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Home -> William Cotton -> Everybody's Guide to Money Matters -> Chapter 7

Everybody's Guide to Money Matters - Chapter 7

1. Chapter 1

2. Chapter 2

3. Chapter 3

4. Chapter 4

5. Chapter 5

6. Chapter 6

7. Chapter 7

8. Chapter 8

9. Chapter 9

10. Chapter 10

11. Chapter 11

12. Appendix







LOANS TO CORPORATIONS AND COUNTIES OF
THE UNITED KINGDOM.

THESE are loans raised by boroughs and coun-
ties, and other authorities in this country, for
local purposes, upon the security of the rates or
other assured income. Before the money is
borrowed the consent of the Local Government
Board is necessary to make the loan legal, and
evidence is required that the resources of the
borrowers are ample to meet their obligations.

On most of these stocks the rate of interest is
3 per cent., though there are some few at 3 1/2 per
cent. The principal is redeemable at fixed dates,
or by a sinking fund, that is, by setting aside so
much a year to pay off the loan at a fixed time,
or as opportunity offers. For instance, in times
when money is scarce or dear there is a proba-
bility of these stocks falling below their par
value, and the Sinking Fund is then used to buy
the stock in the market. Thus the Corporation
may be able in effect to pay off a loan of ?100
for ?90 or ?95, whatever the price may be, and
so gain the amount of the difference.

Investments in securities of this kind may be
considered absolutely safe, although certainly
there is the contingent risk of a town, after bor-
rowing up to its full powers, drifting into decay
from the loss of its staple trade, and so finding
itself unable to meet its obligations. The in-
vestor should, however, find no difficulty in
discovering where such a contingency would be
possible.

The interest on these loans is usually sent
direct to the stock-holders, by means of an order
on a bank.


COLONIAL GOVERNMENT SECURITIES.

Loans made to the various Colonies of Great
Britain have always been a favourite mode
of investing money, as they command a better
rate of interest, at least they have done so
in the past, although the confidence which the
Colonies have succeeded in inspiring now
enables them to borrow money at a low rate of
interest. At the same time the old stocks have
advanced to a very considerable premium.

Experience has shown that, so far, the invest-
ment has been a safe one, although great fluc-
tuations have from time to time taken place in
the value of some of the stocks, owing to a
check in prosperity, depression of trade, or
diminished confidence in the stability of the
Colony from various causes. These transient
clouds have, however, in time, passed away, and
confidence has again been established.

The investor should be able readily to distin-
guish between those Colonies which are perma-
nently settled and not likely to be seriously
affected by any passing crisis, and others in a
less fortunate or advanced position. And he
would do well, if adversity should at any time
overtake a Colony, and so send down the value
of its stock, to avoid selling out in a panic, but
to consider whether the circumstances are such
that the crisis may pass off at no distant date,
and confidence be restored. It should be remem-
bered that there are always speculators who, at
such times, endeavour to intensify a crisis, in
order that prices may be forced down, and that
they may be thereby enabled to acquire stocks
at low prices from timid holders.

There are two modes of investing in these
securities,
1. Inscribed or Registered Stock.
2. Bonds.

In the case of Inscribed or Registered Stock,
any amount can be invested, and the same is
registered in the books of the Bank of England
or elsewhere, in the name of the investor, in the
same way as the Government Funds. The divi-
dend or interest is sent to the owner's address
by an order payable at a bank, half-yearly or
quarterly, as the case may be, or it may, on
written instructions being sent to the agents, be
transmitted to the credit of the account of the
holder at his own bankers periodically. This is
by far the best plan; it saves trouble and risk,
and, for the matter of that, something in postage.
It is, moreover, the method much preferred
by the agents themselves, and it involves no
additional expense.

