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INVESTMENT
AN EXACT SCIENCE
BY .
HENRY LOWENFELD.
Enlarged and Revised Edition.
Published by
THE FINANCIAL REVIEW OF REVIEWS,
2, WATERLOO PLACE, LONDON, S.W.
te
Price 2/6 Netr.
Copyright.] [All Rights Reserved.

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é
LONDON;
“THE BISHOPSGATE PRESS,"
44-47, BISHOPSGATE WITHOUT, EC.
ot oe
cae

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CONTENTS.
a
‘Paar.
Tur Osseor or tuts Boox wes bes v.
CHAPTER. ‘
J. On Investment Risks ... te see 1
II. Waar Inruvences tHe ReauisaBLE VALUE
oF Stocks? ... wee wee vee 18
III. Tae Gsoarapnican DisrRiBution oF
CAPITAL bes vee wee vee 45
A IV. Way GeroerapnicaL Disrrizution Pro-
TECTS BOTH CAPITAL AND INCOME... 59
V. THe Practican Construction oF INvEsT-
MENT SCHEMES vee tee ves 72
VI. Tur Trearment or Existina Invesr-
MENT Lists... vee bes see 99
VII. Tue Worwup’s Stock Markers ... .. 110
VII. Tse Derecrs or tHe Baitisa TRUSTEE
Acts... wee vee vee w= 429
APPENDIX. WoRLD-TRADE AND THE GEOGRAPHICAL
_. Disrripution oF Caprrau. Reprint
of Popular Financial Booklet XXT. 186

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LONDON, S.W.

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THE OBJECT OF THIS BOOK.

Upwards of a quarter of a century of actual
work among investors and their investments
has proved to us that the only means for
insuring permanent investment success con-
sists in the adoption of a true and systematic
method of averaging investment risks. How-
ever carefully any single investment may
be investigated prior to its purchase, and
however desirable from every point of view
it may seem at that time, yet its future
progress always remains an uncertain and un-
ascertainable quantity. The history of stock
market fluctuations proves that there is no
stock in existence, the future realisable value
of which is ascertainable with certainty ;
hence it is impossible to eliminate the in-
dividual risks attending the purchase of any
single investment.

This fundamental principle having been
established, it naturally follows that the only
method by which investment success can be
made permanent is to insure against this un- -
certainty in the realisable value of any single

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viii .
security. It has been theoretically and prac-
tically proved that by splitting up invested
capital in equal proportions among a number
of investments similar in quality, yet whose
price movements are all governed by different
influences, a combination of investments is
obtained in which a fall in the realisable value
of a portion of them is simultaneously counter-
balanced by a rise in the realisable value of
another portion of them, and that in this way a
true balance of values is established.

This system of investment poise and
counterpoise is known as the system of
Geographical Distribution of Capital. Just as
a carefully studied system of averages elimin-
ates all taint of gambling from a sound system

- of insurance business, so a sound system of
averages, based upon the Geographical
Distribution of Capital, reduces to a minimum
the taint of speculation from the act of invest-
ment. From their very nature, insurance and
investment are both highly speculative trans-
actions, which can only be raised to the

dignity of solid business by a carefully con-
structed system of averages.

By means of this system of Geographical
Distribution of Capital every investor, who
has quite made up his mind what his real
investment object is, can, from the very outset

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ix
of his career as a capitalist, arrange his
stocks in such a manner that the results
obtainable therefrom become almost a
. certainty ; whilst investors who have hitherto
failed to attain their investment objects
can so rearrange their holdings that they
are likely to be more successful in the
future. ‘

In this book are set out and explained the
fundamental principles of the Geographical
Distribution of Capital; whilst the general
principles, which should guide every investor
in the selection of his individual holdings, are
discussed in its companion volume, “How ‘to
Manace CapiTAt.”

Having once systematically arranged his
Investment List, it becomes essential for the -
investor to follow up and examine the progress
of his holdings. For this purpose we publish
the ‘“Invesror’s Yrar Book,” as well as a
monthly publication entitled the “FinancraL
Review or Reviews.” Lastly, we publish an |
Account Book, known as “ Hartry’s Investor’s
Account Boox,” by which a clear record of an
investor’s financial transactions may easily be
kept in accordance with the principles of
Geographical Distribution. .

All that is now necessary to enable an
investor to command success in his investments
B

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x
is that he shall put into practice the lessons to
be learnt from these publications.

For the reason that Trustees and others
interested in the investment of Trust Funds
are, by various Acts of Parliament, limited in
their selection of securities, we have published
for their special guidance another book entitled

. The: Investment of Trust Funds. This book
explains how testators and other founders of
trusts may draw suitable instruments of trust
for the guidance of their trustees, and also
how trustees, when called upon to act, may
best employ the capital committed to their

care, so that it may yield both the largest
obtainable income and also exhibit that
stability of realisable value which is the

a very essence of Trustee investment. ,

Our Company was founded twenty-seven
years ago for the purpose of assisting investors
in the management of their capital, and our
publications owe their existence to the success
which we have attamed in accomplishing this
object.

Tue Investment Recisrey, Lrrrep.
(Established 1880).
2, Waterloo Place,
London, 8.W.

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CHAPTER I.
ON INVESTMENT RISKS.
INVESTMENT is the act of laying out money with
a view to keeping it safely, and at the same
time securing an income from it. Two distinct
objects being aimed at by the act of invest-
ment, there are naturally also two separate and
distinct risks attached to it, namely, the risk
attendant upon Capital and the risk attendant
upon Income. .
All investments fluctuate in value, and
there is hardly an investment in existence
which may be relied upon with mathematical
certainty to realise without any diminution the
exact sum originally laid out in its purchase.
There is, however, a large number of invest-
ments which may be absolutely relied upon as
regular and uniform income-producers, so that
the main difficulty of investment lies in keeping
the original capital sum intact.

Not only is the safety of capital attended
by the greater risks, but, in addition, it con-
stitutes the cardinal question in the considera-
tion of the safety of an investment ; because,
so long as capital remains intact, any diminu-

B2

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‘ 2
e
tion in income is reparable, whilst to attempt
to maintain the original standard of income
with a reduced capital sum is a difficult and
frequently a hazardous proceeding. |
In recent years it has been quite easy to
construct a very safe investment list to yield
43 per cent. per annum on an average, but it has
never been easy very greatly to increase this
yield with due regard to capital safety. Now,
suppose £10,000 had been invested to produce
£450 per annum, and this income had dropped
20 per cent. to £360, but the capital value had
remained intact. In the following example,
. . taken from actual experience, this condition of
affairs is very nearly approximated, thus :—
, Boucur in 1892. Annual
Price. Income.
£2,000 Barry Railway Ordinary
at 203. Div. 94 per cent. ... £4,060 ... £190
, £2,500 Queensland 4 per cent. Stock
ab 108 eae ee wee BOB 9B
60 shares Union Bank of Australia
at £57 a share. Div. £3 a share 3,420 ... 180
£10,075... £462
VaLug iw 1897. Annual
Price. Income
£2,000 Barry Railway Ordinary
at 291. Div. 10 per cent. «-» £5,820... £200
£2,500 Queensland 4 per cent Stock.
at 113 vee wee eee w. 2,825... 92
60 shares Union Bank of Australia
at £29ashare. Div.£1ipershare 1,740 ... 75
| £10,385 .., £367

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5

In such a case as the above the investor
would simply sell his holding of stocks and
re-invest again on the same easy and safe

basis from which he started. His position

would have remained unchanged, and his

unimpaired £10,000 can nearly always be

made to yield 44 per cent., or £450, with safety.

In fact, investment lists, whose income yield is

- legs than 44 per cent., can, save under excep-

tional conditions, always be brought up to a

43 per cent. basis without disturbing their

capital safety; indeed, in many cases the
capital safety can be increased.

But, supposing that both capital and income
had dropped 20 per cent., and the realisable
value of the stocks held had fallen to £8,000
and the income to £360, then the case would
be serious indeed. To produce £450 per
annum on £8,000 necessitates an investment
which yields over 53 per cent., and to make
up the capital to its original amount means -
dispensing with income entirely for a period
of four years ; both of which are unsatisfactory
contingencies.

The position which we have here illustrated
has recently arisen in the case of some of the
finest British investments, as many of our
readers are unfortunately aware by their own
actual experience; we will therefore not

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4
enlarge on it further, but we will confine
ourselves to the question of the two classes
of Investment Risk which may be- defined
as follows :—

1.—Diminished Capital.—This disaster

cannot be repaired out of income except
with great difficulty, and in any event such

a calamity must result in impaired capital
safety, if the original rate of income is to

be maintained. .

2.—Diminished Income.—This minor
investment inconvenience can always be
rapidly remedied if capital still retains, or
has improved upon, its original value.

In other words, Capital is the tree,
Income is the fruit. The welfare of the tree
must always be the first consideration. In-
vestors will do well to permanently fix the
above axioms in their minds, and to be guided
by them in all investment questions.

Having fully grasped the all-pervading
importance of capital, our readers might now
jump to the hasty conclusion that successful
investment simply resolves itself into being
contented with a very moderate income and
investing in nothing but the finest securities.
Unfortunately, however; the quality of the
investments held is not sufficient in itself to
ensure capital safety.

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5
Amongst Stock Exchange securities the
British Trustee stocks are rightly considered
to be the soundest type of investment. In
this book we deal with stocks and shares only,
and therefore we here leave all other forms of
investment out of consideration. In spite,
however, of their individual merits, an invest-
ment made in Trustee stocks in 1896 and
realised in 1903 would have produced a
result similar to the following :—
Boucur in 1896.

£1,500 Birmingham Corporation 34 per cent.
stock at 131... wee see .. £1,965

£1,300 London & North Western Railway
4 per cent. Preference at 160 ..» 2,080

£1,600 Southern Mahratta Railway 34 per
cent. Guaranteed at 129 wee .» 2,064
£6,109

VaLuE mw 1903.

£1,500 Birmingham Corporation 33 per cent.
stock at 104... wee vee 6 £1,560

£1,300 London & North Western Railway
4 per cent. Preference at 125 w= 1,625

£1,600 Southern Mahratta Railway 33 per
cent. Guaranteed at 104... . «1,664
£4,849
Toss... wee eee £1,260
We should explain that the prices quoted
in the above tables do not represent the full
extremes of fluctuation during the period
under review. Had we attempted to stretch

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6 :
_ our illustration to its full possibility, we could
have shown even a more calamitous loss than
£1,260 upon £6,109, the original capital
sum invested. So that, without in any way
straining our illustration, we are able to depict
a loss of rather more than 20 per cent.
upon three Trustee stocks, each of which
seemingly represents interests widely differing
from those influencing the other two.
Now, if so deplorable a result as this is
produced by the purchase of three stocks
which are supposed to represent all that is
most solid in English finance, it would seem
that there is just as much fluctuation in a
stock with a gilt edge as in a sound stock
not so adorned. Briefly, the tabular results
displayed above conclusively prove that
capital safety is not arrived at by merely
forming a combined Investment List of stocks
of unquestionable individual soundness. It
therefore follows that in order to achieve
stability of capital an Investment List must be
endowed with some other characteristic in addi-
tion to the intrinsic merit of individual stocks,
if the investor is to ensure capital safety.
But before we begin the discussion of this
further requisite quality, let us first establish
the simple rudimentary principles which must
be the foundation of all successful investment.

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7 . ;
To begin with, the danger is obvious of an
investor confining his purchases to one stock.
Jn such a case he would be staking his
accumulated wealth on the fortunes of a single
security, and on any serious depreciation over-
taking the stock of his choice his loss would
be considerable. Further, he would be reduced
to the vexatious position of having no other
practical course open to him than to wearily
nurse his crippled investment in the vague
hope of its ultimate recovery. A prudent
wnvestor will therefore split his capital up

among a variety of investments. The number |
of investments which would best suit his case
depends entirely upon the amount of capital’
of which he is possessed. Thus, with a capital
of £1,000 to invest, three stocks might suffice,
whilst with. £5,000 capital, ten stocks would

be requisite. Later on in this book we shall
lay down a very definite scheme for the

scientific sub-division of capitals of all sizes.

The idea of investing capital in a variety
of stocks is to prevent any financial disaster
adversely influencing more than a small portion
of the total capital. Therefore, to select two
or more stocks whose price fluctuations depend
on the same influences would be to defeat the
whole scheme of distributing capital. So that
not only must capital be sub-divided among a

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8
number of stocks, but care must also be taken
to select for the purpose stocks which are
susceptible to as widely divergent influences
as possible.

. So far we are afraid that we must appear
to be rather gloomy counsellors with a tendency
to harp upon disaster. But if an investor will
only first safeguard himself against serious
loss, the rest of his investment career presents
no very great difficulties. There is, for
instance, a bright side to the distribution of
capital, because an investor would require to
be exceptionally unfortunate if among the
variety of securities which he held he did not
possess some stocks which improved in capital
value or in income-producing power, or in
both. In fact, the whole system of splitting
up capital, in the manner in which we advocate
in this book, is based upon the selection of
stocks in such a way that the resultant influence
affecting them as a whole must tend to
be a beneficial one. In other words, not
only will ‘the losses be counterbalanced by
profits, but the profits will so outweigh
the losses that the investor will steadily

' increase the realisable value of his Capital as
time goes on; and with the increase of Capital
Account we have already shown that an |
improved Income follows as a matter of course.

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9

As a general rule investors distribute their
capital in a haphazard sort of way. They will
buy £100 worth of one kind of stock and
£1,000 worth of another. This is fatal toa _
successful counterbalancing of profits and
losses, for :—Capital must not only be split up
amongst various investments, but these divisions
of capital must all be of equal original cost.

The idea of distributing capital amongst a
variety of investments is that the movement of —
one division of capital may counterbalance the
movement of another division. Clearly, then,
if this system of counterpoise is to prove of
practical value, the weight of the several
adjusting divisions of capital must be
identical. For instance, suppose that £1,000
had been unequally invested in two stocks, their
costs being £800 and £200 respectively, and
let us further assume that the investor
judiciously selected two stocks which repre-
sented two widely differing investment risks,
and that one stock was adversely affected
whilst the other improved in value. Now, if
the stock which represented £800 of his
capital fell five points and the other, in which
he was: only interested to the extent of £200,
experienced a precisely similar rise, the
investor would lose £40 over the first and, as
a set off to this, he would only have made a

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10

profit of £10 over the second. He would thus

be £30 out of pocket over the joint transac-
tions, and his capital distribution would have
failed in its object. Whereas, if he had ©
invested £500 in each stock, then the loss on

the first stock would have been counter-
balanced by the profit on the second, and his
capital distribution would have proved its
practical utility.

Of course, the point might be raised that
supposing the respective movemenis of the
two stocks had been exactly reversed, and the
£800 investment had risen and the £200
investment had fallen, in such a case the very —

irregularity of the distribution would have
contributed to an increase of profit. But
this result of an unsound investment policy
in no way disproves the fact that unsound
investment policies invariably result in a final
catastrophe. Unequal investment of this
nature, where the result is left to chance, is
nothing more than speculation. In fact, a pur-
chase of securities as in the illustration given
above is not an investment at all; as far as
£600 of it is concerned, it is a speculative risk
against which no provision has been made.

The main object of sound investment is to
safeguard capital against loss, and this object
can only be attained by a refusal to jeopardise

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11 ;
capital for the sake of a possible profit. The
purpose of this book is to supply our readers
with a sound system of investment and not
to encourage them to risk their capital in
speculation.

_ In the above example it will be noticed
that the movements of the two stocks were
of similar extent, that is to say, they both
fluctuated five points, so that their width of
fluctuation was identical. Now, when com-
paring the characteristics of different stocks,
it is important to remember that stocks
-resemble or differ from one another in sound-
ness, in dividend-productiveness, and in width

of fluctuation. Their limits of fluctuation
constitute a very material difference between
stocks; and of two stocks, both subject to
precisely the same market influence, one may
rise or fall five points as the consequence of a
given event, whilst the other may move only
two points in response to the same influence.
The safety of Capital is obtained by dividing
it (1) equally among a number of sound
stocks (2) of identical quality, but (3) every
stock held must be subject to an entirely
. different market and trade influence.
In selecting stocks of identical quality, the
average annual fluctuations over a period of
at least three years should be compared. It

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12
often happens that a stock either gradually
improves or deteriorates in stability in direct
ratio with an improvement or a deterioration in
its desirability as an investment; for example,
the average annual fluctuation of Grand Trunk
Railway Second Preference Stock in 1901, based
on the preceding three years, was about 30 per
'  cent.; whereas the average annual fluctuation
at the present time, based on the last three
years, is under 10 per cent. In such case the
stock must be treated as if it were a new stock
which has not yet found its proper market
position, and, to minimise the element of
chance, it should be avoided until the per-
manence of the average annual fluctuation of
the stock, at its altered level, can be appreciated

at its true limits. .

Again, in selecting stocks that are subject
to different market influences, it must be re-
membered that the chief market for any
particular security is liable to transposition.
By market influence we mean the influence
created by the general investment conditions
obtaining on the Stock Exchange in which the
stock is mainly dealt in. Thus, a few years
ago a number of the bond issues of American
Railways were chiefly held in this country, and
the principal market for them was accordingly
the London Stock: Exchange.. But, owing to

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13
the growth of American wealth, nearly all
these securities are now held by the Americans
themselves, so that Wall Street is now the
chief market, and the influences affecting Wall
Street will control the prices of American
Railway Securities.

Bearing these factors in mind, the above
rule embraces all the knowledge which is
requisite to enable anyone to invest safely
and profitably in stocks and shares, and if it is
closely observed, in scarcely any event can
capital be exposed to danger.

But the investor must clearly understand
that the observance of any part of the rule will
avail him nothing if he is unwise enough to
disregard the remaining portion. The efficacy
of the rule lies in the mutual support which
its component parts lend to each other, and,
finally, it is their combined sustaining power
which preserves the equilibrium of capital.

In the early part of this chapter we gave
an illustration of the result produced from an
investment in three British Trustee stocks,
viz.: Birmingham Corporation Stock, London
and North Western Railway Company Deben-
ture, and Southern Mahratta Railway Company
Guaranteed Stock. We there saw depicted a
loss of rather more than 20 per cent. on the
original cost within a few years from the time

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14
of purchase. In that case only two out of the
three cardinal points, contained in the rule we
have just set out, were followed. The capital
. was evenly divided over three first-class
_ stocks ; the prices of these stocks were identical
in width of fluctuation; but they were all
subject to the same market and trade in-
, fluence; in other words, they were all subject
_ to the general investment conditions obtaining
on the London Stock Exchange as well as to
the general trade conditions ruling in Great
Britain ; for all Trustee stocks are alike in
this respect, that they are almost solely held
in this country. This one defect was sufficient
to nullify the rest of the precautions which the |
investor had taken.
In this case the loss was due to the
disregard of the same essential to sound
_ investment as is neglected in all investments _
which consist exclusively of British stocks.
And this same defect is responsible for all
the losses which are made in investments of
this type.

Now, having detailed the dangers which
assail capital, we will next consider the risks
attendant upon the safety and regularity of
income. Income is paid out of revenue. In

the case of Government and Corporation stocks,
revenue is derived from rates_and taxes raised

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16
by the borrower ; *but, in the case of stocks and
shares of other types, revenue consists of the
nett income earned during a given period.
The safety of revenue derived from rates
and taxes is estimated from officially published
statistics which are accessible to all. The
earnings of companies are published in their
annual balance-sheets, copies of which are also
obtainable in most cases. In How.to Manage
Capital we explain how investors, by means
- of the statistical information, can appraise the
income safety of every investment almost at a
glance, and we will, for this reason, here simply
state the main rules for estimating income
_ | probabilities :—
1.—Income is safe from Railway and
Industrial Debentures and Preferences when
; the Company has a large surplus income
remaining after satisfying these obligations.
The safety of income derived from Govern-
ment and Corporation Loans mainly
depends on the political and financial
honesty of the individual Government or
Corporation, and must, therefore, be gauged
by past records, taken in conjunction with
the budget and revenue returns. If a |
Government or a Corporation has met all
its obligations without failure or delay for
a period of ten years immediately preceding
: Cc

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16 ;
the date of investment the income may be
regarded as safe.
2.—-The safety of income derived from

Ordinary stocks and shares depends upon

the amount of surplus revenue remaining

after satisfying all prior charges and paying

a dividend on the Ordinary stock. Such

surplus is either carried forward to the

next dividend period or credited to the
company’s reserve fund. ;

But when calculating the dividend proba-
bilities of Ordinary and Deferred Ordinary
capital, which rank for dividend after satisfying
all prior charges, it must be remembered that
such calculations are exceedingly hazardous

and partake somewhat of the nature of
prophecy. Some companies after paying
regular dividends for many years have had
their career of prosperity brought to a sudden .
end through some trade dislocation, through
some change in the national habits of life,
through an increase in competition, or through.
some other event which it was impossible to
foresee. Then, again, other companies after a
period of barren years, during which they
_ have not distributed any dividend among their
shareholders, have suddenly opened up a new
avenue of trade, and consequently have
developed into regular dividend payers. But °*

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17
even in the case of the most prosperous con-
' cerns, dividends on Ordinary and Deferred
capital are so wholly dependent upon the good
or bad business done by the company that
dividends derived from capital issues of this sort
are never quitefree from a taint of speculation.

So that investors who desire to receive a safe

and regular income must eschew Ordinary and
Deferred stocks entirely, and also every type
of prior charge which does not show a large
surplus of revenue beyond its own individual
dividend requirements. There is a large
number of stocks and shares known on the
London Stock Exchange which are so well
secured from an income point of view as to
practically preclude the possibility of any
irregularity or reduction in dividend pay-
ments. It is to securities of this class that
every investor, who aims at stability of income,
should confine himself.

It is, of course, possible to average income
risks by splitting up the capital to be invested
amongst a number of securities paying large
dividends and by setting aside a part of this
large income annually to cover possible future
contingencies. ‘This plan is followed by many
careful investors, who thus manage to make a
large and fairly stable income.

ca

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CHAPTER II.
WHAT INFLUENCES THE REALISABLE |
VALUE OF STOCKS?
In writing this chapter we have assumed that
the reader is already acquainted with the
various types of stocks which are in existence,
and that he knows how they respectively rank
for dividends and how they compare with one
~ another in soundness and desirability. These
points we have fully explained in How to
Manage Capital, which is the companion
volume to the present book, and we need not
repeat the explanation here. In the previous
chapter we showed that in the selection of a
stock for investment the chief characteristics
to be considered are :—

1.—The capital security which it affords.

2.—Its income-producing power.

These two questions have at all times
received attention from all cautious investors,
but their investigations have rarely extended
beyond these two points. We now intend
to explain the existence of a third influence, _
which is even more potent than the other

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: 19
two, particularly in the case of gilt-edged
and other low-yield stocks, in the control
which it exercises over the realisable value
of securities.

That a third influence of some sort does
exist is easily capable of demonstration. Let
us take an irredeemable Trustee Debenture of
an English Railway paying a fixed rate of
interest. Here we have an investment which
is so fully secured as to capital and income
that its value would be incapable of fluctuation
if there were no third influence to consider.
For example, the perpetual 44 per cent.
Debenture of the London, Brighton & South
Coast Railway. .

This Debenture stock can never be paid
off without the consent of the Debenture
holders ; no new capital charge can ever be
created to rank in front of this Debenture.
The Debenture is fully secured by mortgage

upon a railway the total value of which
is seven times larger than the total of this
Debenture issue. The Debenture interest is
at the fixed rate of 44 per cent., and the
nett earnings of the line are sufficient to pay
this annual interest nearly seven times over.

It is obvious, then, that both capital safety
and income productiveness admit of no ques-
tion in the case of this Debenture, which can

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20
neither be materially influenced nor its value
altered by the variations which occur in the
-annual earnings of the Brighton Railway
Company. Were these two points then the ©
only influences upon the price of the Deben-
ture, its quotation must remain permanently
unaltered year after year ; whilst, as a matter
of fact, £100 nominal of the London, Brighton
& South Coast Railway 43 per cent. Perpetual
Debenture possessed a realisable value of
£180 in the year 1896, and yet in the year
1904 the same quantity of the same stock
was worth no more than £134. Here, there-
- fore, we have a practical example of an
investment of a seemingly unalterable quality
depreciating 46 points, or one quarter of its
total value within the period of a few years.
Neither is this example in any way an
isolated one, for we publish a chart in The
Investment of Trust Funds showing how a
number of precisely similar securities depre-
ciated to a like extent during the same period.
Not only does this chart show that the depre-
ciation in these stocks was identical during a
period of years, but it also exhibits with
startling clearness that the movement of each
stock in the group, during each year, was
reflected by the movements of all the other
stocks, and finally, of course, of the whole group.

