450 TIMBER BONDS 



issue, he could, at a crisis, sell a piece of tim- 

 ber or make some other turn. After floating 

 a bond issue the entire property is mortgaged 

 and he is helpless unless the bond house has 

 provided him with enough money, under a lib- 

 eral mortgage, to permit him to operate with 

 safety and economy. The bond house that 

 makes the sinking fund charges all the traffic 

 will bear is not financing the borrower, but is 

 starting him on the high road to default, fore- 

 closure and bankruptcy. 



The soundest method of figuring sinking 

 funds now employed is that used by a large 

 house that is fully conversant with logging and 

 milling operations. This house knows the 

 cost of each kind of lumber on cars in every 

 locality and is conversant with the markets and 

 the margin the operator has between cost on 

 cars and selling price. They make allowances 

 for all contingencies and base their sinking 

 fund charges accordingly. This system is safe 

 for all concerned when used by the above house, 

 but in the hands of a bond house that is not 

 fully in touch with the various phases of the 

 timber business it is positively dangerous. The 

 writer believes there should be a universal 

 sinking fund rule ; safe, and fair alike for both 

 borrower and lender. 



The timberman can now borrow in the form 

 of a bond issue from one-third to one-half the 

 value of his holdings. If his timber is worth 

 four dollars a thousand on the stump he can 



