Pitfals of Timber Bond Issues 549 



vestment business, for, certainly, if he had been closely identi- 

 fied with that branch of banking during the last decade of the 

 nineteenth century, he would have realized that he could not 

 explain the present- 6% prevailing interest rate on timber bonds 

 by declaring that it was because the securities were somewhat 

 new, but that, in time, they would be better appreciated and sell 

 upon a 5% basis. The reason why timber bonds are now being 

 placed at 6^ as against 5% about 15 years ago (of which latter 

 fact the social science writer evidently was quite ignorant) is 

 not to be accounted for by his method of reasoning, for, in truth, 

 up to comparatively recent days, rates have been increasing rather 

 than decreasing. However, this rising rate has not been confined 

 to Timber Issues alone. 



But that is quite in line with much of the enthusiastic litera- 

 ture which is put out, especially by some bankers, as they call 

 themselves — and who reckon not of the hereafter — who suddenly 

 bloom out with an office selling such issues, and who have had 

 little, if any, previous training in the very serious business of 

 selecting and marketing investment bonds. 



There is no question but that, as a class, timber bonds have 

 suffered much abuse, due both to the lumbermen and the bond 

 houses. Such issues ought to be among our most desirable securi- 

 ties, because the property behind the mortgage is a staple product 

 which should find a ready market. A commodity of this character 

 undoubtedly has some good loaning basis. The present condition 

 of the market (which has been one of increasing suspicion as re- 

 gards the attitude of many investors towards timber issues) 

 would seem to be due, therefore, to unnecessary causes. 



For some years previous to nineteen hundred and eight or nine, 

 there was a phenomenal increase in the value of timber holdings 

 throughout this great country ; so steady and rapid was this in- 

 crease that lumbermen grew to believe that there was no top to the 

 market price of their properties. During the last two or three 

 years, however, they have watched the pendulum swing in a 

 lessened arc, and prices have been sagging, if moving at all, so 

 that in the present market, there are bargains to be had which 

 would not have been dreamed of three or four years ago. 



''This article was prepared by Mr. Rollins, just previous to the outbreak 

 of the present European War. — Editor. 