--- Page 29 ---

21
There is abundant and conclusive evidence,
therefore, that there was some third force
at work altering the values of these apparently
unalterable securities, and that this force is
universal and equable in the influence which it
exercises. We have already called this third
force the ‘ Market Influence”; that is to say,
the influence which is prevalent on the Stock
Exchange where the securities are either
solely, or mainly, dealt in. In fact, the force
_ of any market influence on any stock may be
said to be in direct proportion to the extent
in which the particular Stock Exchange
controls the stock. Thus, on Consols, British
Trustee Stocks generally, and on the majority
of British Industrial Securities, the influence
for the time being prevalent on the London
Stock Exchange has full force; whereas on
Argentine and other South American issues
it plays a-much smaller part, the influences
prevailing on the Stock Exchanges of the
issuing countries themselves, as well as those
on the Paris, Berlin and New York Exchanges,
bearing their proportionate share in this third
force of the Market Influence. We will now
trace shortly the chief factors that cause
variation in the nature of this all-powerful
influence which: a large number of investors
have hitherto not sufficiently appreciated.

--- Page 30 ---

29,

The dominating force which controls the
realisable value of all stocks and shares
principally held in any one country is the
spending and saving power of the people of
that country. The extent of this spending
and saving power, again, depends upon the
state of trade of the country.

The reason for this is that whenever trade
is good the earnings of the money-saving

_ classes exceed their immediate wants; they
therefore hoard their surplus earnings. Pre-
cisely as these surplus earnings increase with
good trade, so do they dwindle during periods
of trade Cepression. Thus the saving power
of any nation entirely depends upon the pro-
ductiveness of its trade. While trade con-

_ tinues to be active, a large portion of these
surplus earnings finds its way back into trade,
the effect of which is to further augment the
eross earnings and thus again add to the
savings; and so on the whole time of the
trade boom. As soon as trade begins to
slacken, and requires less capital to keep it
going, these accumulated savings are set free
and an investment outlet has to be found for
them.

In addition to the savings of traders there

_ are the savings of a large-number of pro-
fessional people. The amount of money which

--- Page 31 ---

23

this class is able to put by is influenced, to a
predominating extent, by the state of trade
of the country; for the members of this large
class are only in a position to invest part of
their earnings when the latter exceed their
daily wants. To the great majority this is
only the case when trade is good; hence they
seek an outlet for their savings at a time
when the public at large can afford to be
considerable spenders.

Nowadays the greater part of every nation’s
savings is invested in stocks. It therefore
follows that towards the close of a trade
boom there arises a constant and increasing
demand for stocks to serve as receptacles for
the nation’s savings, whilst when trade is
depressed for any length of time this demand
for investments first slackens, then entirely
ceases, and is finally succeeded by a small
trickle of realisation, which increases in
volume until the next trade boom is well
in hand.

In this way the floating supply of stock
promptly satisfies any few chance buyers who
may be about in bad times, and then the —
surplus supply hangs over the market and
seriously depresses prices. The whole ques-
tion simply resolves itself into one of supply
and demand; so that stocks are steady in

--- Page 32 ---

24
normal times, in active demand with rising
prices after a spell of good trade, and in
excessive supply with drooping prices after
. a spell of bad trade.

The country’s course of trade is, therefore,
the dominant factor causing the variation in
the nature of the Market Influence. But
there are one or two minor factors (though
they are intimately associated with the course
of trade) which temporarily enlarge the out-
let for the savings of the nation, and 80
compete with the demand for existing stocks;
for the demand for loans may rise to such a

| point that it is more profitable to deposit
with the Banks or lend to traders than to
receive interest from stocks. Thus the
demand for stocks is temporarily delayed.
Furthermore, there may be a sudden increase
in the supply of stocks, caused by trade
expansion, over-production, wars, and other
similar conditions. If such securities are issued
to more than the normal extent, the supply of
stocks becomes greater than the demand, so
that in order to compete successfully with older
securities new securities are offered below
their comparative value, and the prices of the
existing stocks are thereby depreciated.

We have now outlined the main factors
which influence the ratio of investment

--- Page 33 ---

25

supply to demand in any one country. It
will be seen that they are all factors which
exercise an influence that equably affects all
the stocks of any one country, yet which must,
of necessity, differ in different countries. The
resultant force of these various factors we
have called the “ Market Influence,” of which
the dominant factor is the course of trade of
the country in which the chief market for the
stock is situated.

So strong is this influence upon the
realisable value of stocks that it is capable
of entirely nullifying the effect which the
individual improvement in a security would
otherwise have had upon its current market
price.

This fact is very strongly brought out in
the case of the Taff Vale Railway Ordinary
stock. In 1898 the average price of this
stock was 79 and the dividend it paid was
12 per cent.; in the year 1901 the dividend
had been increased to 34 per cent., but the
stock had fallen to 71; again, by 1904,
the dividend had further improved to
3% per cent., yet in this year the price of

. the stock touched 68. Briefly, as the Taff
Vale Railway Ordinary dividend steadily
increased, the price of the stock steadily
diminished,

--- Page 34 ---

26

The reason of this seemingly contradictory
movement was that the Taff Vale Railway
Ordinary stock, being a British security whose
market is entirely in this country, was more
dependent for its price fluctuations on the
trading and financial conditions of Great
Britain, and their effect on the London Stock
Exchange, than it was on its own merits.
The price of Taff Vale stock did not there-
fore improve with its improving yield and its
enhanced capital safety, but simply followed in
the wake of the general investment conditions

obtaining on the British Stock Exchanges.
This example is not an isolated one, and
similar cases occur by no means infrequently.
Thus, Lancashire & Yorkshire Railway
Ordinary stock sold in 1904 as high as
111; early in 1907 its price was 101, yet
the dividends paid on this stock were as
follows: 1904, 33 per cent.; 1905, 32 per
cent.; 1906, 48 per cent. Again, South
Eastern Railway Preferred Ordinary stock
received the following dividends: 1904, 44
per cent.; 1905, 5 per cent.; 1906, 53 per
cent.; whilst in 1904 the stock sold at 135
and early in 1907 at 115. A large number

of equally striking examples could be quoted.
So as to make it additionally clear that it
is the Market Influence which mainly controls

--- Page 35 ---

TYPICAL PRICE MOVEMENT OF BRITISH SECURITIES .
[vatue Chart Shewing Movement of Value. Taterests | Quantities and Names
11893 {1994 [1698 [1896] 1897 |1898[1899|1900] 1901]1902|1903] 1004] 1908] 1906, sented. of Btocks. [1898 |1894/1895|1896]1897/1898h899| 1 900] 1901] 1902) 1904 1004[1905[1 906]
== SS SS SS SS SS SS SS SS | |
Ea a SF SS SESE ours | @ sr.tn natrgtam lala
1350 == SER Ree See . Stock (Irredeemable}, 36 | 36 | 36 | 36 | 36|36|86/36/36/36) 36/36/36 | 36
150 == AEST awar | @) £000 Lon. Ti. & South
SS AP qreree a ae ee — — ” . . ‘
‘oso SES eS SSS DEB. Rly. 4% Per. Db. Stk.|| 36 | 36 36 | 36] 36 | 36 | 36|36! 36/36/36
Ab eS iraway || @) £500 London & North-
1200|\LA— ar ee a ee ne el ed ee ee Oe ° Western Rly.Ord.Stk.|. 27 | 31
SS SESE tae [Ow ars
1100/- tt 7 7A ENA NS arr’s Bank ...| 38/38 |88 /38 /38 |38 /40|40 /40 |40 40/40] 40/40
aE ES)
1050 CF EASE ENS steep BREVE | ©) £860 Bass, Ratcliff &
Gane ae See sae Sees ea eee ERIES. Gretton 5%C. Pf. Stk.) 42 |42 |42|42|42)42142 |42 |40 |49/42 142 42 142
: ee i <1 —|- 4 Pat tS HE SF :
1000 DN 00) )
th 1 4 poe oe SSS Bt ES CANALS. |
950 Ser oe7 ss ee ee eran sees oo eee 0 Canal Ordinary Stock 24 | 24 |24| 24] 24/24 24/024 24 24/18 18 |18
ya Se NEE 5) cow.
00 SSS ee ig, | D100 0r0 Ss. Spencer
(Op ta) ener Roser "|| 38 | 85 | 35 |40 | 40| 40 | 45 | 40 |40 |40 80
850\| — FA AS eget
Gee ESS inous. | @)40 Cum. Pref. Shares
ooo SS EEE EES = ES fin Bryant @ May. 82 82 |35|35| 35|35|30 28/28 |28 |28
SSS aS = SSS SS SS Se SS
10 Pea pepe S) cumin) © £1000 Raiway ives
@ as aS a SS SS SS SS Se SSO TRUST. ment Co. Pref. Stock|| 37 | 40 /40 140 | 40/40/40 /40 | 39 |40 |40 | 40 |40 |40
700 / ROA EN ee
SERS BEES as @) £400 Brentford GasCo.
650 SES Se ee . Consolidated Stock || 46 |46 148 |48 48 (48 |48 |48 |/48 |48 |48 50
000 Sf iinsun. | @) 100 Shares Guardian 7
580 ihe ee eS SEES ANCE. Assurance Co. ...|/ 37 |87 |42/ 45 | 40/42) 42/42) 42/42/42 |42/ 45/45
Oe a a ee a ee Sa a
es a SSS SS ei 10) tw. | @ 160 Ord. Shares Pro-
a O a= ae ee Se ee eae ee oe SZ OR vincial TramwaysCo.| 30 | 30 | 45 67) 67| 67/45/45 | 45/52/56
aoe feo. re anf SEH ASSERT VSD SS) (47a 47 5 |477 a oT 4 JO [9 |

--- Page 36 ---

27 ;

the prices of all large and representative .
stocks, we append a chart showing the price-
movements of twelve representative British
stocks from the year 1893 down to the end

. of 1906, the last year for which completed ~
annual figures are available at the time of
writing.

In this chart the horizontal straight lines
denote the £50 intervals in the price levels of
stocks and the vertical straight lines mark off
the yearly periods. The zigzag lines are a
faithful pictorial presentment of the price-
movements of the individual stocks.

In order to keep the zigzag price lines
at reasonable intervals apart and within
the limits of the chart, we have so arranged
the quantities of the stocks that the range
of prices commences at intervals between
£500 and £1,200. It is, of course, obvious
that the quantity of stock dealt with does
not alter the relative movement of the
lines. Beyond this, the chart has been left
to tell its own story; and the reader who
scans the names of the securities we have .
chosen before he addresses himself to the
study of the respective price-movements, will
admit that a more varied selection of stocks
could not be found amongst all the British
stocks habitually dealt in.

--- Page 37 ---

28

The reader can easily translate into figures
. the price-movements depicted on the chart,
by means of the horizontal price lines. ‘These
annual average value figures have been added
up, and their totals displayed at the foot
of the chart. _ By this means the chart not
only pictorially illustrates the various price-
movements, but it also gives the several total
annual values of all the stocks depicted, year

by year, at their respective average prices.
The typical British stock, of course, is
London & North Western Railway Ordinary.
- ‘his starts at the price of 164—almost in
the middle of the chart— gradually rises
to 204 in the years 1896-1897, and then
equally gradually declines, until it records
150% as its lowest quotation in the year
1904. It will be noticed that the tendency
of nearly all the stocks included in the chart
is to slavishly follow the same direction
as that marked out by North Western Railway
Ordinary, both in their upward and _ their
downward movements. Here and there in the
chart an occasional short deviation occurs
in a few of the zigzag price lines. These
deviations are due to an exceptional individual
increase or decrease in capital safety or
dividend productiveness on the part of that
particular stock. But it is curious to notice

--- Page 38 ---

ag
how quickly these individual movements
exhaust their force and how rapidly the
deviating stock once more swings into line
with the general movement which controls the
whole chart. .

For example, take the year 1904-1905. It
is wonderful with what unanimity nearly all
the stocks show an upward move in that year,
following on the long monotony of falls in the
preceding seven or eight years. The only
substantial exceptions are Bass, Ratcliffe Pre-
ference, and Spencer, Turner & Boldero. If
we consider these two stocks for a momerit, we
at once recognise the reason for their distinct
price-movements. The former was subject to
a special influence in the state of the legisla-
tive and temperance movement, which is
putting all Brewery investments in Great
Britain under a shadow. The reason for the
movement in Spencer, Turner & Boldero is at
once seen by a reference to the dividend table,
wherein we discover that from 1903 to 1905

there is a drop of £15 in the dividend paid by
that company.
' In 1905-1906 there is a somewhat hesitating
‘ tendency; indeed, a very similar state of
affairs exists to that indicated by the chart
. in the year 1896-1897, just prior to the
continuous fall.

--- Page 39 ---

80 a

It will also be noticed that the increase in
value does not correspond with the increase
in income. At the commencement of the chart
in 1893 the average yield was about 4 per cent.
per annum. Between 1893 and 1897 there was
an increase in value of £2,902, but the
dividends had only increased by £54, which
was at the rate of under 2 per cent. per
annum on the increased value. In 1895 and -
1906 the income was exactly the same,.
viz., £453, yet the capital value in the latter
year was reduced by £1,204, or over
10 per cent. Again, in spite of an increase
in dividend of £10 in 1906 as compared with
1905, yet the capital actually decreased in
value.

Indeed, the more closely this chart is
studied the more apparent becomes the over-

whelming influence of British trade and finance
on Home securities.

The great lesson to be learnt from the
chart is the hopelessly mistaken belief of a
great many investors who hold a mixed assort-
ment of British stocks that the increased
prosperity of a portion of their Investment
List may be relied upon to counterbalance any
dwindling of value and dividends amongst the
other portion of their holdings. That any
counterpoise of this sort is ever to be derived

--- Page 40 ---

TYPICAL PRICE MOVEMENT OF THE REPRESENTATIVE STOCKS OF GREAT BRITAIN, FRANCE,
UNITED STATES OF AMERICA, ARGENTINA
1—GREAT BRITAIN (General Investments). FRANCE. GERMANY.
WALU Price Movement During VALUE! WALUEL Price Movement During VALUE! WALUE!| Price Movement During WALUE!
Class of Stock, oF oF Class of Stock OF oF Class of Stock, OF OF
@ ELECTRIC RLY! 149 EET 140 @ STEEL 580 EERE TT 580 @- BANK 160 PULTE 150
‘oO at Ken
@ INDUSTRIAL ||130 OTA ELT 180 ELECTRICITY ||570 | AC ANP RHEE 570 @ cas A nua | ha caaeee
mower [WETTED ETE SSSEESLLL Dine! | acoso A LARS INCL[ CEEEECE ES seer (RlOEPECECESESHATT LL ol
@® BREWERY = |/120 |) LCCARBRECTCN bop | |l120 ® vocks seo fOK A | 1h PYNL | Lge PS 660 @ RAILWAY 120 MT oe ath 190
ee LLL ATs esol SC Ler Efe wea tos SF Lee ELEEE EL | LEAT os,
@ cas vo] paa NO {XU 110 ® TRAMs cs 2 I 4 pee yey | 1S 550 @ BANK 106 |L4 LL pated [fed |e aoe P5105
Se TNS A | Ue — BEEP TL | PSST TTT - Se ENS Le ear
© insurance |)! | a <I PS ata ® Raitway — |/540 it PoC CEPR SLT Lg 540 ® MINE |] 99 Catcoesanee mae cane ole
ee i - 4 nnn
90 |G} (| paar PANY 90 © municipat. ||689 Cer edihewanoraeumccmeare 530 15 8g TT Serr Lee 18
Suu eT Peete pococnn MS AOU ANNG ANAS Be ccc oe 0 aE CR MMOH e ca unin ca NAAR
80 {Or hel ieee | Tl eo 620 |] . S 8) 590, 80 [ eee ee aeiind L 60
@ CANAL ye” oe} GAS &WATER |)” | 7 @ INDUSTRIAL lB, +
one Pe C verre lo ELPA so mewn LTT LL
70 |_| 70 510 45 45
sais LEE EEE et P ree tool LETTE FEEL Et eueiNs | ol
60 60 \ 500 600 ee | | 30_|
Names oF Stocks.—(1) Liverpool Overhead Railway 4% Deb.; (2) J. & P. Coats Names or Stocxs.—(r) Acieries de France; (2) Thomson Houston (procédés) ; Names or Stocks.—(1) Frankfort Mortgage Bank Shares; (2) General Gas
6% Cum. Pref.; (3) Bass, Ratcliff & Gretton 5% Cum. Pref ; (4) Brentford Gas (3) Docks du Havre; (4) Lyon Omnibus & Tramway Company; (5) Lyon 5%; Company of Magdeburg; (3) Liibeck-Biichen- Hamburg Railway; (4) Deutsche
Consolidated Stock; (5) Guardian Assurance Company; (6) London & North (6) Ville de Besangon; (7) Gaz et Eaux; (8) Soc. Lyonn. de Teintuie Apprét et Bank; (5) Gelsenkircher Mine; (6) Schaafhausen Bankverein ; (7) estphalia
Western Railway Company Consolidated Stock; (7) Grand Junction Canal Gaufrage. Wireworks ; (8) Passage Building Society of Berlin.
Original Shares; (8) Parr’s Bank Shares.
1.—GREAT BRITAIN (Trustee Stocks). CANADA, JAPAN,
ecu g PTT
Denawano [ep He fro} = FO gange — ocol TTT TTT TTT ey lf anew Toco LT 00
@wom rool LANL ETEL LL Tico) Jo ean rere LETT TELE || aba Lb | PLL
teeeesres WH PST cavenes 160]! ong 1896 Bp 150 @ BANK 180] | Vy i" 180
ms ——
omewe Ww ALT SALT vo} oassmon vole CETERA eae) [OS CCEA TUTE
oe author's y
Ort eL TANL mesos | | LBM ger iad CARTY LP LER
Om MEESTER TASKER eoases sc anWe GNC wet Nee
oe STN TS | iLL ane couuieny NTT ey
®t. BRITAIN ||120 cal Haas 1 hee | _||120 ® FINANCIAL ||120 a anaes Ami | 720 ® cwmcwenen § 1004 h 4 Tey, | nang 13}! 120:
sma SCCM Ten] (OS RO en see Acad lc UUPEESAEAAL
@natat 110 |fg) BN SGmen 4000 SERS EE no t | i160 © RAILWAY Ih 00 {33 ‘ 0
i Ges eeer eer Prep ser Trae © oats PL ee TU RTL TTT SARNIA | DSL EH Eb 46
100 (SRE ETT EET TTD be4|100 100 EG Ae 100 © suippina || 80 (Te, Tepe Tet TTS) 80
oman TorHt | teers) [OSE SCE roeoeey TTTTTT | meee | SPTTN Sree
panareetapaalase = K nase 2eSty poh i
t 5) oo oo| | Let Lect | w ULL N Seer TOPE
@®@cANnaAda . NOTEThis Chart is copied from “The Investment of Trust Funda” TRUST C L1G)" @ RAILWAY 60 i LT Sa Pa
ce ae 80 by the same author, 80 eooces 80 iS les . 80 : | 40 bd neal aaa 1 40
Names oF Stocks.—(1) London & North Western Railway 4% Preference ; Names of Srocks.— The 1895 and 1896 prices were not obtainable.—(r) Canadian Names or Srocxs.— (x) Sanyd Railway; (2) Bank of Japan; (3) Yokohama
(2) Southern Mahratta 4% Debenture; (3) Birmingham Corporation 33%; Bank of Commerce; (2) The Ontario Bank; (3) Toronto Electric Light Company; Specie Bank; (4) Hokkaido Colliery; (5) Japan Railway; (6) Japan Steamship
(4) India 34% ; (5) British Local Loans 3%; (6) Natal 33%; (7) New Zealand 337 ; (4) The Standard Bank of Canada; (5) Toronto Mortgage Company; (6) The Company; (7) Kwansai Railway.
(8) Canada 3%. Traders’ Bank of Canada; (7) Grand Trunk rst Pref.; (8) Real Estate Loan
Company. .
. (Copyright.)

--- Page 41 ---

GERMANY, SWITZERLAND, BELGIUM, CANADA, JAPAN,
SWITZERLAND. BELGIUM.
VALUE Price Movement During ALUE, VALUE Price Movement During VALUE
PPA TTT UT oe
© INSURANCE |fiood BF pase 000 @ Bans sd cone 160
BAN PRL EAN Ce eee TE LL ele
® raicway asin ' . Lt rT IS om @ steer = /5|, + Eee 145
nd CTA TE ELT Tah woof Lebel | SLEEP aL a)
® BANK 5) N @® COMMERCIAL Lal epee d *| FA 7 4
BANK oof J H \ . aeandaiy ooo 116 cual bh hh ava ASI 115
RAILWAY 8 PN tet] | beer T |
© RAILWAY 20 ee LN peer 970 @ ors. |}100 caus LES HH “| 100
© musicreat [ou oP TN EAE EEL Te vl |@ cuemoar | as Be eee Le HT es
Seetebtee + 7 Te ¥
) seer EET TTT
© GOVERNMENT || 910 ALCL Ls ryt"! 910 © inoustaiat |} 70 [OT 70
Hol LULL LPR TT ELT veer | LUTTE TPT
880 et | 880 65 55°
© Sere ETE Oe te ELT ae
| 860 860. —_ 40 40
Namus or S1ocKs.—() La Genevoise Assurance Company; (2) Jura Simplon; Names oF Srocxs.—(x) Banque d’Anvers; (2) Athus ; @) Société Immobiliére
(3) Banque du Commerce; (4) Central Swiss Debenture, 1894} (5) Ville de Genie; de Belgique; (4) Société d’Eclairage du Bassin Houiller de Mons; (5) Produits
(6) 3% Rentes; (7) Industrie Hiectrique de Genéve Debentures, | Chimiques de Droogenbosch ; (6) Prayon; (7) Glaces de Charleroi.
{
\
UNITED STATES OF AMERICA, ARGENTINE REPUBLIC.
\VALUE| Price M t Duri VAILUE, j : VALUE) Price Movement During VALUE
| a LPT ETT ce
@ ENGINEERING |} 980 LH te La as aleo © RAILWAY i100 | SAeGL 100
: S AEE TT geri
ol LTTE ELL EEL LL hell | col 411 wo
eatin) RUUD ON DREN TROP NEO 9726310 melee On One cern
'® INDU 220 -== ‘a veal ae by 920 80 se ha: TLL a 80
STAUAL fe Vy ret LL
"1190 CE eae Ne 190 © GOVERNMENT, 7 ad ami 4 Fe 70
A te F| LAD
INDUSTRIAL wy Sueece 4 /| F] ery SROUAEG 5
© mover hen | LAT La | ee en eo Aledo lL bdebtetet*T | fel 0
LAIN ramen eT LEP ET be
© wsupance liao | TL LL TL MOAT | INVALTT reseeeese |g et | 0
COAL 100 att Lhe Cte | Lae LL | 100 ® TRAMWAY | 40 (4) L Jedednbedadedeh TT | 40
aLSeECerrrtAL TT PTELELL | stellate LUT LETT TET LU
} i F 80 |@ Lee : 30°
ome: (ECERATTITET Lc! lemme RSET LDL
tool. i | Hi 40 | 20!" | 20
Namzs oF Srocxs.—(z) The Pullman Company; (2) Delaware & Hu son Names or Stocks.—(1) Buenos Ayres Western Railway Ord.; (2) Buenos Ayres
Company; (3) American Express Company; (4) Wells, Fargo & Com any; 5% Water Works Loan ; (3) 44% Sterling Loan 1888; (4) River Plate Trust Loan
(5) Home Fire Assurance Company; (6) Consolidation Coal Company; f Jew & Agency Company; (5) Anglo-Argentine Trams ; (6) Argentine North Eastern
York, Chicago & St. Louis Railroad Company. pany Rail Ord, P
; St. . ailway Ord.

--- Page 42 ---

from an all-British Investment List is an abso-
lutely vain hope. Yet this vain hope may be
said to constitute the sheet-anchor upon which
the British investor relies to enable him to ride
out every financial gale that blows, and this
is why the amount of investment-shipwreck
all round the United Kingdom is so appalling.

Before he finally turns from the contem-

-  plation of this chart we would draw the

, reader’s attention to the fact that on it is. _

depicted every type of English investment,
and that the individual history of each of
these stocks during the period between 1893

and 1906 contained separate special events
peculiar to that stock. But in spite of the
variety of trades and interests represented in
the chart, and in spite of the diverse indi-
vidual histories of the several securities during

. the period, all the price-movements are clearly
indicated by, and, in the main, follow the
price-movement of London & North Western
Ordinary, and, where some small individual
deviation does take place, such deviation is
purely temporary, and the whole list of
British investments is, in fact, controlled by
the course of British trade and finance.

And what is true of the securities of Great
Britain is equally true of the securities of
almost every other country. We demonstrate

: D

--- Page 43 ---

82

this by the annexed charts of the typical price
movements of the stocks of the following
countries :—Great Britain (two charts), France,
Germany, Switzerland, Belgium, | Canada,
Japan, U.S. of America, the Argentine Republic.
In every instance a number of representative
stocks have been taken, and their price-
movement depicted upon the basis of annual
average values. Although some of the charts
appear slightly similar in movement, they are
not so in reality, as in each instance, on account
of the widths of fluctuation, a different scale
has had to be adopted. Thus, for instance, the
charts of the U.S. America and of Canada look
somewhat alike, yet a close examination will
show that in the years 1902-1903 there was a
. strong rise in Canadian stocks, whilst during
- the same period there was a considerable fall
in American stocks. In the same way dissimi-
larities will be discovered in every one of the
charts on comparing them with each other,
when the difference in scale which unfortu-
nately had to be adopted is taken into

consideration. .
These ten charts are ocular demonstrations
: of the fact that the prices of the principal
stocks of every country move alike, under
the dominant influence of the trading conditions
of that country; so that the foundation of

--- Page 44 ---

33
profitable investment may be said to rest
on the following law :—The realisable values of
all securities whose market lies chiefly in any
one country are under the duminant influence
of the trading conditions of that country.

