Show THE BLOATED bondholder by john C shipp immediately after the great war it seemed to be up to somebody to eat at the lunch counters and sleep in the park A house famine prevailed building of homes had been at a standstill for more than two years material and labor had been too high priced for the ordinary family the scarcity of houses was wonderful tonic for landlords and landladies after a few bottles they were able to raise the biggest rents without taking a long breath to meet the situation tenants studied the ways of the sardine and became wise two and three families lived where one had lived before happily the law of supply and demand came to the rescue since 1923 a building boom has been in progress all over the country and we are informed by the bureau of labor statistics that the supply of houses has virtually caught up with the demand A table prepared by the bureau based on the permits issued in 68 cities shows that of every dollar spent in the construction of buildings in the cities of population or over during the first half of 1925 two thirds of the money spent for the erection of buildings 6 during the period in these cities went to provide dwelling places more money was spent for the erection of one family dwellings 6 than any other single class of buildings permits were issued for structures of this type the next largest amount was spent for apartment houses the total expenditure for one family and apartment houses was about the bulk of this money went into the pockets of material producers and building craftsmen thus making times better for them as well as for the closely packed and highly charged tenantry As a reaction of the building boom rents have begun to come down and family life to get back on a normal basis there is no question that the instrumentality by which the seven hundred odd million of dollars were mobilized for the financing of construction deserves a kind word this same instrument ins instrumentality trumen tali ty makes it possible for towns and cities to have paved streets beautiful parks fine schoolhouses school houses attractive public buildings water systems lighting plants and in some instances their own car lines by means of this device utility corporations such as railroads telephone companies power companies and gas companies are able to extend their service to outlying districts long before those districts have residents enough to pay for the cost of the extension the average cost of erection of the one family dwellings was so it is perfectly obvious that the owners a majority of whom are wage earners did not pay tor for them cash down any more than chati the municipalities and utility companies pay for their improvements and extensions out of daily receipts what we have to thank for these new homes is THE mr MORTGAGE usually half or two thirds of the money paid for materials and labor is borrowed borrower signs an instrument ment pledging the property as security for the repayment PY of the borrowed money and the agreement is called a mortgage A big mortgage sweetened with interest and served in individual portions becomes a bond issue mortgages on such properties as railroads skyscrapers manu fac turing plants and land tracts are almost always represented by bonds the bondholders bond holders the people who loan the mone money y 0 on n the mortgages are creditors nobody loves a creditor th ahe e newspapers and politicians used to refer to the folks who bitor E investors digest san francisco advanced money for corporate improvements as bloated bondholders bond holders because they were supposed to be gorged with unearned wealth but now days when the bondholder appears in in person we are as likely to see a fellow in overalls with calloused cal louses on his palms and grease on his nose as a man with yellow spats a silk hat and a touch of the gout millions of us are interested in bonds without knowing it our money goes into them by ways of the savings bank and the insurance company the interest from the bank and the indemnities from the insurance companies come largely out of bonds the bulk of bond loans are mal made up of small savings today folks of small means in growing numbers are taking an chances on become bloated and investing in bonds direct instead of through institutions figuring no doubt that investments which are good for insurance companies and banks must be good for anybody to the investor whose affections are wavering between the charms of bonds and the fascination of stocks I 1 would suggest that he approach the question as he would consider a deal with a friend in business would it be best to buy an interest in the business with the possibility of considerable profit or loss or to lend him the money at a fixed rate and let him run the business it all depends on whether you are willing to give careful study and thought to the business or prefer to escape the responsibility the prices of stocks vs bonds should also come in for consideration if stocks are ahe cheap ap and their yields high one can afford to take more chances and will incline to stocks As stocks rise and their yields decline bonds become more attractive on this point I 1 quote from moodys moods investors service as follows stock market ceilings in the past have been those price levels at which large and typical groups of stocks showed definitely lower yields upon their prices than competing new bonds the comparison should be with new rather than old outstanding bonds because the alternative that faces the investor in the usual case is to buy either a new bond offering or else an active listed stock allowing for changed conditions it seems likely that stocks should yield about half a point less than com competing petin g bonds in order to indicate that the market has reached ceiling but in this accuracy is not attainable with dividends unchanged it would require only a 4 point further rise in the stocks used in this calculation to bring stock yields a half a point below those of competing bonds stocks and bonds may vary in their appeal to private investors but in one respect they are very much alike both are important to the economic well being of the average man in the case of the housing problem ment mentioned boned at the beginning of this article bonds and mortgages were better adapted to relieve the suffering public than stocks when building is needed when public improvements are desired when there is necessary for railway extensions extension s or the erection of great industrial plants the investor is doing a good turn for himself and the public by putting his income in bonds it is bond money that pays for the permanent f fixed axed installations it is bond money that does most to boost employment and wages in the building material and construction st lines I 1 feel that it will be worth the while of tb the e thrifty wage earner and abd the tenant investor to include bonds in their savings plans good bonds bond sare are always good income investments nor need they exclude one from the timely purchase of stocks stock s if the bonds are well chosen they will be good is as collateral forsbe for the buying bryin g of stock at any time the owner finds stocks in a particularly desirable position for profit making j |