THE ART OF INVESTING. 71 



nificent sum of 840,000, which was paid, not in cash, but in receiver's 

 certificates that had been purchased at a large discount ! 



That the foregoing case was not a solitary one, nor so exceptionally 

 bad, might be inferred from the fact that the president of the railroad 

 company, who managed its business, and was understood to be its 

 principal beneficiary, was afterward elevated to the United States Sen- 

 ate, and is said to have been offered a seat in the Cabinet of one of 

 our Presidents. 



The business referred to has not been confined to railroads. "We 

 now have stocks and bonds upon the market representing nearly all 

 conceivable kinds of property — telegraphs, telephones, mines, cattle- 

 ranches, grain and grass farms, water-works, electric lights, factories 

 and mills of every description, steamboat lines, and apartment-houses. 

 There seems to be no limit to their production. There never was a 

 time when it was so easy to invest money — and to lose it. Of the 

 securities that are offered with first-class recommendations, it is prob- 

 able that about one third are actually good, one third have some 

 value, and one third are practically worthless. 



For the condition of things described, the laws of our States, in 

 giving corporations almost limitless power to issue negotiable paper, 

 are, undoubtedly, very largely to blame. Our banks are closely 

 watched and restrained from taking people's money on false pretenses ; 

 but how much better is it for railway and other corporations to take 

 it by means of legalized fictitious evidences of value ? Banks are by 

 no means the only corporate institutions that need watching. One 

 of the reforms that would seem to be very much demanded is legis- 

 lation that will prevent companies existing by authority of law from 

 putting out debentures or scrip not represented by money actually 

 paid into their treasuries, or by proprietory interests whose value is to 

 be determined by disinterested parties. Pennsylvania has incorjDorated 

 substantially such a provision into her Constitution. Her example 

 should be followed by all other States. 



For the losses they have sustained, investors, as a rule, have them- 

 selves chiefly to blame. The mistake made, in nine cases out of ten, 

 has been the purchase of cheap securities. The hope of realizing a 

 little more than ordinary interest, by buying paper at a discount, has 

 proved to be the rock on which unnumbered capitalists have split. In 

 addition to their money's worth, they have endeavored to get some- 

 thing for nothing, with the result, most generally, of getting nothing 

 for something. It is remarkable how blind are people, ordinarily saga- 

 cious enough to make money, to the fact that property can not pay a 

 revenue beyond its producing capacity. For instance, how can a rail- 

 road company, whose line is wholly or mainly built from the proceeds 

 of mortgage bonds, sell them at a heavy discount, besides allowing 

 large commissions for selling them, and then pay a high rate of interest 

 on their face ? 