We commenced this explanation by quoting
the price-movements of the London, Brighton
& South Coast Railway 43 per Cent. Perpetual
Debentures, which fell from 180 in 1896 to
134 in 1904, although no alteration had taken
place either in the capital safety or in the
dividend productiveness of this security. The
explanation of this apparently inexplicable
price-movement is now simple, and this stock’s

_ serious depreciation was solely due to the
external influences obtaining on the London
Stock Exchange. These external influences .
dragged down the price of every English
security, beginning with Consols and going
down to the shares of industrial trading
companies.

The annual totals of the average annual
prices given at the foot of the chart of British
securities give a very complete picture of how
all investors who had invested their capital
solely in British stocks have fared between ,
1893 and 1906. These figures teach the valu-
able lesson that :—Hvery investor who places
his money exclusively im Ue investments of

D2

--- Page 45 ---

34
any one country is speculating on the future
trading profits of that country.

We also see, by comparing these annual
totals with the price-movements of individual

stocks on the chart, that the final result which
an investor will achieve by investing in British
stocks is practically unaffected by the number
of stocks he may select.

Although the rule that the price of every
stock is mainly controlled by the trading con-
ditions of the country in which it is chiefly
dealt in ig universal in its application, there

. are, of course, many exceptions to this rule. - —
But the exceptions, although by no means in-
frequent, are seldom to be met with amongst
the representative stocks of any country.

There are stocks in existence which so
seldom change hands that their quoted prices
may be said to solidify to an extent which
renders them insensible to the prevailing
Trade Influence. Moreover, individuals or
groups of individuals frequently create artificial
exceptions to this rule.

We will illustrate our meaning by giving
an example of an artificially solidified stock.
We have already shown that British stocks
started from a low level of prices in 1893,
steadily rose until 1896-7, and then fell away
again more or less rapidly. This was the

--- Page 46 ---

35
natural course of price-movements, but as will
be seen from the following chart the Ordinary
' stock of the Metropolitan District Railway
Company did not follow the prevailing move-
ment :—
112 (The top figure indicates the
1897 Mo average price, the bottom figura
109 vr ~ 598 the year in which it ruled).
18960 No.
v4 \
105 7 104
5895 0” 859
/ * Paar
101 / \ 100 a as
96! Bode 1590 f ws
1893 ¢ ‘ \ ‘
~e « vn
CONsOLS. AX \ frass
fee 4 #1902
. Ong 29 \ SOU oe
1393 884 2L" fos8 1897 & 2 ieoo \,
METROPOLITAH DISTRICT RLY. 29>.
ORD, STCCK. ‘ 1903 ag
1904
The reason for this quite exceptional
course of prices in the case of the Metropolitan
District Ordinary stock was that a certain
well-known syndicate of financiers had deter-
mined, first to obtain control of the line by
buying up a sufficient quantity of stock to
secure the majority of voting-power, and then
to electrify the railway. The syndicate, in fact,
prevented the natural movement of the stock
by locking up large blocks of it, and so
- temporarily removing it from the influence of

--- Page 47 ---

36
Supply and Demand.” Similarly, any stock can
be solidified by anyone who is sufficiently strong
financially to absorb the whole floating supply.

There are also some stocks which are
permanently solidified in this way and which
never respond to trade influence. Such
are stocks of local trading companies and
local gas and water companies, paying
steady dividends, whose shares are in a few
private hands and seldom if ever change
hands outside the borders of their own
immediate locality.

Under these conditions a stock naturally
ceases to be liquid, and remains unaffected by
the state of the national trade.

' In selecting stocks for investment it is
essential to remember that it is the
geographical position of the country which
controls the investment demand for the stock
that has to be considered, and not only the
geographical position of the security itself.
For instance, the table which we have given
in Chapter I. of this book includes the
Southern Mahratta Railway amongst British
Trustee stocks. The Southern Mahratta
* The late Mr. Yerkes was the chief moving spirit of this
syndicate. He died in 1906, and soon after, the influence of the
syndicate being removed, Metropolitan District Ordinary fell from
374 to 16, to which price they would have fallen long before had
. the above-named influence not existed. :

--- Page 48 ---

387
Railway is geographically Asiatic, but its
guaranteed stock, being a British Trustee
investment, moves solely in sympathy with
British trading and financial conditions.

Where different countries are equally large
holders of particular stocks, as, for example,
in the case of certain South American issues,
the geographical position of the security itself
becomes of greater importance. The purchases
of such stock caused by surplus profits derived
from the good trade of one of the interested
countries may he neutralised by the sales
caused by the bad trade of another; so that
the purchases or sales of the issuing country
itself exercise a greater influence than might
otherwise be the case. Moreover, as a country
develops and increases in wealth, it is bound
to exercise a greater control over its own stocks
wherever they are held, For not only does the
resultant increased security appeal to the
foreign holder, but the investing public of that
country is itself in a position to extend the
purchases of its own stocks.

We have now explained how the course of
trade dominates the values of investments and
how this otherwise all-powerful influence can
be nullified by the special conditions of a
stock’s ownership. The natural exceptions to
the rule are rare, and so great is the financial

--- Page 49 ---

38
strength requisite to create artificial exceptions
that an investor can afford practically to dis-
regard them.

However, should it ever happen that one of
our readers finds that some stock held by him
is moving irrespective of the general trend of
all other prices controlled by the same financial
centre, he ought to bestir himself forthwith to
make enquiries into the cause of this special
movement, with a view to disposing of this
particular security if the reason for the unusual
price-movement does not meet with his approval.

- Although the course of the country’s trade
dominates the value of stocks, it is an external
influence which need not necessarily affect the
individual working of the enterprises them-
selves. The internal influences which affect
the actual prosperity of a particular investment .
have to be carefully considered by investors, as
they are a considerable factor in improving
or impairing the dividend-earning powers of
the stock.

The dangers entailed by internal causes
are to be dreaded because their effects are so
peculiarly apt to be permanent. For instance,
mismanagement may so completely cripple a
company as to make its liquidation or its re-
construction inevitable. Or, again, the increase
of trading competition may so reduce the profits —

--- Page 50 ---

890
of any industry as permanently to extinguish
a company’s dividend-earning capacity.

But, on the other hand, although these in-
ternal influences are apt to be so permanently
disastrous in their effects, it seldom, if ever,
happens that the holders do not receive
ample warning of the malady from which
their stock is suffering. Whether trade is
passing into the hands of competitors, or
whether mismanagement is reducing the com-
pany’s assets, or whether death or retirement
has removed the chief organising brain upon
which the company relied for its prosperity
in times past, it is impossible for these events
to occur without notice of them being given .
in the reports and balance-sheets issued to
shareholders.

Public companies and nations do not
suddenly drop down dead from financial heart
disease; but, rather, a slow mortification sets
in, and the investor who has the nerve and
the courage to amputate promptly may
generally escape with no more than the loss of
a limb. Budgets and balance-sheets constantly
convey warnings to investors, and if they do
not disregard them, they may, by facing their
first comparatively small loss; succeed in
getting out of an undesirable investment
without waiting for the final catastrophe.

--- Page 51 ---

40 .

For these reasons, no investment should be

purchased without due consideration of the
. company’s balance-sheets and position.

A close valuation of a company’s affairs is
much less complicated than many imagine, and
whenever any difficulty is experienced in this
respect it can always be easily cleared up by
consulting a competent financial adviser.

We have now established the fact that
external causes give-the keynote to the price-
movements of almost all solidly founded and
well established investments, and that internal
causes only modify this main controlling
force in exceptional cases.

Another glance at the charts of price-
movements, which we publish earlier in this
chapter, will indicate that the relative strengths
of external and internal causes in the case ©
of sound investments may be respectively
expressed by the ratio of 4 to 1. This
ratio only applies to investments where in-
trinsic safety is capable of clear demonstration
at the time of purchase, as it is, of course,
patent that new and untried ventures have
first of all to find their right price level.

During the period when a new concern
is moving erratically in search of its proper
orbit of fluctuation, it is obvious that internal
influences, such as altering capital safety,

--- Page 52 ---

~ Al
management and dividend-earning power, will
. mainly determine the course which it will take.
So soon, however, as an investment has settled
down in its proper sphere, external influences
will prove to be its main controlling force.

In the same manner as a new stock has
thus to pass through a period of financial
infancy, so have the stocks in a country which
suddenly adopts the unfamiliar workings of .
the system of Joint Stock enterprise.

When Joint Stock Companies were intro-
duced into England, the newly created stocks
and shares developed the most extraordinary
and erratic price-movements, which resulted in
a final crash, historically known as the bursting

of the South Sea Bubble; although the South
Sea Company was only one of the hundreds of
concerns which simultaneously collapsed at
that time. A similarly baseless wave of
inflation, though on a much more modest scale,
was recently observable in Japan when the
Joint Stock principle was introduced into that
country in 1890. Indeed, it was only in the
year 1899, after nine years’ experience of Stock
Iixchange fluctuation, that a normal course of
price-movement began to display itself in
Japanese stocks.

A representative specimen of the indis-
criminate fluctuations which were. at first

--- Page 53 ---

42
| ks is furnished
displayed by Japanese stocks Js nee
by the shares of the Tokyo Tramway
. The face value of these shares is
50 ve ; rom 43% yen to the
1 rose from 434 y:
50 yen apiece. They ae en ee ant
i 405 yen betw
1896. From thi . int h teadily continued
1896. From this poimt they s O thoy wore
i i il in
to shrink in value, unti ( °y We
\ feat of a Tramway
uoted at 65 yen. The . ,
Ordinary share rising over 5° per fonts coe
| iblei ry where the w g
only be possible in a country " ® wituly andes
of Joint Stock enterprise was bu ar
stood. As the general movement of some 0
principal Japanese stocks is rather curios
we here illustrate them.in the form of a
JAPANESE PRICEMOVEMENTS.
| Pram oe ai 7
. @) Hokkalds Rly. Comp. | al EEN LL HHH
vases Heit Nishi:
Bank Ord. Shares ‘ {
Omgaie on AUT Perr
' ly. Go, Ord, TALL ey |S pis i BP |
© Snares. bee ae LSE NS Se ‘
© wontamee LTTE WT AT
sarees PLLC ANWR Na
Japan Steamship Co SHUN F Re
Ord. Shaves __.... |KO | ‘x TAMA y me
Ord. Shares... tt i | il
() Sanys Rly. Co. Ord. ere =f TTT PCR :
Shares... fue onankall | a
2 ove sree FLT TUTE TEU

--- Page 54 ---

43 ‘

This chart will serve the double purpose of
showing that neither in new countries nor in
untried issues is it possible to absolutely rely
on any theory as to price-movements. It will
also be seen from this chart that the solid
fixed Income stocks like Tokyo City Bonds
and Imperial 5 per Cent. Consolidated Loan
indicate the movement, but that the specu-
lative ventures, the scope of which is not
fully understood by the public, do not follow
it, but mark out price-movements of their
own. In spite of the stocks following a
speculative course of their own, irrespective
of the course of national trade, there is an
undeniable general tendency among all of
them to move together.

; We have now established the fact that
it is impossible for any investor safely to
invest his capital in any one country. It is
true that by limiting his investment area to
small local stocks an investor might succeed
in purchasing a number of securities which
were free from the fluctuations due to trade
influence. But stocks of this stamp are —
attended by all the grave drawbacks of

_ companies which are managed by a small
clique. ‘The shareholders are either friends or
others with common business interests. For
example, if a company be created to carry on

--- Page 55 ---

44
the business of a local hotel, you will find the
grocer who supplies the bacon, the butcher
who supplies the meat, the wine merchant who
supplies the wine, and so on, are shareholders
in the company. Owing to lack of competition
for the contracts, the result naturally is that
the hotel is carried on at great expense, and the
shareholders suffer in consequence. This
matters little or nothing to the interested
shareholders who continue to make large
profits by their contracts; but it hardly con-
duces to the satisfaction of the disinterested
investor. Indeed, such a form of investment
is scarcely less dangerous than confining the
capital to be invested to one country, and
so speculating on that country’s future trading
prosperity. - .

In the next chapter we shall discuss a
practical scheme whereby an investor may so
widely distribute his investments over the

world’s area as to endow his capital with
the maximum stability of value.

--- Page 56 ---

CHAPTER III.
THE GEOGRAPHICAL DISTRIBUTION OF
; CAPITAL.

A srupy of the published official trade reports
of all civilised nations proves that the world’s
trade, if taken as a whole, is constantly
expanding. Indeed, the mere fact that the
. world’s population continues to increase steadily
; renders a corresponding expansion of the
world’s trade inevitable. Statistics also prove
that two countries which are under different
Governments and geographically distinct from
each other will generally differ widely in their
respective trade activity. Thus, locally, trade
may suffer periodical depression, but the trade

of the whole world is perpetually growing.
The fact that, whilst the world’s trade is
constantly expanding, the share of each
separate nation in it is constantly altering is
the fundamental principle of our geographical
method of equalising investment risks, As the
proof of this fact is of necessity the work ofa
statistician, Mr. Holt Schooling has been asked

to independently investigate this subject.

--- Page 57 ---

. 46
His conclusions have appeared in the April,
1907, number of the Financial Review of
Reviews ; they have since then been published
in the Popular Financial Booklet XXI., which
Booklet has been reprinted and appended to this
. book. .

It follows that if an investor widely distri-
butes his capital over the earth’s surface, local
depression in one quarter will be counter-
balanced by the local trade activity in another
quarter. Further, it also- follows, if an

' investor’s capital is sufficiently large to enable
him to purchase investments representative of
every trading centre in the world, that the
world’s perpetual trade expansion will auto-

matically tend to increase the realisable
. capital value of his investments year by year.
Moreover, as the tendency of the younger
countries is .to increase their proportion of
the world’s trade, so their credit necessarily
tends to appreciate also; with the result that
_ the representative stocks of those countries
must show a special tendency to rise in

value.

By way of giving an illustration, proving
the practical value of the above conclusions,
we have prepared a chart covering the same
period, and in construction identical with the
charts given in the last chapter, but depicting

--- Page 58 ---

.
2 18
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t+ op] © “la
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S| 8) ¥ $ | 38 os
; ns 0 ra 2 vf 4 ara ‘
= ¥ wl e| Sa sete
| |3[e ¢ + x ai Sis ‘Oo = 2
3 a i ® | 8 a ole
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2 |, |. gt. 8 BI t y| 8 q | 8} 2 5
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2 ee el g 5 7 8 [2
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x ES =| 3 st ~ ‘e 0 + — e 0 d,
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2 cel 2 Ys 8 oS 32/8 a -3 |2
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Lu =3 S53 32 os = Sz TMT He
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Si re ieveal ta Ht PHN SUNN al at il HH =
e aun = es :
= b f : L =
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6) i eee uM oe uu iN :
DAE HHH ae — HAL Hts
at ni Hil ETL ual NT Bu rh act TATE Att PU s
fe aes ai at eal nn =
Zz 2 ~ a Pal SCTE i =
ud ‘g Aiur ior as ist LH 3S
= 2 ala | tH qe iat cil net 1M nie nit Bin co TT =
ul ‘(3H LULL nu aa eee tn sua JIN
= pa i nM HE WT] aun TTT eae age Nth ELLE er LITT
eo) Zale H [ TE ATT LL anidi —_e aH sla rs) ] 2
= 28 Ii ra Nae ttt titi Sos) a
elel et pat ae SIO¢ oe
Oo |3 ae NX as eat EK) 8
= 2 eo g ,
f ee g 8
= °
z 2 a Hee nH sf &
® LL nin HLT a LEE 2 a
ra ath TT ie rT g
fa S Me nial CELLET! |
> ik TT il LUT 8
ral al ETT 3 2 8
Zz 2 LL ° 3 =
~ BoE Se
>

--- Page 59 ---

| ap .
the price-movements of a number of invest-
ments, every one of which belongs to a different
country and is subject to a different trade
influence. A very cursory glance at this chart
will immediately establish the practical benefits
which an investor derives from a wide geo-
graphical distribution of investment risks.

In this chart the horizontal straight lines
denote the intervals in the price levels of
stocks, and the vertical straight lines mark
off the yearly periods; the zig-zag lines are
a faithful pictorial presentment of the price
movements of individual stocks,

For the sake of convenience the respective
quantities of the stocks have been adjusted,

_ where necessary, in such a manner as to keep
the size of the chart within reasonable limits.
This variation in the quantities of the stocks,
however, does not alter the relative positions
of the price lines to each other.

In order to make the picture as little tiring
to the eye as possible and to keep the zigzag
lines at reasonable intervals apart, we have
also so arranged the quantities of the stocks
that the price lines commence at fairly regular
intervals between £875 and £1,190. Beyond
this, the chart has been left to tell its own
story ; and the reader who scans the names of
the geographical divisions represented and

E

--- Page 60 ---

48

the names of the securities depicted before
he addresses himself to the study of the
respective price-movements, will admit that
the chart fairly embraces the investment areas
of the whole world, as far as the limited
number of stocks included permits of this.

The reader can easily translate into figures
the price-movements depicted on the chart
by means of the horizontal price lines. These
represent the annual average values, and
their totals are displayed at the foot of
the chart. By this means the chart not
only pictorially illustrates the various price-
movements, but it also gives the several total
annual values of all the stocks, depicted, year
by year, at their respective average prices.

The chart comprises stocks situated in
the following geographical divisions :—Great
Britain, London and North Western Railway
Ordinary Stock; British Colonies, Canadian
Pacific Railway Four per Cent. Preference
Stock ; Europe North, Deutsche Bank (Berlin)
Ordinary Shares; Europe South, Royal
Sardinian Railway B Shares; Asia, Bombay
Gas Company Shares; Africa, Egyptian Delta
Railway Four per Cent. Debentures ; America
North, Illinois Central Railway Common ;
America. Central, Mexican Railway Six per
Cent. Debenture Stock; America South, .

--- Page 61 ---

49
~ Buenos Ayres Western Railway Ordinary ;
General International Investments, Direct
Spanish Telegraph Preference Shares. The
ptice-movements of all the stocks on the
chart show that no two of them display
similar fluctuations throughout the whole
period. Here and there, but during different
years, there is a curious temporary parallel of
movement between some of the stocks; but the
very fact that these seemingly sympathetic
tendencies affected different stocks at different —
times only tends to preserve the Capital stability
of the whole list during the various years which
we have illustrated.

The representative British security in this
chart is the London and North Western
Railway Ordinary stock, and this stock, being
influenced by British trade, is of course
similar in price-movement to the stocks
depicted on the chart of all-British stocks which
we have already given in the preceding chapter.
It is significant to see how entirely all the rest
of the Geographically Distributed stocks differ
in their price-movements from the British
stock. It is this individuality of movement on
the part of each security, included in a well-
distributed Investment List, which ensures the
first great essential of successful investment,
namely, Capital Stability.

--- Page 62 ---

; 50

The whole appearance of the International
Chart, in fact, clearly demonstrates that as the
trade prosperity of cach country differs from
that of all other countries, so the. price move-
ments of the stocks in each country differ from
those of all other countries. * ||

The secondary point which at the outset
of this chapter we proposed to establish was
that in consequence of the perpetual growth
of the world’s population there was a corre-
spondingly perpetual expansion of the world’s
trade. Now, we have already shown that
Trade Prosperity has a very great influence on
Stock Exchange values, so it follows that, if

. the world’s trade does expand as we have
maintained that it does, then the realisable
value of an International Investment List will
also, at reasonable intervals, show a tendency
towards expansion. The expansion of realis-
able value in the list of securities given in our
example is to be found in the several annual
totals at the foot of the chart. In 1893 the
realisable value was £10,160, and it gradually
rose to £12,405 in 1906.

In Chapter II. we have shown that all the
representative stocks of one country constitute
the same investment risk, and that, therefore,
an Investment List entirely composed of stocks
of any one country is unsafe. We have now,

--- Page 63 ---

PRICE-MOVEMENTS OF THE STOCK EXCHANGE VALUES GIVEN BY THE BANKERS’ MAGAZINE.

For the past ten years (1897-1906) the Bankers’ Magazine has published the aggregate values of 387 representative securities, divided into groups. These
groups are here arranged, as far as this was possible, on the principle of Geographical Distribution, into two sections, the top section representing the British
Stocks, the bottom section the Stocks of other countries. The value at the end of each year has been taken as the means of determining the direction of the
zig-zag price-movement lines of each group,

Ui ,e

(in thousands). 1897. 1898, 1899. 1900. 1907, | 1902, | 1903. 1904, 1905, 1906.
- ae
s | eamisn: OE Ne ee ee ee eee
(Cy. —!
wort | Ogee Of et NP) |_|} |
Ow KANE
. ~ “Ss
wen) Otmee PSO OPS ee
%
| TE _
913,007 (© Railways, Ord. (P) anh. XN P|
—— PPO RARLOY <=
“‘ ss
mn | Qmmmam coh es She SSS eR
: ailways, Deb.
eee Ne re ee eee ee
129,08 |) ©)Raiways, pret, | | | | | POA Ep ae
ee is ON nes Pees meets Care
nan) Oe +1111 | Pent a4 pet [| | PS Ree
LIPO IO a fa:
| eR ae ee
£ ame PRICE MOVEMENT OF STOCKS (OTHER THAN BRITISH) OF THE mero
NOMINAL VALUE OF £466,404,000.
119,916 | @) BRITISH COLONIES. ef So eee 3)
B@eovseoser ees ——————
| ee aS ee ee ee ee ee ee
pee Oke GTR De SSS ere
IS — a A -
ise | @awenonnorme | P| |) IN et Se
OT ore ELLIS 41 we es
On Ns Ps a ae a a
65,944 || @) america, souTH. dn aclnnnnnpaer yr PPE a @)
LPVOID ws?
Ong | | | PSE TP TE
ze [Owes OT Ss Sse
@_. Set A
_Reprinted from The Financial Review of Reviews. The above Chart is copyright, and may not be reproduced without permission of the Publishers of The Financial Review of Reviews.

--- Page 64 ---

51
in the International Chart, grouped together
the price-movements of the stocks, each of
which is subject to a different trade influence,
' and as a result it is seen that :—

If an investor divides his capital equally
among a number of stocks, every one of which
is under a different trade influence, then each
of these.divisions of his capital will constitute
a distinct investment risk, and a true system
of averaging investment risks is thereby
established.

The charts depicting price movements,
hitherto given in this book, have displayed .
in every instance the fluctuations of the indi-
vidual. stocks only. In order to show that,
when groups of stocks are taken, and when
charts are prepared depicting the price move-
ments of these groups, the results obtained are
similar to those from individual stocks, we
here reproduce a chart which appeared in
the Financial Review of Reviews for June,
1907. This chart was prepared from the
aggregate-value figures of 387 representative
securities published in the Bankers’ Magazine
month by month. The groups given by the
Bankers’ Magazine were divided into two

‘sections. The upper section represents groups
of purely British securities, and the lower
section represents groups of stocks situated

--- Page 65 ---

52

outside of Great Britain, each group of which

is subject to a different trade and market in-
fluence. The result shown is identical with

the results obtained in the former charts given

in this book. Although we are here dealing
with groups of stocks representing hundreds

of millions of capital value, the British groups
move slavishly together, whilst every one of

the non-British groups displays an individual
movement of its own. So that the wholesale
movements of a large bulk of securities and
the individual movements of a single stock

are identical in their results. In fact, the
figures from the Bankers’ Magazine show

in the upper chart how unsafe from a capital
point of view is an investment which is sub-
ject to the trade or market influence of a
single country ; whilst in the lower chart

an investment in which capital is geographi-
cally divided, displays a true balance between
the rises and falls in value.

' his exhausts the chief noteworthy points

in the International Investment Chart, and we

will now proceed to discuss the features of
this chart in comparison with those of the
all-British Chart which is to be found facing _
page 27. To begin with it should he noticed
that the stocks comprising the International '
List are on average inferior in quality to those

--- Page 66 ---

53
contained in the all-British List. Their
inferiority is attested by the fact that their
average annual widths of fluctuation are
greater than the widths of fluctuation in
the all-British List. In a similar International
List, but composed exclusively of higher grade
securities which we publish in Chapter V. of
this book, the maximum capital variation
during a period of ten years is very slight.
As the aim of that chart is to show how
funds can be invested with the greatest safety
both of Capital and Income, we naturally
chose stocks of a higher grade than we have
done here, where our object is to show how
widely different are the price-movements of
stocks of various _ nationalities. But by
selecting stocks of great width of fluctuation
for the International List exhibited in this
chapter, we are now in a ‘position to
show by comparison with the all-British List
that the Geographical Distribution of Capital
collectively endows an Investment List,
consisting of individually inferior stocks, with
greater Capital Stability than is possessed by
an Investment List composed of higher-grade
stocks, all influenced by the same investment
risk. So that :—
An investor who geographically distributes
‘his capital can, with safety, afford to hold stocks

--- Page 67 ---

54
whach yield a larger income than he can hope to
receive from an Investment List which disregards
the important point of Geographical Distribution.

