COPY OF DRAFT-LETTER, FULL OF "FINANCE AND FIGURES," REFERRED TO IN THE PRECEDING LETTER
"There are, of course, the U. S. sixes, if you are content with so low a rate of interest. The New York stocks are about the same. There are others which are lower. If put to the choice myself, I should prefer bonds secured by mortgages on real estate, or, as we familiarly call them, b. and m. at 7 p. c., which, with care, can be had, even in the present plethora of money. There are also many varieties of bonds of private companies paying 6 or 7 p. c.; but, as a general rule, I should decidedly prefer bonds and mortgages on real estate.
"There are also stocks of private companies. Many of the banks are earning 7, 8, 10, or even more per cent. But these stocks are at considerable premiums, and have risen much recently. They cannot be always continuing on the ascending series. When a commercial depression shall occur these bonds will feel it more promptly and more deeply than that of most corporations; their dividends will be reduced, the premiums (which are equivalents for future, unearned, dividends) will fall off; and you may lose more by this decline than you have realized in the excess of the dividends over a fair interest. The same remark is applicable to the few railways which pay very large dividends, although they are not so sensitive to the fluctuations of commerce as the banks—in this as in the other case. The Delaware & Hudson Canal Company—whose business is to produce and bring to market anthracite coal—has declared about 16 per cent. for the last four or five years. The premium on its stock is now 50 p. c. That is lower than it has been, because of special circumstances, while I think that the next year's business will be better. The dividend is over 10 p. c. on premium and all. I would rather risk the continuance of its high premium than in any other case of a railroad. I may say, any other similar case. There is a similar company which has just come into operation—a very solid concern—which we think will be at least as good; its stock at a premium of 15 p. c. It is not so well known or so promptly marketable, and its stock is in a rather complex form, which it is expected to simplify next winter. It would be idle to say that I have not great confidence in it, since I have transferred what I had in the other to it, and have put in it more than the sum you mention in your letter; but I should not like to have another person invest in it or any similar thing merely on my judgment; and, to do so on his own, he ought to have more detailed knowledge than could be communicated in this hasty letter. The claim is that its stock will not advance much for the next 3 months—perhaps not for the next 6 or 8 months.
"There are also classes of ins., to some of which I have great objection, but it would be futile now to discuss their merit.
"With respect to investments in private companies generally, I have some observations to make. A very large proportion of one's means should not be concentrated in one institution, especially without the most thorough familiarity with its affairs. A wise selection between them requires at any time special knowledge and individual judgment; and more so now than usually. The abundance of capital and low rates of interest causes high premiums to be given for the most productive stocks as well as the most so that it is scarcely possible to get them at prices [half a page is here utterly undecipherable] unless in special cases where the enterprise is comparatively new and unknown, or its real merits are not fully appreciated by the public, in which cases you rely upon what you suppose to be superior information or judgment.
"I ought to add, in qualification of those general views, that I do not mean that the market has reached its highest elevation. I think it probably has not; nor can I now see the particular time when, or the particular event by which a change is to take place. We are not in a state of high speculative excitement; we appear to be tending to such a state, though causes may occur to check the tendency. But we do know that—whether the present abundance of capital and prosperity of business shall, temporarily, increase or not—we cannot expect them to continue for a very long period, even to the present degree. It is desirable to make your investment at as low prices as possible, in order to enhance your interest and have greater security against possible contingencies; but even this consideration may be so modified by peculiar circumstances that it is difficult to state an absolute rule applicable to all cases.
"On the whole, your main interest is to find your money safe and available when you come here, and are able to make a permanent disposition of it on your own judgment. I am gratified to be able to believe that you have already secured an ample provision for the future—its reasonable tastes as well as its necessities—at a rate of productiveness which will give the greatest safety. Anything that you can hereafter add to your income or capital would be really of very slight importance to you, compared with what you now have. I do not undervalue your fortitude and energy, or concede to own to the impertinent advances of time, when I say that your chief care should be to avoid even the possibility of being compelled to begin anew the work of life—so far as the providing for its material wants can be called such—when, if the period most fitted for that purpose have not passed, the years which have been allotted to it cannot be recalled. The advantages of such skilful disposition of your means as are consistent with safety—and such advantages there are—will be to be enjoyed by you when you shall become—as I hope you soon may—a resident in our country. In the mean time, a deposit with the trust company seems to be as good a temporary arrangement as you can make at your distance from the scene or as I can suggest in my ignorance of your particular affairs, wishes, and future movements. I need not add that any aid which I can give you in making this or any other disposition of your remittances which you may prefer will be very cordially rendered. I shall be happy also to answer further inquiries and convey additional information, as far as can be done by correspondence; and shall hope to do so more promptly than I have been able this time, and more briefly; for without purpose to be very I happen to have been visited by unusual concourse of people talking to me about all sorts of things and by a necessity of my talk with you very rambling and diffuse. I have had the to read it over—with something of dismay that I should ever have written such a letter to a lady, and I must beg that it be communicated to Mr. Chase, to whom, in truth, it seems mainly to be addressed—and to all eyes but his remain forever a sealed book. It might ruin all my prospects with less forbearing fair ones if it were supposed there could be any risk of a similar epistle.
"If you should place a deposit, or otherwise temporarily dispose of such remittances as you may make through the winter, would not the true policy be for Mr. and Mrs. C. to come on here for a short time, next spring or summer, to make more permanent arrangements? The journey is not much, and might be more than repaid by the business results. If you could leave your affairs at home the trip might be useful in all respects. I have left myself little space for other topics. But I must find room to say, in reply to the friendly message of Mr. Chase, that I consider myself already, in some sort, acquainted with him, and to beg that he will not measure the little attentions I had the pleasure of rendering to a lady who interested me, as well by her personal qualities as by the situation in which I met her, by the disproportionate sense of them which she entertains.
"I fear the probability of my being able to visit Tampico at present is not sufficiently substantial to fabricate a dream of. My consolation must be the hope of meeting you here, in which I trust you will not disappoint me. The authority with which you commission me to 'say many kind things' to certain of your friends—if intended to be general—is too flattering in its conferment and too agreeable in its exercise to be renounced. And yet I fear I should not be the 'faithful agent' you hope if I did not candidly admit how little, in this respect, you need, or can be aided, by any service of mine.
"Hoping to hear from you shortly, and to see you at an early period, and wishing Mr. C. and you every prosperity and happiness, I remain,
"Very truly, your friend,
"——."