Will You Pay The Price?

Many a man in business is eager to put persons above things, but is not willing to pay the price. He is not willing to reorganize his sweatshop or his sweat-store so that human beings may work therein in health and happiness. He attempts a short-cut to grace and glory by donating a drinking fountain to the town. Other men have tried to shade the price by proffering playgrounds, welfare work, profit sharing, and other partial payments. All these are excellent; but they are incomplete. The full price and the strict terms require the complete subordination of things and the complete elevation of men. There is no short-cut to enduring investments.

Enduring Investments The Safest

Statistics show that the investments founded on Christian principles are the safest and that the Ananias kind are the most risky. Instructors in the economic and financial departments of our universities and colleges are making a great mistake in giving so much attention to the statistical side of investments and so little to the moral or ethical side. Yet, the latter features are infinitely more important. The world is ruled by feelings, not by figures. The real security for our investments depends not on property, but on the integrity of the people. The bonds, stocks, mortgages, and bank books in our safety deposit boxes are valueless in themselves. Their real value is the integrity, faith, thrift, and purposes of the people. This is very evident when one considers that the great bulk of the securities are owned by only about five per cent. of the people while ninety-five per cent. own very little. Yet only fifty-one per cent. are needed to confiscate all debts and make our bonds, stocks and mortgages valueless.

But the attitude of the masses is not the only ethical factor to watch when considering enduring investments. A corporation whose officers are not God-fearing men may be in as critical a condition as if it existed in a community of Bolshevists. The securities of either class of corporation are far from enduring investments; - in fact, they are very risky investments. The securities of corporations with selfish or Godless men in control - men who can think only of themselves regardless of the rights of others - are the risky securities and cannot be recommended as enduring investments. These are the corporations which have labor difficulties, contract cancellations, law suits, stock exchange corners, and similar troubles.

Municipal Bonds

I have instructed my family to invest only in municipal bonds after my death. Why? Because they are "savings bank investments"? No, most assuredly not! Some of the most popular of the savings bank investments such as the bonds of the New York, New Haven & Hartford Railroad Company have suffered the greatest declines. This was largely because the New York, New Haven & Hartford Railroad failed to perform the required service to the community through which it ran. It is the element of service which determines security.

My family is instructed to buy municipal bonds because the money paid for them is used for permanent improvements which benefit the whole community. New schoolhouses, better roads, improved sewerage systems make all the people healthier, happier and more prosperous. Hence, the bonds sold to provide the money for these things are the safest bonds to buy. Thus, municipal bonds are far more enduring than corporation bonds. Moreover, to the extent that the money received by the Federal and State Governments is used for good purposes (and not to fatten the pocketbooks of political profiteers); so are "Liberty" and state bonds likewise a form of enduring investments.

Figures Versus Ethics

Security, statistically speaking, depends upon a true value of assets owned by the debtor, applying these first to the payment of bonds and other liabilities, and then to the outstanding stock.

Yield, in the case of stock, is the amount of dividend per share, divided by the actual investment per share. In the case of bonds, there is an addition to this "annual return" which recognizes the present worth of the gain in receiving par at maturity in the case of a bond bought at a discount; or the loss in case the buyer pays a premium for the bond.

Marketability is a factor which no investor can afford to neglect, no matter how great the security, nor how satisfactory the income. Without the assurance that the issue is known in some market where there is a resale demand, the owner is in the position of the holder of an annuity and not that of an investor. His principal is not at his disposal, however much he may desire it.

There is an additional group of conditions affecting investments that we recognize as the Ethical Factor. These influences are not easily reduced to figures nor deducible from current balance sheets, but they have their effect.

Why did the keenest analysts advise purchase of railroad bonds at a time when statistical data indicated the worst showing in their history? Because they saw we had reached for the first time recognition, in principle, at least, of justice in relation to railroads, of the right of capital invested in the property to a fair return, of the right of labor to a fair wage, and of the right of the public to fair service at the lowest possible cost. Why were industrial issues a sale at the very time that their earning statements were the best in all history? Because at that time our entire industrial life was being conducted in a spirit of unfairness and injustice. The general attitude of the worker, of the manufacturer, and the merchant was for each to get all that he could without any consideration of the service rendered in return. The inevitable result was the "buyers' strike" which carried down some of the worst offenders in industry into the ruin of their own making.

When an investment is being considered, more important than the figures on any corporation are its relations with employees and with the public, the honest performance of contract, and a reputation for good faith and honor. These are the things which make up the Ethical Factor. Statistics show that a worthy purpose of issue and a righteous management form the bases of an enduring financial investment in the stock or bond class.