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PSF: NY William O. Douglas
RETIRED FOR PRESERVATION
PSF
Box 144
P5F: full Doriglas
THE WHITE HOUSE
WASHINGTON
11-27-37
Memorandum for Mr. McIntyre:
Chairman Douglas dictated the following
memo over the 'phone:
"Mr. Jerome N. Frank, of New York City,
is agreeable to an appointment on the
Commission. I am very enthusiastic to
have Frank. Frank would like to know
that if there is available at some future
time an appropriate Federal Judgeship
that he would be given consideration, as he
is interested in permanency of tenure in the
Federal Government, as he has to leave a
very good law practice and does not want to
return to it if he comes down.
"John Haines, of C.E. Barney & Co., Member
of the New York Stock Exchange, is a very
good prospect. I am planning to have a
conference with Haines, if agreeable, in
the very near future, to size him up further.
"At the present time I feel that Frank and
Haines would be an excellent combination and
I will report the results of my conference
with Haines in a few days."
W.O.
PSF: Douglas
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
OF THE CHAIRMAN
February 5, 1938.
The President
The White House
My dear Mr. President:
In view of your interest in a recent compilation pre-
pared by Goodbody & Company, purporting to set forth certain
values for public utility securities, I have had our Public
Utilities Division investigate and analyze the results of this
study.
The "Goodbody Study" represents an attempt to measure
the assets and earning power underlying holding company securi-
ties. The physical assets of the subsidiary operating companies
which form the base of the whole security structure have been
revalued on the basis of figures derived from averaging the
detailed property accounts of 120 public utility operating com-
panies. Earnings were then computed on the assumption of a
6% rate of return on the property values 80 calculated. The
calculated values and earnings based thereon were substituted
for book values and actual earnings of each individual company
in arriving at Goodbody's computed values and earnings applicable
to the securities of the holding companies listed in the study.
The calculated asset figures were derived from an
averaging process of the detailed property accounts of one hun-
dred and twenty public utility operating companies examined.
To clarify just how the averaging process was developed,
I have obtained from the files of the Public Utilities Division
a copy, which I am inclosing, of the Goodbody Market Letter and
indicated in red penoil the portion which shows, by specific
illustration, how the method was employed.
The method is admittedly only for test purposes and
does not profess to develop "original oost" or "prudent invest-
ment valuations" for any given company. The application of
average computations to specific cases has the usual weakness
that is inherent in any averaging process. For that reason, I
believe that the "Goodbody Study" does not necessarily indicate
the extent of "write-ups" or "water" present in the various
holding-company systems. It would however indicate the companies
2
where inflated values probably exist and thus serve as a rough,
though not accurate, measure of their extent. In other words
it does not necessarily give a reliable measure of such inflation.
The study was designed primarily to warn investors in
a general way of the companies whose earnings in the future might
be less than in the past. I believe it is of value in distinguish-
ing the better holding companies from the poorer ones from the
point of view of investors who are contemplating putting their
money into holding company securities.
The following appears to be the way in which they may be
classified on the basis of the "Goodbody Study."
Making the best showing:
North American Company
Columbia Gas & Electric Company
American Gas & Electric Co. (Electric Bond & Share System)
United Gas Improvement Company
Making the next best showing:
Niagara Hudson Power Company
Electric Power & Light Co. (Electric Bond & Share System)
National Power & Light Co. (Electric Bond & Share System)
Engineers Public Service Co. (formerly Stone & Webster
System)
Commonwealth & Southern Corporation
American Water Works & Electric Company, Incorporated
Making a poor showing:
United Gas Corporation (Electric Bond & Share System)
North American Light & Power Co. (North American System)
United Light & Power Company
Central & South West Utilities Co. (Middle West System)
American Power & Light Co. (Electric Bond & Share System)
Standard Gas & Electric Company
I shall be happy to supply any other additional informa-
tion you may desire.
Yours faithfully,
4m 0 wayla
William 0. Douglas,
Inc.
Chairman.
This letter is not to be deemed a
solicitation of orders or a prospectus.
MONTHLY
MARKET LETTER
Utility Valuation Yardsticks
January 17, 1938
GOODBODY & Co.
