of the Eaeh
Cummina BUI and the
announcement! of large
freight and passenger
rate increases. Our con?
fidence in the safety of
well ? secured railroad
bonds has been restored.
LONG-TERM rail?
road bonds yield more
than they have at any
time in the past genera?
tion.
$ao8nfett & jftm,
Founded 1797
Seasoned Investments
30 Pine Street, New York
Owners of sound bonds
bought at a high level
should increase their hold?
ings at present low prices.
Thus the average cost will
be reduced and the yield
increased.
Upon request we shall be glad
to send a list of diversified of?
ferings which we recommend
for! Investment yielding from
5.10% to 7.80%
Kea-.bc-"*> New York and Fittsbvst*
8t<?.? Sacha???*
33 Pine St. New York
Uaiaa Asta.? Sldg? PHtsbvgk
FINANCIAL MEETINGS
Stockholders of the Denver
& Rio Grande Railroad
You are requested to attend a
very important meeting of the
New Protective Committee, to be
held at Ro_m 701, 50 Broad Street,
on Wednesday, September 29th,
at 3.30 P. M.
DAMEL W. BIXMENTHAI..
Counsel to the Stockholder??
l'rotee-tlve Committee.
E. V. JAEOER, becretai-y.
Raising Internal Value
Of U. S* Dollar Opposed
Professor Cassel, of Stockholm, Believes Stabilizing
World's Exchanges Would Be Furthered by Pre?
venting Gold From Regaining Its Pre-War Level
The subjoined memorandum on the monetary problems of the world
will be submitted to the delegates to the financial conference now in
session at Brussels under the auspices of the League of Nations. The\
Bankers Trust Company, which brought Professor Cassel's report to
this country, characterizes it as "the most important individual memoran?
dum to be submitted to the conference." It is presented herewith in part,
not because it corresponds with the opinions of The Tribune, but for its
rntrinsic merit as an expression by a European of a possible remedy for
the grave situation that confronts the Old World.?Financial Editor.
By Professor Gustav Cassel
Of the University of Stockholm
Evsry country should decide at the
earliest possible date what amount of
d?flation it thinks proper and possible
to attain, or perhaps, in the worst
cases, what limit it thinks it can set to
further inflation. And the policy thus
determined should be made public in
order that the people should know what
they have to reckon with.
It is often believed that the recovery
of trade, which is now so urgently need?
ed, could best be furthered by the es?
tablishment of an international stand?
ard of money. This is obviously a mis?
take, for if every country should retain
its own currency, the international
money could only fill the function of an
intermediary link in international pay?
ments. But there is .?.o need whatever
' of such a link. As long as the inter
? national value of a currency continued
| to fluctuate, the exchange bstween this
I currency and the internutonal stand?
ard would fluctuate, too, and the intro
! duction of this standard would not
i have brought us a bit nearer the stabil
! ity of exchanges, but only created a
new and unnecessary complication.
Au International Standard
If we analyze the d.fferent schemes
put forward in favor of a new inter?
national standard, w? shall almost in
? variably find that they involve the cre?
ation of new masses of paper currency,
and that they, in fact, derive a great
{ part of their alleged usefulness from
the fresh purchasing power, which in
this way is put at disposal for pur?
poses thought to be of primary impor?
tance for the world. Ultimatelj, *.nen,
such schemes unveil themselves as a
policy of continuing, on a world-wide
scale, the process of inflation hitherto
carried on as a national concefn. But
that this cannot be the solution of the
world's present monetary difficulties
seems clear enough.
It is now clearly in the interest of
all countries endeavoring to stabilize
their dollar exchange that the Uqfted
States should not enter upon any mon?
etary policy effectively raising the in?
ternal value of the dollar. In fact, the
problem of stabilizing the world's ex?
changes being in its nature an inter?
national problem, it is desirable that
one country should take the lead by
fixiny the internal value of its money,
and it seems natural that this country
should be the United States.