The following is a list of the Inscribed Stocks
of the Colonial Governments, with an example
of the way in which the market price, which
of course varies almost from day to day, is
quoted:-


COLONIAL GOVERNMENT INSCRIBED STOCKS.
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| | | | | | | | |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| | | | | | | | |
|----------|----------|-----------------|---------|-----|------------------------------------------------------------------------
| ? | ? | | | | | | |
| 100,000| 100,000| 1 Mar. 1 Sept.| 4 Aug. | 4 |Antigua 4% Inscribed Stock | 1919-44 | 115 - 117 |
| 375,000| 375,000|15 Mar. 15 Sept.| 17 Aug. |3 1/2|Barbados 3 1/2% Inscribed Stock | 1925-42 | 109 - 111 |
| 1,120,000| 969,940| 1 Jan. 1 July | 16 Dec. | 3 |British Columbia (Province of) 3% Insc. Stock | 1941 | 101 - 103 |
| -- | 194,500|15 Jan. 15 July | 16 Dec. | 4 |British Guiana 4% Inscribed | 1935 | 118 - 120 |
| 7,505,800| 7,505,800| 1 May 1 Nov. | 19 Oct. | 4 |Canada 4% Stock Registered |1904-4-6-8 | 105 - 111 |
| 3,975,614| 3,975,614| 1 Jan. 1 July | 15 Dec. | 4 | Do. 4% Reduced (late 5%) Registered | 1910 | 109 - 111 |
| 4,550,300| 4,550,300| 1 June Dec. | 16 Nov. |3 1/2| Do. 3 1/2% Stock Registered | 1909-34 | 107 - 109 |
| 3,431,700| 3,431,700| 1 Jan. July | 15 Dec. | 4 | Do. 4% Loan for ?4,000,000 | 1910-35 | 110 - 112 |
|10,939,834| 9,978,021| " " | " | 3 | Do. 3% Stock Registered | 1938 | 102 - 104 |
| 3,000,000| 2,115,152| 1 June 1 Dec. | 16 Nov. | 4 |Cape of Good Hope 4% Stock Registered | 1917-23 | 117 - 119 |
| 3,769,465| 3,769,465| " " | " | 4 | Do. (Loan of 1883) Inscribed | 1923 | 119 - 121 |
| 9,997,566| 9,997,566|15 Apl. 15 Oct. | 2 Oct. | 4 | Do. 4% Consolidated Stk. Ins. | 1916-36 | 116 - 118 |
| -- | 5,154,272| 1 Jan. 1 July | 16 Dec. |3 1/2| Do. 3 1/2% Consolidated Ins. Stk.| 1929-49 | 115 - 117 |
| 1,076,100| 1,070,100|15 Feb. 15 Aug. | 16 Jan. | 4 |Ceylon 4% Inscribed Stock | 1934 | 123 - 125 |
| 1,450,000| 1,450,000| 1 May 1 Nov. | 2 Oct. | 3 | Do. 3% Inscribed Stock | 1940 | 104 - 106 |
| 123,670| 123,670|15 May 15 Nov. | 16 Oct. | 4 |Grenada 4% Inscribed Stock | 1917-42 | 115 - 117 |
| 341,800| 341,800|15 April 15 Oct. | 16 Sept.|3 1/2|Hong Kong 3 1/2% Inscribed Stock | 1918-43 | 107 - 110 |
| -- | 1,086,241|16 Feb. 16 Aug. | 16 Jan. | 4 |Jamaica 4% Inscribed Stock | 1934 | 120 - 122 |
| 480,749| 480,759| 1 Feb. 1 Aug. | 2 Jan. | 4 |Mauritius 4% Inscribed Stock | 1937 | 121 - 123 |
| -- | 282,481|15 May 15 Nov. | 16 Oct. | 4 |Natal 4% Consolidated Stock, Inscribed | 1927 | 120 - 122 |
| 3,026,444| 3,026,444| 1 April 1 Oct. | 1 Sept.| 4 | Do. do. do. | 1937 | 123 - 125 |
| 3,714,917| 3,714,917| 1 June 1 Oct. | 3 Nov. |3 1/2| Do. 3 1/2% Inscribed Stock | 1914-39 |107.5-108.5|
| 320,000| 320,000| 1 Jan. 1 July | 16 Dec. | 4 |Newfoundland Inscribed | 1913-38 | 109 - 111 |
| 550,000| 550,000| " " | " | 4 | Do. 4% Inscribed Stock | 1935 | 110 - 112 |
| 200,000| 200,000| " " | " | 4 | Do. 4% Consolidated Stock Inscribed | 1936 | 110 - 112 |

