for the Naval School. In extent and in cost they are beyond those supplied by any other nation. This is well, but it is vastly more important to know whether the moral, intellectual, and professional training which is to be given in these buildings looks toward the highest type of manly life and of professsional service. As compared with the men of other nations, the American is alert, resourceful, and superficial. Alertness and resourcefulness are great qualities, but

alone they do not win, in the long race, against thorough training and intelligent preparation. Those who have to do with education need to set their faces resolutely toward those things which make for simplicity, sincerity, and thoroughness; and in no school can such training count for more in the Nation's well-being than in the one which fits for the Nation's navy. The race for national and for naval leadership is a race between schools.

But

Land and houses are attractive investments. Some of the greatest fortunes of the world have been built up by the intelligent purchase of real estate. investments of that character require considerable sums. The owner of $1,000 does not usually purchase a corner lot, a railway company, or a factory site. What, then, shall he do with his savings? He confronts the alternatives of bonds, stocks, mortgages, or the savings bank. The purpose of this paper is to discuss the relative desirability of bonds and stocks as investments for moderate savirgs.

Bonds and stocks are simply certificates of value. They represent, fractionally, material property such as houses, land, factory sites, railway stations, steam-engines, steel rails, machin

ery, docks and terminals, etc., and also such intangible things as earning power. Corporations must operate upon borrowed money, just as a merchant does. The latter borrows from his bank for two, four, or six months, in order to finance his purchases; as security for his borrowings he gives to the bank his personal note. Sometimes he is required to give collateral security as well. porations borrow on a larger scale and for longer periods. The form of borrowing they employ is called a bond issue.

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A bond is a written promise to repay a loan at a given date. The interest to be paid during the life of the loan is also specifically stated upon the face of the bond. The bond is secured by the pledge of some material thing, such as a railway property or a factory site. All these facts are minutely stated in a contract or mortgage, together with a detailed description of the property offered as security. This contract is deposited with some responsible person or banking institution, usually a trust company, who shall act as trustee for possible purchasers of the bond. Conservative companies issue their bonds only up to about seventy-five or eighty per cent of the actual market value of the property pledged. This leaves a satisfactory margin of safety for the prospective bondholders. If the company

fails to pay interest on the loan at the stated times, or the principal at maturity, the trustee is empowered by the clauses of the mortgage contract to sell the property and satisfy the claims of the bondholders both as to principal and as to interest. What remains after the satisfaction of the bondholders' claims goes to the stockholders.

What, then, is a stock? It represents the right to, or title to, or ownership of a property and of the earnings of that property, after running expenses and interest on debts have been paid, or, in case of foreclosure and sale, of what remains after payment of debts of every description, with principal and interest. It may stand for great value, or merely for future possibilities. A bond is a fixed liability. So much interest must be paid annually and so much principal at the maturity of the loan, else the property offered as security is forfeited. On the other hand, the management of the company is under no defined obligation to the stockholders. The latter must take their chances. If times are good and earnings are great, they may expect large returns. When business is depressed, they must be satisfied with a decreased income, the amount being subject to the discretion of the directors. It will be seen, therefore, that the value of a stock, both actual and as to market price, is variable. The intrinsic worth of a bond, in contrast, having been practically determined before its issuance, remains relatively unimpaired, although its market value may fluctuate in sympathy with the general activity or depression of business. Also, since stocks represent ownership, while bonds do not, and since control of property is the desire of men, stocks are subject to speculative manipulation that bonds are free from.

Bonds and stocks cannot be all things to all men. What may be a perfectly legitimate investment for a shrewd banker or merchant might easily seem recklessly speculative when purchased by a minister, or teacher, or widow inexperienced in financial transactions. Indeed, no uninitiated person should attempt to decide the details of such matters unaided by expert counsel. But the essentials

he may master. vinces one that the inexperienced investor should place his savings where they need cause him no anxiety. He should be able to put his security away in his strong box, confident in the assurance of unvarying income and indestructibility of principal. He has no time to watch the gyrations of financial markets, nor knowledge wherewith to gauge them. Therefore, generally speaking, it would seem that bonds are preferable to stocks for persons of moderate means. Let it be borne in mind that the bonds and stocks discussed here represent the obligations of old and established corporations that have withstood the winds of adversity and the temptations of prosperity. The real investor should be concerned with no other class of securities. So soon as he strays from the straight and narrow path of conservatism, he becomes a speculator in a greater or less degree.

A little thought con

Stocks of some companies may be more desirable investments than bonds of others. The stocks of certain great railway and industrial corporations, for instance, have, through years of careful management and consequent steady payment of dividends, come to be regarded as being practically equivalent to fixed obligations. (Income from bond investments is called interest, that from stocks dividends, the one meaning payment to the lender for the use of his money loaned, the other signifying a division of surplus profits.) Bond investments promise a known and steady income, with relatively little likelihood of advance in market price beyond a certain point.