Members
New York Block Exchange
New York Ourb Exchange
Chicago Board of Trade
New York Cellen Exchange
Chicago Btock Exchange
Detroit Block Exchange
Pittaburgh Stock Exchange
Commodity Exchange, Ins.
New York Come Exchanga,Ina.
New York Produce Exchange
Dallas Cotton Exchange
MARCUS GOODBODY
JOHN L. GOODBODY
A. LAWRENCE PEIRSON
ROBERT GOODBODY
W. W. PHELPS
D. L MOORE
HAROLD P. GOODBODY
FREDERIO H. HAHN
IL VAN BRUNT M.KEEVER
Limited Partners
M.J. GOODBODY
CHARLES A., KOLLSTEDE
D. GOODBODY
ROBERT 000DBODT (2nd)
115 Broadway, New York, N. Y.
Telephone: BArclay 7-0100
Bell Teletype: N.Y. 1-672
Cable Address: "Accurate"
Uptown Office:
60 East 42nd Street
Telephone S. Micray Thill 2-6353
PUBLIC UTIGITIES DIVISION
PMON
Beffalo, RECEIVED a. Cess. Cons.
Genera, N.
Mass.
25
Oleg. N.Y.
Mich
City, Mr
Bradford Pa.
PA
X.J.
Presion RY
OR
Terento, Onl.
DMM
'EM'
DISPOSITION
Information presented berein, while obtained from sources
we believe to be reliable, is not guaranteed.
common stock will be for the next year or the
BUSINESS AND PRICE INDICES
year after, under a political system which is
Closing
constantly-trendwise-trespassing on corpo-
Timesha Annalist
Dow, Jones averages
Busi-
Com-
30
ratè, management's freedom of action, which.
nose
modity
Indus-
ad
40
gradually, but persistently, in its primary aim
Index
Index
trigle
Rails
Bonds
Jan.
17,
1938
80.8
64.9
132,49
31.01
91.45
of seeking more power for the Federal Govern-
Dec. 16, 1937
85.0
85.9
125.75
31.68
93.42
Nov. 17, 1937
93.7
ment, is deadening the hopes and ambitions of
88.9
127.54
32.73
93.19
Oct.
18,
1937
100.2
91.4
125.73
30.55
94.26
the country's brains, which for tax and many
Sept.
15,
1937
106,6
94.7
162.85
41.45
98,41
Are.
16,
1937
111.2
94.8
189.34
53.62
101.26
other reasons scares capital away from ventur-
July
15,
1937
110.1
95.4
179.71
53.82
101.63
June
ing into new projects or from expanding old
16,
1937
107.1
93.2
165.86
53.57
101.18
May
14,
1937
109.0
93.0
169.15
17.76
101.18
plants, which through a policy of an unbalanced
Apr.
16,
1937
107.4
94.1
180.75
60.26
101.47
Mar.
16,
1937
106.9
95.1
189.95
63.06
102.61
budget and É political philosophy that believes
Feb. 15, 1937
102.3
92.5
188.39
57.37
104.23
Jan. 18, 1937
the national income should be distributed widely
105.2
92.7
184.95
$5.86
105.89
1937 High
111.2
95.6
194.40
64.40
105.89
is causing those with capital to prefer safety
1937 Low
84.3
85.0
113.64
28.91
91.54
1936 High
106.8
91,2
184.90
$9.89
106.01
rather than assume the risks of profits, and
1936 Low
89.9
79.6
143.11
40.66
98.92
which broadly, as a result of all its policies, puts
a premium on inferiority and a discount on
January 17, 1938.
superiority?
It is a new year, and the world presents a
If business is to be good or normal in any
ghastly picture of unworkable ideas and policies,
country, somebody must spend money on the
of nature thwarted by the temporary rise to
capital goods industries. In this country, it
power of the masses and of individual men with
appears that something like $3,000,000,000 to
almost unprecedented political powers, greedy
$5,000,000,000 of new money issues is neces-
and itching for more. It is a unique picture for
sary annually to secure fairly good business or
this generation. Consequently, it has a most
better. In the 1920's, it came from private
important bearing on investment and specula-
sources. For the past 43/3 years, it has come
tive advices.