It seems, then, in the first instance,
to be a common interest for the world
to prevent gold from riiing again in
value. The present low value of gold
is majnly the consequence of a rela?
tively diminished demand for gold for
monetary purposes. The actual circu?
lation of gold is very generally aban?
doned, and the great central banks
have reduced their claims on relative
gold coverings considerably. Should a
return to pre-war conditions in this
| respect set in, the inevitable conse
j quence would be an enhancement of
tne value of gold. To avoidsthis it is
necessary that all countries should ab?
stain from measures for reintroducing
?an actual gold criculation and content
I themselves with their present standard
of fold holdings as basis for their
paper circulation. Countries which are |
in a position to draw gold to them-1
selves from the rest of the world
should abstain from doing so. Thus,
th-j stabilization of the value of gold
I will clearly require, in the coming
years, a close cooperation of all coun?
tries. Perhaps it will be possible to
come to some international agreement
in this matter.
Stable Value of Gold
The second chief problem of the
?wcild'g gold question is to secure for
' the future as f':r as possible a stable
value of gold relati c to commodities.
The withdrawal of gcid from circula?
tion and the disappearance of all defi?
nite standard-, of gold-cover have in
a most serious degree impaired th?
stability nf the value of gold. If gold
is tc be used henceforth as a monetary
standard, it ?f, therefore, necessary to
take special measures for stabilizing
the vaiu.- of ?he metal.
The stabilization of the value of gold
involves, however, special difficulties
anting in connection with the produc?
tion of the meta]. If we have a stabil?
ized monetary demand for gold, we
must, of course, have an annual pro?
duction of gold corresponding to the
general rite of economic progress of
the world and, in addition, sufficient
to cover *he yearly waste of gold,
Assuming the same rate o? progress in
the years before us as occurred dur?
ing the period of 1850-1910, we shou'd
need at present an annual productior
cf gold of about ?100,000,000, increas?
ing in subsequent years at the rate oi
2.8 per cent yearly. . . . The tota
fei the world's productior. in 1919 i:
estimated to be not more thai
?75,000,000.
Production Not Sufficient
The production is consequently a
present not sufficient for a normal in
crease in the world's stock of gold
As the necessary annual production o
gold would, under the assumed rat?
of progress, in ten years be ?132,000,
000 and in twenty years ?174,000,000
the danger of a qui':e insufficient sup
ply of gold is much more immincn
than seems to be generally recognizec
Another factor is working in th
same direction. Gold being the on!
commodity which has not risen >
price, while in countries with an effec
tive gold standard other prices hav
bet?i doubled and the generi
level of incomes has been raise
in the same proportion, it is onl
natural that the demand for gol
as a material for articles c
luxury should have increased sul
stantially. it is also known that th
use of gold in the arts is growing raj
idly. This consumption threatens, i?
deed, to absorb a large part of tr
diminished annual production,..of gol
Regulating Monetary Demand
It will therefore probably be neee
sary not onlv now to prevent the mon?
tary demand for gold from resumir
its old dimensions, but also to reg?
late henceforth this demand with
view to reduciner it gradually, as tl
growing scarcity of the supply of
gold may require. If we further
take into consideration the pos?
sibilities of changes in the con?
ditions of gold mining, we shall find
that the scop? for this regulation of
the monetary demand for gold may
easily be considerably widened. Thus
the task may seem to involve great
difficulties. But if we are not prepared
to abolish at once and forever the use
of gold as a standard of value, we
clearly must do something to stabilise
the value of gold, and this is certainly
not possible without a rational regula?
tion of the monetary demand for gold.
In addition, we may perhaps apply
other means, viz?, first, suitable re?
strictions of the industrial demand
for gold; and, second, a policy aiming
at cheeking the demand for cold from
the Far East by developing Asia's needs
for more useful European products.
Taxes Increase U. S.