Stocks stand for variability in the matter of both principal and income. They may reap enormous profits, or they may return their owner nothing. In the selection of stocks as an investment, therefore, the purchaser should be even more careful than in the case of bonds. He should satisfy himself by diligent study and inquiry that the company whose stock he is about to buy has earned for a long period and is now earning a surplus far in excess of all expenses of operation, interest on bonded indebtedness, and, finally, of the dividends paid on that stock. If these facts can be

established beyond question, then the stock may be acquired with wisdom.

There are many classes of bonds, and their relative investment value depends upon a variety of circumstances and conditions. Stock issues, too, include several classes. Some companies, notably the smaller manufacturing corporations, have no bonded obligations, but have trusted to the sale of stock for financing their operations. A number of stocks of this class form excellently safe and profitable investments. Their market, however, is a narrow one, as a rule. But most corporate organizations issue both bonds and stocks.

Bonds are issued usually in denominations of $1,000, but there are also many bonds for $500 each, and some for $100 each. Interest is ordinarily paid semi-annually, and little detachable checks, or slips, called coupons, representing the amount of interest due each half year, are attached to the bond. These should be cut off and presented at the office of the company for payment upon the agreed day. Such bonds are termed coupon bonds." There are also what are known as "registered bonds." These do not possess the little checks or coupons, but show instead, upon the reverse side, blank spaces for the purchaser's signature. His name and address are at the same time registered upon the books of the company, together with the number of his bond. At interest periods the company's treasurer forwards him a check for the interest due. Registered bonds may not be sold without the written consent of the holder over his signature, or that of some person holding his power of attorney. For this reason the purchase and sale of registered bonds involve considerable detail and sometimes expense. Hence their market price is usually lower than coupon bonds of the same issue. The latter are readily negotiable by any holder, and require no form whatever. If a registered bond were stolen, it could not be disposed of by the thief, whereas the sale of a stolen coupon bond might be an easy matter. Savings banks and trust estates generally prefer registered bonds as investments because of their greater safety

and their convenience in the matter of interest. Certain bonds may be issued in either coupon or registerable form at the option of the purchaser.

Financial ingenuity has created many kinds of bonds and has tagged them with a great variety of names. In another article these different sorts of bonds will be considered individually. For the present it will suffice to enumerate the various classes. In some instances the appellations are self-explanatory. Bond issues include first, second, and third mortgage bonds (and occasionally even. fourth or fifth mortgages), general, unified, consolidated, collateral trust, extension, refunding, divisional, sinking fund, convertible, equipment, and participating mortgages, and debentures. The last are not mortgage bonds, although frequently quite as desirable. A debenture is simply an unsecured promise to pay, and resembles a note. The bonds thus enumerated include the issues of all manner of stock corporations, railway, both steam and electric, gas, water, electric lighting, and industrial companies.

Stock issues are less diversified. They consist, usually, of a preferred and common stock. But there are occasionally three classes: i.e., first preferred, second preferred, and common stock. Their relative claims as regards the company's earnings, its lands, buildings, machinery, fixtures, and other material property, are specifically defined at the time of their issuance. In some cases the preferred stock is allowed so much out of surplus earnings, then the common stock so much, after which they share alike in what remains applicable, in the discretion of the company's directors, to dividends. Again, the preferred stock may be limited to a certain per annum income, after which dividends upon the common stock are to be restricted only by the amount of surplus earnings available for distribution. In other cases the income upon each class of stock may be limited by agreement to a maximum figure. A share of stock usually represents one hundred dollars, and this is called its par value. But the par value may vary with different companies. The par value of some stocks is fifty dollars, of others five dollars, and of yet others one dollar.

A very great number of mining shares, for instance, have a par value of one dollar. When an investor buys a share of stock, it is transferred to his name upon the company's books, and his name is written across the face of the certificate, upon which is printed the statement that John Doe is now the owner of one share of the capital stock of X Company. The stock may not be sold without his signed and witnessed permission, or that of his attorney. The company issues certificates representing one share, and multiples thereof up to any amount purchased. Dividends are paid semi-annually, or quarterly, by the company's check.

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The distinction between the relative investment values of bonds and stocks when productive conditions are unfavorable (and regard should always be had for such possibilities) may be simply illustrated as follows: A farmer finds it necessary to borrow money with which to sow or to harvest his crops, for fertilizers, or for other purposes. gages his farm for $10,000. But the farm is actually worth $16,000. Because of adverse circumstances he fails to pay interest. The mortgage is foreclosed and the farm sold for $16,000. Out of the proceeds of the sale the mortgage debt is paid, both principal and interest. What remains is turned over to the farmer. Had times been prosperous the farmer might not only have paid his interest, but from the remaining surplus earnings he might have actually reduced the sum of his principal indebtedness. In the case of the stock corporation, the bondholders correspond to the man who has loaned the farmer money. The stockholder represents the farmer.