largely from the Government, either directly or
We must appreciate fully the awe. and fear-
indirectly from a forcing process through the
inspiring changes that are occurring not only
consumers' goods industries. Does any intelli-
on our own political, economic, and social front,
gent person suppose that, after 435 years of
but also throughout much of the world. We
shrinking, private capital will now come for-
must expect that it is going to be very difficult
ward confidently? Do not most business men,
to convince those who have lived through the
at least, the so-called monopolists, know that
honeymoon stage and the early marriage era of
they are in somewhat the same position now as
this country that those days can never be re-
the Jews of Germany were several years ago--
called, that an investment program fif for the
scapegoats? Isn't it self-evident that there is a
1920's and all earlier years can no loriger be
world-wide tendency, including this country, to
followed if capital is to be preserved. A policy
centralize and give. more power to Govern-
of buying a cross-section of the market, putting
ments? By giving this power to Governments,
doesn't it mean more control over business
it away, and forgetting about it is as passé as
the horse and buggy.
because growth of power means use of power?
All this dampens business confidence increas-
Now let's see why any long-term investment
ingly. Doesn't it follow then that the burden of
program does not seem at all feasible for the
stimulating business must fall more and more
years just ahead and that only a short range
on Government action? If so, then any invest-
policy, six months or so, is all that seems logic-
ment policy must depend largely on what the
ally possible at best. Basically, It is because we
Government does or does not do. Under such
are shifting from a free economy to a managed
conditions, how can you have a long-term in-
economy - just as some half the world's popu-
vestment program? As a consequence of all
lation has completely shifted to a managed
the above. will not safety supersede appreciation
economy. Can we, or anybody, tell at all accu-
as by far the most important consideration
rately or with reasonable probability what the
Investment-wise? If so, won't most common
earnings of any company or the price of its
stocks sell gradually at lower and lower levels
in relation to earnings-say, eventually, at 5 to
We cannot condone their continuance." This
effect on the earnings of some utility companies
10 times earnings instead of 10 to 25 times?
thought was reiterated in his Press Conference
might be quite adverse where rates were re-
The decline in business over the past four
of January 14th, last. Moreover, it is common
duced so that earnings were equal to only 6%
months has probably been more drastic, per-
knowledge that the Federal Power Commission
on a rate base determined through the use of
centage-wise, than for any comparable period
has espoused such a theory, for immediately
the "prudent investment" theory.
in our history. This fact raises a presumption
following a recent Supreme Court decision in
that business is apt to improve moderately be-
regard to the Pacific Gas & Electric Co., Acting
It is to be noted that even if the "prudent
fore growing worse. Firmness in commodity
Chairman Seavey of the F.P.C. announced
investment" valuation theory should be accepted
that the Commission would use the Prudent
throughout this country, the rate of return al-
and high grade bond prices in the past month
Investment Plan for valuing the property of
lowed on such valuation would probably vary
helps to increase that feeling or hope. Although
as between States or sections. Due to local or
there is little evidence as yet in business figures
292 electrical utilities. We fear the possibility
to substantiate any such opinion, we think some
that the Courts will accept ultimately this
sectional differences, some companies would be
upturn businesswise may occur in this first
valuation method.
allowed somewhat higher or lower returns, de-
Therefore, now that the whole matter of
pending on how much is necessary to attract
quarter, barring unexpected political develop-
ments. At least in sporadic cases, wage scales
valuation is receiving current Federal consid-
capital to the enterprise.
may decline and labor conditions generally
eration, it is important that utility holding com-
Up to the present time, utility stockholders
should show improvement from the employers'
pany stockholders, particularly, should know
have remained almost completely in the dark
viewpoint. Politically the news is likely to be
how vulnerable their respective positions might
as to what this "prudent investment" method
more appetizing, as the Senate may be expected
become. For, even though the actual outcome
might mean to them in dollars and cents when
to assume a reasonably independent attitude in
is clouded, stockholders should realize that the
translated specifically into a possible effect on
legislative matters. Inflation psychology, al-
results of the adoption of "prudent investment"
their own security holdings, especially if these
ready aroused by the President's budget mes-
could reflect themselves in two ways: (1) A
securities were the preferred or common stocks
sage and his comments on a rearmament pro-
possibility that the actual asset value (as finally
of holding companies. But now, probably for the
gram, may readily grow in this first quarter-
allowed) behind each share of stock might vary
first time, there is available to the small and
if not as a result of actual developments, then
considerably from the price which they paid
large investor a rather unique method for test-
from a spreading conviction that Government
for the security; (2) a possibility that a ceiling
ing, under some assumptions as to "prudent
spending must increase fairly soon. Thus,
on earnings, based on a fair rate of return at
investment" and a fair rate of return, asset
businesswise, laborwise, politically and infla-
or below present levels, might be imposed on
values and earning power behind his securities.