Deposits in Banks
About $300,000,000
More Treasury Certificates
Are Held and Other Loans
Are Heavier, According
to Federal Reserve Report
Frcm The Tribune's Washington Bureau
WASHINGTON, Sept. 26.?Substan?
tial increases in the holdings of Treas?
ury certificates, in connection with the
issuanc" on September 15 of about
$450.000,000 of tax certificates, and
largor increases in other loans and in?
vestments, reflecting the increased bor?
rowings inciaen*. to the September 15
tax payments, are indicated in the
Federal Reserve Board's weekly state?
ment of condition on September 17 of
?IS member banks in leading cities. Aa
a result mainly of the large tax re?
ceipts government funds on deposit
with the reportin_ institution^ show an
?ncreas-e of more than $300,000,000.
Treasury certificate holdings in?
creased by $65,600,000 at all reporting
banks and by $74,500,000 at the mem?
ber banks in N*w York City, while othei
government securities show but nomi?
nal changes for the week. Total loans
supporte, by government securities de?
clined by about $3,000,000, the New
York Ci*.y banks reporting a decline oi
$8,700,000 under this head. Loans sup?
ported by corporate securities fell oil
$8,100,000, though the New York City
banks report an increase of $3,300,000
in this item. Other loans and invest?
ments, comprising largely commercial
loans and discounts, on the other hand
went up by $77,900,000, of which $41,
300,000 represents the increase in New
York City. As a consequence of these
changes in the leading asset item?
loans and investments of all reporting
institutions show an increase of $134,
200,000. For the New York City bank:
a corresponding increase of $109,800,00(
is noted.
All classes of deposits show largei
totals than the week before; govern
ment deposits by $301,300,000; othe:
demand deposits (net) by $32,700,000
and time deposits by $9,500,000. Th<
much larger increase?by $105,600,000
in the net demand deposits in New Yorl
City apparently represents increases
balances to cove; income tax checks ii
process of clearance.
Accommodation of all reporting bank
at the Federal Reserve Bank shows ;
further reduction of $170,100,000 fron
$2,142.200,000 to $1,972,100,000 and con
stitu\.?d 11.6 per cent of the banks' tota
loans and investments on September 11
as against 12.7 per cent on the previou
Friday.
For the New York City banks a re
duction under this head from $826,
600,000 to $672,100,000 is noted, reduc
ing the ratio of accommodation ta th
Federal Reserve Bank from 14.7 to 11.
per cent.
Reserve balances of all reporting in
stitutions show a nominal increase
while cash in vault declined by $5,
700.000. For the New York bank
an increase of $7,200,000 in reserve bal
anees and a reduction of $2,500,000 i
cash in vault are shown.
-?-??
Investment
Information
Questions of feueret interest te <n
vosters will b? answered in this col?
umn, in which eat? only initial* wi?
b? used. Other? will b* answered by
mail. Address all inquiri??, inelo?
ing a stamped, addressed envelope, te
Financial Editor, The Tribune, Ilk
Nattau Street, New York City.
Woman Had Better See It Tfer?a**r&
Question?Can you riva me any Informa?
tion about Missouri, Kansas & Texas Rail?
way Company in ?general, and particularly
about the prospects, If any. under the new
F?d?rai laws of the coupons on their
bonds being: paid? I own a few of the 4H
per cent bonds, purchased some twenty
years aro as an Investment. Unfortunately,
because I had been Informed they were a
gilt-edged security, I put them away and
never learned of their depreciation In value
until the coupons were no longer paid. As
the bo.ida were bought at par practically,
tnelr sale at present depreciation in value
would be almost tantamount to loss of the
whole capital. Can you venture to ?ay
whether the new railroad bill offera any
hope of rehabilitation of the Missouri,
Kansas & Texas, and. If not, have I any
equity??Mrs. A. R. C
Answer?Until definite plans for re?
organization of the Missouri, Kansas &
Texas are forthcoming it is not pos?
sible to tell how the bondholders will
fare. In all likelihood the reorganiza?
tion will embody on exchange of cer?
tain securities for new ones. Apparent?
ly the 4V4 per cent are in this class.
