markethereheprovidessomeinvestmenttipsforoneoftheperiodspopularmagazinesLadiesHomeJournalseetextp772SourceFromSamuelCrowtherEverybodyOughttoBeRichAnInterviewwithJohnJRaskob ID: 265259
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![No. 74.]Lunacy.[1950.S.4 amended. 3. Section four of the principal Act](https://thumbs.docslides.com/117865/no-74-lunacy-1950-s-4-amended-3-section-four-of-the-pri.jpg)
Raskob(1879-1950),associatedwithDuPontandGeneralMotors,servedaschairmanoftheDemocraticNationalCommittee,thechoiceofAlSmith.Himselfaninvestor market,hereheprovidessomeinvestmenttipsforoneofthepe-riod'spopularmagazines,Ladies'HomeJournal(seetextp.772).Source:FromSamuelCrowther,"EverybodyOughttoBeRich:AnInterviewwithJohnJ.Raskob,ÈLadies'HomeJournal(August1929).Copyright1929,MeredithCorporation.Allrightsreserved.UsedwithpermissionofLadies'HomeJournal.Beingrich amilliondol-lars,thatamillionairedoesnotcauseanycomment.FixingIIbulkline say,ashaseverbeengivenbyhisearnings.Thatamountofprosperityoughttobeat-tainablebyanyone.Agreatersharewillcometothosewhohavegreaterability....Itisquitetruethatwealthisnotsoevenlydistributedasitought justifysavings,butatthesametimehastoomuchsensetobuyfakestocks-andsosavesnothingat beenherefortheasking.Thecommonstocksofthiscountryhaveinthepasttenyearsincreasedenormouslyinvaluebecausethebusi-,nessofthe.'countryhasincreased.Tenthousanddollarsin-vestedtenyears torswouldnowbeworthmorethanamillionanda GeneralMotors itisnotfoundedonexperience.Inmyopinionthewealthofthecountryis increatinganddirectingatleastadozentrustsforinvestmentinequitysecurities.Thisplanofequityinvestmentsisnomeretheorywithme.Thefirstof othersintheyearsimmediatelyfollowing.Underallofthesetheplanprovidedforthesavingoffif-teendollarspermonthforinvestmentinequitysecuritiesonly.Therewerenostocksboughtonmargin,nomoneyborrowed,noranystocksboughtforaquickturnorre-sale.Allstockswithfewexceptionshavebeenboughtandheldaspermanentinvestments.Thefifteendollars thetrustandreinvested.Threeofthesetrustsarenowtwentyyearsold.Fifteendollarspermonthequalsonehundredandeightydollarsayear.Intwentyyears,therefore,thetqtal al-mostanyonewhoisemployedcandothatifhetries.Ifheinvestsingoodcommonstocksandallowsthedividendsandrightstoaccumulate,hewillat haveatleasteightythousanddollarsandanincomefrominvestmentsofaroundfourhundreddollarsamonth.Hewillberich.AndbecauseanyonecandothatIamfirminmybeliefthatanyonenotonlycanberichbut rich.Theobstaclestobeingricharetwo:Thetroubleofsaving,andthetroubleoffindingamediumforinvest-ment.IfTomisknowntohavetwohundreddollarsinthesavingsbanktheneveryoneisouttogetitforsomeab-solutelynecessarypurpose.Morethanlikelyhiswife'ssis-terwilleventuallyfindtheemergencytodrawitforth.Butifhedoeswithstandallattacks,whatgood noincentivetosave,andsincethewholeisunderhisjuris-dictionhecandependonlyuponhisownwilltosave.Tosaveinanysuchfashionrequiresastrongerwillthanthenormal.Ifhethinksofinvestinginsomestock thinksthathehasnot.Supposehehasathousanddollars;thebankcanonlyadvisehim probablyhasnottheexperi-enceanywaytogivesuchadvice.Tomcangetreallyade-quateattentiononlyfromsomemanwhohasaworthlesssecuritytosell,forthenallofTom'smoneywillbeprofit.TheplanthatIhavehadinmindforseveralyearsgrowsout