| 9,686,300| 9,686,300| 1 Jan. 1 July | 2 Dec. | 4 |New South Wales Stock, Inscribed | 1933 | 120 - 122 |
|16,500,000|16,500,000| 1 April 1 Oct. | 2 Sept.|3 1/2| Do. 3 1/2% Stock, Inscribed | 1924 | 110 - 111 |
| -- |12,826,200| 1 Mar. 1 Sept.| 5 Aug. |3 1/2| Do. 3 1/2% Stock, Inscribed | 1918 | 109 - 110 |
| 4,000,000| 4,000,000| 1 April 1 Oct. | 2 Sept.| 3 | Do. 3% Inscribed Stock | 1935 |101.5-102.5|
|29,150,302|29,150,302| 1 May 1 Nov. | 2 Oct. | 4 |New Zealand 4% Consolidated Stock Inscribed | 1929 | 115 - 116 |
| 5,960,588| 5,960,588| 1 Jan. 1 July | 2 Dec. |3 1/2| Do. 3 1/2% Stock | 1940 |105.5-106.5|
| 1,527,000| 1,526,620| 1 April 1 Oct. | 2 Sept.| 3 | Do. 3% Inscribed | 1945 |100.5-101.5|
|10,866,900|10,866,900| 1 Jan. 1 July | 2 Dec. | 4 |Queensland Stock Inscribed | 1915-24 | 113 - 115 |
| 8,516,734| 8,516,734| " " | " |3 1/2| Do. 3 1/2% Inscribed | 1921-4-30 |105.5-106.5|
| 1,250,000| 1,250,000| " " | " |3 1/2| Do. 3 1/2% do. | 1945 |107.5-108.5|
| 85,490| 85,480|15 Feb. 15 Aug. | 16 Jan. | 4 |St. Lucia 4% Inscribed Stock | 1919-44 | 112 - 114 |
| 7,721,000| 7,721,000| 1 April 1 Oct. | 11 Sept.| 4 |S. Australia (Loans of 1882-3-4-5-6-7) Reg. | 1916-36 | 112 - 114 |
| 2,850,713| 2,517,800| 1 Jan. 1 July | 14 Dec. |3 1/2| Do. 3 1/2% Inscribed Stock Registered | 1939 | 111 - 113 |
| 839,500| 839,500| " " | " | 3 | Do. 3% do. do. | 1916-26 | 97.5- 98.5|
| 3,546,500| 3,546,500| 1 Jan. 1 July | 16 Dec. |3 1/2|Tasmanian 3 1/2% Inscribed Stock | 1920-40 | 106 - 108 |
| 1,000,000| 1,000,000| " " | " | 4 | Do. 4% do. | 1920-40 | 114 - 116 |
| 100,000| 100,000|15 Mar. 15 Sept.| 17 Aug. | 4 |Trinidad 4% Inscribed Stock | 1917-42 | 114 - 116 |
| 3,365,300| 3,365,300| 1 Jan. 1 July | 16 Dec. | 4 |Victoria 4% Railway Loan, 1881, Inscrib. Stock | 1907 | 106 - 108 |
| 9,358,200| 9,358,200| 1 April 1 Oct. | 16 Sept.| 4 | Do. Loans of 1882-3-4, Inscrib. Stock |1908-13-19 | 107 - 113 |
| 6,000,000| 6,000,000| 1 Jan. 1 July | 16 Dec. | 4 | Do. Loan of 1885, Inscribed Stock | 1920 | 112 - 114 |
|12,000,000|12,000,000| " " | " |3 1/2| Do. 3 1/2% Inscribed Stock | 1921-3-6 |104.5-105.5|
| 2,107,000| 2,107,000| " " | " | 4 | Do. 4% Inscribed Stock | 1911-26 | 108 - 110 |
| 961,277| 961,277|15 Jan. 15 July | 16 Dec. | 4 |Western Australia 4% Inscribed Stock | 1934 | 121 - 123 |
| 1,876,000| 1,876,000|15 April 15 Oct. | 2 Oct. | 4 | Do. 4% Inscribed Stock | 1911-31 | 112 - 114 |
| 750,000| 750,000| 1 May 1 Nov. | 16 Oct. |3 1/2| Do. 3 1/2% Inscribed Stock | 1915-35 | 110 - 112 |
| 750,000| 750,000| " " | " | 3 | Do. 3% Inscribed Stock | 1915-35 | 98 - 99 |
| | | | | | | | |
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The numbered columns are explained as follows:-
1. The amount of Loan authorized to be raised. | 5. The rate of interest on the Loan.
2. The amount actually owing. | 6. The name of the country borrowing.
3. When the interest is payable. | 7. When the Loan is re-payable - thus "1919 or 1944."
4. When ex interest. | 8. The price for every ?100 of stock.