We do not believe you will lose all, by
any means. Under the circumstances,
we believe, too, it would be well to keep
your bonds rather than sell at present
quotations (about 28 to 30), awaiting
the reorganization p?an. The new rates
should be of great benefit to the road.
If you can afford to see the matter
through we believe it well to do so.
Allis Chalmers Common Speculative
Que?tlon?I own about fifty shares of
Allm Chalmers common, bought at about
?38 each. Do you think they are a good
Investment? Would you advise to hold
them'.'?P. B.
Answer ? Allis Chalmers common
stock is not an investment issue. It is
sensitive to the company's earnings,
and, therefore, speculative. The com?
pany at present is doing well and ap?
pears to have a very fair future. The
stock pays $4 a year, and on this basis
*eturna a high yield at present prices,
if this stock represents your entire
capital we do not think it wise to hold.
You rhould under these circumstances
place your funds only in seasoned
bonds or preferred stocks.
None Better than Liberty?
Question?-My capital contilits of %2 000
I have $600 invested In Liberty bonds a
$1.500 In sayings bar.*'-.. I was thinking o
buying bonds of the fourth and ruth Lib
arty loan. Would you ad-vi se ma to do this. ;
or la there a better Investment for m-s
with aa food a security as Liberty bonds? ;
Also would ask the .boat way to purchaaa :
Liberty bonds.?A. H. I*
Answer?We believe you would do
best to continue buying Liberty bonds, j
There is nothing better. The bonds j
are selling 15 points below par and the i
yield is over 5 per cent. Consult any {
of the houses which advertise in The !
Tribune or go to your bank.
Thinks Pound Will Be at Par Soon
Question?Will you be so kind aa to give I
me your opinion of buying sterling at the j
present low rate of exchange, to be held
until It reaches it? normal rat?, which can j
hardly be more than two year???F. W.
Answer?We have no more idea of
what the coarse of sterling exchange
will be than we have of the state of the
weather for the next two years. Until
England's balance of trade with the
United States is more favorable to her
sterling will reflect this condition by
being depressed. If you believe that
England will accomplish this, then
sterling exchange may be a good specu?
lation. It appears to us, however, that
you had better purchase some of the
British internal bonds, which are of?
fered at low prices in conformity with
sterling exchange. If the rate for ster?
ling is higher it should be reflected in
the price of the bonds.
Swedifh Bonds Payable in Dollars
Question?Will you kindly advise me
your opinion of Swedish bond?. 6 per cent,
and all you know of them? Are they
paid in dollars or In the Swedish currency
when mature? I am thinking of buying
same if safe for Investment.?A. J.
Answer?Swedish 6 per cent bonds
are due in 1939. They are an external
loan, payable, both principal and in?
terest, in American dollars in New
York. The government of Sweden has
always enjoyed good credit and ap?
pears to be somewhat freer from Bol?
shevism than most Fur^pean nations.
We regard the bonds as a very fair in?
vestment at the present tirae.
Long Term Bonds Good Buys Now
Quf-Htlon?Plea*?*, give me your opinion
on the following: In the c-ase of a man
having about $25.000 ?n Liberty bond?,
purchased at a price yielding over C per
cent, of the series maturing In May, ?923.
We hear so much advice at this time
about buying gilt-edged long term rail?
road bonds, yielding say 6 per cent, and
taking advange of ine present low prices.
Da you think that there Is any hurry
about making such *. change? T.fte
French government *uKt recently had to
pay 8 per cent, r ?> ?--ou think that the
present so-called bargains in gilt-edged
low priced railroad bonds will soon all be
taken up and that It would be wise to
convert the above mentioned Liberty
bonds Into such securities In the near
future, or do you think it would be better
to hold the? Liberty, lr. the expectat'on
that at or before their ma'url'y prsMbly
better bargains In long term bonds will
be available??T. L. '.?.
