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C H A P T E R X
THE MARKETING OF LOW-GRADE SECURITIES
Risk Incident to All Promotion—All enterprises, even all
industries, are, at their inception, highly speculative. The
essential difference between an established enterprise and a
promotion, from the investor's standpoint, is that in the former
case there is a body of working evidence for predicting the
future, whereas in the case of the promotion project this body
of evidence is absent. A substitute may be offered the investor
in the shape of a report of the earnings of similar enterprises,
or in the shape of predictions of earnings authorized
by men of known standing. At best, however, the future of
all business enterprises is uncertain; what is sound and successful
today becomes unsound and weak tomorrow, and what
is speculative for one generation becomes the conservative
widows' and orphans' investment the next. The old order
changeth and values become matters of degree.
So it is with the relative uncertainty of new enterprises.
The earnings of a combination of established electric light
or water plants can be predicted more accurately than those
of any other promotion project; on the other hand, the earnings
from a patent to manufacture a new kind of breakfast
food do not come even within the range of prediction. So that
when one refers to speculative or low-grade securities, one
usually means the securities of companies the earnings of which,
for one reason or another, are conspicuously uncertain. It
is only a matter of degree. Money can be lost through the
purchase of municipal bonds; money can be made even through
the purchase of stocks of unproductive gold mines. To speak
of the one as the ultra-conservative investment and the other
as arrant speculation, means merely that the degree of certainty
with which future payment of interest on municipal
4.32
| Titel | The financial policy of corporations |
| Auteur | Dewing, Arthur Stone |
| Jaartal | 1926 |
| Collectienaam | NIVRA Historisch Archief, UBVU gedigitaliseerd |
| PPN | 344552586 |
| Toegangsgegevens (URL) | http://imagebase.ubvu.vu.nl/getobj.php?ppn=344552586 |
| Signatuur origineel | NIVRAHA149 |
| Evaluatie |
| Titel | NIVRAHA149_00456 |
| Transcript | C H A P T E R X THE MARKETING OF LOW-GRADE SECURITIES Risk Incident to All Promotion—All enterprises, even all industries, are, at their inception, highly speculative. The essential difference between an established enterprise and a promotion, from the investor's standpoint, is that in the former case there is a body of working evidence for predicting the future, whereas in the case of the promotion project this body of evidence is absent. A substitute may be offered the investor in the shape of a report of the earnings of similar enterprises, or in the shape of predictions of earnings authorized by men of known standing. At best, however, the future of all business enterprises is uncertain; what is sound and successful today becomes unsound and weak tomorrow, and what is speculative for one generation becomes the conservative widows' and orphans' investment the next. The old order changeth and values become matters of degree. So it is with the relative uncertainty of new enterprises. The earnings of a combination of established electric light or water plants can be predicted more accurately than those of any other promotion project; on the other hand, the earnings from a patent to manufacture a new kind of breakfast food do not come even within the range of prediction. So that when one refers to speculative or low-grade securities, one usually means the securities of companies the earnings of which, for one reason or another, are conspicuously uncertain. It is only a matter of degree. Money can be lost through the purchase of municipal bonds; money can be made even through the purchase of stocks of unproductive gold mines. To speak of the one as the ultra-conservative investment and the other as arrant speculation, means merely that the degree of certainty with which future payment of interest on municipal 4.32 |
