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Show Trusts. A GREAT deal is said these days about trusts, and in fact they form the chief problem in the business and political world at this time. The way they are organized is this: An enterprising promoter will arrange ar-range with all of the factories engaged en-gaged in making a certain article (for instance, steel), to sell their plants for a specified sum each usually about double what they are worth. The promoter pro-moter then forms a company capitalized capital-ized for about ten times the total cost of all of the individual factories, and gets people to buy the stock. The money so paid for stock very soon pays for the Individual factories, a large slice goes into the pocket of the promoter, pro-moter, and then the "trust" is ready for business. In order to re4uce expenses, ex-penses, some of the factories are closed down, the office forces are reduced and prices are put up a notch or two. The stock of the trust pays handsome dividends, divi-dends, and as a result the price of the stock goes up. The holders of this stock Increase their incomes and figure fig-ure that they have doubled their principal, prin-cipal, they increase their living ex-j ex-j penses, and live in accordance with what they think they are worth. All j this time, as a matter of fact, the as-I as-I sets of the trust would not sell for ! one-twentieth of what the stock Is selling at. The price of the stock keeps up because individuals buy it in order to . get the dividends, never inquiring in-quiring what actual value is represented. repre-sented. As an instance of the profit to promoters) it is a well known fact that J. Pierpont Morgan pocketed $50,000,000 as his commission for organizing the steel trust. Who paid this fifty millions? mil-lions? Surely not the owners of the factories; it was paid by the people who bought the stock of the trust what is known as "watered" stock. Some idea may be formed of what $50,-000,000 $50,-000,000 is by recollecting, that that sum would pay the salary of the president of the United States for 1,000 years! It is no wonder that farseeing statesmen states-men and business men look forward with apprehension to the results of this inflation of values. The history of the business world shows that there always al-ways comes a time when 'everything must be adjusted on actual values, when air bubbles are punctured and each man can get only a dollar for a dollar's worth. What will be the result re-sult to the stockholders in these trusts when that day of reckoning comes? The stock will shrink in value to almost al-most nothing, people who have contracted con-tracted debts and expensive habits will see what little is left to them disappear, disap-pear, the trusts will disintegrate, the owners of the Individual factories will una tneir Dusiness gone, and there will be widespread ruin and disaster. History His-tory also shows that the collapse comes sooner than later, and it would seem as if the time was about ripe for such a catastrophe now. It would seem, therefore, to be the part of wisdom for people to look to their investments, and see if their stocks are actually worth the selling price. If not, then the wise man will invest his money in such a form that it will not shrink when the pinch comes. He should look back to the perid between 1893 and 1898, and see what investment it was that paid regular reg-ular dividends, without shrinkage of capital. That is the Investment which the wise man will select at this time, being content with a reasonable rate of earning, and absolute safety of capital. |