tionwise, we think the news or its anticipation
those assets. Certainly, they are justified in
We emphasize that the method is only for test
will supply a sufficient stimulus for a rally in
seeking impartial guidance in this matter.
purposes and does not give us the original cost
stock prices over the next month. However,
Under this "prudent investment" theory, as
or prudent investment valuations for any given
this does not mean any change in our advices
we understand it, the original cost of the var-
company.
to investors.
ious elements of a utility's physical property
Such a method, call it a yardstick if you
(plus the use of reasonable judgment in deter-
UTILITY VALUATION YARDSTICKS
will, has heretofore not been generally used,
mining certain values open to question) is by
possibly for the following reasons: (A) Utility
It has been believed for many years that the
far the major factor in arriving at a proper
executives have generally believed that their
property valuations of some utility companies
rate base upon which to predicate a fair rate
local conditions were "different" enough to
were carried at too high a figure on their books.
of return. Two other important factors usually
In the past few months, the President has advo-
make such a method inapplicable to their sit-
considered are depreciation and working capi-
nation. (B) The enormous amount of work
cated the use of a so-called "prudent invest-
tal. If State Commissions and Courts should
required to develop the method has discouraged
ment" theory in valuing public utility proper-
hold that 6% was a fair rate of returnt the
efforts to attempt it. (C) Only in very recent
ties, and only very recently in his Jackson Day
+ Considering the liberal trend of Court opinion, we
months have there been available for public
address, the Chief Executive, it appears to us,
have allowed in our computations a 6% rate of
further alluded to this theory when he said:
return which may be low temporarily for some
inspection, in the files of the Federal Power
companies. In 1934 the case of Dayton Power &
Commission, reports of operating companies
Thousands of investors have lost money
in buying holding company securities which
Light vs. Ohio Public Utilities Commission (292
with sufficient detail from which to work up
S. 290). Mr. Justice Cardozo held that a return
had blue sky above them instead of tangible
the necessary data. Nevertheless, because we
set at 61/2% was adequate. However, in 1935 in
assets behind them. That evil of utility holding
the case of West Okin Gar Company vs. Public
felt that these objections, while valid within
Utilities Commission of Ohio (294 U. S. 63), the
limits, were not insurmountable and believed
company control will not grow in the days to
come, because this Government has now passed
dissenting opinion of the Supreme Court held that
that the implications of the study would be
a 4.91% return upon reproduction value determined
laws to prevent similar occurrences in the
helpful to investors, we proceeded to set up two
as of March 31st, 1928 was not unreasonable. These
future. but we have not yet corrected the exist-
and other cases that could be cited show there is
yardsticks with which to test asset values and
ing evils that flow from mistakes of the past.
considerable leeway in what the Courts may judge
earning nower of certain companies as shown
to be a fair return.
in the following table.
A
B
C
D
E
7
o
H
I
X
Normal
Total of Individual Accruss to Parent Company as computed for us from the Own-
A 1936 figures were used by LII, for the most part, in developing the results shown here.
enship of Securities and Surplus in its Respective Subsidiary Operating Companies
(Which We Have Analyand), per Share of Parent Company Stock Specified.
B In compiling the figures for this column the following exceptions were made: Where
the adjusted plant account was higher than the present me, the asset equity figure
was based on the present plant account. This issumes improbability of official value
ASSET EQUITY
EARNING EQUITY
tions being sanctioned higher than those based on present book figures.