Colonial Government Bonds, the other form
of investment, are paper or parchment docu-
ments, on which are printed all details of the par-
ticular loan taken up by the Colony, the nature
of the Security the lender has in advancing
his money, the rate of interest, and when and
how the principal is to be repaid. These
bonds are payable to bearer, and pass from
hand to hand without any formal transfer, so
that as much care is necessary in safe-keeping
them, as with bank-notes. Attached to these
bonds are little coupons or slips of paper, each
one representing a half or quarter year's in-
terest, from the date of purchase to the time
when the principal is to be paid off. The
coupon bears the name of the bank or agency
where it may be cashed, and any banker will
negotiate it. Of course, only the coupon for the
interest actually due on the date indicated on
the face must be cut off.


FOREIGN GOVERNMENT STOCKS.

These represent money borrowed by various
foreign countries on the security of their credit or
solvency, and the loans stand to them in the same
relationship as the British Government Funds
do to this country. The debts are chiefly repre-
sented by bonds, the same as Colonial Govern-
ment Bonds, and with coupons attached, which,
whether payable in England or their own
country, are collected by bankers in the same
manner. Such European States as Germany,
France, Russia, Denmark, Sweden, and Italy,
always enjoy good credit, and they may be con-
sidered responsible for their financial engage-
ments. In the case of Italy, however, it must
be remembered that the Italian income-tax,
amounting to 20 per cent., is deducted from the
interest, which has also to bear the English
income-tax, whatever at the time it may be.

When investing in Colonial or Foreign bonds,
especial care is necessary in observing the con-
ditions of re-payment. Sometimes it is at the
option of the borrower, but usually at a certain
specified date. Neglect of this precaution may
lead to an investor purchasing at a premium,
and sooner than expected being paid off at par.

Some of these loans, too, are paid off by
annual instalments, lots being drawn to deter-
mine the bonds to be redeemed. If the bonds,
therefore, have been bought at a premium, there
is always the risk of their being drawn for pay-
ment and paid off at par. On the other hand, if
the bonds are bought at a discount, there is no
danger of loss; and a profit will be realised
should they be drawn for payment.

For instance, a ?100 bond is purchased at 4
premium, costing ?104. If the bond is paid off
at par, or ?100, there is obviously a loss of ?4;
but if the bond is purchased at 4 discount, cost-
ing ?96, it is equally obvious that, if paid off at
par, there would be a gain of ?4.


RAILWAYS.

Next to the British Government Funds, by far
the largest amount of money is invested in Eng-
lish railways. First in order of safety, as an
investment, is the debenture stock of a railway
company. This is the first charge on the rail-
way, and holders of the stock are paid the in-
terest thereon in priority to all other stocks. In
the event of the failure of the company they
must also be fully satisfied as to principal and
interest before any one else can receive a penny.
Any amount of stock, odd or even, may be pur-
chased through a banker or broker, and war-
rants for the interest are forwarded half-yearly
to the address of the registered holder. The
debenture stocks of good English railways com-
mand a high premium, and the investment,
therefore, though undoubtedly safe, does not
yield much in the way of interest. Guaran-
teed stocks are of various kinds and rank --
some on the same level as, and others next in
order to, debenture stocks. In some cases
the interest is guaranteed by another railway.
Before investing in these stocks the nature of
the guarantee should be ascertained and its value
taken into consideration. Preference stocks
and shares come next in rank as an invest-
ment. The interest on these is fixed at a cer-
tain rate per cent., and, after satisfying the
preceding stocks, must be paid in full; or if
there is not sufficient profit in the year to pay
in full, then as much as means will allow.
But any deficiency cannot be carried on to the
next year, and so it is lost to the holders.

