quotations of 200 and over. This is because of the fundamental difference whereby bond income is limited and stock income unlimited. In cases where the stock return is limited, such as preferred stock, the price will tend to keep within the same limitations as bond prices. The example of Bethlehem Steel preferred, stated earlier in this chapter, shows this may not always be the case, however. When preferred stock is redeemable, the maximum market price is held down by the redemption price as well as by the limited income. If the redemption price is par, the market price will seldom exceed par to any great extent because of the ever present possibility of redemption. The preferred stock of the American Cotton Oil Co. is redeemable at 105 and the highest price quoted on this security since 1901 was 1074. Stock prices are not entirely dependent upon the dividends that are actually paid. The earnings available for dividends may be far more than the required amount, in fact the earnings may be large and no dividends paid. In both such cases it is obvious that a substantial surplus is being accumulated by the corporation for the benefit of the stockholders. This will normally result in a higher rate of annual dividends, or occasional large extra distributions. In anticipation of such increased income, the stock price will increase often to a point where the actual yield based upon the dividends paid is below that of supersafe mortgage bonds. At such a time it is obvious that the stock, regardless of its other advantages, is not an investment. The Standard Oil stocks generally come in this category. Bethlehem Steel did when it sold at 700 in 1916, as did also Delaware, Lackawanna and Western when it sold at 680 in 1909. Relation of taxation.-An interesting advantage in favor of stock over bonds as investments is shown in their relative taxability. It has previously been stated that there has always been a decided tendency in this country to impose a heavier tax upon bond incomes than upon stock incomes. The present Federal Income Tax law illustrates this clearly. Stock dividends are entirely exempt from the normal tax whereas bond interest must be included with all other income. The effect of this advantage is immediately apparent. A further discussion appears in the Chapter "Relation of Taxation." Conclusion. Although as a class, stocks present a less desirable investment opportunity than bonds, it is nonetheless true that certain stocks have deservedly a fair investment rating, often better than many bonds. Stocks undoubtedly comprehend a large element of risk and for this reason are more suitable for the business man than for one less acquainted with commercial affairs. The investor in stocks should always receive a higher return than from an investment in high grade bonds, as he has sacrificed part of his security and deserves this recompense. CHAPTER X RAILROAD SECURITIES Railroad industry in the United States.-The steam railroads constitute the largest industry in the United States and engage the services of the greatest number of workers with the exception of agriculture. The roads comprise about 250,000 miles of line and 380,000 miles of track. The total number of employees in 1914 was 1,710,296, receiving a total compensation of $1,381,117,292. Labor received about 44 per cent. of the gross revenue of the roads, a larger percentage than in foreign countries as is shown in the case of England, 25 per cent., and Germany, 38 per cent. The outstanding securities of the roads on December 31, 1916, were as follows: But sixty-two per cent. of the total stock was on a dividend paying basis in 1916. The average rate on that portion was 6.75 per cent. and on the entire stock was 4.19 per cent. The total dividends paid in 1916 amounted to $366,561,491 and interest $481,435,525, making a total of $847,997,019 distributed as income to security holders. Principal American railroads.-The United States has no true transcontinental roads as the Mississippi River marks in a fairly definite manner the end of the lines which originate at the Atlantic seaboard and the beginning of the routes which terminate at the Pacific Coast. The great trunk lines, such as the New York Central, the Erie, the Pennsylvania, the Baltimore and Ohio, and the Chesapeake and Ohio, carry the traffic from Boston, New York, Philadelphia, and Baltimore to Chicago and St. Louis, where the so-called transcontinentals, the Atchison, the St. Paul, the Great Northern, the Northern Pacific and the Union Pacific, continue the journey westward through the Rocky Mountains. New England is served by the Boston and Maine, the Boston and Albany, and the New Haven. The North Atlantic section is covered by the Delaware and Hudson, the Lackawanna, the Jersey Central, the Reading and the Lehigh Valley. The Middle Atlantic district has the Western Maryland, and the Norfolk and Western. The South Eastern States have the Southern, the Atlantic Coast Line, the Seaboard Air Line, and the Atlanta, Birmingham and Atlantic. Chicago is served to the northwest by the Burlington, the Great Western, the Northwestern, and the Wisconsin Central, and to the south and southwest by the Alton, the Monon, the Rock Island, and the Illinois Central. St. Louis traffic moves northeast over the Wabash and southwest over the Missouri Pacific, the Katy, the 'Frisco, and the Cotton Belt Route. The Southern Pacific and the Atchison cover. the Southwestern States and the Rio Grande, the Colorado and Southern, and the Western Pacific operate through the Rocky Mountain States. Few of these roads continue their operations to any one section, and the foregoing classification should be taken in a very general way. The short names used in many of the roads mentioned are explained in the following paragraph. Short names of roads.-The long title of many American roads renders the use of the full name inconvenient for ordinary use. A short name has been coined in numerous instances as in the case of the Minneapolis, St. Paul and Sault Ste. Marie. This road is known as the "Soo." A list of the more common short names is appended: Alton Burlington Cotton Belt Route Frisco Great Western Lake Shore New Haven Northwestern Pan Handle Chicago and Alton 'Atchison, Topeka and Santa Fe Cleveland, Cincinnati, Chicago and Chicago, Burlington and Quincy Toledo, St. Louis and Western St. Louis and San Francisco ern Lake Shore and Michigan Southern Chicago, Indianapolis and Louisville New York, New Haven and Hart- Chicago and Northwestern Pittsburgh, Cincinnati, Chicago and |