20 



HARDWOOD RECORD 



The Security of Timber Investments and Timber 



Bonds 



Tliin-e is :i belief among a good many people who have no specific 

 knowledge of hunlier affairs that all lumbermen are either rich or 

 on the immediate road to that alluring condition. There seems 

 to be an idea prevalent that all any man has to do to acquire 

 wealth is to buy timber land, erect a sawmill and go to sawing 

 wood. 



Unfortuuatidy all lumbermen are not rich, and equally unfortu- 

 nate is it that all lumbermen are not on the road to vast fortunes. 

 Still the legend exists, and is being emjiloyed as a stock in trade 

 by either the unscrupulous or the ignorant to foist on the investing 

 [uiblic numerous and sundry land and timber schemes. These vary 

 from eucalyptus-growing to opportunities to get into timber invest 

 ments in tlie Pacific Northwest on the basis of .$100 a throw, down 

 to timlier bonil investments of varying sizes and allurements. 



Secretary Wilson has recently backed Hardwood Record in its 

 analysis of the schemes of the eucalyptus jjiratcs. Last Sunday 's 

 Chicago Kecord-Herald had a flamboyant advertisement in which 

 the name of Gifford Pinchot was employed, and in which Mr. 

 Pinchot's picture was used in the effort to foist a timber deal on 

 !!mall investors. 



This deal may be all right 

 and may be all wrong. 



The editor's desk is loaded 

 down with the announcements 

 of various schemes of a similar 

 n.'itnre. One highly colored 

 pamphlet, with Seattle as its 

 source, announces that the chief 

 forester of the United States 

 states that a continuance of the 

 ju-esent rate of timber cuf- 

 fing in this country will com- 

 pletely e.xhaust the supply in 

 twenty years. This statement 

 is used in argument that great 

 fortunes are to be made from 

 timlier investments at the pres- 

 ent time and holds out allure- 

 ments to the "moderate inves- 

 tor" that he may have tlie 

 same opportunity to reap profits 

 from the "timber industry" as 

 does the large investor. This 

 is "The Menz System of Tim- 

 ber, Gold Bonds, Profit Sharing, 

 Deed Protected." 



This scheme jnay be all right 

 and it may be all wrong. 



Mr. Menz's picture is repro- 

 duced from the Mississippi Val- 

 ley Lumberman with a page of 



glowing tribute, and his picture is again produced with a facsimile 

 from the Lumbermen's Review, and interspersed in the booklet are 

 wonderful pictures of big trees and lots of figures indicative of the 

 vast profits made in Pacific coast timber transactions, all centering 

 about the Menz system. 



As a general proposition the Record ihies mif like to see this 

 system of mining exploitation fastened on to the lumber trade. 

 Heretofore the lumber business has been conducted on a business 

 basis and on the level. Individuals or corporations have purchased 

 large or small blocks of timber, have erected sawmills with their 

 own money and have manufactured and sold lumber. Some have 

 been successful and others have not. The greatest factor in com- 

 mercial success in timber and lumber operations is a specific 

 knowledge of the business. It is not within the realm of lumber 

 history that any man ever made a success of lumber operations 



TO THINK ABOUT 



^ The science of stopping in time has never re- 

 ceived the consideration its importance war- 

 rants. 



^ Genius consists in doing: the right thing with- 

 out being told more than seven times. 



*1 Don't be afraid to blow your own horn. 



*I Inspire respect for yourself and confidence in 

 the goods you sell, if you would be success- 

 ful. 



*I A customer neglected is a customer lost. 



*I If you don't believe in yourself, how do you 

 e.xpect others to believe in you? 



<! Think twice before you speak and when you 

 speak talk to yourself. 



1 Never lose a customer. If you have an unde- 

 sirable one quit him — don't let him leave you. 



*I Make good — or make way for someone who 

 can. 



vicariously. The successful man has always been on the job 

 himself, and has had previous experience and lots of it. 



The foregoing observations are made simply to call the investing 

 public 's attention to commercial history in lumber affairs, and to 

 warn them against making timber investments through strangers 

 simply on bare representations of glowing financial results. The 

 Record would say: Carefully investigate before putting up a dollar. 

 Now there is another form of investment which at first was 

 liased on absolute legitimacy'. This was the timber bond. These 

 timber bonds were originally placed by large and going lumber 

 coriiorations, who desired to supplement their timber holdings and 

 perpetuate their business for a long period of time by increasing 

 their timber holdings. These bonds were serial in character and 

 usually carried (i per cent semi-annual interest, and were paid off 

 at regular periods in proportion as the timber, the basis of the 

 security, w'as cut. Concerns seeking this form of loans were large, 

 conservative and successful ones, people wlio by years of expe- 

 rience had demonstrated that they knew how to estimate and 

 analyze timlier properties and how to manufacture and market 

 lumber successfully. The value of these bonds was recognized 

 by the investing public and they have been easy sellers in both 

 good and bml tijnes. The i)rofits of the bond companies handling 



this class of securities, and the 

 fact that they have become a 

 standard in the market, have in- 

 duced sundry pikers of late to 

 spring on the public bond issues 

 that do not constitute high-class 

 security for the money proposed 

 to be invested. These bopd ex- 

 ploiters in their overanxiety to 

 get rich quick have taken des- 

 perate chances on the character 

 of the properties bonded, and at 

 the present time there is offered 

 for sale sundry timber bonds on 

 a representation that the secur- 

 ity is two. flnee or four for one, 

 that will not bear scrutiny, and 

 the statements made cannot be 

 warranted by experts in timber 

 values. The result of this flood 

 of questionable securities being 

 placed on the market will be 

 that the legitimacy of the many 

 first-class securities of this sort 

 that are out will very soon be 

 questioned and the legitimate 

 timber bond will go begging. 



There are certain basic prin- 

 ciples which should be consid- 

 ered in the purchase of timber 

 bonds. These may be enumer- 

 ated as follows: 

 timber lands involved perfect 



of the 



i'irst: Are the titles 

 beyond perad venture? 



Second: What is tlie quantity of the timber stand and the 

 kinds of timber? 



, Third: What are the physics of the wood and what will the 

 timber develop in doll.'irs :ind cents in the form of lumber at 

 shipping point? 



Fourth: What is the legitimate cost of placing this timber in 

 the form of lumber ready for shipment at shipping point? 



Fifth: What is the fire risk involved in this timber; what is 

 the flood risk and what is the agricultural or mineral value of the 

 land when the timber is removed? 



Sixth: Are the individuals seeking this loan men of wide expe- 

 rience in lumber afl';iirs; is their commercial history good; and are 

 they competeni to civvy on the hnnber operation on a basis of 