There are several degrees of Preference
stock, some taking precedence of others as to
interest; a first preference may be as good as
debenture stock, whilst the last preference of
the same railway company may be no better
than ordinary stock.

Preference stock may be purchased in any
amount in the market, and the interest war-
rants are sent half-yearly to the registered
holders.

Ordinary stocks depend on the profits for the
year for the interest they yield, and thus afford
a wide field for speculation. The stocks of the
great English lines may be relied upon as a
good investment, the profits being steady and
sufficient to assure a fair amount of interest
after satisfying the prior claims of debenture
and preference stocks.

Ordinary stock may also be purchased in any
amount, and the warrants for interest are sent
half-yearly to registered holders of stock.

In all cases railway warrants of every kind
will, upon written request to the secretary of the
railway company, be forwarded periodically to
the bankers of the holder of the stock for the
credit of his or her account.


INDIAN RAILWAY STOCKS.

These are a favourite investment with the
British public. They consist of Debenture,
Guaranteed, and Ordinary stocks. The Deben-
ture stocks are similar to those of British rail-
ways, and are a first charge on the undertaking.
The Guaranteed stocks are those upon which
there is an undertaking by the Secretary of
State for India that the interest shall not be
less at any time than they are stated to bear;
any deficiency in the earnings being made up
by the Government. Should the earnings be
more than sufficient to pay the stated interest,
the surplus is divided between the Government
and the railway company. Annuities may be
purchased in some of these railways, that is to
say, by paying, we will assume, ?30 as the
market price, an annuity of ?1 a year will be
granted for a certain number of years. In
dealing with these it is necessary to ascertain
when the annuity ceases, or the investor, hav-
ing sunk the capital sum, may cease to receive
any income therefrom when least expected.

Warrants for interest on these stocks are
periodically sent to registered holders.


AMERICAN RAILWAYS.

The stocks and shares of Canadian and
American railways offer a more remunerative
return than English railways, as they may be
purchased at much lower prices. They are
subject, however, to speculative influences of
many sorts, and can hardly be recommended
for safe permanent investment.

No venture should certainly be made in these
stocks without full knowledge of the position
and prospects of the railway company and the
contingencies to which it may be subject. Any
banker would obtain for a customer all the in-
formation that could be afforded in regard to
these stocks, and indicate their market value as
an investment, apart from the fictitious value
induced by speculators, and the manoeuvres of
syndicates and wire-pullers.


FOREIGN RAILWAYS.

The capital of foreign railways consists of
obligations, stocks, and shares. The obligations
are in the form of bonds, being a first charge on
the railway. The bonds vary in amount, but
chiefly represent ?100 and ?20, and they bear a
certain rate of interest. Some of the Conti-
nental railways may offer a fair investment in
this way, but great care is required in the
selection.

The stocks and shares of some of the South
American railways command a high premium,
but of the whole number quoted in the official
list the large majority show a heavy decline on
the original value, many indeed being valueless.
These stocks are highly speculative and subject
to be affected by political convulsions and other
contingencies, which make them undesirable as
an investment.


BANKS.

A joint-stock bank is composed of a number
of proprietors who hold the shares which make
up the capital of the bank, and to the nominal
amount of these shares their liability is limited.

The whole of this amount, however, is not
paid up, but only sufficient for the working re-
quirements of the bank, the remainder being
held in reserve for contingencies. Let us take,
for instance, the London and Westminster Bank,
which has the largest capital of all the joint-
stock banks.

The capital amounts to ?14,000,000, made up
of 140,000 shares of ?100 each. Only ?20 of
this ?100 is paid up, leaving a liability of ?80
on every share.