Before proceeding further with the question
of how far it is prudent to attempt to employ
Geographical Distribution as a means of en-
hancing income, let us re-affirm our opinion that
capital safety should: always be an investor's
first consideration. But, unfortunately, this
life is prolific of circumstances under which
counsels of perfection are of no practical utility.

For .example, let us suppose the case of

a professional man with rapidly increasing
family responsibilities, and a slowly growing
professional income which is supplemented
by the interest yielded by his private fortune
of £4,000. ‘To aman so placed, who roundly
asserts that £240 per annum is the minimum
income from his private means upon which
he can make both ends meet, it is useless to
advance the perfect theory of investment.
Circumstances compel him. to seek a yield of
6 per cent., and, under the circumstances, his
financial adviser can only put him in the way
of securing this income with safety.

In cases of this description a most carefully
prepared International Investment List will
prove the greatest of boons ; for the stocks, .
displayed on a chart given in Chapter V.,

--- Page 68 ---

55 |
vield about 7 per cent. upon the capital
invested, and yet offer collectively a very
fair amount of capital safety.

Referring again to the all-British Chart
given in Chapter II. and the International
Chart given in this chapter, we show, at the
foot of these two charts, the total annual |
values and annual income of the all-British
and the International Investments which they
respectively illustrate. We here reproduce

_ them in tabular form, as a close study of these
figures proves various important points. .
_ Capital Value. Annual Income. _
Year. All-British | International | All-British | Interna-
oe List. List. List. [tional List.
£ £ £ £
1893 10,226 10,161 420 495
1894 10,475 10,242 427 503
1895 11,456 10,667 453 512

1896 12,702 11,243 479 523

1897 13,128 11,609 474 518

1898 12,727 11,613 | 476 501

1899 |- 12,214 11,811 485 524

1900 11,672 11,501 | 477 534

1901 11,127 11,522 470 528

i902 | 10,902 | i167 | 451 | 532

1903 10,487 11,424 434 535

1904 10,089 11,621 429 546

1905 10,282 | 12,325 443 | 564

1906 10,252 12,405 453 566

This table shows : —

1—The capital value at starting is
almost identical in both lists, but the

International List produces 18 per cent,

--- Page 69 ---

56
more income than the all-British List from
the very commencement.
2.—The all-British List improves in
value during the first five years by £2,902,
but this improvement gradually disappears
again and in 1906 the value is sub-

stantially the same as it was in 1893.

The International List rises in value but

gradually; this rise, however, is main-

tained, and a final increase in value of
£2,245 is recorded.

Another very important point in favour of
the Geographical Distribution of Capital is that :

No set of circumstances could cause all the
stocks in a Geographically Distributed Invest-
ment Last to show a simultaneous depreciation
below cost price.

This is an advantage which an all-British
Investment List does not afford its owner.
For an investor who stakes his Capital Stability
on the trade prosperity of one country fre-
quently finds that every stock in his possession
is quoted below “cost.” Now, nearly every
investor desires at times to realise some part
of his invested capital, and to be able to do

_ so only at a loss is disastrous. It is, therefore,
well to remember that an investor who con-
fmes himself to the stocks of one country

- may and must find himself at times in this

--- Page 70 ---

57
predicament; whilst with a Geographically

_ Distributed Investment Listan investor doesnot,

. and cannot, find himself so disadvantageously
placed.

To the speculator, of course, as well as to
the investor, the advantages of Geographical
Distribution open a very wide vista; here,
however, we are only concerned with the
welfare of the investor. A properly distri-
buted Geographical Investment List is the

first and only practical investment scheme
which has ever been placed before the
public. With the aid of Geographical
Distribution, safety of investment in stocks

' and shares is reduced to a mathematical
problem, which is solved by means of a
simple set formula, which never varies.

. To carry out the construction of an Invest-
ment List, in accordance with the system of
Geographical Distribution, is a matter in
which the investor will be glad of some
assistance. In order to meet his require- .
ments, the publishers of this book also publish
an Investor’s Year Book, in which all the
stocks included therein are classified geographi-
cally, their width of fluctuation is tabulated,
-and the past history of their respective
dividend-earnings and yields is clearly set
forth. When an investor has once got his

--- Page 71 ---

; 58

Investment List into order, they further assist

him to keep in close touch with his actual
investment position by means of Harley’s
Investor's Account Book, which is based upon

the system of the Geographical Distribution

of Capital, and is so arranged and ruled that

the investor never loses sight of this great .
essential to profitable investment.

To many of our readers the whole idea of
the Geographical Distribution of Capital is, of
course, new, because this important financial

. discovery was only recently made by us.
Having originated the idea, we have person-
ally reduced to practical working shape a
system which every prudent investor should,
after satisfactory perusal, forthwith apply to
his own Investment List.

--- Page 72 ---

CHAPTER IV.

WHY GEOGRAPHICAL DISTRIBUTION
PROTECTS BOTH CAPITAL AND INCOME.
By means of the examples already given in |
this book we have clearly established the fact
that every individual purchase of stock is
strongly tinged with the element of specula-
tion, and that this speculative element cannot
be eliminated from any isolated purchase or

. from any individual holding, for it is impossible
to predict the exact future of any individual

_ stock.

_ Jt is true that a close investigation of the
inherent safety and value of a particular
security may serve as a most useful and,
indeed, a very necessary guide to future proba-
bilities. But probabilities are by no means
certainties, and anyone who pronounces this
or that investment to be a practical certainty
should be regarded with distrust by all prudent
investors.

It would, perhaps, be impossible to find a
more convincing example of the slender
foundation upon which all investment cer-
tainties rest than is furnished by Consols.

--- Page 73 ---

60

Who, for instance, would have believed, in
1897, when Consols were 114, that in seven
years’ time they would have fallen to 85? Or,
again, who would have calculated on any
statistical basis that Canadian Pacific Railway
Common stock would rise from 35 to 182
within the space of ten years, or that Atchison,
Topeka and Santa Fé Railway Ordinary would
rise from $9 to $91 during the same period?

Whether in adversity or in prosperity, the
future of any given investment must always
remain a matter of considerable speculation.

No doubt there exists a large body of in-
vestors who, by shutting their eyes to obvious
facts, endeavour to deny that the element of
speculation enters in any way into the act of
investment. Such wilful perversity, however,

is only a fruitful cause of. disastrous capital

losses. Investors of this type will be heard to
assert that, having bought none but the safest
of stocks, their capital must be secure. Further, _
they argue that, so long as their income remains
undiminished, they can afford to let the realis-
able value of their capital take care of itself.
But although such specious arguments may
seem indefinitely to postpone the day of
reckoning, yet. sooner or later the actual
situation will have to be faced, and no investor
can afford to delude himself with the idea that

--- Page 74 ---

. 61 *
capital safety and the realisable value of his
investments are matters which can be dis- ;
regarded with impunity.

But, it may well be asked, if every purchase
of stock is a speculation, what should the .
investor do who desires entirely to eschew
speculation? ‘The answer to this question is
that precisely. as a carefully-studied system of
averages eliminates all taint of gambling from
a sound system of insurance business, so a
sound system of averages, based upon the
Geographical Distribution of Capital, should
reduce to a minimum the taint of speculation
from the act of investment.

From their very nature, insurance and
investment are both highly speculative trans-
actions, which can only be raised to the dignity
of solid business by a carefully studied system
of averages.

We have already shown that the realisable
value of all important and intrinsically sound
stocks is dominantly influenced by the trading

- conditions of the particular country in which |
they are principally held and dealt in, and
that the trade of every country moves in
cycles of prosperity, followed by cycles of
adversity.

Further, we have shown that the course of
trade of countries which are under different

--- Page 75 ---

6 .
62
governments, and are geographically situated
widely apart, will nearly always differ in
activity at any given moment.

. Lastly, we have shown that the trade of the
world, considered as a whole, is constantly
increasing, and that a decline in the trade of
any one country simply means the transfer of

: it to another country, and not a loss of trade.
These three facts taken conjointly and
utilised as the basis upon which the fluctuations
of investment values should be averaged, con-
stitute the practical means of freeing the act of
investment from the taint of speculation. Their:
application resolves itself into the Geographical
Distribution of Capital. Let us take the
important points of this system of invest-
ment seriatim, and explain their individual
importance :—
1.—The Speculative Element Reduced to a
Minimum.—Although it is impossible to
predict the future of any single invest-
ment, it is possible to predict the result
of distributing invested capital amongst
a number of different investments which
embrace the world’s area. We have
already seen that the value of all sound
investments is dominated by the trade
of the country to which they belong, and
similarly the total value of a number of

--- Page 76 ---

63
investments which cover the world’s area .
depends largely upon the world’s trade.

- The trade of the world, considered as a
whole, however, is not subject to alternating
cycles of boom and depression, but is con-

. stantly expanding. .

Similarly, the total value of an Invest-

| ment List comprising stocks which prac-
tically cover the world’s area in their
geographical distribution must have a
tendency to appreciate in value. It is the
constant growth of the world’s trade which
reduces to a minimum the element of
speculation from the future of a _ well-
distributed Investment List.

2.--A proper system of Investment Averages
established. In order to. maintain the
average realisable total value of an Invest-
ment List, it is necessary that the depre-
ciation in value of some of the stocks
comprised therein should be counter-
balanced by an appreciation in the value of
others. A sound investment scheme is the
result of an accurately balanced system of
poise and counterpoise. But the central
idea of counterpoise is altogether lost sight
of when the choice of stocks is made
indiscriminately, without due regard to the
probable extent of their future movements,

F

--- Page 77 ---

64

or, worse still, when the area of investment

is largely or wholly restricted to the stecks

of one country. For this latter method

of investment absolutely precludes the

possibility of any sort of counterpoise.

On the other hand, by adopting a world-

wide scheme of Geographically Distributing

Capital, the system of poise and counter-

poise is assured, because no two stocks

controlled by the course of trade of two

different countries ever move absolutely

alike. Furthermore, the resulting average

of such a system must be in favour of the

investor who adopts it, because the total

average value of his holding depends to a

very great extent upon the trade of the

whole world, which is constantly growing.

So that, if taken over a reasonably long

period, the rise in the value of the appre-
ciating stocks comprised in an Investment

List so constituted must inevitably exceed

the fall in the value of those stocks which

have depreciated.

3.—-Income and Capital Safety increased. The

' yield obtainable from representative invest-

- ments depends entirely upon the value of

- eredit in the countries in which they are

principally. held. The richer the country

the smaller is the yield upon its stocks.

--- Page 78 ---

65
For instance, Consols yield under 3 per
cent., and British Railway Debentures
about 34. per cent.; whereas, the yield
from French Stocks of similar class is
_ slightly higher in both cases. Again, in
other parts of Europe, and the United States,
Railway Debentures yield yearly 4 per
cent.; whilst South American, African,
Japanese and Chinese investments of this
type yield considerably more than that
rate. In similar proportion in each
country the yield from all other classes
of stocks moves in a progressive ratio,
which is in inverse proportion to the
country’s accumulated wealth. Therefore,
an investor who confines his investments
to the stocks of one country, thereby limits
the yield from his invested capital to the
ratio of yield of that particular country.
But if he geographically distributes his
invested capital, he receives the average
rate of yield which rules the world over.
. It is almost unnecessary to say that. this
-average rate is considerably larger than
' the rate obtainable from British stocks ,
of the same class. Thus, at the time of
writing, whilst a list of British investments
-- of good medium class would yield, say
_ * about 44 per cent., a list of in every
F2

--- Page 79 ---

66

way equally safe investments of wide - .

geographical distribution would yield

about 5 per cent. In fact, without in
any way diminishing the individual safety

of the investments held, the yield from a

Geographically Distributed Investment List

must always be materially larger than the

yield from an all-British Investment List.

. A glance at the all-British Chart of price-
movements and income yield, and at the
Geographically Distributed Chart and income
yield given in this book, will confirm the
three contentions which we have advanced
above.

In addition to the points which we —
have already enumerated, there is another
important contingency which can only be
guarded against by adopting the principles
of a world-wide Geographical Distribution of
Capital. This contingency is the permanent
depreciation. which may possibly overtake
some portion of any capital sum invested.
For, no matter how carefully investments may

_ be chosen at the outset, it is quite impossible
to guard against a certain percentage of
the stocks selected failing to realise the
reasonable expectations formed concerning
their future. Truly this percentage of the

--- Page 80 ---

67
' unsatisfactory may, by careful selection and

attention, be reduced to a minimum, but so
long as the world continues it will be necessary
to reckon upon a certain amount of disappoint-
ment in every effort made to precisely calculate
the future. This being the case, it is clear that
if an investor is to preserve his Capital intact,
he must form a Reserve Fund to provide for
the contingency of disappointment.

On examining any of the Geographically
Distributed Charts: given in this book, it
will be seen that many handsome profits
which are at one time displayed by in-

dividual investments are swept away again ;

later on by the inexorable tidal movement of
Stock Exchange values.

The constant recurrence of this phenomenon
will naturally lead the investor to enquire .
whether it is absolutely essential to the scheme
of Geographical Distribution that a handsome
accrued profit should never be converted into .

. cash, but should be thus left at the mercy of the

backward movement, which the charts will have
convinced him is certain to ensue.

The answer to this enquiry is that the rises .
which occur should be utilised for forming a
Reserve Fund ; and, with a Geographically Dis-
tributed Investment List, it is always possible
to realise accrued profits without disturbing

--- Page 81 ---

68

the counterpoise of the Investment List; for,
however numerous are the countries over which
an investor has geographically distributed his
capital, there are always other countries
available whose trade interests stand con-
trasted with those of the countries in which |
he has already invested. As it is the
differences in trade which are the main cause
for the rise and fall in the value of the
individual stocks, the system of poise and
counterpoise will still be maintained if the
proceeds of the stock realised be invested in a
country which has not already been selected, but
whose stocks stand at a temporary depreciation.
If, therefore, a stock which shows a consider-
able profit is realised, and the proceeds in-
vested in a stock of another country yielding
a higher rate of interest, but whose price is
below its normal value, the advantageously
acquired new purchase should, in its turn, at
no distant date, display a similar profit to
that already secured.

When a geographically distributed Invest-
ment List is judiciously managed in this
fashion, ut becomes practically certain that the
realisation of one profit will tend to the future
accumulation of another profit.

The investor will now begin to perceive
that one of the main advantages offered by a

--- Page 82 ---

69
world-wide distribution of capital consists of
the opportunities which this system presents :—
1. Of realising an accrued profit in one
or more geographical divisions.

2. Of purchasing or of averaging depre-
ciated investments in another geographical
division with the capital so realised, and
with the accrued profit so secured.

3. Of materially increasing the capital
. value of the whole Investment List by thus
making a profit, which has already been
secured, act as a stepping-stone to another
future profit on an unduly depreciated
security, which is purchased with the pro-

ceeds of the stock sold.

It may occur to a thoughtful investor that
the system of securing accrued profits, advo-
cated above, would necessitate his investing
his capital in more or less speculative stocks
of great width of fluctuation. But a glance at
any one of our charts will satisfy the reader that
extensive upward and downward movements are
by no means confined to speculative securities,
for we find that a Trustee investment like
Nottingham Corporation Stock in the all-
British Chart has fluctuated to the extent of
31 points, whilst a more speculative stock
like Illinois Central Railway Common Stock
in the International Chart has only fluctuated

--- Page 83 ---

70

to a similar extent. These facts show that
the system of securing accrued profits and of
re-investing the proceeds of the stock thus
sold in some other temporarily depreciated
security, can be followed alike by investors
holding the choicest securities and by those
who select the more speculative stocks.

How large are the profits to be made by an
investor who follows this plan may be gathered
from the price-movements given on the
Geographically Distributed Chart. It will be
noticed that the stocks therein depicted fre-
quently rise 15 points in two years, and that
on an average quite a third of them do this
during the period. To speculators, of course,

- “the above briefly sketched plan offers a wealth
of possibilities, but. we are not here interested
in any speculative questions.

By this time we trust that we have clearly
established the advantages of Geographical
Distribution. But it is important to remember .
that in order to secure the benefits of this
system it is necessary to apply to it a
thorough grasp of Stock Exchange markets,
combined with an intimate knowledge of
Political Geography. There are many intri-
cacies attached to the fact that so many stocks
are situated in one country but have to be
treated as belonging to another country, because

--- Page 84 ---

. 71

. it happens that the bulk of the capital is held
in that other; for example: the Debentures of
the Russian Petroleum & Liquid Fuel Com-
pany move in sympathy with Consols and the

rest of the London Market, rather than with
the Government Loans of Russia, and so does :
the Frank Jones Brewing Company, although
the brewery is situated in the United States.

Difficulties of this type tend to render a com-

petent financial guide almost an essential to
the satisfactory working of the system of
Geographical Distribution, and to the pro-
duction of the material advantages which result
from the proper application of its principles.

--- Page 85 ---

CHAPTER V.
THE PRACTICAL CONSTRUCTION OF
INVESTMENT SCHEMES.

To most investors it will prove quite a novel
idea that any necessity exists for an Invest-
ment Scheme, and that such a scheme requires
construction, .

With the exception of the managers of
Banks, Insurance and Finance companies, and
perhaps a few isolated large private investors,
the investing public have always looked upon
investment as a haphazard business, in which
luck was the main factor. Whenever money
was to be invested the pros and cons of this
and that security were considered mostly
without any reference to the investments
already held, and without weighing anything
except the safety and yield of the proposed .
purchase. This is the one and only reason
why so few investors are permanently suc-
cessful in their operations.

In the preceding chapters we have
explained the necessity of considering all
investments held as one harmonious whole,

--- Page 86 ---

73

- of which all the component parts must pro-
_ perly balance each other, and that both in
quantity and quality all the various stocks
held must be on a near approach to equality.
We have further endeavoured to show, unless a
contemplated new purchase proves on investi-
gation to blend satisfactorily with the stocks
already held, it is dangerous to combine it

with them in the same Investment Scheme.

Here we will describe the fundamental
principles which should guide investors in
the construction of Investment Schemes. In
pursuance of this idea, we will first assume
that the investor starts without any stocks

. in hand. ‘Then, when we have exhaustively
treated of the construction of an Investment
Scheme, we will in the succeeding chapter
deal separately with the treatment of
stocks in hand, and show how an existing
Investment List should be placed on a sound
foundation.

First of all the investor should make up
his mind what results he desires to obtain.
Almost any reasonable result is procurable,
provided: that the means most likely to
produce the desired end are employed. ‘To
illustrate clearly what we mean we will outline
and discuss a few of the typical and most
frequently recurring objects of investment.

--- Page 87 ---

74

I. Maximum Capital and Income Safety
coupled with the minimum amount of personal
trouble to the investor.

An investor who desires a moderate income,
coupled with great capital security, and who
does not wish to attend to his investments
more than is absolutely necessary, should
minimise the number of stocks in which he
invests as far as is compatible with a
proper geographical distribution of external
investment risks. He should confine himself
to investments whose inherent safety is
capable of the clearest demonstration,
which are as far as possible removed from
political influences, and from whose internal
capital and income safety the speculative
element is completely removed. Such a list
should consist exclusively of Government or
Municipal Loans which show the least fluctu-
ations in price-movement, and Debenture or
Bond issues of undoubted security. Deben-
ture and Bond issues are the more preferable
class of investment, as they are more removed
from political and monetary influences than
are Government and Municipal Loans. There
is a general idea abroad among investors that
the Government issues of the principal
Kuropean States are most suitable for such

--- Page 88 ---

. 75

an investment; we, however, are not of this

. opinion, and infinitely prefer absolutely safe

stocks which have a limited market and for

this reason fluctuate little in value. The

age of these investments need not neces-

sarily be considered, provided that their

inherent capital and income safety are un-

questionable. _ A list constructed on these

principles will give no cause for anxiety,

one hour in every year spent on it will be

sufficient to keep it in perfect order; the

capital value and income will be stable, and

risks of all kinds reduced to a minimum. A

- specimen of this type will be found in the

4 per cent. Chart given in this chapter. From

this chart it will also be seen which class

of stocks of this kind are subject to wide

fluctuation.

Il. Maximum Capital Satety coupled with

a larger yield, but requiring more careful

An investor who desires a larger yield than

he would obtain under Example I. must. be

prepared to take a certain amount of trouble

. over his investments, and have them re-valued
and examined at least four times in each year.

He must cover as many geographical divisions

as his capital will satisfactorily permit, and he

--- Page 89 ---

76

must adhere closely to the three cardinal rules.
for obtaining capital safety, as defined on
page 11 of this book. In return for this
additional trouble he will obtain an increased
yield of up to 14 per cent., and he will.
experience no difficulty in making his capital
produce about five per cent. He should confine
himself exclusively to sound Debentures, Bonds,
and first-class Preference shares, and he should
avoid all stocks which are easily swayed by
political and monetary influences, or financial
cliques or combinations, taking in preference.
issues which are less liable to these influences.
By these means his capital safety will be quite
as secure as if he had invested in accordance
with Example I. .

lil. Reduced Capital Safety compensated by
a comparatively high yield.

An investor who is forced by circumstances
to make his capital return him a larger yield
than five per cent. can achieve this object by
taking additional trouble over his investments.
The stocks which he selects should in the main
be of the same nature as those described in
Example II, yet giving a higher yield.
Ordinary stocks and shares situated in old- -
established industrial centres may be blended

--- Page 90 ---

: 77
with Debentures, Preference and Govern-
ment stocks of more recently developed
countries. The individual stocks selected will
be of a lower grade, and therefore individually
less safe from a capital point of view. This
loss in individual safety must be counter-
balanced by additional sub-division of the main
divisions of geographical distribution. In this
way the smaller inherent safety of such
stocks will be compensated for by the more
perfect distribution of external risks. Lists

. properly constructed on this principle afford
quite satisfactory capital safety.

IV. High Income the main object.

An investor to whom a still higher yield
than that described in Example JII. is of
paramount importance ‘can obtain this result
by investing in Ordinary or Deferred shares
and low-grade Debentures or Preference
shares. An example of this class of investment
scheme is shown facing page 87. There are a
number of experienced investors who consider
a list of this nature quite as safe as lists made
in accordance with Examples I. and IIL;
but great discrimination is necessary, both in
the selection of the geographical divisions and
of the individual stocks, in order to make
a high yielding list of this description safe.

--- Page 91 ---

78 .

_ Y. Chance of fair increase in Capital Value
with some regard for Income.

An investor who is not solely dependent on
the income derived from his invested capital,

~ and who is ina position to accumulate fresh
capital from time to time out of earned income,
should pay the greatest attention to a possible in-
crease in the capital value of his stocks, making

the income-yield a subordinate consideration.
There are quite a number of stocks which,
like Ground Rents, automatically increase in
capital value, such as Loans and Debentures,
redeemable at a fixed date and at a certain
fixed price, which can be bought below their
redemption value. ‘here also appear on the
market, from time to time, new Debentures
and Bond issues which are thoroughly well
secured and are offered below the value which
they are likely to command when the under-
taking becomes established. There are many
Geographical Divisions in which industrial
development is fast: expanding, and in which
the current rate of interest paid on loans
displays a constant tendency to diminish.
These conditions cause a gradual appreciation
in the rise of all sound Stocks in such
divisions. We have a very good example
of this in the recent development of Mexico,

--- Page 92 ---

79

and the corresponding rise in value of its
representative stocks. From time to time
opportunities are also afforded of purchasing
first-class low-yielding stocks at comparatively
low prices, on account of the adverse trade and
financial conditions temporarily prevailing in
certain Geographical centres.

The above are the main opportunities of
increasing capital value in a sound and effica-
cious manner, the. question of income-yield
being regarded as a subordinate matter. The
main principles of Geographical Distribution
of Capital. should be closely adhered to when

- lists are constructed for the purpose of accom-

plishing this object. Every stock which shows

a fair increase of capital value should be sold

- as opportunity arises and re-invested on the

same favourable terms as in the original pur-

chase, care being taken that the poise and

counterpoise obtained by a proper geographical
distribution is not thereby disturbed.

VI. The Maximum Chance of increase in
Capital Value, with entire disregard for Income.

An investor who disregards Income and
simply desires to increase his Capital should
select the reasonably largest number of com-
paratively younger stocks standing at low
prices (whether they yield a dividend or no

G

--- Page 93 ---

: 80
is immaterial), all of which show a great
capital variation year by year, and are
spread over the largest possible geographical
area. A list of this description, worked
on the principles explained in the previous
chapter, should be non-speculative as a whole
and yet give the maximum chance of a large
increase in capital, for the largest imaginable
falls in some directions will be counterbalanced
by corresponding rises in valuein others; whilst
the intermittent purchase of cheap stocks by
the realisation of other stocks which have
materially improved in value as described in
the foregoing chapter, will Jead to the investor
securing the large profits which will accrue
to him. Only investors who consider them-
selves to possess financial skill and who are
fair judges of the probabilities of new
investments should undertake the construction
and the subsequent management of an
investment list of this description. They
must be prepared to see some of their
investments result in total failure, and they
must rely upon the very large profits made on
others to produce a constantly appreciating total.
The above suggestions are made with the
double object of showing, in the first place,
that every individual Investment Aim is to
be achieved in a fashion -peculiar to itself,

--- Page 94 ---

81
and, in the second place, of explaining how
various types of securities should be employed
in order to obtain certain desired results.

