Playing between the point of economy and the point of superior virtue is illustrated in the follow ing: We are anxious to commence shipping ore within ninety days, and for this purpose we want to sell sonic treasury stock, but I seriously object to deal thru brokers. I know that I am going to make my fortune from my investment in this enterprise; I have put into it all I had. I told my as sociates that I was satisfied there were enough people who knew me, or knew of me, who would believe in my representa tions, and would invest in the enterprise if they knew I was connected with it. Naturally, therefore, I objected to the paying of exorbitant commissions to brokers, and insisted that the company should derive the benefit of every dollar received by it.
Aside from this, brokers, in order to market their se curities, quite often exaggerate statements. In the past forty years I have established a reputation which I am anxious to maintain and I want to be sure therefore that the company's literature is under its own control, so that no statements will be made that a self-respecting man could not stand for.
11. The inside offer.—Bacon said in his "Advance ment of Learning," "The Italian thinketh himself upon the point to be bought and sold, when he is better used than lie was wont to be without manifest cause." If the average American prospective investor were as sharp as the Italian referred to, the bald and bungling offers of special inside prices found in ques tionable prospectuses, offers made to you personally, to win your lifelong patronage and friendship or to test your good judgment in investment matters, would be merely funny. After looking upon the glowing picture of inside opportunities offered, one may well ask himself, "Why are not the promoters keeping this good thing for themselves? Why have local capitalists in the neighborhood where it is grow ing ignored it? Who am I, that I should be specially selected?" "When I let you in," say the promoters of a min ing company, "on the inside at the absolutely ground floor price of 10 cents a share, I think I am demon strating that I am favoring you to a greater extent than you will appreciate until you look into this prop osition fully." The promoters of one concern write: You are one of the few to whom I have shown the specifi cations for the United States Letters Patent. You are one of the few that I am favoring with the opportunity to sub scribe for a block of this stock at the inside price of five cents per share. I have shown the machine itself to a num
ber of my friends and have allowed them to subscribe at the five cent price, but I wanted to test your judgment on the undertaking, and that is why I have favored you in pre senting the proposition to you at this time and giving you the opportunity to come in at the five cent price.
12. Testimony of the amateur.—Worthless stocks are often sold by mail order, on the recommendation of well-known people who are deluded into giving indorsements.
Much more amusing is the commonplace device of walking a committee of innocent stockholders thru a mine or a partially completed factory, and then ob taining from them letters of indorsement. The most expert efficiency engineers and cost accountants would not be drawn into making any sort of comprehensive statement after such a cursory inspection ; but a group of innocent grocers and school teachers and farmers will follow a carefully prearranged path thru a plant of a business of which they know nothing, and will then draw up resounding phrases of indorsement from the plenitude of their ignorance. In 1908, the Sterling Debenture Corporation was exploiting the Oxford Linen Mills. A selectman, a postmaster, a merchant, a contractor, a jeweler and a Chief of the Fire Department of North Brookfield, Massachusetts, were passed thru the mills and these men thereupon wrote themselves down as "taking pleasure" in indors ing "a meritorious enterprise," and in marveling at the "really remarkable results." In their ignorance they presumed to pass judgment on a project which claimed to be revolutionizing the world's linen in dustry. They doubtless contributed in causing many innocent investors to lose their savings. They did not prevent the Federal District Court of New York from sentencing the promoters of the enterprise.
13. Guaranteeing one's own securities.—Books on finance say, "Of course no one will be caught by the project of a company attempting to guarantee the dividends on its own securities." Unfortunately this much cannot be assumed.
The following is a characteristic appeal: We have selected your name with a few others, from among our many thousands of clients, as one who would be interested in a guaranteed, interest paying, safe investment : we refer to the stock of the company, now closely held by a few individuals who have profited very largely from their holdings.