havefollowedfortheexecutivesintheGeneralMotorsandtheDuPontcompanies.In1923,inordertogivetheexecutivesofGen-eralMotorsagreaterinterestintheirwork,weorganizedtheManagersSecuritiesCompany,madeupofeightyse-niorandjuniorexecutives.ThiscompanyboughtGeneralMotorscommonstocktothethenmarketvalueofthirty-threemilliondollars.Theexecutivespaidfivemilliondol-larsincashandborrowedtwenty-eightmilliondollars.ThestockholdersoftheManagersSecuritiesCompanyarenotstockholdersofGeneralMotors.TheyownstockinacompanywhichownsstockinGeneralMotors,sothat,asfarasGeneralMotorsisconcerned,thestockisvotedasablockaccordingtotheinstructionsofthedirectorsofthe237ManagersSecuritiesCompany.ThissuppliesanimportantinterestwhichcanexercisealargeinfluenceinshapingthepoliciesofGeneralMotors.FROM$2.5,000TOAMILLIONTheholdingsofthemembersinthesecuritiescompanyareadjustedincasesofmenleavingtheemployofthecom-pany.TheplanoftheManagersSecuritiesCompanycon-templatesnodissolutionofthatcompany,sothatitshold-ingsofGeneralMotorsstockwillalwaysbeenbloc.Theplanhasbeenenormouslysuccessful,andmuchofthesuc-cessoftheGeneralMotorsCorporationhas thatis,acorporationthatwillinvestincommonstocksonlyunderproperandcare-fulsupervision.Thiscompanywillbuythecommonstocksoffirst-classindustrialcorporationsandissueitsownstockcertificatesagainstthem.Thisstockwillbeofferedfromtimetotimeatapricetocorrespondexactlywiththevalueoftheassetsofthecorporation gotothestockholders.Thedirectorswill offhismotor-carloan.Whenfinishedhewouldownoutrightfivehundreddollarsofequitystock.Thatwouldtakehissavingsoutofthefree-willclassand isoutofthequestiontomakepeoplerichinspiteofthemselves.Themillenniumisnotathand.Onecannothaveallplayandnowork.But sopoorthatlivingatallwouldhardlybeworthwhile.Unlesswehaveconsumptionweshallnothavepro-duction.Productionandconsumptiongotogetherandarigidnationalprogramofsavingwould,ifcarriedbeyondapoint,makeforgeneralpoverty,fortherewouldbenoconsumptionto beregardedasafinancialplan.Constructivesavinginordertoincreaseone'sincomeisafinancialoperationandtobegovernedbyfinancialrules;disciplinarysavingisan-othermatterentirely.Thetwo oldpreceptscontrastingtheimmoralityofspeculationwiththemoralityofsoundinvestmenthavenobasisinfact.They onlyonedi-rectioninsofarastheactualreturnindollarsandcentsisconcerned.Butinadditionhespeculatesagainsttheinter-estrate.Ifhissecuritypays4percentandmoneyisworth6 morethanhecouldotherwiseget.Thebuyerofacommonshareinanenterpriselimitsneitherhisgainsnorhislosses.However,heexcludesoneelementofspeculation-thechangeinthevalueofmoney.Forwhateverearningshegetswillbeincurrentmoneyval-ues.Ifhebuyssharesinawhollynewanduntriedenter-prise,thenhishazardsaregreat,butifhebuysintoestab-lishedenterprises,thenhetakesnomorechancethandoestheinvestorwhobuysadebt.Itisdifficulttoseewhya investmentthanagoodstock,fortheonlydifferenceinpracticeisthatthebondcanneverbeworthmorethanitsfacevalueorreturnmorethantheinterest,whilea thanwaspaidforitandcanreturnalimitlessprofit.Onemayloseoneitherabondorastock.Ifacom-panyfailsitwillusuallybereorganizedandinthatcasethebondswillhaveto moneyandpossiblytheywillbescaleddown.Thecommonstockholdersmayloseall,oragaintheymaygetanotherkindofstockwhichmayormaynoteventuallyhavea butthevalueofrealtyshiftsquicklyandeventhemostexperiencedinvestorsinreal-estatemort-gageshavetoforecloseanappreciablepercentageoftheirmortgagesandbuyinthepropertiestoprotectthemselves.Itmaybeyearsbeforethepropertycan OnamortgageI Ilend,butImaygetbackless.Thelinebetweeninvestmentandspeculationisaveryhazyone,andadefinitionisnotto reasonsthathavebeensetout-thefallacyofconservativeinvestmentwhichisnotconservativeatall.Thewaytowealthistogetintotheprofitendofwealthproductioninthiscountry.Questions1.WhatessentiallyisRaskob'sadvice?2.Whatchallengesdoeshebelievefacethosewhowanttoberich?3.Which