C Where the present return was less than 6% - the present rate have (as deter-
After allowing 6% return
mined by us) and the adjusted plant account - higher than the present one, then
Determinel by us, as
on our rate base which we
. 6% return was allowed on the present base; where the adjusted plant account
explained is text, after
derived from plant account
was lower than the present one, and 6% on the assumed adjusted rile base showed
applying la various
adjusted by - - explained
allowed. an earning equity higher than the present earnings equity, the higher figure was
dements of plant aver-
in text. by applying to vari-
age unit costs derived
our elementa of plant ever-
D d-deficit.
from analysis of
As deter-
age unit costs obtained from
As deter-
approximately:
mined by
analysis of approximately
E To the case of North American Light & Power Co., our
Latest 12
minet by 13
us from
Reseres are after adjusting for reorganization of Illinois
months
Approx.
from reports
20 Selected
reports of
20 Selected
Power & Light Corp.
Consolidated
Market
of Individual
120 Operating
Low Cost
Individual
120 Operating
Low Cost
Earnings
Price of
Companies
Companies
Companies
Companies
Cominanies
Companies
Name of Company
Issue
per Share
Stock
See Note a
See Note Il
See Note C
See Note C
American Cas & Detrie Co.
is Cum. Pld.
$38.26
110%
$ $58.00
$ 427.00
$331.00
$ 33.30
# 21.70
$ 12.75
Common
2.56
2614
37.00
26.50
18.90
2.18
1.26
0.54
American Power & Light Co.
$6.00 Cum. PIL
6.36
1436
144.50
91.80
51.30
5.87
4.13
2.56
$5.00 Cum. Pfd.
6.36
28
144.50
91.80
51.30
5.87
4.13
2.56
Common
0.54
5%
17.80
d 13.30
137.00
0.25
di 0.78
4 1.70
Americas Water Works & Electric Co.
$6.00 Cum. PM.
22,14
87
246.60
102.50
78.80
23.73
7.14
6.09
Common
1.38
1136
12.50
0.22
1.81
1.51
0.10
0,01
Beston Edison Co.
Com. $100 Par
8.86
122
169.60
169.60
136,30
8.38
8.38
8.38
Central & 5. W. Utilities Ca.
$7.00 Cum. Prior Lies PM
16.27
95-99
205.00
146.83
28.20
15.32
7.12
1.59
$7.00 Cum. PM.
9.06
1014-12
74.20
17.75
496.60
8.17
0.17
di 5.16
Common
0.08
1%
d 2.04
4.28
48.80
0.05
4 0.27
40.48
Columbia Car & Electric Corp.
0% Com. "A" PM
13.96
79
327.00
253.00
220.00
13.52
16.07
12.88
5% Cum. Pid.
13.96
64%
327.00
253.00
220.00
13.12
16.07
12.88
5% Cum. Casy. Pref.
64.29
1856
1,815.00
1,233.00
963.00
60.50
80.10
55.50
Common
0.57
1H
17.10
11.29
8.62
0.55
0,76
0.51
Commonwealth Edison Co.
Com. 125 Par
2.21
26%
29.30
29,30
29.30
1.75
1.63
1.63
Commonwealth & Southern Corp.
PM way 0095
10.62
3736
210.00
140.00
64.80
8.90
9.43
4.12
Common
0.31
14
4.64
1.53
d 1.84
0.13
0.15
4 0,08
Consolidated Edison Co. of N. Y.
$5.00 Cum. PM.
16.90
H
353.00
320.50
259.00
17.77
20.05
16.98
Common
2.17
214
48.10
40.23
30.80
233
2.83
2,19
Detroit Edison Ca.
Com. 1100 Par
8.38
105%
119.60
118.10
91.60
8.39
8.15
6.57
Electric Power & Light Corp.
$7.00 Cam. Pfd.
12.33
38
274.00
230.00
141.60
10.05
15.25
10.52
$6.00 Cum. Pld,
12.33
36
274.00
230.00
141.60
10.06
15.25
10.52
$7.00 Com. M PM.
$2.54
35
1,160.00
954.00
138.00
31.54
79.60
15.80
Common
1.10
11%
29.80
19.91
4.0.13
0.60
1.76
0,70
Engineers Public Service Co.
$5.00 Cum. Come. Pld.
8.80
4836
179.00
170.00
117.00
7.53
5.65
4.47
$5.50 Cum. PM.
8.80
53
179.00
170.00
117.00
7.53
5.65
4,47
$6.00 Cum. PM.