Answer?We do not attempt to fore?
cast the trend of the bond market. It
appears to us, however, that the money
Situation will be better before it grows
much worse. The tendency already
points that way. There is no better
investment than Liberty and Victory
bonds, yet it seems to us that, as your
issue matures in a short time, it would
be far-sighted to take steps to make
your investment more permanent. The
bond market is higher than it was two
or three months ago, to be sure, yet it
is many points below where it was in
' 1917 and 1918. While we do not look
for an early return to pre-war condi?
tions, we believe that high grade bonds
which yield from 6 per cent to 6^ per
cent and running for several years, are
good purchases at present.
Shell Transport and Trading
Question?In December, 1919, I had a
legacy of $25,000. and one of the members
nf a well knwn brokerage firm In Boston,
among other thinss, recommen.led Shell
Transport and Tradinir. I bouicht ?hire?
at SSO the ?hare. Recently I received
$401 SO as rljhts. I proposed putt.ng the
money back Into She'.l sharer?, but was
advised not to As I make no use of the
Income from the $35,000. only inv.-'sting It,
It Is not a matter of grea' importance,
but kindly answer as to worth or worth
?e.-snesH of the company.?Mre. M. W.
Answer?Shell Transport and Trad?
ing Company, Ltd., was incorporated in
London in 1897 to take over the busi?
ness of M. Samuel & Co. and other oil
houses. The company hi* large inter?
ests in the Dutch East ladies. In 1?07
the company amalgamated its interests
with those of Roya? Dutch. The com?
bined assets of both companies were
turned over to two new companies, of
which the Shell Company owns 40 per
cent. The combined interests ex
panded their sphere of activity and
acquired large possessions in the
Dutch Indies, Rumania, Russia, Egypt,
the United States, Venesuela, Trinidafl
and Mexico. The outstanding stock is
?2,000,000 5 per cent cumulative pre?
ferred, par ?10, and ?12,910.641 ordi?
nary, par ?1, New York. Shares repre?
senting two of the ordinary shares of
?1 pur valuo are listed on the New
York Stock Exchange. The stock is
speculative on account of the natura
of the company's business. However,
it is a large, well managed company.
Four full columns of in?
vestment questions and an?
swers are published in The
Tribune every Sunday.
National City Realty Company
The National City Realty Corpora?
tion, which has taken over the real es?
tate interests o? the National City Bank,
the National City Company and the
International Banking Corporation, has
perfected its organisation and the fol?
lowing of?cers have beea el?**cted:
Edward F. Barrett, president; E. A.
Baker, vice-president; N. C. Lenfestey,
secretary and treasurer. In addition to
these officers the directors include Will?
iam L. McKee, F. G. Schwedtman and
L. M. Jacobs. All are officers of the Na?
tional City Bank, the National City
Company and the International Banking
Corporation.
^Announcement
ABOUT OCTOBER I, I?20, THE BUSINESS HERETOFORE
CONDUCTED BY THE BOND DEPARTMENT OF THE
GUARANTY TRUST COMPANY OF NEW YORK WILL
BE TAKEN OVER BY THE
Guaranty Company
of New York
This separation of the activities of the Trust Company is one
of corporate organization only. It has been effected because
the great growth of the Trust Company's business in securities has
made necessary a type of organization which is free to render the
fullest scope of service by means of its own branch offices through?
out the country.
The^Trust Company owns the entire capital stock of the Guaranty
Company of New York, and in policy and management the new
company will be the same as its predecessor, the Bond Depart?
ment of the Guaranty Trust Company. The Guaranty Company
will have the complete co-operation of the parent organization.
The Main Office of the Guaranty Company is at 140 Broadway,
New York. It has branches in the other offices of the Guaranty
Trust Company and in 28 cities throughout the country.
The Guaranty Company of New York places its complete in?
vestment service at your disposal.
GUARANTY TRUST COMPANY OF NEW YORK
Executor Trastee
Chartered 1822
The Farmers' Loan and Trust Company
Nos. 16, 18, 20 & 22 William Street
Branch Office, 475 Fifth Avenue
At Forty-fikt Street
New York #
London Paris
Foreign Exchange
Administrator Guardian
Member Pedaral Bsesrro System and Hew York ?earing Honw
i
NEW ISSUE
$4,000,000
Cleveland Electric Illuminating Co.