Stocks should be used by investors in the
same way as an architect uses building
material. Just as there are various kinds of
timber, every one of which possesses different
qualities, so there are different classes of
stocks with varying advantages or drawbacks.
The lowest class of timber can be utilised
in its proper place, and in the same way even
the lowest grade of stocks can under certain
circumstances be advantageously employed.

It would be a pity to employ fine oak
beams for supporting the roof of an outhouse,
and it is equally unwise to invest in a
British Trustee Security when a fair Ordinary
share would do. In a virgin Oak forest, far
removed from civilised centres, oak logs might
be so employed, for the timber does not
command a fair comparative price in such a
region; and similarly a first-class 6 per cent.
yielding Debenture emanating from a country

. where money is dear, might be used for
ordinary Investment purposes.

For, as with timber, whose price is
regulated by its proximity to markets, so
is it with stocks, whose yields are regulated
by their geographical position.

a2

--- Page 95 ---

82

Thus a good British Debenture Stock will -
command a price at which it will yield only
about 44 per cent., whilst an equally well
secured local African or Japanese Debenture

; can be bought to yield 6 per cent. ; or in other
words £75 invested in the latter, will go as far
as £100 invested in the former.

A builder of an investment scheme requires
materials (Stocks) which are situated in different
parts of the globe. For some of those which
emanate from the centre of civilisation, he will
be forced to pay high prices; these should be
offset by the compensating low prices at which
others, situated in remote countries, are

purchased. The less civilised a country, the |
more its stocks should yield, and in this way a
fair average return can be secured from
capital judiciously distributed over the earth’s
surface.

Tf a Trustee is forced to invest exclusively
in British Trustee Stocks he will obtain an
average yield of under 3} per cent., whilst a
Trustee whose hands are not equally tied can
obtain over 4 per cent., and every security
which he holds can be quite as sound as the
British Trustee Securities are. Private investors
are not in any way restricted in their selection ;
hence they are wasting their substance when
they neglect to provide a sufficiently wide area

--- Page 96 ---

. 83
4 of investment for their capital, which con-
sequently remains comparatively unproductive
—to say nothing of the additional and
indispensable capital security which Geo-
graphical Distribution carries with it.

There are as many varieties of Investment
aims as there are forms of leaves on the trees,
and the examples which we have given

are only a few average specimens. | If the
personal aims of any one of our readers are
fairly described in one of the given specimens,
then no difficulty arises in constructing his
investment scheme; but should his case not |
fall under one of these general and most *
frequent heads, then we should advise him

to take special advice. .

The foregoing examples will also serve to
illustrate how our mode of constructing
Investment Schemes reduces to a minimum
the element of speculation. Further, they
will enable an investor who follows our
principles to decide at the outset by what —
means he can best attain the investment
object desired by him.

Investors have been so frequently misled
by rosy pictures of future possibilities, that
a great many of our readers may possibly
consider our outline of obtainable results
overdrawn, and may feel inclined to doubt

--- Page 97 ---

84
the possibility of so reducing chances as to
make satisfactory investment results a practical
certainty from the outset.

This dubious frame of mind we consider
rather advantageous than otherwise, because
it should tend to egg the doubter on to
a close study of the subject of averaging ..
investment risks. All investigations which

; he will make will lead to a better under-
standing of the subject, and to the ultimate
conviction that we have in no way overstated
the accuracy with which an investor can pre-
arrange a given result.

Having once determined what results he
desires, and having discovered what classes
of stocks he should include in his investment
list, an investor should be guided by the
following main points of a safe Investment
Scheme, which are applicable to all investment
schemes whatever the desired object may be.

1.—The Division of Capital. The amount
invested in every separate stock must be alike ;
therefore the number of stocks which the in-
vestor decides to hold settles the amount of
capital to be placed in each. In our opinion
the evolution of invested savings should be
somewhat as follows :—When annual earnings
first begin to exceed the annual expenditure,
the Post Office Savings Bank should be the

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--- Page 99 ---

; 85
repository for anything up to the first £100.
As soon as the deposits reach that figure they
should be taken out and invested in one stock.
This process should be repeated with the next
hundred, only the second stock chosen must be
under a different market and trade influence
from the first. We deal with the best selection
of countries for this purpose in the third
of these sub-divisions, of which this is the
first. With the third hundred a third stock
should be bought, and so on up to £500.
(Until the invested capital is protected by at
least three different market influences, capital
safety has not been arrived at. For this
reason we would recommend that the first
stocks bought be most carefully examined as to
capital stability). After £500, the number of
stocks to be invested in will largely depend
upon the objects desired by the investor, as
outlined in the early part of this chapter. For
ordinary purposes, where a substantial income
with good capital stability is desired, we
have found, in our experience, that capital is
best divided up in the following pro-
portions :—

From £500 wp to £1,000 capital, 5-6 stocks of equal value.
», £1,000 ,, £2,000 ,, 57, ” ”
» £2,000 ,, £5,000 ,, 6-8 ,, » »
» £5,000 ,, £20,000 _,, 8-10, ” ”

For larger sums 10-30 stocks of equal value,

--- Page 100 ---

86

Many investors indulge in some small
speculative transactions, or hold, for personal
reasons, sinall interests in some particular
enterprises. These minor holdings form no
part of the real Investment Scheme; they
should be treated like a petty cash account;
otherwise these extrancous holdings will
obscure the results which the Investment List
is producing, and impede its proper working.
‘Investors derive no benefit from holding
two or more stocks which are subject to
the same Trade Influences. Every additional
stock held entails additional labour in super-
vising its progress, and as it is futile to
create additional work which can be produc-
tive of no beneficial results, the number of
stocks held should be reduced to as low a
point as-is compatible with adequate Geo-

graphical Distribution.
2.—The Quality of the Stocks held. As to
the quality of the stocks, which an investor
elects to buy, he must be guided by his own

Income Requirements.

. Investors who are content with a yield
of 4 per cent. or under should make their
selection among high-grade securities, similar
to those which in British stocks rank
immediately behind the gilt-edged group.
Those who desire a yield of from 4 to 5 per

--- Page 101 ---

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--- Page 102 ---

87
cent.-can satisfy their requirements amongst
the Debentures and Preferences of old-
established Home Industrial Companies,
whilst in other geographical divisions they
will find that they have a wide choice amongst
Foreign Railway Mortgages and Preference
Stocks. Investors requiring from 5 to 6 per
cent. upon their invested capital will find a
fair selection amongst Ordinary stocks and
Foreign and Colonial Industrial Debentures
and Preferences; but in the British division
such a return is only obtainable from Industrial
Issues of lesser repute.

In How to Manage Capital we give a detailed
explanation as to how the comparative class,
value and safety of individual securities is
determined, and in the Investor’s Year Book
and the Financial Review of Reviews is
set forth the statistical information neces-
sary to ascertain the dividend safety and
the widths of fluctuations of all the securities .
contained therein. With a very little practice
the investor will find himself thoroughly com-

petent to arrive at a correct opinion on these
two points.
- As we have already indicated in the
examples given earlier in this chapter, it
is in the selection of the quality of the .
investments to be held that the investor must

--- Page 103 ---

88 —
decide whether he chiefly aims at permanent —
stability of capital value or at the enhancement
of the realisable value of his capital. In
the previous chapter we have explained
how Geographical Distribution will assist in
the enhancement of the value of capital in-
vested, and if this is the object chiefly desired,
then stocks of great width of fluctuation
should be chosen. If, however, Capital Stability
is all that the investor aims at, then stocks
with the mivimum width of fluctuation, in
fact, stocks which but rarely change hands
and do not possess a free market, are
preferable.

Any yield up to 6 per cent. is usually
obtainable, and, as will be seen from the
two specimen charts here interleaved, it is
possible, with the aid of Geographical Distribu-
tion, to select stocks which scarcely fluctuate
in their combined realisable value. The
lower the yield of income obtainable from
an investment scheme, the smaller will be its
variations in total realisable value. Thus,
the 4 per cent. scheme illustrated in the
chart starts with a capital value of £10,185, -
and during ten years its extreme variation
was a fall of £323 in the year 1904, whilst
the 7 per cent. chart starts with a capital
value of £10,660, and displayed its extreme

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--- Page 105 ---

, 89 ;
variation in the year 1906, when it had
risen to £13,676.

A study of the 4 and 7 per cent. chart
discloses the fact that Government Stocks
fluctuate most violently, whilst all stocks
which are, as far as this is possible, removed

. from political influences, fluctuate to a much
lesser degree. Investors who seek for tran-
quility of mind should invariably give their
preference to stocks which, although they
_are saleable, have a rather congested market.
These classes of stocks but rarely change hands,
never attract the attention of speculators, and
therefore only follow the general wake of
price-movements in a sluggish manner. In-

-_-vestors who desire to increase their capital
value should select widely-moving stocks.

3.—The Geographical Divisions. If we take

a map of the world and look at the different
countries thereon depicted we shall find some
forty countries in which at present it is possible

. to select representative stocks that are subject
to different trade influences. As more countries —
develop their resources, there will naturally, in
the future, be even more countries from which
the investor may make his selection. Now
the object that an investor should invariably
keep before him when he decides upon a
Geographical Distribution of his capital is to

--- Page 106 ---

90
so select his countries in which he desires to
invest, as to obtain as great a contrast as is
possible in the trade influences which govern
each one of his holdings. If the reader will -
look at the accompanying map of the world we
will attempt to outline the method he should
adopt, not only in his initial selection of such
stocks, but also in the management and
manipulation of his holdings as recommended
in the preceding portions of this book. For
the sake of clearness we shall develop the
method of distributing savings over a geo-
graphical area from its incipient stages.
We have already mentioned, in dealing with

the division of capital, that the first savings
should be placed in the Post Office Savings
Bank. As soon as the deposits have reached .
the sum of £100 this amount should be taken
out and invested in one stock. The first stock
chosen should be of a general international .
character. We will explain more fully here-
after the nature of such stock. When the. next
£100 has been saved this sum should be
invested in a British stock. The next £100
should be invested in a stock whose trade
influence is the most likely to be in diametrical
contrast to that of Great Britain. The stock
chosen should therefore be an American stock.

' The succeeding fourth sum of £100 should be

--- Page 107 ---

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--- Page 108 ---

91

invested in a different Continent to those in
which stocks are already held; for this reason
we will select the Continent of Asia. Africa
will afford the investment centre for the. fifth
£100 and Australasia for the sixth £100.
As there is very often great difficulty in
securing the required class of stock in the
latter division, an alternative division may be
necessary, and either Canada, India, or South

America be. selected as a substitute. °
We have now covered the five continents of
the world, and have supplemented these by a
General International stock so that the safety
of our capital should be assured. If sound
stocks in each continent are selected for the
‘purpose of investment, it is not absolutely
necessary to carry the division of the earth’s
surface any farther, whatever the amount of
capital to be invested may be, so long as
such capital be evenly distributed. Indeed,
so long as there are four or five well-con-
trasted countries in which the investor selects
his stocks, the necessary poise and counter-
poise incidental to a sound geographical dis-
tribution of capital will always be secured.
In illustration of this we append a chart
- covering five -geographical divisions only.
But where the investment objects necessitate
a wide distribution of capital in accordance

--- Page 109 ---

92
with the directions given in the examples set
out in the early part of this chapter, then more
divisions become necessary.

The number of geographical divisions
amongst which an investor decides to distribute
his Capital should always increase in direct
ratio with the Income-Yield worked for. In
an Investment List constructed to yield an
income of 4 per cent. the minimum number
of stocks and of geographical divisions will
suffice. But, when the investor requires a yield
of 5 or 6 per cent. from his capital, and con-
sequently purchases stocks of a more specula-
tive type, Capital Distribution should be made
as wide as the amount of capital will permit.
This, of course, applies also where the selected
stocks are desired to show large fluctuations.

If the reader will again refer to the map
of the world we will lead him on to further
countries in their natural succession. In order
to show clearly the motive for our selection,
and to aid the reader when we come to the
question of realising investments, we would ask |
him to provide himself with a few pins to repre-
sent stocks and to fix first of all five of them
into the divisions already selected, thus :—-One
in the spot denoting London, one in the spot
denoting San Francisco, one in Tokio, one
in Cape Town, and one in Melbourne, and a

--- Page 110 ---

938
sixth pin should be inserted in the middle of
the Atlantic Ocean to denote the General
International stock. After these we take
, Europe as a division distinct from that of
Great Britain, and we will place a pin,
say in Italy. The next step is to divide ©
- America into two divisions, North and South.
As we have already one pin (representing a
stock) in North America, our next selection -
must be a stock in South America. Let us
place a pin in the spot denoting Buenos Ayres.
The next division will be Europe into North
and South, placing a pin, say in Berlin.
Lastly, we again divide America, forming a
distinct division of Central America, and we
will place a pin in the centre of Mexico.
This limit of ten divisions, which we have
chosen as our method of covering the earth’s
surface for the purpose of the Geographical
Distribution of Capital, will be found a very
convenient one for all ordinary purposes.
Being a decimal unit the division of capital
is rendered extremely simple, and it is also
admirably adapted for the purposes of poise
and counterpoise. A glance at the pin- |
covered map will, of course, show a large
number of uncovered countries, some of
which are governed by still different trade
"influences ; for example, in the British Colonies,

--- Page 111 ---

94
Canada and India are both unlike Australia
in their trade movements; while in North
Europe, Belgium and Switzerland, although
near neighbours, show similar differences in
their respective trading conditions (see chart
of price-movements in different countries).
Indeed, by consulting a financial expert who
thoroughly understands the Geographical
Distribution of Capital, new divisions can
be arranged in any quarter of the globe
where it seems to be expedient. This is a
very important point to bear in mind when
it is desired to realise any particular stock
which has shown a substantial appreciation.
We will proceed to illustrate on the map how
these realisations and re-purchases should be
carried out in practice.

Let us suppose that the stock which is
represented by the pin. in Italy shows a
realisable value considerably above cost price.
That is to say, suppose that after a period of
trading prosperity the increased purchasing
power of the Italian investor has carried the
price of Italian stocks up to a point where on
their realisable value they return but a low
rate of interest. Then this stock should be

realised at a considerable profit, and the
proceeds should be invested in a stock of the
same width of fluctuation in a country in the

,

--- Page 112 ---

95
same main division, but whose credit is below
its normal point. Let us suppose these con-
ditions obtain in Austria, so that our purchase
will consist of an Austrian stock of kindred
quality to the Italian stock which has just been
sold. Our capital will then have been enhanced
by the profit realised on the Italian stock and
will now stand a further chance of enhance-
ment in the future. Moreover, the balance of
our investment scheme will not be imperilled,
for if we transpose the pin from Italy to the
spot denoting Vienna we still find our pin-
covered map shows a similarly wide distribution
; of capital over the whole surface of the globe
as it did originally.

: Again, if the appreciated stock is the one
denoted say by the pin fixed in Buenos Ayres,
we then purchase another similar stock in
some other part of South America, and where-
ever we place the pin—whether in Para, or
Valparaiso, or Rio de Janeiro—we still find an
equally wide distribution of our capital
evidenced by the symbolic pins on our
coloured map. —.

If it should happen that no country in the
same division affords a suitable investment,
then we must look at the pin-covered map,

; and choose a favourable stock in some other
division. which is as far removed from any
H

--- Page 113 ---

96 .
of our upstanding pins as possible. In this
way, also,. the equipoise of our investment
risks will remain undisturbed.

. For very large amounts of capital, more
than the ten suggested Geographical Divisions
may be made by means of further sub-
divisions, care being taken always to secure
a well-balanced distribution. At the end of
Chapter VII. of this book will be found an
extended list of all the principal Stock
Exchanges of the world, showing the main
divisions under which they fall, and in each of
which it is possible to find stocks that are
mainly or wholly controlled by its own market
dealings.

In addition to the division of the earth’s
surface into contrasted trading centres, it will
be seen from the coloured map that we have
included a tenth division, which bears an
international aspect. In this division we
include all the undertakings or concerns

_ which trade between nations, like Shipping
Companies, Marine Insurance Companies
and Cable Companies. This is an extremely
important division and it should be repre-
sented in every Investment List where the
smallness of the capital sum _ precludes

. the investor from achieving a world-wide dis-
tribution. The reasons for always investing a

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97
portion of capital in this division briefly are
that the business of Shipping, Insurance, and
Cable Companies always benefits during war
times or during political complications which
threaten war. Therefore, when other securities
are flat, stocks of this type are enjoying a period
of abnormally large earnings. Further, the
- whole freight market always benefits in every
trade route by an exceptional demand for ton-
nage in any quarter of the globe, because any
exceptionally prosperous part of the world
attracts to it the surplus tonnage from other
routes, and so improves the prosperity of ship-
ping all the world over. Lastly, it will be
found that the dividend yields obtainable from .
General International Investments compare '
favourably with the yields obtainable in the
other geographical divisions.

When finally deciding upon the purchase
of stocks, the adjustment of the equality of
invested capital in the various divisions should
not, if it can be avoided, be pushed to the
point where the nominal amounts of stocks
purchased are broken up into smaller quan-
tities than multiples of £100 nominal stock.
Otherwise the investor will find himself
possessed of a number of oddments of stock
which he will only be able to realise in
the future at some concession below the .

H2

--- Page 115 ---

98
current market price ruling for even amounts
of the same stock.

The above explanation furnishes all the
items of detail which are involved in the

construction of Investment Schemes to meet
every conceivable requirement. In every
instance the ultimate success of a scheme con-
structed on these lines will merely depend upon
whether the scheme decided upon does
actually embrace all the objects the investor
is aiming at, and whether, in any modifica-
tions of the original scheme which he may
make in the future, he imports no new factor
into his Investment List which upsets the har-
mony of the original arrangement.

An Investment Scheme, when once adopted,
must be consistent in character to the smallest
detail, and the very consistency of his invest-
ment policy will be found an immense assist-
ance to an investor in enabling him to form a
right judgment in every financial contingency
which may arise. No longer will the investor,
with money in hand for investment, hesitate
between the comparative merits of an endless
variety of securities. His Investment Scheme
will solve the problem for him, and clearly
indicate to him in which geographical division
and in what quality of security he must seek
the stock he requires.

--- Page 116 ---

CHAPTER VI.
THE TREATMENT OF EXISTING
INVESTMENT LISTS.

Bur few of those who read the pages of this ,
book will find that their own investments are
distributed in the manner suggested by us as

the safest; because stocks and shares are
usually acquired gradually, and added to from

time to time without any definite Investment
Scheme being followed.

Whenever the investor’s banking account
discloses an unnecessarily large cash surplus,
a stockbroker is consulted, and this or that
stock is bought without any regard to previous
purchases, and without considering the fitness
of the new stock to assist in the development
of a wide distribution of risks. As the sums
of money so freed for the purpose of invest-
ment naturally vary, at one time a large
purchase is made, whilst on another occasion
only a small amount of stock is required.

As a natural result the most curious com-
binations of investments are strung together,
in which the quantities of the various stocks
held bear no symmetrical proportion to each

--- Page 117 ---

. 100
other; so that the depreciation of a large block
of stock cannot possibly be counterbalanced
by an equal appreciation in a small holding ;
and, in addition to this, the external risks
which dominate these indiscriminate purchases
are entirely disregarded.

Besides this, some investors buy thirty
different securities where six well-selected
stocks would have sufficed; whilst others
purchase five stocks where at least ten
would have been necessary for a proper distri-
bution of risks.

The commonest and most disastrous idea
which seems to prevail among investors is that
it is only necessary to consider the pros and
cons of every stock separately, and that if
each stock held is internally safe the total
result must be satisfactory.

We have now fully explained to our
readers the fallacy of this argument, and have,
we hope, made clear to them the disastrous
consequences which these popular mistakes
entail. So that by this time our readers
should be in a position to lay their fingers
upon the precise cause of every financial loss
which they may have sustained in the past.

To reconstruct to the best advantage
existing ill-assorted Investment Lists is by
no means an easy task. We give in How to

--- Page 118 ---

101
Manage Cajntal a detailed description of the
_ way in which this can best be carried out, and .
' will, therefore, here state briefly that the
investor should commence this task by first of
all ascertaining his real investment position.
There is nothing which will make this easier
for him than a tabular statement showing,
firstly, how his own investments are split up
over the ten main Geographical Divisions
which we have explained in the last chapter, ;
and, secondly, in what proportion his capital
is divided among the various securities held.
We have demonstrated in the previous
chapters that a proper distribution of risks is
the only way in which successful investment
can be arrived at. This distribution of risks
- entirely depends upon the number of different
Trade Influences which are represented in a list
of investments. We have also demonstrated
that capital, to be safe, must be equally divided
amongst a number of stocks of similar quality.
It is only by means of such a tabular
statement that the true existing investment
_ ‘position can be revealed. In this way alone
can it be shown how many separate trade
influences are covered by existing investments,
how much capital is placed in each one of
“them, and how far an equal division of capital |
among all stocks held has been effected.

--- Page 119 ---

102
Investors who are unfamiliar with work of

this kind will be well advised to have such a
table prepared for them by an expert, as it is
of indispensable importance that this table
should be correctly made out in every detail.

As soon as the Table is complete, the
investor should examine the examples of
investment objects given in the preceding
chapter, ascertain which of these examples
represent his own case the most accurately,
and then compare his own list of holdings (as
shown by the Table of his own investments)
with the recommendations given in such
example.

- The investor will now have two pictures
before him, the one showing how his money
is actually invested, the other how it ought
to be invested so that his capital may be safe
and his investment objects obtainable. When-
ever it is found that an investor’s own list
differs widely from our. example, then prompt
and drastic action should be taken, and the
list rectified without delay. Our examples
are based on a life-long experience, and have
‘proved themselves in practice to be correct.
On the other hand, we have hardly ever known
a case in which a badly-constituted list has
produced the results which the investor
himself has desired.

--- Page 120 ---

103

In all cases where none of the examples
of Investment Aims given in the previous
chapter really fit in with the actual object
desired by the investor, he should either
endeavour to make up a combination, fitting
his case for himself, or he should consult a
competent adviser.

It is just as useless to expect a toy terrier
to grow three feet in height as it would be to
expect a dearly purchased fixed charge stock
to show a considerable increase in capital
value. There are certain future possibilities in
every stock, and unless these possibilities carry

out the investment aims of its holder, disappoint-
ment is bound to be the ultimate result.

. Before any alterations in the existing
investment list are made, a DEFINITE INVEST-
MENT SCHEME, setting forth the number of
stocks to be bought, the class of security
selected and the Geographical Divisions to be
covered, should be made out, and then such
existing investments as do not fit into this
scheme should be sold and the proceeds in-
vested in stocks which answer every require-
ment of the scheme.

In some cases it is wise to carry out an
entire reconstruction forthwith ; in others, it is
preferable to do so gradually. It is quite im-
possible to give any rigid directions in this

--- Page 121 ---

104 |
respect ; but investors should always remember
that the sooner they get into a really sound
investment position the better it naturally is for
them. .

It frequently happens that investors delay
the re-arranging of their investments because
their own investments have fallen in value and
they prefer to wait for a recovery in prices. It
is, of course, most unsatisfactory to sell at a
loss; yet, in many cases, the first loss is the
best.

Waiting for a recovery in prices means
speculating on a future event. There is really
no difference between a man waiting for a
stock to recover and another buying this same
stock in a speculative way with a view to its
rising in price. It is from this standpoint that
all investors who are reluctant to face a loss
should consider the matter, and if they are
content to speculate as to the future, they can
then delay their reconstruction of investment.

There is, however, another way in which
the contingency of selling at a loss. may be
met. In almost every Geographical Division
there are some stocks to be found which at
some time or another have commanded higher
prices than those at which they can be bought
when a reconstruction is contemplated. By
exchanging the investments which show a loss

--- Page 122 ---

105

for stocks of this kind, the investor may secure
quite as good a chance of a future rise in value
as he may have in respect of his existing
holdings. Such a procedure might hinder the
immediate investment in stocks which are likely
to carry out the investor’s real investment aim ;
but it would tend to forthwith improve the
Geographical Distribution of his capital, and
this is, after all, a very great step in the right —
direction. To wait for a future rise in any
security is speculation and not investment, and
whether the anticipated rise is to take place in
a security which is actually held or in one
which has just been purchased does not alter
the fact. To make investment and speculation
go hand in hand is not an easy matter, and it is
from this point of view that every delay in the ©
sale of unsuitable stocks should be considered. |

Tn all cases where a stock broker is consulted,
his ipse dixit on investment questions should
not be accepted as final, but he should rather
be asked to furnish good reasons for the
suggestions which he may make, and to
explain at the outset his Investment Scheme as
a comprehensive whole. This not only makes
for the greater enlightenment of the client, but
it also gives the latter an opportunity of testing
his adviser’s ability to handle the delicate
question of investment.

