(Financial Situation, continued from page 81) trasting considerations stood the much better realized condition of the country's manufacturing plant, whose war-time extensions, made with unprecedented rapidity to provide for the utterly abnormal war demands, were necessarily left at the end of the war with facilities to meet the increase in the normal requirements of peace-time trade for a long period in the future. CTUAL statistics show that the American ACTUAL Productive Capacity as a Factor steel plant, for instance, was enlarged in capacity 41 per cent during the four war years. Cotton-spinning capacity in 1924, mainly because of an exceedingly rapid increase in the Southern plant, was nearly 20 per cent in excess of 1914. That this greatly enlarged capacity of production did not check the rise of prices in 1919 was due to the fact that merchants, middlemen, and speculators, obsessed with the then-prevailing delusion of scarcity, accumulated goods, in the eight or nine months while the "trade boom" lasted, on a scale far beyond the needs of actual consumption. In 1923 the producing capacity had been caught unprepared for the sudden and urgent demand for immediate delivery of goods and quite un able to fill orders; but within three months, when mills long idle had been hurriedly put into operation, the position was so far reversed that trade reviews were describing current production as beyond consumptive needs, with unsold supplies accumulating in the yards. The merchant had learned, from the experience of the half-dozen preceding years, that even a further considerable increase in the consuming public's requisitions could be met by immediate increase in the output of the competing producers. Under such circumstances it was not to be supposed that merchants, already reasonably supplied with goods (as they were not in 1923), would repeat the policy of the old-time trade boom," whose typical characteristic was a rush of purchasers of goods to bid against one another on a rising market. Such a result had undoubtedly been expected in many quarters where the circumstances of the day had not been clearly understood, and in many industries prices had been raised to take advantage of the supposed outstripping of available supply by actual demand. But when the situation had been tested by the posting of the higher prices, and it was found that the consuming community did not respond, prices necessarily came down again. This was STARTLING! "Bankers estimate that Americans pay out one billion dollars a year for worthless securities. Think of it-nearly $10.00 apiece for every man, woman and child in the United States... And yet, such losses can be avoided: Caution, care, investigation and, above all, consultation with your investment banker will reveal safe and profitable investment opportunities for you"-An editorial from March issue Harper's magazine. afford the ideal selection to thoughtful investors. Insured Mortgage Bonds are recommended by conservative investment bankers throughout the nation. They are first guaranteed by the Mortgage Security Corporation of America and then further safeguarded by the joint guarantees of this Institution and the National Surety Companythe world's largest surety company. These guarantees are endorsed on the bonds and cover full payment of principal and interest from date of issue to date of maturity. Insured Mortgage Bonds are issued to investors through established Investment Bankers as arranged by this Institution's fiscal agents, STEIN BROS. & BOYCE Investment Bankers Since 1871 6 So. Calvert Street Baltimore, Md., to whom orders for bonds and inquiries for pamphlet "The Highest Level of Safety” should be sent. the secret of the "readjustment" in the markets of early spring. THE past season's experience raises some in The Consumer of Prices teresting questions for the future. Nothing that has happened has in the least impaired the reasonable expectation of increasing prosperity in the United States as a sequel to the fortunate harvests of 1924. Progressive recovery of the agriculand a Rise tural West and South is a certainty, and with that recovery an increasing consumption of the products of our industries. But the prospect of a rise in prices such as used to occur, even in the "trade booms" of the two decades before the war, is seemingly more remote than it has been at any time since 1920. No market could have been better staged for a spectacular rise in prices than the wheat market, with last year's estimated world harvest outside the United States Guiding the Buyer— smaller than the year before by 441,000,000 bushels, or 16 per cent; but the test of a twodollar price demonstrated almost instantly the consumer's capacity to red ice his requirements in proportion as the price advanced. Considered along with the close balancing of possibilities for increasing consumption of other products with the capacity for rapid proportionate increase in production and distribution, it throws a curious light on the theory of prices necessarily regulated