A joint-stock bank is governed by a board of
directors, elected by the shareholders; and
managers and other officers are appointed by
the board to conduct the business. Many of
these banks, besides having a head establish-
ment in London, have branches all over the
country. Every joint-stock bank is compelled
by law to publish its accounts so as to show its
position, and these accounts are presented to a
yearly or half-yearly meeting of the shareholders
for approval.

The British Colonies have a good many joint-
stock banks, with agencies in London. By a
Permissive Act passed in 1825 the shareholders
in most of these are liable for double the amount
of their shares.

The profits of banking have been, in times
past, very large, and the original shareholders
of the older banks have reaped the advantage
thereof, but bank shares of good repute are not
now to be obtained except at a high premium.

The dividends are sent half-yearly to the ad-
dress of the shareholders, and they are not liable
to income-tax, as the bank pays this. Any one
entitled to exemption from income-tax can claim
from the surveyor of taxes the amount the bank
has paid in respect of the dividend, on a certifi-
cate from the bank to that effect.*

* See Note, p.39.

Individuals of a timorous disposition, if they
value their peace of mind, would do well to
avoid investing their money in bank shares.
There are banks whose position and stability
are above suspicion, and which return handsome
dividends to their shareholders; but there have
been cases of banks, enjoying unlimited confi-
dence, which have unexpectedly collapsed and
overwhelmed their shareholders in ruin. The
nervous person, therefore, who could not read of
the collapse of a bank without a fearful appre-
hension that his own would be the next to go,
had better be content with a smaller rate of in-
terest and a tranquil mind therewith. The more
sanguine investor who desires a good rate of
interest for his money, and has a contempt for
contingencies, should at least have some know-
ledge of accounts, and be able to form some
estimate of the position of a bank from the
annual balance-sheet, and should carefully
ascertain what immediate contingent _liability
he would be_ subject to in the event of collapse.


COLONIAL AND FOREIGN CORPORATION STOCKS.

These represent money borrowed by munici-
palities and trusts in Colonial and foreign towns,
and the security offered consists of rates and
revenues from the various undertakings, such as
harbours, gas, and water-works, city improve-
ments, &c., in which the loans are invested.
The loans are mostly represented by bonds, to
which coupons are attached for interest, and are
repayable at a certain specified date. Although
they do not command the high credit of British
Corporation loans, yet some of the Colonial
towns are in fair repute as an investment, and
the rate of interest is high enough to tempt a
large amount of money from this country.
Towns of some size in our Colonies, and
thoroughly settled, may be relied upon to carry
out their obligations, but mushroom cities and
foreign places liable to political fluctuations
should be looked upon with suspicion.


CANALS AND DOCKS.

These offer but a limited area for investment.
They were formerly very popular with the
British investor, but rival interests and labour
troubles have affected the confidence in which
they were held, and the ordinary stocks are
mostly at a considerable discount.

Gas and electric lighting companies, trams
and omnibus companies, telegraphs, telephones,
water-works, &c., must all be judged by the
localities which they serve and the amount of
business they are likely to command. As per-
manent investments it should be considered
whether they are likely to suffer by supersession
or opposition, and if they are managed by a
trustworthy competent board of directors.


BREWERIES.

Among the numerous commercial undertak-
ings offering for investment, brewery companies
form a class of themselves, and, with few excep-
tions, the English companies appear to have
done well, and the shares of the best of them
stand at a high premium. Properly managed
and dealing in an article of universal consump-
tion, brewery companies ought to be a trust-
worthy investment: but they are liable to much
fluctuation. The shares of one of the leading
concerns, which now stand at about 150 for the
?100 share, were only four years ago as low as
28, and at the same time only half the interest
was paid on the preference shares. American
brewery companies are liable to be manipulated
by cliques and syndicates, and should be avoided
as an investment.


COMMERCIAL AND INDUSTRIAL COMPANIES.

Speaking generally, taking shares in this
class of property is like purchasing tickets in a
lottery in which the prizes are not numerous.
It may fairly be said that at least three-quarters
of these companies are formed for the purpose
of relieving private owners of concerns which
were on the verge of failure through some cause
or another.