--- Page 123 ---

106

The publishers of this book will both
prepare Tables of existing investments as
heretofore explained, and also construct com-
plete Investment Schemes for every investor’s
individual case. TFurthermore, they analyse
the stocks held as to soundness, and sug-
gest which of them could be most advan-
tageously retained. They also keep up a
permanent Register in which the safest, best,
and most remunerative stocks for the time
being in every Geographical Division are
recorded. By means of this Register they can
indicate instantly stocks most suitable to
every kind of Investment Scheme.

There are some investors who have a
rooted prejudice against all Foreign Invest-
ments. This attitude is highly patriotic, no
doubt, but, like every other fancy, it has to be
paid for.

To such investors as these the theory of
this book will not prove palatable, in spite of
the obvious wisdom of a wide distribution of
investment risks. It is, in our opinion, impos-
sible to construct a really safe Investment List
consisting of British stocks only, for the simple
reason that these stocks are bound all to move

; together. The best practical substitute which
we can suggest for world-wide distribution of
investment capital is the careful choice of

--- Page 124 ---

107

varied local enterprises to make up an invest-
ment combination, great attention being paid
to the point that no two companies selected
shall be identical in their objects or in their
trade interests and that all stocks held should
be as far removed from general trade influences
as possible. Further, care must be taken that
the selected enterprise is being carried on as a
sound business concern and not for the benefit
of a few chosen individuals with whom the
company does business. These points we have
fully explamed in a previous chapter.

After all, when the sun shines the milliner
is jubilant, whilst in rainy weather the
umbrella-maker rejoices. In this way it is
possible to arrive at something approaching a
distribution of risk without going outside the
United Kingdom, provided that the stocks
selected are unimportant, and for this reason
as far removed from the influence of British

| trade as they possibly can be.

Conservative investors are naturally dis-
inclined to change their holdings, and rich
people are especially dilatory in their financial
affairs. But our twenty-seven years of experience
have proved to us that every holder of a badly
distributed Investment List is in the true sense
of the word constantly on the verge of a
precipice, and we have known the finest

--- Page 125 ---

108
fortunes disappear through a bad distribution
of risks.

As long as matters prosper all is serene,
but the first financial disaster makes a breach
in the stronghold; the endeavours to repair
the breach lead to dabbling in more speculative
investments, and these again are followed by
speculation pure and simple, with the final
result of a complete catastrophe.

It is too late to lock the stable door after
the steed has been stolen ; it is much wiser to
see to the lock whilst the animal is still on the
premises. Therefore every holder of a ques-
tionably distributed list should at least
consider his position in its true light. After
all, this can be done without much trouble or
expense, and it is no great matter, even if
ultimately no change is made. It will clear the
air at all events, und serve to illuminate the
investor’s real position. An exact knowledge
of his true position is the first essential of a
business-like investor.

Sometimes the reconstruction of an Invest-
ment List is delayed on account of the expense
which it involves. This objection rests on a
most shallow foundation, for in most cases
reconstructions can be so carried out that while
the new list offers greater capital safety and a
safer and larger future annual income than the

--- Page 126 ---

109

existing list, yet all attendant expenses are
paid out of the reconstruction, the investor
not being asked to find any additional money.

We hope that this book will tend to
reduce materially the number of badly dis-
tributed investment lists which at present exist,
and thereby prevent further large loss of
capital. Quite as much money is lost from
want of adequate distribution of capital as |
is swallowed up by losses made in specu-
lation and gambling, although it may surprise
many people to hear that this is so.

--- Page 127 ---

CHAPTER VII.

THE WORLD'S STOCK MARKETS.
Every important commercial centre has a Stock
Exchange of its own, and the dealings in every
one of these Stock Exchanges are naturally
confined to those securities which are held by
the public of the neighbourhood in which each
Stock Exchange is situated.

Some stocks are held in many quarters of
the globe. Dealings in them therefore take
place on a large number of Stock Exchanges.
Other, or so-called “local”’ stocks, are not so
widely distributed, and therefore not so
universally dealt in. It is really not the size
of a stock which determines its number of
regular markets, but simply the manner in
which it is distributed among the population
of the world. Thus, there are some large and
important stocks representing millions of capi-
tal which have only one principal market, like
British Consols, the only real market for these
being London; whilst comparatively much

’ smaller issues, like the loans of the Turkish
Empire, are dealt in on nearly every Stock
Exchange in Europe.

--- Page 128 ---

111

British Consols can, of course, be dealt in
on every British or Foreign Stock Exchange,
as they are known throughout the world; but
nearly all these transactions come directly
or indirectly by letter or telegram to London
and are finally transacted on the London
Stock Exchange, where almost any quantity
of the stock can readily be bought or sold.
In fact, only London can be relied upon to
absorb or supply any substantial amount of
the stock, and London is consequently the sole
market.

In securities which have various large
centres, where they are dealt in, like the

Turkish securities, this is not so; they
~ are held largely by the public which make
the London, Paris, Berlin, Brussels, Amster-
dam, Vienna, and other less important Stock
Exchanges their places of dealing, and conse-
quently any one of these centres is always .
ready to supply or absorb Turkish stocks.

In fact, while every important transaction
in: Consols sends its reflex to London, Turks
are dealt in locally, and these dealings only
affect indirectly the other places they are
quoted. For this reason London alone
determines and controls the price of Consols,
whilst the price of Turks is determined by
international arbitrage dealings. ,

1

--- Page 129 ---

112

Arbitrage transactions are the sales and
purchases of stocks which are effected by letter,
telegram and telephone between the Stock
Exchanges of different countries. In these
international dealings the level of the respec-
tive quotations at any two centres is deter-
mined by the current rate of exchange between
them. The rate of exchange becomes the
arbiter of value—hence the term arbitrage.
For instance: Paris quotes Turks in francs,
and it is therefore necessary to work out the
French franc-quotation by the rate of exchange
into its equivalent in English money before

’ an arbitrage dealer can determine whether it
is possible to buy or sell Turks more advan-
tageously through his agent on the London
market than he can buy and sell them on his
own Bourse. It is the constant rush on the
part of arbitrageurs to buy stocks in the
market where quotations are low, and to sell
them in the market where quotations are high,
which keeps internationally-dealt-in stocks at
a uniform price at the various centres.

In these international securities, of course,
the most powerful centre determines the quo-
tation. Thus, if the Paris public is more
interested in Turks than Berlin, Paris is able
to absorb or supply larger quantities of stock,
and it is then the Paris market which controls

--- Page 130 ---

113

the price and fixes the level of value to which
Berlin is compelled to conform. If, in the course
of time, the interest in Turks in Paris gradually
diminishes, and the people of Berlin or any
other centre should become the largest holders
of Turks, then the position would be reversed,
and the Berlin or some other Stock Exchange
would commence to dominate the market in
Turks.

In this way the principal markets for in-
ternationally held stocks are constantly
changing, and the dominating centre of a
stock does not depend upon its nationality,

but upon the place where it is principally —
dealt in.

Thus, the principal market for the Loans of
the United States of America was at one time
in London, but has now been transferred to
New York. In the same way the Grand
Trunk Railway is really a purely Canadian
enterprise, but no Canadian or American Stock
Exchange can at present control the price of
its stocks, as London dominates the market ;
whilst in the case of the shares in the Rio Tinto
Copper Mine, which is situated in Spain, there
is no independent market either on the Madrid
or Barcelona Bourses. The shares are held
in France and England, and the London or .
the Paris quotation alternately dominates the

12

--- Page 131 ---

114 ;
market, though the control is generally in the .
hands of Paris. .

To the holder of stocks it is, for the
above reasons, not only important to know
where an enterprise is situated and where its
stocks were originally issued, but also which
financial centre happens to determine their
quotations.

Not only do wars, political troubles, trade
stagnation or prosperity influence the prosperity .
of the enterprises and the prices of stocks
which are held in a country, but such
events as these also affect the stocks in which
that individual country is the dominant market.
This is a point which should be most carefully
considered by all those who desire to obtain a
real international distribution of risks.

Many investors object to. hold stocks
which they do not see daily quoted in the par-
ticular newspaper they regularly read, and this
fact alone prevents them from obtaining a
proper capital distribution. No newspaper is
able to quote all the really important stocks
of the world, as this item of intelligence alone
would suffice to fill the most voluminous
newspaper. ‘The largest number of stocks
which are at present quoted in any newspaper

“or periodical of any country are contained
in the Financial Review of Reviews. But

--- Page 132 ---

115
although this periodical gives (in 320 pages)
the last four years’ prices, dividends and yields
at present prices of upwards of 5,000 individual
securities, yet this number of stocks is onlya
tithe of all the investments of the world.

Every paper has to confine itself to a few
stocks only, and these again are selected
according to the individual ideas of the
editor, who is usually not influenced by the ~
relative importance of various stocks, but
by the amount of public attention any given
security happens to command for the time
being. ‘Thus, frequently, prices of unim-
portant speculative securities are recorded
by all papers to the exclusion of the
quotations of really safe, solid, important
investments. Frequent newspaper references
to any one stock are tantamount tu a large
number of trade advertisements of a com-

- mercial article. Publicity does, doubtless,
create a demand for much-advertised articles,
but in the same way as it does not
follow that any particular soap is the best
because its name is on every hoarding, so the
Allsopp Brewery issues have not proved the
best investment of their kind because during
a number of years they have been constantly
quoted and commented upon in every British
financial paper and in every City article.

--- Page 133 ---

116

When the choice of an investment is being
considered, it is better to select a comparatively
unknown security, because in such a stock the
probability of securing a real bargain is far
greater than amongst stocks that are in every-
body’s mouth. And just as consumers should
always give a wide berth to all largely ad-
vertised articles, which have not already

- positively proved themselves to be the best
of their kind, so investors should shun every
stock which is much written and talked about
at the moment, unless the past records of that
stock prove it to be safe, sound and cheap at
the ruling quotation.*

The argument frequently advanced that
investors should only interest themselves in
stocks which command a free and ready
market, proves to be quite fallacious on close
investigation. The difference between a stock
in which there is a free market and one in
which the dealings are not frequent really
consists in the difference between the buying
and selling prices.

It is true that some stocks can be bought
and sold at a difference of 5s. in every £100,
whilst in other stocks this difference amounts
subject in the Popular Financial Bouklet No. 17 (The Money
Market Article and the Private Investor), published by the same
publishers.

--- Page 134 ---

117 |
to £2 for the same quantity. But stocks of
both types are subject to market fluctuations,
and an increasing or decreasing demand for a

particular stock will rapidly alter the facility

with which it can be dealt in; so that the

_ free market of to-day becomes the laborious
negotiation of to-morrow.

Investors do not buy with the intention
to sell again soon after; they buy to hold
for years. Suppose an investor, intending

in 1905 to invest in a speculative South
American Railway stock which paid a high
rate of interest, had selected the then so-
very-much-talked-about Buenos Ayres & Pacific
Railway Common Stock rather than the
very little known 5 per Cent. Second
Preference Stock of the Cordoba Central
Railway, and that he had made this choice
because the former stock had a very free
market, whilst in Cordoba Second Preference
there was very little dealing and a difference
of £2 per £100 between the quoted buying
and selling prices. The income yields from
both transactions in 1905 were about the same,
while the dividends paid in the meantime on
both stocks remained unchanged; but if he
had allowed himself to fall a victim to the
free-market delusion and had bought Buenos
Ayres Pacific Common at 143 (quoted then at

--- Page 135 ---

118

1424-143), whilst he might have had to pay
90 for Cordoba Second Preference (quoted
88-90), what would his position have been in
March, 1907? Why, he would then have .
found that the Buenos Ayres & Pacific Stock
had in the meantime not only dropped in
value, but had also lost its free market, and he
‘would have to accept 119 for, or in other
words he would have lost £24 on, every £100
of stock which he held. Whilst Cordoba
Central Second Preference, which had also
receded in the meantime, and still remained
a wide-priced stock, were yet saleable at 86
(quotation 86-88) representing a loss of £4
only on every £100 of stock held.

It is true that in the purchase of the
Buenos Ayres & Pacific Stock only 10s. more
than the lowest price quoted at the time was
paid, while the market turn in the Cordoba
case amounted to £2, yet not all this disadvan-
tage in dealing was repeated at the time of sale,
Thus nominally about £2 was saved on the
Buenos Ayres & Pacific transaction. But into
what utter insignificance these forty shillings
sink when it is considered that the cheaply
completed transaction produced an ultimate
loss of £24 against a loss of £4 only on
the same quantity of the less negotiable
security.

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119

We wish it to be quite understood that in
the above example Cordoba Central Second ~*
Preference and Buenos Ayres & Pacific Com-
mon have only been used to prove the
argument and not because we consider that
they will retain their respective positions,
both as to price or marketability. It is
always dangerous to give in a financial hand-
book an example of this kind, as a book of
this sort is frequently read many years after
its date of publication, and both stocks used in
the example might then have ceased to exist.
For this reason we hope that our readers will
understand that the future of the stocks quoted
in the example is an unforseeable quantity,
and that the argument only is of value.

The speculator who intends to realise again
promptly must, of course, consider the tempo-
rarily existing marketability of a stock. The
investor should, as a matter of fact, turn his
attention to stocks which are unfashionable
and rather difficult to deal in. Every good
investment is always saleable at a price, and
the margin of difference between purchase
and sale prices is a matter of small moment
in comparison with the ultimate destination
of a market movement. It is therefore the
present and future prospects, and the suita-
bility of a stock to a specific Investment

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120
Scheme only, which ought to weigh with an
investor, and not the margin of difference
between its sale and purchase prices.

Again, it is really immaterial to the in-

~ vestor who holds a good stock which particular .
iixchange determines the price of that se-
curity. Whether it is quoted in England
or elsewhere, or what may be the small
actual expenses of purchase or sale, are minor
considerations so long as it pays him to hold
the stock at the nett cost price, including all
charges.

Every investor who once grasps this im-
portant fact will experience no difficulty in
distributing his investment risks on the plan
explained in this book in such a manner that
no conceivable combination of circumstances
can seriously reduce the realisable value of his
invested capital.

To the investor who realises the truth con-
tained in the foregomg paragraph, the world,
so to speak, is open, and he can buy the safest
and most remunerative securities in existence,
and thereby free himself from the confined
limits of any one financial centre. An inter-
national firm of stock dealers is in a position to
supply him with the best selection out of all
markets, together with the necessary material
for forming a capable opinion of the stocks he

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121
is inclined to purchase. Such a firm will also
inform him as necessity arises how all his
stocks are valued on those Stock Exchanges
on which they are principally dealt in.

“ If the question of what people think of
stocks and what they consider safe isanalysed,
we come again to a point of geography pure
and simple. A Swede will consider Swedish
the safest National Loans, and an American
will entertain a preference for those of the
United States. The Scotchman will prefer the
British Linen Company Bank to the London &

- Westminster, the Londoner vice versé. If an
Englishman were told to buy the Austrian
North Railway Debentures he would hesitate,
while an Austrian might consider London
& North Western Debentures to be highly
speculative. As a matter of fact, both these
debentures are equally safe, as can be proved
by statistics; therefore, why should an investor
allow local feeling to interfere with his
obtaining investment safety ?

When the various Stock Exchanges of the
world are reviewed, and when we consider that
each Stock Exchange deals in quite a number
of stocks which have only a very limited, if
any, market in other countries, yet which stand
high in the estimation of local investors, we see
more clearly how wide may become the area of

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122 .
an investor’s choice, and how, in this way, it
becomes possible to find stocks which are able
to realise any reasonable investment aim, what-
ever its nature.

To give the reader some idea how the stock °
markets are scattered over the surface of the
earth we append the following list of ‘principal

- Stock Exchanges obtaining in each of the nine
main Geographical Divisions ; a reference to
the coloured map of the world in Chapter V.
will indicate how widely they are distributed.
I. British Division.

Principat Stock Excnancrs :—

London, Manchester, Glasgow, Liverpool,
Birmingham, [dinburgh, Dublin,
Cardiff, Leeds, Bradford.
I. British Colonies.

PrincipaL Stock ExcHances :—

India: Calcutta, Madras, Bombay,
Rangoon.

Canada: Montreal, Toronto.

Australia: Adelaide, Melbourne, Sydney.

Tasmania: Hobart.

New Zealand: Wellington, Christchurch,
Dunedin. .

Straits Settlements : Singapore.

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128
III. Europe, North.
PrincipaL Srock ExcHanaEs :~-
Belgium: Brussels, Antwerp.
Denmark : Copenhagen.
Germany: Berlin, Hamburg, Frankfort,
Bremen, Breslau, Munich.
. Holland: Amsterdam, Rotterdam.
Norway : Christiania.
Russia: St. Petersburg, Warsaw, Moscow,
Odessa.
Sweden: Stockholm.
Switzerland: Geneva, Basle, Berne.
IV. Europe, South. .
Principat Stock Excaanaes :—
Austria: Vienna, Prague, Trieste.
Bulgaria: Sofia. *
France: Paris, Marseilles, Bordeaux,
Lyons, Lille. 7
Greece: Athens.
Italy: Milan, Genoa, Turin, Rome.
Hungary : Buda-Pesth.
Portugal: Lisbon.
- Roumania : Bucharest.
Spain: Madrid, Barcelona. ;
Servia: Belgrade.
Turkey : Constantinople. .

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124
V. Asia.
Principat Stock ExcuaNGEs :—

Japan: Tokio, Yokohama.

China: Shanghai, Hong-Kong.

VI. Africa.
Principat Stock Exc#ancEs :—

Cape Colony: Cape Town, Port Elizabeth.
Egypt: Cairo, Alexandria.

Natal: Durban.

Transvaal: Johannesburg, Pretoria.

VII. America, North.
PrincipaL Stock EXxcHAaNGEs :—

New York, Chicago, Boston, Phila-
delphia, San Francisco, New Orleans,
Baltimore.

Vill. America, Central,
PrincipaL Stock Excuancr :—
Mexico City.
IX. America, South.
PrincrpaL Stock ExcHaNnuEs :-—

Argentine: Buenos Ayres.

Brazil: Rio de Janeiro.

Chili: Santiago.

Peru: Lima.
Uruguay : Monte Video.

--- Page 142 ---

125

We have, in the above list, named some 80
different Stock Exchanges, among which it
should not be a difficult matter to find just
the stock necessary to fit in with any kind of
investment scheme.

Whether the securities held by an investor
are marketable in London or in any other
part of the world makes nowadays but
little difference. There are many stock-
dealing firms in Great Britain who are in
daily contact with every Stock Exchange
centre, and by means of telegrams and cable
transfers stocks can now be quite readily
bought or sold, wherever their chief market
may be. Quotations for all stocks, no matter
where they are dealt in, are daily obtainable
with the same amount of facility, provided
that the proper firms are applied to.

Those investors, however, who prefer London
as their market for investment transactions will
not find it absolutely necessary to go consider-
ably outside that Stock Exchange. The
London market deals in a great variety of
securities, a number of which are mainly con-
trolled in other parts of the world, and a very
fair distribution of capital can be achieved
by confining oneself to that market alone.

In former times this was not quite the case ;
but during recent years the position in this

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126
respect has improved to the advantage of the
individual investor, though perhaps to the
detriment of London’s financial supremacy. .

. During the third quarter of the last century,
which witnessed the dawn of the present
industrial development, Europe was in a state
of great political unrest, and all Continental
bourses were still in the infancy of their
subsequent financial importance. For this
reason, Great Britain—-or perhaps it would be
better. to say London—-was then the only
existing international harbour of refuge for all
financial transactions of magnitude. Not only
every important issue of stock found its way
to London, but, in addition, a great deal of

foreign capital was entrusted to London for
investment. All foreign magnates and poten-
tates had their nest-eggs in the safe custody
of British Banks.

This gave to London the undisputed
supremacy of the finances of the world, and
this position continued until the end of the
Franco-German War. This war resulted in
the payment of a large indemnity by France
to Germany, and the subsequent consolidation.
of all German interests, which struck the first
blow to London’s financial supremacy.

Then—and particularly during the last
decades of the past century—trade, commerce

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127

and industry all over the world developed that
historically unprecedented expansion which
so enormously multiplied the wealth of the
world, and gradually. withdrew from London.
its former financial power. Investors of all
nationalities used their newly acquired wealth
in the purchase of the stocks of their own
countries, thereby shifting the dominating
markets in them to their own Bourses, and .
in this way the London Stock Exchange has
lost control over many stocks in which its
influence was at one time supreme.

A very striking example of this happened
recently in the case of Argentine securities.
These were formerly wholly in the hands of
English investors, and British trade depression
spelt inevitable reduction in Argentine values.
Now it is different; and whilst during 1904
financial stagnation prevailed in England,
Argentine stocks were on the boom, and every
ship which left English shores for South
American harbours. conveyed parcels of
Argentine stocks to a new domicile; and this
has continued to the present day.

This loss of financial control is a sad fact
for the British nation as a whole, but
it is advantageous to every individual
British investor, as the number of stocks well
known to him and to his London stockbroker,

K.

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128

which are free from British trade influences, is
gradually increasing. In this way, as time
passes, it daily becomes easier to obtain a
fine distribution of capital risks by means
of an internationally distributed list of stocks,
without going beyond the securities which are
known on the British Stock Exchanges.

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129
CHAPTER VIII.
THE DEFECTS OF THE BRITISH

| ‘TRUSTEE ACTS.
One very curious result at which the
-investor arrives from the study of the question
of Investment Distribution is the conviction
that the British Trustee Acts are framed in
. such a way as to fail signally to accomplish

the very object that they had in view.

The main object of the Trustee Acts is to
provide that Trust Funds be so invested as to
protect the beneficiaries under Trust deeds
from the risk of diminution in the Trust’s
capital. That there should also be a stability
of income from such investments was another
point which engaged the attention of the
framers of the Trustee Acts. But the protec-
tion of the capital sum was their chief anxiety,
as is proved by the fact that stocks returning»
the minimum of income: were selected as
fulfilling Trustees’ requirements. Income was
a minor matter; safety of the trust’s capital
was the great point. When the possibility of
obtaining a more substantial income appeared ta

K 2

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130
clash with affording the maximum of protection —
to the Trust’s Funds, income was unhesitatingly
sacrificed to capital security. Capital security
is the keynote of the Trustee Acts. .

Money is invested in trust with the intention
that, the capital sum invested shall be preserved
intact, so that it either- may be handed on
without diminution from one beneficiary to
another succeeding beneficiary, or else that
the whole of the original fund shall be available
for distribution at the expiration of the term —
of the trust. Unfortunately,: however, this:
primary intention of affording the maximum
of protection to the capital of Trust Funds has
been entirely defeated by the fact that the
fluctuations in British Trading Prosperity
control the fluctuations in capital value of
the British Trustee stocks.

How uniform is the movement of all
Trustee stocks and how absolutely identical
are their fluctuations over a lengthy period of
years may be readily seen from the following
chart, which is reprinted in reduced size from
our new Investment handbook The Invest-'
ment of Trust Funds.* a

* The Investment of Trust. Funds, by: Henry Lowenfeld:: ,
Revised as to statements of Law by A. E. Scratchley, of
Lincoln’s Inn, Barrister-at-Law. Price 2s. 6d. Published at
2, Waterloo Place, London, S.W. — . OS

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133
of the capital of trusts, it was possible to
obtain absolute Capital Stability by investing
money, in the Government stocks of a variety
of nationalities distributed over a world-wide
area. It is almost unnecessary to remark that
these Government stocks are, of course, Trustee
stocks in ‘each of their respective countries of
issue. So that what we have already shown
to be true of internationally selected stocks’
generally is, as might be expected, equally true
of internationally selected Trustee stocks ; that
is to say, when a group of international Trustee
stocks is so chosen that the bulk of each
stock is held in the country of original issue,

. then each of the stocks which form the group —.
will be controlled by'a separate trade influence,
and each will fluctuate as an independent item. ;
In brief, such a group of investments would
display that very stability of realisable value
which is so conspicuously lacking in a group
of all-British Trustee stocks.

In The Investment of Trust Funds,we publish
a chart showing the price-movements of fifteen
Government loans which may fairly be said to
embrace every investment quarter of the globe.
In this group we have not failed to include
United States 4 per Cent., Spanish 4 per Cent.,
Russian 4 per Cent., Japanese 5 per Cent., and
Chinese 5 per Cent. Gold Loan, although all

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184

_ these stocks, with the exception of the last,
were the national issues of belligerent Powers
during a war period, and Chinese Fives were
. adversely influenced by the Boxer rebellion
and the invasion of the country by an inter-
national force engaged in the armed suppression

of the Boxer rising.

Yet, in spite of these adverse historical
events, it will be seen that this cosmopolitan ~
collection of stocks displayed as a group a far
finer Capital Stability than did the purely
British Trustee stocks whose fluctuations are
illustrated in the chart given in this chapter.