by the increase or decrease of the gold in a country's bank reserves. It suggests that production and consumption, capacity of producers to speed up output in response to larger demand and higher prices, and capacity of consumers to reduce their purchases when goods cost more than prospective purchasers deem reasonable, may after all be the controlling influences in this immediate period of post-war recovery. Scribner's Magazine has an established investment service department equipped to furnish reliable advice about your investment problems. The same careful attention will be given whether you have $100,000 to invest or $100. All financial correspondence is treated confidentially. There is no charge for this service. For further information, see page 90 following. 8% Safely Earned Baldwin protected, first mortgage real estate bonds offer a wholly sound, 8% investment. Loans inflexibly limited to 50% of value of rapidly-enhancing, income earning properties. Rigid appraisals. We have been in Florida for years and know the real value of Florida properties. 84 A New Book on Investments This book is now available. We invite you Write for this book-you will find it interest- 314 U. S. Mortgage Bond Bldg., Detroit, Mich. Capital $1,000,000 C2% Resources UNITED $10,000,000 FIRST MORTGAGE BONDS Guiding the Bond Buyer Upon request this bureau of SCRIBNER'S MAGAZINE, which is maintained for the service of subscribers, will furnish information concerning investments without charge. ELEVEN BONDS Q. Please give me your opinion of the investments that I own. A. We assume from your letter that safety is your first consideration, and we are reviewing your list with this factor in mind. Penn Mary Coal Co. 1st 5s of 1939. This issue we would rate AA, or next to the highest rating. The bonds at present prices yield about 5.28%. They are selling somewhat higher than the average for their class. Philadelphia Electric Co. First Mortgage 5s of 1966. This issue is also entitled to a rating of AA. The bonds are selling slightly higher than similar securities in the same class. U. S. Steel Ref. 5s, due 1963. Our rating on this issue is AAA or highest. The bonds are selling higher than the average for securities in this class. Cuban Dominican Sugar First 52s, 1934. Our rating on these bonds is BB, or fifth grade. The bonds are selling slightly lower than the average for similar issues in this class. Penn R.R. Equipment 6s of 1926. Rating AAA-highest. Lehigh Valley Coal 1st and Ref. Gold 5s of 1974. Rating A-third highest. Duke-Price Power Company 1st 6s of 1949. Rating BBB-fourth class. Tenn. Elec. Power 1st 6s of 1947. Rating A-third class. United Drug Preferred. Rating BBB-fourth class. Pacific Fruit Express Equipment 75. Rating A-third class. West Virginia Coal & Coke Co. First Mortgage 6s of 1950. Rating A-third class. As a general rule the rate of a bond is consistent with its degree of safety. Four or five years ago many companies were experiencing difficulty in obtaining money. Rates of good bonds were considerably higher than they are to-day. In fact, some of the highest grade issues could be purchased to yield better than 7% and bearing a 7% yearly interest rate. These same bonds would be sold upon a 5% interest basis or even a lower figure than 5% to-day, so that you will see that it is very difficult to classify the safety of bonds according to the interest rate they bear, as the conditions existing at the time of issuance are a very strong factor. To-day you will find most of the good 6% and 7% issues selling above par. In other words, their interest return runs from 4.75% to 5.25%. We would advise you to hold a few Liberty Bonds in your list. They have an instant market and are not subject to material fluctuation in price. DIVERSIFICATION Q. As a young investor and therefore one who operates on a small scale, please advise me on: 1. Real-estate mortgages. 2. Building and loan associations (monthly payment). A. The intrinsic value and safety of real-estate_mortgages is governed largely by the character of the issuing organization. A well-organized company composed of experienced real-estate mortgage men, who have made a study of their particular territory, usually surrounds its investment offerings with every possible safeguard. There are many attractive real-estate bonds to be had, yielding from 6% to 8%. In our recommendations we are governed largely by the character of the issuing house. We would, therefore, prefer to recommend to you firms with whom we are familiar owing to their advertising in SCRIBNER'S MAGAZINE. Building and loan association investments have an excellent record and form one very good type of investment. Diversification is a principle followed by the most successful and conservative investors, and we would advise you to diversify your investments, putting part of your funds in real-estate mortgage bonds, part in building and loan associations, and part in sound railroad, industrial, and publicutility bonds. In writing to advertisers please mention SCRIBNER'S MAGAZINE |