It would be palpably foolish for a man or a
firm doing a prosperous business to give it up
into other hands, unless such a price could be
obtained for it as would be almost ruinous to
the purchaser. True it is that in the remaining
quarter may be found perfectly legitimate un-
dertakings formed into companies, owing to the
death of the owner, deficient capital, or some
other valid reason. Some of these flourish and
take root, others are prosperous for a time and
gradually die out. After a time it will be found
that few remain which could be recommended
for a permanent investment; and much informa-
tion has to be sought and acquired before the
venture should be made.

There are, of course, many persons who have
the means of acquiring reliable information
about a company, and are able to form a sound
opinion as to its prospects, but the information
is derived from personal knowledge and not
from kind friends or from public prints, which
are not always to be trusted. These persons
purchase shares either for investment or as a
speculation -- in this latter case with a know-
ledge or, at all events, a safe presumption that
they will go to a premium, that is, rise in value
to considerably more than their nominal amount,
either from their own merits, or from an active
demand for them on the part of the public, or by
artificial stimulation. The holders know pretty
well when the highest price has been reached,
and then sell out with great advantage to them-
selves. It is often at that moment that the _tyro_
is recommended to buy, or is seized with a desire
to have a share in so good a concern, and parts
with his money. The knowing speculator has
taken his profit, and sees with grim satisfaction
the shares gradually declining in value, until
they arrive at the position of more than one-
third of existing companies which are now
quoted at a discount.


FINANCIAL LAND AND INVESTMENT COMPANIES.

These companies are mostly formed for the
purpose of employing their capital in the
Colonies, where money commands a higher
rate of interest, and can be more profitably
employed than in this country.

Some of the older concerns have been suc-
cessful, but of the whole number of existing
companies at least one-half, judging from the
price of their shares, have been failures. The
difficulty with these concerns would seem to
be the want of direct control, their business
having chiefly to be conducted by agents who
often consider their own interests before their
employers'. Some of these companies appear
to have advanced large sums of money on the
security of land which they can neither sell nor
let, and which has been abandoned by the
borrower.


FINANCIAL TRUSTS.

The shares in these trusts were at one time
much sought after as an investment. The
ostensible business of a trust company is to
purchase shares and stocks of other concerns at
favourable opportunities, and to invest widely
in foreign and other companies offering good
dividends, so as to average a high rate of inter-
est. They are divided into debenture stock,
preferred stock, and deferred stock. The latter
has its share of the profits after the others have
been satisfied, and at present three-fourths of
the companies now doing business have their
deferred shares at a discount. The financial
collapse in Argentine, some years since, very
seriously affected most of these concerns, and it
is doubtful, in view of the risky nature of the
business, whether they will ever come into
favour again.


INSURANCE COMPANIES.

Under the head of Life, Fire, and Marine
Insurance, these companies, as a class, have
been more steadily successful than others. Most
of these concerns are making large profits, and
their shares command a high premium; so high,
indeed, that an investment at current prices
yields but a moderate rate of interest. The
risks undertaken by insurance offices are enor-
mous in extent, but the law of average by which
they are conducted is so accurate that, taken in
the long run, and with sufficient business main-
tained, misfortune is almost impossible. In all
cases, however, so little is called up of the
nominal amount of their shares, that a very
large liability attaches to them.


STEAMSHIP COMPANIES.

Judging from the prices of the shares in these
companies, they have not been very successful
as a whole, and it would appear that a Govern-
ment subsidy for mail or other service is almost
necessary to make them profitable.


MINES.

Speculation in shares of mining companies
has of late years been indulged in to an enor-
mous extent, and large fortunes have been made
and much money lost. As a rule the prizes
have been secured by those behind the scenes,
and the public have not had the opportunity
of participating until the price of shares had
reached a figure which was almost prohibitory.
As an investment mining shares, even of the
best, are not to be recommended. Mines are
apt to get worked out when the source of income
fails and there is an end to the concern. More-
over, hundreds of companies are promoted which
have a specious appearance on the prospectus,
and are puffed in every imaginable way, when
they have not an ounce of ore or a yard of
ground to call their own. Of course, there are
genuine undertakings which answer well and
yield large profits, but it is extremely difficult to
discriminate between the good and the bad, and
the best after all are but a speculation.




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