Whether the obvious shortcomings of the
British Trustee Acts, as evidenced by these
charts, will ever be legislatively remedied
by the British Parliament extending the
scope of the Acts to include certain selected
Foreign Government securities it is im-
possible to predict. But in the meantime
one fact is clearly established, and that is that
the British Trustee stocks, owing to their
absolute identity of movement, do not furnish
the essential Capital Stability which Trust
Funds should -possess.

Our researches into the question of the
Geographical Distribution of Capital and of
the protection thus afforded to investors have
so firmly convinced us of the danger of

--- Page 150 ---

135

Trustees investing solely in British Trustee
stocks that we have applied ourselves to the
question of how trustees may best avoid the
dangers by which the interests confided to
their care are confronted owing to the uniform
movement of Trustee stocks.

These investigations are set forth at length
in the recently published handbook above
referred to.

--- Page 151 ---

APPENDIX.

POPULAR FINANCIAL BOOKLET XXI.
(The subjoined Article was written for the issue of the
Financtal Review of Reviews of April, 1907).
WORLD-TRADE AND THE GEOGRAPHICAL
DISTRIBUTION OF CAPITAL.

Geographical Distribution of Capital has been put forward by the
author of “Investment, an Exact Science,” as the only known means for
ensuring capital safety and stability. The principle of Geographical
Distribution of Capital is based upon the fact that whilst the trade of
any one country is subject to trade cycles, the trade of the world is
immune from such trade cycles: and that, therefore, whilst the invest-
ments of any one particular country suffer from bad trade in that
country, the investment trade over the surface of the world cannot on
average so suffer. In this article Mr. John Holt Schooling, F.S.S.,
author of the “ British Trade Year Book,” etc., makes an independent
investigation of this subject. His analysis is, of course, authoritative,
and his results confirm the accuracy of the argument put forth in
“Investment, an Exact Science.” ‘he subject of capital safety and
stability is one of such vast importance that Mr. Schooling’s article
should be read by all investors who have not yet adopted the system of
Geographical Distribution of Capital, and have therefore, so far, failed
to achieve capital safety and stability.

Tue idea of the Geographical Distribution of
Capital is based upon the main principle that
safe and profitable investment of capital, as
distinct from speculative finance, depends upon
_ the sagacious distribution of the investment of
capital in different parts of the world. It has
already been ably shown that the investment of
capital in various securities of one country
exposes the capital invested to considerable and
unsuspected speculative risk. That speculative
risk arises because the state of trade in this or
in that country is the predominant factor that

--- Page 152 ---

. 187

appreciates or depreciates the capital value of
securities of many different kinds. In other
words, the idea of the Geographical Distribution
of Capital is broadly based upon a wide
application of the old adage—“‘ Don’t put all
your eges into one basket.” And “basket”
here means “ country.”

The enormous loss suffered by investors in
the capital securities of the United Kingdom
during recent years, and the large depreciation
of our National credit, are most serious matters.
And the present subject is well worthy of
careful examination. ,

I have been asked by the Editor of the

Financial Review of Reviews to examine the |
fluctuations of the trade of the world, with
special reference to this matter of the
Geographical Distribution of Capital. The
main points put to me are these :—

Does the trade of the world constantly
increase, despite falls or rises in the trade of
various parts of the world? And, is falling
trade in one part of the world more or less
counterbalanced by rising trade in another part
of the world ?

These are interesting questions, and the
investigation of the facts necessary to reply to

' them ought to bring out some widely-based
results of much value, apart from the results

--- Page 153 ---

; 188
specially appertaining to this present matter of
Geographical Distribution of Capital. So far
as I know, no examination of world-trade _
fluctuations has hitherto been made. —

- Now as to the data to be examined. The
world’s trade consists of the home or internal
trade of each country and of the foreign
commerce of each country. Records of the
home trade of the countries of the world do
not exist to an extent sufficient for a broadly
based inquiry of this sort. Thus we have to
turn to the records of the foreign commerce of
each country, and perhaps the best available
test is to examine the exports of each country.
Let it be clearly understood that while
export trade is one important part of a nation’s
trade, it is by no means an exclusive or an
exhaustive test of a country’s progress or
regress in trade generally. [ will use this part of
trade because it seems to me to supply the best
_ data that are available for my present purpose.
The countries whose export trade has been
examined during each year 1890-1904 are as
follows :—

Evnrore.—United Kingdom, Germany, France,
Holland, Russia, Austria-Hungary, Belgium, Italy,
Spain, Switzerland, Sweden, Denmark, Roumania,
Norway, Finland, Portugal, Greece, Bulgaria,
Eighteen countries, stated in the order of their
importance.

Awenics.-United States, Canada, Argentine -
Republic, Chile, Mexico, Uruguay, British West

--- Page 154 ---

139
Indies, British Guiana, Newfoundland, Costa Rica.
Ten countries, stated in the order of their
importance.

Asts.—British India, China, Straits Settlements,
Japan, Ceylon, Aden, Mauritius. Seven countries,
stated in the order of their importance.

AustratasiA. — Australian Commonwealth, New
Zealand. ‘Two countries, stated in the order of
their importance.

Arrica.—Egypt, British South Africa (Cape of

- Good Hope, Natal, &c.), British West Africa
(Gold Coast, Nigeria, Sierra Leone, &c.). Three
countries, stated in the order of their importance.

Thus, the facts for forty different parts of
the world have been examined during fifteen
years. In some countries, such as Brazil and
Turkey, the necessary records do not exist.
And some countries where the trade is trivial
or where the facts are wanting, such as British
Honduras and Cyprus, have not been included.

The first thing that had to be done was to
summarise the export trade for each of these
forty parts of the world for each of the fifteen
years 1890-1904. This has been done, and the
net result of these 600 tabulations may be
condensed as follows.

Taking the world’s exports (from my work-
ing sheets) and summing them up in successive
periods of five years and of ten years, so as to
show the course of trade, I find that the world’s
export trade is not absolutely immune from fluc-
tuation. It is nearly constantly increasing, but
not quite, as the following statement shows :—

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140
A.—-THE WORLD’s Exports.
Yearly Average during each quinquennium and during each decennium.
Period, 1890-1904. See Diagram
Quin- Million Quin- Million De- Million
quennium. £ quennium, £ cennium. £
1890-1894 ... 1,414 1896-1900 ... 1,674 1890-1899 ... 1,496
1891-1895 ... 1,403 1897-1901 .... 1,758 1891-1900 ... 1,538
1892-1896 ... 1,408 1898-1902 ... 1,837 1892-1901 ... 1,583
1893-1897 ... 1,439 1899-1903 ... 1,924 1893-1902 ... 1,638
1894-1898 ... 1,494 1900-1904 ... 2,000 1894-1903 ... 1,709
1895-1899 ... 1,579 ; 1895-1904 ... 1,790
Draeram I,
The World’s Exports. Yearly Average during each quinquennium.
Period, 1890-1904. See Statement A. :
WORLD’ : SSE woe P
EAvORTS S2eesFaa83s
FER TITiT Ty; I TtiTe
Se xe Om tT HOD EPH HAO
Milkions DNADMHRAF HANA DS
of 2 2 eeeereere .
2000 2909
1200 Y
1700
asoor. ‘ ‘
(500
JA OO Ube k by :
_|t300 ,
1200
1100 : ;
1000 .
990
800
7090 .
600 . .
500 .
1,00 oe
399
200) : :
100 . ca
The years at the top and the long curve show the average yearly
exports of the World during each quinquennium.
EXAMPLE :—During the five years 1890-1895, the Warld’s Exports
averaged 1,414 million 2 yearly, oe

--- Page 156 ---

141

It will be seen that there was one fall—in
the period 1891-1895. But beginning with
that period the advance was continuous. A
glance at Diagram I. will show the upward
course. of the world’s export trade.

When we look at the decennial averages in
Statement A we see a steady increase in the
world’s export trade. And this method is
probably the best that can be used to make
the course of trade disclose itself. It has been
extensively applied by me in my “ British

- Trade Year Book” (John Murray), and I may
point out that when the trade of single
countries is thus treated by the method of

. decennial averages many up or down gradients
of trade are seen to exist, which, as the latter
part of Statement A shows, are wholly absent
from the trade of the world.

It is, I think, to be expected that the trade
of the world should constantly increase, apart
from the evidence of fact given in Statement A,
which relates to one important part of the
world’s trade. I say this because we have the
fact that the world’s population is constantly

increasing. This means that the material
needs of that population also constantly in-
crease. Therefore, the world’s activity in
producing merchandise of all sorts, for con-
sumption by the world’s increasing population,

--- Page 157 ---

142
must also increase constantly—in the world.
There is not necessarily an increase in each
part of the world.

Thus, for all practical purposes, such, for
example, as this matter of the Geographical
Distribution of Capital, the first question put —
to me may be answered in the affirmative by
Statement A. And if it were possible to

- include the results for the home trade of each .
part of the world, with the large section of
foreign commerce here dealt with, it is
probable that even the trivial fluctuation seen
in the first part of Statement A would vanish.

I come now to the consideration of the
second question. This relates to the yearly
trade fluctuations in different parts of the
world. And it will be interesting to observe.
the many instances where a fall in one part of
the world’s trade 1s accompanied by a rise in
another part of the world’s trade.

First, let me summarise the facts :—

B.-—Tur Wortp’s Exports purine 1890-1904.
Million £. Per Cent. of Total,
Europe ... - ... 16,786 eee 67°3
America ... «. 4,952 see 19°8
Asia we w» = 2,220 wee 89
Australasia wee 583 ee 2°3
Africa... wee 424 wee L7
; Total . ... 24,965  .., 100°0

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. 148
This is 24,965 million £, or an average of

exports equal to 1,664 million £ per year.
These exports are nearly all “ special exports ”
of each of the forty countries. That is to say,
they are the exports of home produce and
manufactures of each country, thus excluding
re-exports. In a few small trading countries,
such as Spain, Roumania, Finland, &c., I have

- had to use the general exports (special exports
plus re-exports) because the special exports are
not recorded. And also in some of the smaller
trading countries the exports include some
bullion and specie which cannot be separated
from the exports of merchandise. But these
points are of trivial importance relatively to the
large: volume of data that have been examined |
and condensed for the purpose of this article.

- The first main result which comes out is
that Europe’s exports vastly predominate.
They form more than two-thirds of the exports
of the world. This fact at once tells us that
when we look at the yearly fluctuations of
trade we must separate Europe from the Rest
of the World. Because as Europe predominates
so greatly in the world’s export trade, it follows
that any fluctuation taking place in Europe
must give a corresponding tone to the total
exports of the world. Thus we must first look at
Europe as compared with the Rest of the World.

L

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144
C.—Exports purine 1890-1904.
& Per Cent. of Total.
Europe ase ... 16,786,000,000 67:3
The Rest of the World 8,179,000,000 32°7
Total ... ...£24,969,000,000 100°0
Having made this necessary distinction, we
will look at the fluctuations in Europe’s -
exports side by side with the fluctuations in
the exports of the Rest of the World. (See
Table 1.)
Taste I.—Comparing the fluctuations in Europe’s Exports.
with the fluctuations in the exports of the Rest
of the World.
Year Hurope’s The Rest of the
. ° Exports, World’s Exports.
. Million £. Million £.
From 1890 to 1891...) Fell by 20 | Rose by 19
» 1891 ,, 1892 ...) Fell ,, 77 Rose ,, 19
», 1892 ,, 1893 ...| Rose ,, 11 Fell ,, 41
» 1893 ,, 1894 ...) Fell ,, 14 Fell ,, 4
» 1894 ,, 1895 ...| Rose ,, 54 No change.
» 1895 ,, 1896 ...{ Rose,, 61 Rose by 16
., 1896 ,, 1897  ...) Rose ,, 36 Rose ,, 37
,, 1897 ,, 1898 ...| Rose ,, 17 Rose ,, 70
» 1898 ,, 1899...) Rose ,, 96 Rose ,, 39
», 1899 ,, 1900 ..., Rose ,, 74 Rose ,, 27
, 1900,, 1901 ...] Fell , 22 | Rose ,, 45
», 1901 ,, 1902 ...| Rose ,, 62 Fell ,, 9
», 1902 ,, 1903...) Rose,, 77 Rose ,, 45
», 1903 ,, 1904 ...) Rose ,, 35 Rose ,, 45

--- Page 160 ---

145

Table I. illustrates the tendency of trade
to fall in one part of the world, and simul-
taneously to rise in another part of the world.
In three years Kurope’s exports fell and in
the same years the exports of the Rest of the
World rose. In two years the process was
reversed. In one year Europe’s exports rose’
and the other exports did not move. And in
the other eight years Europe’s exports fell or
rose disproportionately to the simultaneous rise
or fall in the exports of the Rest of the World.

Observe that there was only one instance
(1893 to 1894) when a fall in Europe’s exports
was accompanied by a fall in the exports of
the Rest of the World, and note that the latter
fall was trivial.

Here we have repeated instances of what
I may call compensating trade fluctuations,
despite the general rising tendency (which we
expect) both in EKurope’s exports and in the
exports of the Rest of the World. The first .
instance of this compensating trade movement
occurs in the first year of the table, when
Europe’s exports fell by £20,000,000 and the

_ exports of the Rest of the World rose by
£19,000,000.

It is, of course, not to be expected that
there should occur an exact degree of com-
pensating trade fluctuation over the vast areas _

L 2

--- Page 161 ---

146

now compared. And we have to bear in

. mind that we are now comparing the two
trade areas as regards one section of trade only.

The results in Table I. certainly sub-
stantiate the theory of compensating trade
fluctuation, and they also evidence the general
tendency of the trade of the world constantly
to increase.

An important point here crops up. Is
Europe decreasing or increasing its share of
the world’s export trade? Although this
question has not been put to me for exam-
ination, it bears upon this matter of the
Geographical Distribution of Capital, and it
is worth looking into. Here are the results :—
D.—Evrore’s SaarE or THE Wortp’s Exports.

Per Cent. Per Cent,
1890... .» = 69°7 1898... = 66°1
1891... .. = 68°38 1899... .. 668
1892... .. ©6599 1900... 0 669
1893... «.  68°2 1901... .. 650
1894... .. 68°0 1902... .. 663
1895... w — 69°2 1903... -» = 662
1896... .. 69°9 1904... = 6B1
1897... we = 691

This means that in the year 1890 Europe’s
exports were equal to 69:7 per cent. of the
world’s exports, and that in 1904 Europe’s
share had fallen to 65:1 per cent. The falling
tendency is well marked. And the deduction

--- Page 162 ---

147 ;
is that, although Europe remains greatly
predominant as a world trader, yet Europe’s
predominance is smaller now than in earlier
years. And, necessarily, the Rest of the
_ World is now of more importance, relatively
to Europe, as a trader, than was the case in
former years. Incidentally, these results give
force to the policy of the Geographical
Distribution of Capital.

Let me now show the fluctuations in
export trade, as regards Europe and America.
(Table IT.)

Taste II.—Comparing the fluctuations in Europe’s Exports
with the fluctuations in the Exports of All America.
Year. Exports, AN eports.
Million £. Million £. .
From 1890 to 1891... | Fell by 20 Rose by 6

» 1891 ,,1892 ...| Fell , 77 | Rose ,, 34

, 1892 ,,1893 ...| Rose ,, 11 | Fell ,, 38

, 1893 ,,1894 ...}| Fell ,, 14 | Rose ,, 8

» 1894 ,, 1895 ... | Rose ,, 54 Fell ,, 14

» 1895 ,, 1896 ...| Rose ,, 61 Rose ,, 18

» 1896 ,, 1897 ...] Rose ,, 36 Rose ,, 34

,, 1897 ,, 1898 ... | Rose ,, 17 Rose ,, 52

» 1898 ,, 1899 ...j Rose ,, 96 Rose ,, 11

» 1899 ,, 1900 ... | Rose ,, 74 Rose ,, 36

» 1900 ,, 1901 ...] Fell ,, 22 Rose ,, 23

, 1901 ,,1902 ...| Rose ,, 62 | Fell ,, 15

, 1902 ,,1903 ... | Rose ,, 77 | Rose ,, 22

» 1903 ,, 1904 ... | Rose ,, 35 Rose ,; 19.

--- Page 163 ---

148

The above summary illustrates the tend-
ency of trade to fall in one part of the
world and simultaneously to rise in another
part of the world.

In four years Europe’s exports fell, and
in the same years All America’s exports
rose. In three years the process was reversed.
In the other seven years [Europe’s exports
rose disproportionately to the simultaneous
rise in the exports of All America.

Here, again, we get striking confirmation
of the compensating tendency in trade
fluctuations, with also further evidence of
the tendency for world trade to increase. In
no fewer than seven of the years in Table II.
a fall or a rise in Kurope’s exports was accom-
panied by the opposite movement in America’s
exports. And the rises in both areas show
plainly the tendency for world trade to increase.

We will now ascertain the progress or
regress in America’s share of the world’s
export trade.

7.—Anerica’s Saare oF THE Worvp’s Exports.
Per Cent. Per Cent.

1890 ... ww. 172 | 1898 ... . 213

1891 ... .. 176 1899 ... w 204

1892 ... . 208 1900 ... we 212

1893 ... .» 185 1901 ... w- 221

1894 ... .. 193 1902 ... .» 20°8

1895 ... ... 176 1903 ... .-- 20°6

1896 ... we. 179 1904 ... wee 20°97

1897... we «192

--- Page 164 ---

149

‘We see that in 1890 the export trade of
America was 172 per cent. of the export
trade of the world, and that in 1904 America’s
share was 20°7 per cent. The rise is well marked,
despite the fluctuations of certain years.

Thus, accepting export trade as one
indication of trade progress, we see that
America has been gaining position relatively
to Europe (see Statement D) as a world-trader.

So far whole continents and vast areas
of the world have been compared as regards
trade fluctuation.

We may now narrow the base and come
to the matter of the United Kingdom’s share
in Europe’s exports.

F.—Tue Unirep Kinepom’s Suare or Evrore’s Exports.
Per Cent. Per Cent,

1890 ... ... 25°8 1898 ... we 21:3

1891 ... we 246 T1899 ... wee 22°2

1892 ... wee 245 71900 ... ve 23°)

1893... we 23'S T1901 ... -- 22°6

1894 ... we 233 71902 ... we. 217

1895 ... we. 231 71903 ... w QU

1896 ... we 231 | T1904 ... we 213

1897 ... w- 218

+ In these years the above figures are slightly too high,
because exported ships were included in the United Kingdom’s
exports during 1899-1904.

In 1890 the United Kingdom’s exports
were 25°8 per cent. of Kurope’s exports. In
1904 the United Kingdom’s share had fallen
to 21°3 per cent. .

--- Page 165 ---

150

Here the trade movement is well marked.
The United Kingdom has lost position and
the Rest of Europe has gained position.
Further, Europe as a whole has largely
increased its export trade. (See the rises in
Table I.)

We will now compare the export trade
fluctuations of two countries under wholly
diverse conditions, for the purpose of further
testing this matter of compensating trade
fluctuation. Table III. relates to the export
trade of the United Kingdom and of the
United States.

Taste H1—Comparing the fluctuations in the United
Kingdom’s Exports with the fluctuations in the Exports
of the United States—See Diagram II. ;

Year. [Unig rorgsom United States’

Million £ Million £

From 1890 to 1891... ...| Fell by 17 | Rose by 6
» 1891 ,, 1892... ...| Fell , 20 | Rose ,,’ 30
, 1892 ;, 1893... ...| Fell > 9 | Fell . 39
» 1893 ,, 1894... ...; Fell ,, 2 | Rose,, 8
1894) 1805... ...| Rose” 10 | Fell > 16
» 1895 ,, 1896... ...| Rose ,, 14 Rose ,, 15
» 1896 ,, 1897... ...| Fell ,, 6 | Rose ,, 35
» 4897 ,, 1898... ...| Fell ,, 1 | Rose ,, 37
» 1898 ,, 1899... ...| Rose ,, 31 Fell ,, 1
» 1899 ,, 1900... ...| Rose ,, 27 Rose ,, 35
» 1900 ,, 1901... ...| Fell ,, U1 Rose ,, 18
* 1901 ;, 1902... ...| Rose, 3 | Fell , 22
» 1902 ,, 1903... ...| Rose ,, 8 Rose ,, 8
, 1903 ,, 1904... ...| Rose, 10 | Rose, 9

* These are “British” exports (special exports), and they include
ships from 1899.

+ These are the ‘“‘special exports” of the United States,

--- Page 166 ---

151

Diacram IT.

Showing the Special Exports of the United Kingdom and
of the United States for each year, 1890-1904.—
See Table ITI. ;
EXPORTS QO 2 NS Fa Sree a6 - aa +
PRYER, - OB ESOSSREERADRS — |
[ot a ~F
320
2280 PV {
2b Lee rbu f
240 i
220 }- :

BOO i i i
: 180 Fusi76 a on -

160

VhOk -

120

100 ;

#0

60 :

4-O

2.0

. ki .

The solid black line shows the special exports of the United
Kingdom (including ships during 1899-1904. Ships were not recorded
during 1890-1898). : :

The dotted black line shows the special exports of the United
States.

In this instance the principle of com-
pensating trade fluctuation is most clearly

--- Page 167 ---

152

evidenced. In six years the United Kingdom’s

exports fell, and in the same years the

United States’ exports rose. In three years

the process was reversed. In the other five

years the United Kingdom’s exports fell or
rose more or less disproportionately to the
simultaneous rise or fall in the exports of the

United States. When our trade has fallen, the

trade of the United States has risen, and vice

versa. And the predominant rises are further
evidence, if any be needed, of the advancing
trade of the world.

The next thing to look at is the share
of the United Kingdom and the share
of the United States in the exports of the
world.

G.—Comparing the United Kingdom’s Share of the
World’s Exports with the United States’ Share of
the World’s Exports.

United United United United
Kingdom. States. Kingdom. States.
Percent. Per cent. Percent. Per cent,

1890 ... 18:0 12:0 1898 ... I41 153

1891... 16°9 12°4 1899 ... 148 14-1

1892... 161 15-1 1900 ... 154 15°2

1893... 15°8 12°6 1901 ... 147 159

1894 ... 159 13°3 1902... 144 14°4

1895 ... 16°0 117 1903... 13°9 13°9

1896... 161 12-1 1904... 139 13°8

1897... 150 13°8

--- Page 168 ---

1538

Statement G is exceedingly interesting.
It means that in the year 1890 the United
Kingdom supplied 18°0 per cent. of the
world’s exports, and that the United States

supplied 12 per cent. of the world’s exports.
In 1904 the United Kingdom’s share had
fallen to 13°9 per cent., and the United
States’ share had risen to 13°8 per cent. The
change of position of the two countries, as
world-traders, is most marked, and we could
scarcely have a clearer illustration of this
principle of compensating trade movement
which is so closely connected with the validity
of the Geographical Distribution of Capital.
Our loss of position as a seller to the
world has been closely accompanied by the
United States’ gain of position as a seller
to the world. The neck-and-neck race
in the latter years of Statement G is a
striking feature. of this most interesting
comparison.

The United Kingdom’s share in State-
ment G is slightly exaggerated in the years
1899-1904, because in those years our exports
include ships which were not included in the
years 1890-1898.

My investigation contains many more
results in addition to the leading features

--- Page 169 ---

154 —
I have shown. But it is scarcely necessary
to give further evidence as regards the
general truth of the statements that the
world’s trade constantly increases, that there
are numerous fluctuations in the trade of
different parts of the world, and that, broadly,
these fluctuations are compensating. That is
to say, a fall in the trade of one part of the
world is accompanied by a rise in the trade
of another part of the world, the demand for -
the production of commodities of all kinds
being necessarily an increasing demand, owing
to the constant increase in the world’s
population, and in the activity of that
population.

- But it may be useful to examine one or two
of the raw products of nations, and to see
whether in this most important direction also
there is to be found the working of compen-
sating trade fluctuation accompanied by an
increase of trade.

Take, for instance, the production of Iron
Ore.. -A most important raw product, because
it enters so largely into processes of manu- ,
facture of many kinds, which, moreover, are
not confined to a country’s export trade, but
which relate also to a country’s home trade
and manufactures generally.

--- Page 170 ---

155 :
Taste [V.--The Production of Iron Ore in the Three
Principal Producing Countries.
Tons (of 2,240 Ibs.*) of Iron Ore Produced in
Year I
United States. Germany. Rated Total.
Million Tons. {| Million Tons, | Million Tons. | Million Tons. .
1890 16-0 11:2 13°38 41:0
1891 146 10°5 12°8 37°9
1892 163 11:3 11°3 38°9
1893 116 11°3 11-2 34-1
1894 11:9 12:2 12°4 36°5
1895 16:0 12-2 12°6 40°8
1896 16°0 14:0 13°7 43°7 ,
1897 175 15:3 13°8 46'6
1898 19°4 15°6 14°2 49°2
1899 247 177 14°5 56°9
1900 27°6 18°7 140 60°3
1901 28°9 16°3 12°3 575 :
. 1902 35'6 17-7 13-4 66°7
1903 35°0 20°9 13°7 69°6
1904: 276 216 13°8 63°0
1905 44-1 23°0 14°6 81-7
Total 362°8 249°5 212-1 824°4
Note.—In the year 1880 the production was :
Million Tons.
United Kingdom tee tee wee 18°0
Germany oe wee see wee T1
United States ... wee wee se 71
*Germany’s production is recorded in metric tons of , .
2,204 Ibs., here converted into English tons of about 2,240 lbs.

