AN INVESTOR'S NOTES ON AMERICAN

RAILROADS.

CHAPTER I.

SPHERES OF INVESTMENT.

SOME fifteen years ago it was held by the writer's friends and by a large section of English society that the government and institutions of America were separated from those of England by an impassable gulf. Every thing American was thought to be more or less ephemeral and transitory, because unprotected by ancient traditions, tending to the growth of an enlightened conservatism. Rights of property in that country were thought by many Englishmen to be more or less illusory, and the permanence of social institutions uncertain and untrustworthy.

Concerning English institutions, on the other hand, a different impression prevailed. It was thought that around property in Great Britain, and especially around the time-honoured freehold, there stood the British Constitution, firm as the hills which stood around Jerusalem. A man who seriously compared the stability of property in England with that of property in America would have been considered scarcely fit to be at large. But since that time many things have happened. Entries have been made on England's record which somewhat alter the relative situation. Such words as "Midlothian,"

"Kilmainham," "National League,' "Fundamental Law," "Home Rule," "Three acres and a cow," "Ransom," "House League," suggest political inferences which fifteen years ago were never dreamed of. London has rioted, and Queen Victoria has abdicated in favour of Mr. Parnell. It has been made clear that the equal enforcement of established law and the protection of existing rights are no longer regarded as absolutely essential to British freedom and prosperity; but are subject to modification or suspension, for the mere purposes of party warfare or personal popularity.

Now the rights of property have been ascertained and defined by a long line of thoughtful precedents and wellreasoned decisions. The immense value of certainty in respect of the rights of property, as a factor in credit and commerce, can scarcely be over-rated. Upon this certainty, as upon a sure foundation, was gradually built up the superstructure of England's commercial supremacy. It is true that the present age is apt to be resentful of authority. But the fathers of English jurisprudence, though certainly not all Solomons, were not invariably simpletons. In the aggregate of their decisions may be found a comprehensive chart, which thoughtfully and critically defines the rights of a free people in the property which they own and the remedies incident thereto. To the casual observer it seems somewhat rash to make these solemn and enlightened sanctions subject to the impulses of the restless or lawless members of the community. In a case where such broad and vital interests are concerned, is it worth while to tear up the chart which marks with precision dangerous reefs and safe channels, and to trust to the mere passion of the hour for a safe voyage? This chart which law has laid down is cold-blooded and criti

cal, if you like; but for that very reason it is well-considered, steadfast, trustworthy, while the impulses of popular emotion are capricious and short-sighted. To govern by reference to the passions, instead of the understanding, is something like steering an ocean steamship by the thermometer instead of the compass.

The American side of the question is also better understood. Sir Henry S. Maine has written; and many candid readers of his able essays will hesitate before they decide that the English Constitution is impregnable, and that the American Constitution is all moonshine. As things now stand, some considerations occur which would seem to render appropriate to the present time a budget of suggestive notes on the subject of investment, provided they should make no attempt at exhaustive treatment of any thing, nor trespass unduly on the time and patience of a busy or pre-occupied investor.

However great and noble may be the advantages which are likely to accrue to the British Empire from the onward march of democracy, it must be admitted that the financial outlook, if not in the last degree depressing, is at least stormy and suggestive of grave uncertainties. Of course critical periods occur during which political talk, involving [e. g.] the integrity of an empire, the rights of property, or the tenure of office by particular men, is exclusively in order. But, as there is a time for every thing which affects the problem of human welfare, occasions recur when finance of the humbler type and the economical investment of individual fortunes may deserve passing consideration. The material prosperity of those classes in the community, which by reason of thrift or inheritance possess accumulated wealth, must sooner or later claim a

hearing. Even the Irish land question is thought by some observers to be tinged with the hue of gold, as well as of blood. Whatever solution of this urgent question may be desired by Mr. Gladstone, it is probable that property invested in Ireland under government pledges will be to some extent protected. It is a matter of deep regret that money when once released from Ireland will not generally seek reinvestment there. But, as a financial fact, it is improbable that it will do so, except under very special conditions and subject to somewhat narrow limits. From the investor's point of view, security of principal and peaceful collection of interest are at least as important as the prospect of liberal profits. As a matter of business, wholly apart from political or party considerations, prudent investors reasonably shrink from locking up their money in any country in which the law is not supreme, or in which the mechanism necessary for the enforcement of existing rights is substantially impaired or indefinitely suspended. A reasonably sound railroad bond may furnish, at most, four or five per cent. on invested capital. But, if at the end of each half-year the holder can collect his coupons peacefully and punctually, this result is on the whole fairly satisfactory. It is, at all events, a better investment than the purchase of land which the owner or mortgagee is afraid to occupy or visit, or the conduct of a business to which the system of boycotting may be any day applied. The economical prospects of Ireland practically divorced from England may be satisfactory to Mr. Gladstone, and yet far from reassuring to the casual investor in Irish securities. The point of view of the former is political, and turns on a large and popular confidence in "flesh and blood." The point of view of the latter is economical, and