'c Cumulative Preferred Stock
Tax Exempt in Ohio and Exempt from Federal Normal Income Tax
A ?inking fund of 2% per annum of the total amount issued i? provided for the
purchase of the stock up to 105 and accrued dividend
Redeemable as a whole at 110 and accrued dividend?. Dividend? payable quarterly December, March, June
and September 1. Par value $100. Total authorized $10,000,000. To be presently issued $4,000,000.
First Trust & Savings Co. of Cleveland, Registrar. Citizens Savings and Trust Co. of Cleveland, Transfer Agent
The following information is summarized from a letter to us from the President of the Company:
Busin-ess
Capitalization
The Cleveland Electric Illuminating Company operates in the City of Cleveland,
Ohio, and adjacent suburban territory, serving with electric light and power a
total present estimated population of over 1,200,000.
Anthortred Oat standing
15-Year 7% 1st Mortgage Collateral Bonds, due 1935_ $8,000,000 $5,000,000
First Mortgage 5% Bonds, due 1939 (remaining
$11,500,000 bonds are pledged or will be necessary as
collateral for the 7% bonds). 30,000,000
6% Cumulative Preferred Stock. 800,000
*8% Cumulative Preferred Stock. 10,000,000
?Common Stock. 19,200.000
18,500,000
800,000
4,000,000
9,763,500
?After proposed changes In capitalization.
Earnings
The business of the company has more than doubled in the last five years, oper?
ating revenue having increased from $4,392,579 in 1915 to $11,700,465 for the 12
months ended August 31, 1920, and gross income from $2.200,987 to $3,899,086
for the same period.
Net income after taxes and interest charges available for depreciation reserves and dividends
on the 6% and 8rn Preferred Stocks was $2,7294215 for the 12 months to August 31, 1920, and
averaged $1,992,890 for the five years to December 31, 1919.
The property has been well maintained out of earnings, the company having set aside $3,962,295
out of earnings in the 5 years ended December 31, 1919, for depreciation reserves, or an average of
$792,459 per annum.
The dividend requirement on the $800,000 6% Preferred Stock and the $4,000,000 8r/c Preferred
Stock is $368,000 per annum.
Property Value The physical property of the company after the new financing will be valued at
approximately $41,000,000, giving a net property value for the 8% Preferred
Stock of over $417 per share, after deducting the outstanding bonds and 6%
Preferred Stock.
Restrictions
Sinking Fund
Dividends
No additional issues of bonds, or notes maturing beyond one year, may be cre?
ated, except for refunding, or at par for not exceeding 80% of the cost of addi?
tions and improvements, and no Preferred Stock can be issued having ?priority
over this issue. Additional Preferred Stock can only be issued when approved
by the Public Utilities Commission of Ohio and when available earnings after
depreciation for 12 months have been at least 2l/2 times the annual dividend re?
quirements on the 8% Preferred Stock outstanding and to be issued.
A sinking fund, beginning 1921, of 2% per annum of the largest amount of 8%
Preferred Stock issued, must be used to purchase stock in the open market up
to 105 and accrued dividend. If stock is not available at that price any unex?
pended balance reverts to the treasury of the company.
The Company has paid dividends on its 6% Preferred Stock since issue in 1893
and cash dividends on its Common Stock at the present rate of 8% since 1904.
The stock offered is subject to authorization of stockholders and stockholders rights, and to the
approval of the Public Utilities Commission of Ohio, and of all proceedings by our counsel.
Price 100 and Accrued Dividend
Chicago
Wra. A. Read & Co.
Nassau and Cedar Street?
New York
Philadelphia
Boston
The Information eomnlned In this advertisement has been obtain??! from sources which
we consider reliable. While not guaranteed, It la accepted by us as accurate.