It is difficult to avoid the allurements of unusual income from investment, even though the eventual cost may mean the sacrifice of principal. A few years ago the stock of a great corporation was offered to the public at a price remarkably low, considering the fact that dividends were then being paid and rumors of their

permanency were being circulated. Here is the actual experience of one investor in that stock. She-for this particular person was a dressmaker in a small town, who had saved a few hundred dollars-did not know what the word stock signified. But she did see, thanks to the "tips" of well-meaning friends, that the purchase of this particular stock meant an income of about nine per cent. (Income upon a stock investment may be figured by dividing the rate per cent paid upon the par value by the market price. Thus: a stock which pays four per cent upon its par value of $100 per share, and which is being sold at $44 per share, nets the purchaser 9.09 per cent.) Therefore, this woman, attracted by an extraordinary income, invested her savings in a mere possibility. The earning capacity of the stock was practically untested. Still, she bought in small amounts as it advanced in market price. Suddenly it began to decline, for, as the wise ones knew, its rise had been due to skillful manipulation. The woman, inspired still by well-meaning friends with "tips," continued to buy as the stock went down. When it had reached a point at which the income was about twenty per cent on the investment, the directors decreed a suspension of dividends for an indefinite period. Immediately the stock fell to something less than ten per cent of its par value. The poor dressmaker's savings were wiped out. She could not even borrow money offering her comparatively worthless shares as collateral. No one wanted them.

Had this woman bought the bonds of the same company, she would have had an assured income of about five per cent per annum, and principal unimpaired. She could not watch the markets and buy and sell as speculators do, risking all for great profit or utter ruin. What she needed was safety of principal and peace of mind.

In a subsequent paper the bonds of a railway company will be considered from the point of view of the investor.

G

USTAVE Charpentier, whose opera "Louise" has held the stage for seven years in Paris and has just been produced at the Manhattan Opera-House in New York,' is, before and above all, a lover of life. While a Prix-de-Rome student at the Villa Medicis in Italy, he produced a work consisting of five symphonic tableaux, entitled "Impressions of Italy," in which he embodied in musical form ("painter's music " some one has called it) the varied sensations and emotions of his Italian sojourn. "Sauntering through Italy," says his friend and fellowmusician, Alfred Bruneau, "he hears the serenades which, under the amorous sun, the swains give, from morning till night, to the maidens. He sees the long lines of women going to draw water at the singing fountain. He is amused by the tinkling bell of the mule trotting along the country road, and succumbs, nevertheless, to the melancholy of its persistent rhythm. On the mountaintops he waxes enthusiastic for the boundless space in which the distant church bells vibrate, in which the spirit flies away in pursuit of the great birds of one's dreams. Finally, he is intoxicated by the deafening noise of Naples en fête. He treasures up in his memory the joyous clamor of the exuberant crowds, the military music of the torchlight processions, the hissing of rockets, and the recurring theme, at once persuasive and full of abandon, of the eternal serenades which, even in the midst of the brutal follies of the pleasure-mad city, the youths still offer to the maids."

After returning to France, Charpentier established himself in Paris, at Montmartre, that bizarre quarter, in which hundreds of young and impecunious devotees of the nine muses have deliberately elected to live in the midst of a population part laboring and part semicriminal, because, forsooth, their garret windows afford ravishing views of all

'Editorial comment on the production of this opera will be found on another page.-THE EDITORS.

Paris and the country round about, which inspire and sustain them in their stern strivings to realize their ideals.

There, where any person the least bit sensitive to environment might (to borrow the phrase of Charles Lamb)" weep for fullness of joy at so much life," Charpentier frequented alike the resorts. of the people and the groups of his aspiring brother artists. Especially, he studied the constantly shifting spectacles and the diverse musical cries of the teeming streets with an eagerness in which love of his kind and love of his art bore each a part-interest begetting affection, and affection in turn begetting interest. The result was that this region, where what is best and what is worst in Paris meet, where the most sublimated idealism is grotesquely blended with the crassest materialism, where the lofty Socialism and Anarchism of the lettered hobnob with the brutal Socialism and Anarchism of the mob, became to him the best-loved spot in all the world.

The winning grace of the workinggirls, the honest sturdiness of the bloused draymen and laborers, the weird slyness. of the rag-pickers, the whining abjectness of the beggars, the slouching insolence of the thieves and prostitutes, the piquant impudence of the pale gamins, and the merry, fantastic heroism of the long-haired, corduroy-clad poets and painters, haunted him like a passion; and all this and more he put into "Louise," which may fairly be characterized as an autobiographical opera, if the word “ the word "autobiographical" be taken broadly enough. The plot of "Louise" contains little that has been fabricated out of whole cloth, and the characters, for the most part, were drawn from real persons. "In Louise,'" Charpentier himself says, "I have translated an epoch of my own existence." He adds: "I have tried to make of Louise' the youth of all of us poets and artists; to depict the desires, the enthusiasms, of our young manhood, when we dream of conquering the immense city and the heart