--- Page 171 ---

156
Table IV. shows the production of iron
ore in the three principal producing countries.

First, we see plainly the large increase in

production. From 41 million tons in 1890 to

81:7 million tons in 1905. That means a large

increase in world products and in world trade.

Now look at the fluctuations for each
country in Table 1V. The United Kingdom

remained nearly stationary during 1890-1905.

But Germany and the United States (especially

_ latter) made great advances. The total pro-
duct of iron ore greatly increased, and our
absence of increase was more than compen-
sated by the increases in Germany and in
the United States. This is a notable instance
of compensating fluctuation as between country
and country, accompanied by increase in world
production.

Tastr V.—The Production of Iron Ore in the Three
Principal Producing Countries, showing each country’s
share of the total produce in the three countries.

The facts in TABLE 1V. shown as percentages of the total
Year. for each year.
, United States.| Germany. | cited Total.
1890 Pep Cont. Pes Cent. Pep Gents | Per Gene
~ 1891 38°5 27:7 33°8 100
1892 42-0 290 29°0 100
1893 34:0 33°2 32°8 100

--- Page 172 ---

157
The facts in TABLE IV. shown as percentages of the total
for each year.
Year.
United States.| Germany. Kee Total.
Per Cent. Per Cent. Per Cent. Per Cent.
1894 32°6 33°4 340 100
1895 39°2 29°9 30°9 100
1896 |; 36°6 82:1 31:3 100 ,
1897 | - 376 32°8 29°6 100
1898 39°4 317 28°9 100
1899 43°4 311 25°5 100
1900 45'8 31-0 23°2 100
1901 50°2 28°4 (B14 100
1902 53-4. 26°5 20°1 100
1903 50°3 30°0 19°7 100
1904 43°8 34°3 21°9 100
1905 53°9 28°2 179 100

Exampre.—In 1890 the United Kingdom produced 33°7%
of all the iron ore produced in the three countries. In 1905
the United .Kingdom’s share had fallen to 17'9%.

Table V., which converts the facts in
Table IV. into percentages, shows even more
clearly than Table IV. the working of this
principle of compensating fluctuation. The
results are exceedingly interesting, not only
as regards the matter with which I am
now specially concerned, but also from the
higher plane of international production and
commerce.

Similarly, I might show coal production
and coal consumption, but that I do not
want to overburden this article with tables.

--- Page 173 ---

158

The whole subject is full of interest and
of important results when the records are
looked at upon a broad-fact base, and without
any of the narrow and superficial picking-out
of this or that year for the purpose of sup-
porting a pre-conceived opinion. The latter
method has, unfortunately, become so common
in this country during the last four years of
discussion upon matters of trade, that one
‘ welcomes any opportunity that comes to
enable any section of trade to be dealt with
in a full and sound way. And as regards
the special purpose of this present investiga-
tion, I am pleased to be able to say that the
large mass of facts which have been examined
and condensed do support the sound principle
of the Geographical Distribution of Capital.
If it be admitted, as I think it must, that
the trade condition of a country has a pre-
dominant and widespread influence upon the
value of the capital securities of that country, |
then it seems to me that the principle of the
distribution of capital-investment im various
parts of the world must tend towards the
safe and profitable investment of capital, and
must go a long way to remove from capital-
investment the unsuspected element of specu-
lation that comes in when capital is invested

--- Page 174 ---

. 159
in various securities of one country. For the
net result of this investigation is to show
that whereas frequent and important trade
fluctuations occur in various parts of the
world, the world itself is practically immune
from such fluctuations.
Joun Hour ScHooxine.

(Author of The British Trade Year Book.)
Nort.—Table VI., Appendix (see next page), gives the
facts for each year, 1890-1904, that will enable any reader
to check the accuracy of the results shown in Statements A
to G, and in Tables I. to ITI. Tables IV. and V. contain
the original facts to which they relate. And Table VI. is

a much condensed summary of the World’s Export Trade. .

: M

--- Page 175 ---

160
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--- Page 176 ---

ESTABLISHED isso.

Peatnatletaicheesierehtielericina dina anrtaetaay
The Fnvestment Regist

nt Registry, Ltd.
. 2, WATERLOO PLACE, LONDON, s.W.
DIRECTORS— ;
Sir JouN ROLLESTON, D.L. | P. BURDETT-CUNNINGHAM.
The Lord ELcHo. E. MORTIMER HARLEY. ~
HENRY LOWENFELD.

SECRETARY—W. W. SMITH. ACCOUNTANT—WALTER G. BELL. AU DITORS—BLAKEMORE
AND Co,, 6, Old Jewry, B.C. BANKERS—LONDON & WESTMINSTER BANK, St. James’s Square, $.W.
» LLoybDs BANK, Lombard Street, E.C.
TWENTY-SIXTH ANNUAL REPORT,

For the year ending 27th September, 1906,

The Directors have pleasure in reporting as follows :—

There are at present 311 shareholders on the Company's Register. The Com-
pany’s gross Profits on Dealings and Sale of Publications have amounted to
£46,526 5s, 3d., and after paying for all outgoings, and making provision for
depreciation, &c., there is a net profit of £19,635 4s. lld. New Investment Lists,
representing a cash value of £2,918,017 have been entered on_the Company’s
Register during the year for the purpose of being re-constructed by the Company
on the principle of Geographical Distribution of Capital. The refusal to under-
take speculative transactions for customers has produced a highly beneficial
effect ; this policy will be continued.

In April last the following halt-yearly interim dividends were paid, viz. :—
at the rate of 54 per cent. on the lst Preference Shares, 10 per cent. on the
Preference Shares, and £1 per share on the Ordinary Shares of the Company.
The Directors now propose to pay the following final dividends for the Company’s
past financial year :—5% per cent. on the 1st Prefefence Shares, 10 per cent. on
the Preference Shares, and a further dividend of £3 per share on the Ordinary
Shares of the Company.

The Dividend now recommended will absorb £5,998, and leave a balance of
£10,434 19s. 1d. to be carried forward. .

By order of the Board,
W. W. SMITH, Secretary.
BALANCE SHEET, 27th September, 1906.
OR. ASSETS. £ 8 ad £ 8s. d.
CASH AT BANKERS— :
London and Westminster ... ane ave ae ae toe oe au ow» $28,443 10 1
Lloyds ... oe oe on on oe oe oo oy ane on os 10,461 10 10
In Hand te on on ae aoe se ate ue on oe te 17015 4—~- = 89,075 16 3 ‘
Stocks, &¢., ON HAND for Delivery on September 27th Settlement at Cost
or Market Price tes see me sos oe ne oon wes ae se 41,858 8 4
SUNDRY DEBTORS 0. se cee nee ote eee nents 15,709 Lt 0
LEASEHOLD PROPERTY, Copyrights, Furniture, Fittings, Goodwill, and
Seeurities on hand, &e, 4. ee tee naka 76,429 0 1
£173,072 13 8
———e
Dr. LIABILITIES.
SUBSCRIBED CAPITAL— £ sa £ 8 a £ aa
36,280 5% per Cent. First Preference Shares of £leach .. + 36,250 0 0
DEDUCT—Amount unpaid... a oo we aw. =: 115 0 036,165 0 0
40,007 10 per Cent. Preference Shares of £leach ... we we one «+ 40,007 0 0
1,000 Ordinary Shares of 10s. each ... one tae ae ve ae ses 00 0 0— 76,672 0 0
SUNDRY CREDITORS—Clients ... ee ae we ane ae one ve 46,351 9 5
Brokers... se see eee anette 81,289 15 7
. Sundries ... we ce aos ase oe oo we - 2,336 9 J 79,977 147
PROFIT AND Loss AccouUNT—
Balance at 26th September. 1905 sae ase ae a we aoe «6.637 3.1L
ADD—wNet Profit as per Protit and Loss Account we a we «. 19,635 4 11
26,472 8 10
DEDUCT—Dividends paid thereout ... - ae oe oe on «. 10,019 9 9— 16,422 19 1
. £173,072 13 8
In accordance with the provisions of the Companies Act, 1900, we certify that all our requirements
as Auditors have been complic@ with. We report to the Shareholders that we have audited the above
Balance Sheet, and in our opinion it is full and fair and correctly exhibits the state of the Company's
affairs on the 27th day of September, 1906, as shown by the books of the Company.
6, OLD JEWRY, E.C. BLAKEMORE & CO., Chartered Accountants,
8th October, 1806 Auditors.
: mM 2

--- Page 177 ---

Caratocue or Pus.icaTions
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--- Page 178 ---

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140 pp. 4/- nett. Explains how a systematic
investment scheme should be started and sub-
sequently kept up. Informs the reader when,
how and what to buy and sell, in order to obtain
the best results from capital invested in Stock
Exchange securities. (See page 14.)

JAMIESON, Geo., C.M.G., late Consul-General in China,
“Chinese Investments and Finance.” Demy
8vo. 16 pp. 1d., post free 14d.

“Interesting and instructive.”’— Vestminsier Gazette.

LOWENFELD, Henry. “Investment an Exact
Science.” New and Revised Edition. Cloth
bound. Demy 8vo. 160 pp. 2s. 6d. Illustrated
by numerous charts. Contents: On Investment
Risks. — What Influences the Realisable Value
of Stocks? — The Geographical Distribution of
Capital——-Why Geographical Distribution Protects
both Capital and Income. — The Practical Con-
struction of Investment Schemes. — The Treatment
of Existing Investment Lists. — The World’s Stock
Markets. — The Defects of the British Trustee,
Acts. — World-Trade and the Geographical Distri-
bution of Capital. Written by J. HOLT
SCHOOLING, F.8.5.

‘“‘A striking argument put forth in convincing style.”—Financial

News.

“The Investment of Trust Funds.” Revised as
to points of law by E. A. SCRATCHLEY, of
Lincoln’s Inn, Barrister-at-Law. Demy 8vo.
100 pp. Bound in art cloth. 2s, 6d. nett.
(See page 11.)

“(Of considerable interest and value.’’— The Standard,

--- Page 180 ---

5 .
Catalogue of Books published by The Investment Registry.
“Professional Men as Investors.” Demy 8vo.
16 pp. 1d., post free 43d.
“The writer deals in a remarkably keen style with the errors into .
which the professional man may fall if he does not grasp the rudiments

of sound investment.””—City Press. ;

“Investment Crazes.” Demy 8vo. 16 pp. id,
post free 44d.
‘“‘Well worth the perusal of all interested in stocks and shares.’?—

Bristol Mercury.

“Consols and National Credit.” Demy 8vo.
16 pp. 1d., post free 13d.
u ‘‘ Investors will follow with interest the arguments of the writer.””—

Daily Telegraph.

McOLEERY, J. Carlisle. “Discounting the Death
Duties.” Demy 8vo. 16 pp. 1d., postfree 14d.

- MW’LAREN, Sir Charles, K.C., M.P., Chairman of the
Metropolitan Railway. ‘ Prospects of Iron and
Steel Ivestments.” Demy 8vo. 16 pp. 4d.,,
post free 14d.
“A very able and interesting article.”—Jnvestors’ Review.

MORGAN, Percy, F.S.S. ‘The Outlook for Brewery
Investments.” Demy 8vo. 16 pp. 1d., post

free 14d.

ROLLESTON, Sir John. “Investments in Real
Property.” Demy 8vo. 16 pp. 1d., post free
43d.

“ & most striking article.’—Leicester Post.

--- Page 181 ---

; 6
Catalogue of Books published by The Investment Registry.
SASSOON, Sir Edward. “Finance and the Feudatory
States of India.” Demy 8vo. 16 pp. 14., post
free 14d.
SCHOOLING, J. Holt, F.S.5. “World-Trade and
the Geographical Distribution of Capital.”
Demy 8vo. 24 pp. 1d., post free 14d,
WITHERS, George. “The Stock Exchange.” Cr.
8vo. 260 pp. Bound in art .cloth. 3/6 nett.
Traces the Stock Exchange bargain from the client
to the final adjustment of the transaction between
the original seller and the ultimate buyer.
“How to Read a Prospectus.” Demy 8vo.
16 pp. 1d., post free 14d.
“How to Read a Balance Sheet.” Demy 8vo.
16 pp. 1d., post free 14d.
“English Investors and American Securities.”
Demy 8vo. 16 pp. 1d., post free 14d. .
WRIGHT, Arnoid. “The Municipal Rakes’ Pro-
gress.” Demy 8vo. 16 pp. 1d., post free 14d.
; * Quite a remarkable article.—Zas “Anglian Daily Times.”

--- Page 182 ---

, 7 .
. READ PRESS OPINIONS ON NEXT PAGE.
sO Pages of Reading Matter. 166 Pages of Tabular Matter.
THE

3 : R x R :

inancial Review of eviews.
MONTHLY, is. NBTT.
Ne INVESTOR can afford to be without a file of the FINANCIAL
REVIEW OF REVIEWS, as this is the only journal in existence
which informs him as to the present real position of his own Investments
: and their comparative merits when gauged by other securities.

This Review not only gives an up-to-date record of all Reports,
Balance Sheets, Dividends, Prices and Yields of every important stock
quoted in Great Britain (about 5,000 individual securities), but it also
contains a digest of every important Financial Article and every new
Prospectus. Jn addition, there are in each number four important
Original Articles on finane’al subjects written by eminent Statesmen,
Economists and Financial Experts.

During the past year the following Writers have contributed:

The Right Hon. Sir CHARLES Sir ROBERT EDGCUMBE.

DILKE, P.C., M.P. = Prof. G. H. BRYAN, Sc.D., F.R.S.

The Hon. MICHAEL H. HENRY LOWENFELD.
HICKS-BEACH, M.P. Sir JOHN ROLLESTOW, D.L.

J. KEIR HARDIE, M.P. ERNEST E. WILLIAMS, F.S.S8.

T. P. O’CONNOR, M.P. GEORGE WITHERS.

The Hon. W. PEMBER REEVES, GEORGE JAMIESON, C.IM.G.,

: High Commissioner for New Zealand. Late Consul-General in China.

A. J. WILSON, 8. F. VAN OSS.

Editor of the “ Investor's Review.’ —_ sip EDWARD SASSOON, Bart., M.P.

Sir CHARLES M’LAREN, Bart., ARNOLD WRIGHT. 7
K.G., M.P. EARL OF CARDIGAN, D.S.0.
Sir THOMAS P. WHITTAKER, M.P. J. HOLT SCHOOLING, F.S.S.
P. C. MORGAN, F.S.S. STEFAN MULLER,
. PERCY F. MARTIN, F.R.G.S. Financial Editor of
T. A. COGHLAN, I.8.0., ‘Neue Freie Presse”
Agent-General for Australia, Baron von MADARASSY-BECK
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obtain at a minimum cost every opportunity of safe-

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The Editor DISCOURAGES Speculation, and ENCOURAGES
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BACK NUMBERS OBTAINABLE.
Che Financial Review of Reviews,
2, WATERLOO PLACE, LONDON, S.W.
Published on the lst of each month.

--- Page 183 ---

i
8 <
THE .
Financial Review of Reviews,
PUBLISHED MONTHLY, PRICE l/- Neit.
EXTRACTS OF SOME PRESS OPINIONS DURING 1906:—
“Ts likely to exercise great influence.” Standard.
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“The hand of the expert is seen on every page.” :
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—Bristol Times and Mirror,
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“240 interesting pages for one shilling.”
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Che Financial Review of Reviews,
2, WATERLOO PLACE, LONDON, S.W.

--- Page 184 ---

9
A Complete Fi ial R
ompiete Financial Record.
The “ FINANCIAL Made in
REVIEW OF REVIEWS” Mahogany, Oak, or Walnut, .
x Price 10s. Gd.
iling abinet. Or with Stationery Rack, k4s.
it can stand on your Desk. It can hang on your Office or Library Wall,
i aaa el j
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\ (rE FeG|Mar|aPt [way| aun [aut] AuG| SEP] OCT Nov|DEC} a
\\\\ ee ay AT a fa L | \ Peg
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Mele he; etei2/2)ss1al2) 2 qe
SSS
The FINANCIAL REVIEW OF REVIEWS contains—

The Topics of the Month, being a digest of everything of importance
which has transpired during the past month, and a glance at the alpha-
betical index preceding them renders the task of reference an easy one,

The Digest of the Month's Reports discusses every important balance-
sheet and directors’ report which has appeared during the month. The
companies are alphabctically arranged, so that such reports as interest
each individual reader can be found instantly.

The Month’s New Issues give a critical abstract of every new public
issue, and compare its value with existing investments.

The Tables give the latest prices, dividends, and income-yields at
current quotations of 5,000 securities, together with a record of their
highest and lowest prices and past dividends paid, and other valuable
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The latest 12 monthly issues filed constitute a complete history of
recent financial events.

The Review Subscription is 10s. per annum post free.
Back Numbers for starting the Cabinet obtainable at any time from
the Publisher, 2, WATERLOO PLACE, LONDON, S.W.

--- Page 185 ---

- 10
Hariey’s Investor’s
Account Book.

Provides a perfect record of every transaction, is con=
tinuous, and always fully posted; every entry is made
once only, and never transferred from one account to
another, It provides for Geographical Division of Capital, °
and can be fully used, even by those who have no
knowledge of book-keeping.

SOME PRESS OPINIONS. .

The Manchester Guardian of March 30, 1905, points out that
“the book itself is so simply arranged, and the directions
and forms contained in it are so easily understood, that even
very indolent and unbusinesslike persons could keep their
accounts in it for themselves without much effort.”

“A very useful book. It is complete in every respect.”—
Glasgow Herald.

“An investor can tell at a glance the real position of his
investments at any time.”—Manchester Courier.

“ Cannot fail to be useful to all owners of stocks and shares
who wish to keep their accounts accurately.”--~Belfast News
Letter. ; .

“A very handy book enabling the investor to see ‘where he
is’ at a glanee.”—Newcastle Daily Chronicle.

~ “Skilfully designed . . . a convenient book for methodical
record keeping.”—Aberdeen Tree Press.

“Cannot fail to be appreciated by all investors.”—Dundee
Cowrier.

“The most complete, concise and understandable work of the
kind we have seen.””"—Bradford Weekly Telegraph.

“Will rapidly win favour—it makes. accurate book-keeping
a matter of simplicity, and by its use the investor is enabled
to arrive at his exact position at a moment’s notice.’—
Yorkshire Daily Observer.

“A most comprehensive and useful publication.”— Yorkshire
Chronicle ; ; ;

Price: Cloth Binding, 4s. nett: Leather Binding, 6s. nett.
"2, WATERLOO PLACE, LONDON, S.W.

--- Page 186 ---

: i]
NOW READY.
a Aa lng
: : IN THE SAFEST AND MOST
B PRODUCTIVE MANNER.
y a
HENRY LOWENFELD.
a
Revised as to statements of law by ,
E. A. SCRATCHLEY,
Of Lincoln’s Inn, Barrister-at-Law.
. te
“Of considerable interest and value.”—Standard.
“ An interesting and enlightening work.”—Financier,
. “The result of most careful study and revision.”
—Dundee Courier.
“Throws much fresh light on the difficulties which may beset the
path of trustees.”—Evening Standard.
- ' “Enunciates very sound principles.”—7'ribune.
“A volume of unquestionable value.”—Liverpool Courier.
“Replete with hints and suggestions.”—-Vanity Fair.
“Many valuable hints and much practical advice.”
; —Northern Whig (Belfast). ;
“ Clearly and concisely written’—Irish Independent.
“A singularly interesting work.”—Devon and Emeter Gazette.
“ Should prove most informing to the general public and welcome
to the legal profession.”—North Eastern Daily Gazette.
“ Should prove suggestive to trustees.”—Scotsman.
“Will be welcomed by many a sorely perplexed trustee.”
—Western Daily Mercury.
“Should be of immense service.”—IJrish Times, ~ .
* Sound, practical advice.”— Globe.
“ Thoroughly practical.”"—-Lastern Morning News.
“A very useful publication. The advantage of geographically
distributing investments is unquestionable.”—Morning Post.
Price - 2s. Gd.
a
PUBLISHERS— ,
2, WATERLGO PLAGE, LONDON, S.W.

--- Page 187 ---

. 12
i ial B
Opular yinanca OKI ets,
This series of Popular Financial Booklets comprises
complete original Articles of universal interest which
have appeared in the “Financial Review of Reviews.”
PRICE ONE PENNY.
i. How to Read a Balance-Sheet .. .. GEO. WITHERS
Explains bow investors may be forewarned by investigating a company’s
balance-sheet.
2, Finance and the Feudatory States of India
Sir ED. SASSOGN, M.?P.
Shows that Great Britain can profitably invest money in India.
3. Professional Men as Investors .. HENRY LOWENFELD
Explains why safety of Investment should be the first consideration of
the Professional man.
4. Prospects of fron and Steel Investments
. Sir GHAS. M’LAREN, M.P.
: Traces the progress and anticipates the future of iron and steel investments.
5. Investment Knowledge .. THE INVESTMENT CRITIC
Deals with the dangers to which a limited investment vocabulary exposes
its owner.
G. Gan Money be Profitably Invested in Land ?
EARL GF GARGBIGAN, D.S.90.
Treats of various methods of land investment.
7. How Investment Safety is attained HENRY LOWENFELD
Describes the main principies of sound investment.
8. A Labour Budget ... vee aes .. KEIR HARDIE, M.P.
Indicates the financial policy of the Labour Party if given legislative power.
9. Japanese Industries and Foreign Investments
. Dr. H. DYER, G.E., M.A.
Reviews the industrial growth of Japan and the openings for foreign capital.
10. investment Crazes.. .. ..  ... HENRY LOWENFELD ;
Indicates how investors should act during financial ‘‘ booms.”
11. The Municipal Rake’s Progress ... ARNOLD WRIGHT
Criticises municipal financial extravagance.
12. The Outlook for Brewery Investments
y P. G- MORGAN, F.S.S.
Discusses the financial bearing of past and prospective legislation ou
. brewery investments.
13. Chinese Investments & Finance GEO. JAMIESON, C.M.G.
Explains Chinese financial methods and discusses investment values.

--- Page 188 ---

Popular Financial Booklets—continved.
14. What Income shouid Investments Yield ?
HENRY LOWENFELD
Proves that a low rate of income does not necessarily indicate capital
security.
15. Safe Investment and improved Income Based on the
World’s Gommerce . THE INVESTMENT GRITIC
16. Discounting the Death Duties .. J. CARLISLE McGLEERY
17. The Money Market Articie and the Private Investor
HENRY LOWERFELD
Shows how to read the Money Market Article with benefit.
18. Methods of Insuring Death Duties
. . THE INVESTMENT GRITIC
A companion booklet to No. 16.
19. An Unique Method of Invesiment ,
Baron JULIUS YON MABARASSY-BECK,
Of the Hungarian Mortgage Bank.
Describes Land Mortgage Investments.
20. English Investors and American Securities
: : GEO. WITHERS
Exp'ains how holders of American stocks should act.
' 24. World-Trade and the Geographical Distribution of Gapital
JOHN HOLT SCHOOLING, F.S.S. .
An impartial investigation of the principles of Geographical Distribution.
22. Gonsols and National Credit .. HENRY LOWENFELD.
Examines the value of Consols from a new standpoint.
23. Investments in Real Property .. Sir J. ROLLESTON
Describes the advantages of mortgage investments.
oe
24, Telephone Investments in the United States
E. R. CONKLIN
Reviews one of the most profitable branches of American joint stock
enterprise.
25. Dutch Experience of American Investments
S. F. VAN OSS
26. The Investor’s Defence against Labour’s Attack on
Capital... . « .« . HENRY LOWENFELD
27. How to Read a Prespectus we GEORGE WITHERS
Any of the above booklets will be sent post free for 13d. each on
application to the Publishers,
2, WATERLOO PLACE, S.W.

--- Page 189 ---

: . if
HOW TO cesses
MANAGE CAPITAL.
A companion volume to ‘Investment an
Exact Science.” Explains how a systematic
Investment Scheme should be started and subse-
quently kept up. Informs the reader when, how,
and what to buy and sell, in order to obtain the
best results from capital invested in Stock
Exchange Securities.
NEW EDITION NOW READY.
Price 6d. nett, Cloth 1/-
THE INVESTOR’S
YEAR BOOK. «sss
. Gives on 695 pages 15 years Highest and
* Lowest Quotations—Dividends—Yields—Inherent
Values---Geographical Division---Capital Position-~
Age, &c., of about 2,000 of the best known Stock
Exchange Securities.
This Book is indispensable to every reader of the
“Financial Review of Reviews.”
NOW READY.
‘ “An extremely useful publication, the particulars set
forth provide a gauge of the value of stocks.” —
Financial News.
Price 1/- nett.

HANDSOMELY BOUND IN ART CLOTH.
a
2, WATERLOO PLACE, LONDON, S.W,

The Bishopsgate Press, London, ELC.