8.80
62
179.00
170.00
117.00
7.53
5.65
4.47
Common
0.76
3
16.92
15.05
3.04
0.48
0.05
4 0.21
National Power & Light Ca.
$6.00 Cum. PM
31.86
14
160.00
254.20
160.50
25.00
10.00
6.26
13.30
8.10
3.10
0.97
0.21
0.01
Common
1.32
7M
Nisgare-Hudson Power Carp.
5% Cum. let PM.
25.42
73
465.00
460.00
285.50
19.37
28.20
10.48
5% Cum. 2d Ptd.
76.14
66
1,360.00
1,337.00
693.00
53.60
86.50
20.44
Common
0,88
.
13.96
13.72
6.56
0.54
0.90
0.17
North American Co.
0% Cum. Pfd. $50 Par
32.01
11%
196.00
360.00
282.00
27.40
21.96
19.57
Common
2.05
1116
24.35
21.90
16.30
1.74
1.62
1.17
North American Light & Power Ca.
6.54
37
88.65
49.90
47.70
$6.00 Cum. Hd.
8.53
8.35
4.68
See Note E
Common
0.03
IN
d1.83
43.91
4.02
0.14
0.12
40.73
Public Service Carp. of New Jersey
122.00
7.72
5.27
1% Com. Pfd.
15.01
140
182.00
166.50
15.30
7% Cum. Pfd.
15.01
123
182.00
166.50
122.00
15.30
7,72
5.27
5% Cum. Pfd.
15.01
10416
182.00
166.50
122.00
15.30
7,72
5.27
$5.00 PM.
15.01
9716
182.00
166.50
122.00
15.30
7.72
5.27
6.70
2.67
0.45
4 0.26
Common
2.60
33
24.00
19.75
Southern California Edison Ca.
Common
2.26
24
29.00
29.00
20.70
2.17
2.07
1.67
Standard Gas & Electric Ca.
8.86
22%
297.00
168.50
28,00
8.55
3.86
4 6.11
$7.00 Com. Pr. Pr. PM.
$6.00 Con. Pr. Pr. PM.
8.86
21%
297.00
168.50
28.00
8.55
3.86
di 6.11
4 58.80
4 6.57
4 7.97
$4.00 Cum. Pid.
1.28
9%
109.50
29.42
1.09
Commin
40.95
4%
14.30
4 13.80
4 44.30
di 1.02
if 3.70
If 4,19
United Gas Corp.
24.67
"
396.00
334.00
317.00
24,29
22.25
21.85
$7.00 Cum. in Pid.
Common
0.22
«
0.56
di 3.17
4 4.26
0.20
0.08
0.06
United Gas Imp. Ca.
39.50
105
436.00
412.00
294.00
37.85
25.07
20.10
$5.00 Cum. PM.
Common
LM
10N
11.08
10.31
6.47
1.08
0.66
0.51
United Light & Power Ca
8.34
25%
167.00
110.00
34.20
7.51
3.00
0.83
$6.00 Cum. PIL
336
6.68
4 3.14
4 16.25
Common
0.41
0.26
4 0.52
0.89
But, the relationship of subsidiary operating
by the corresponding number of units of each
companies to holding companies must be under-
company. Suppose it had been found that the
stood first. As a rule, the holding company does
total miles of a certain size of transmission line
not generate or sell any electric power of its
for all 120 companies was 100,000 miles and the
own, it is merely a directory company-a "hold-
corresponding aggregate book value of these
ing company". The bulk of its assets usually
transmission lines was $500,000,000. Then the
consist of securities of its subsidiary operating
average unit value would have been $5,000 per
companies. Thus, it is evident that the value of
mile. Applying this to Company A, having
the parent company securities depends mainly
100 miles of this size of transmission line on
upon an appraisal analysis of a portfolio,
the books at $550,000, we would obtain as our
item by item, of subsidiary company securities
appraisal value, 100 X $5,000 = $500,000, in-
(representing for the most part the parent's
stead of the $550,000 as shown. Similarly the
ownership of practically all the assets it pos-
other types of equipment belonging to Company
sesses). The results of this, in more technical
A would be appraised, after which all the sun-
language, are referred to as the "total of indi-
dry appraisals would be totaled to obtain our
vidual accruals to the parent company from its
final yardstick value for this company. Thus
ownership of securities and surplus in its re-
each operating company had its various kinds
spective subsidiary operating companies." And
of property appraised at values which we found
moreover it is obvious that the value of these
generally prevailed in the industry.
securities making up the holding company port-
The first yardstick was derived from a study
folio depends upon the value of the most impor-
of about 120 operating companies (equivalent
tant assets of the subsidiary companies. There-
to approximately two-thirds of the electric
fore an analysis of these most important assets
power industry), while the second yardstick
was necessary.
was derived from a study of about 20 selected
These consist of their plant and property
operating companies (including one from each
accounts (usually 75% to 85% of their total
holding company system studied) whose equip-
assets). Thus, the values found for these assets,
ment appeared to be lowest in cost. While
when translated, first, into what is behind the
neither of the two valuations we arrived at
securities of subsidiary operating companies in
should be considered a prudent investment
respect to the proportion owned by the parent
valuation for any given company, our lowest
company, and then, further translated into what
figures may be taken as a rough guide as to
is behind each share of parent company stock
the worst that probably could be expected if
shown in the tabulation, is referred to as the
the prudent investment method should be
"asset equity" accruing to the individual se-
applied.
curity shown. In simpler words, we use the
The important columns in the table for
term "asset equity" to mean the value of the
serious consideration are, first of all, Column F
assets (such as generators, transmission lines,
and Column G under "Asset Equity". Column
net working capital, etc.) which we found in
F shows what effect a comparatively mild
back of, or belonging to, each share of the stock
adjustment to the book value of fixed property
shown in the tabulation. Similarly, the term
(or plant) of subsidiary operating companies
"earning equity" means the earning power of
would have on the specified securities of the
these assets which we found in back of each
parent holding company. We arrived at these
such share (according to our assumptions).
adjusted values by applying yardstick, or aver-
In developing our yardstick valuation method
age unit, values derived from the group of 120
we took each type of equipment (such as miles
companies.
of transmission lines) and totaled it for our
Column G on the other hand, shows what
group of 120 companies, and divided this total
effect a more radical revaluation of the book
by the aggregate investment of those companies
value of fixed property or plant of subsidiary
in this particular item. Thus, we arrived at
operating companies would have on these same
average unit values. In the case of transmission
parent company securities. Again we arrived
lines, the average unit value was expressed in
at these adjusted values by applying our sec-
dollars per mile of line (according to size).
ond set of yardstick or average unit values
We then went back and multiplied these values
derived from the group of 20 selected "low
cost" companies. Once more we should warn our
rived from our first method of valuation, which
should be in gold shares, and the balance
readers that this is in no way to be construed
we used in getting Column F. Column K
should, be in cash or in very carefully
as representing "prudent investment", for it is
shows $2.56 as the earnings equity figure we
selected good grade bonds, if yield is essen-
obvious that this method bears no relation to
found for the preferred stock. This was de-
tia) or insisted upon.
what would be called for in an examination of
veloped from our assumption of a 6% return
However, if this program of elíminating
original costs and "prudent investment" result-
on a rate base derived from our more drastic
all common stocks except gold shares has
ing therefrom for any particular company. But
test method of valuation (which we used in
not yet been completed, we would defer
it is our judgment that the application of the
getting Column G).
further liquidation until a rally, which we
"prudent investment" theory would result in
The principal purpose of this study was to
expect will occur over the next month.
asset equity figures per share for any company
attempt to show which properties might be sub-
TABLE 1
within the range established by Column E
ject to rate reductions and how much share
(which we developed for comparative purposes
HIGH GRADE DOMESTIC CORPORATION
earnings might be reduced under our assump-
BONDS
to reflect, in so far as we were able, the present
tions, because of too high earnings, as tested
1936
book values of the operating companies we
by what might be considered a fair return on
Approx.
Yield
Interest
Jan. 14ch
Call About Cover-
studied) and Column G-with the distinct
our valuations. We do not say that the val-
Close
Price %
age
possibility that the figures would fall within the
uations given by us in Columns F and G
A.T.&T.deb.354s, '61 or 66.101
10736 3.20
a5.53
Column F-Column G range.
A., T. & S. Fe gen. 4s,
N.C.
3.65
c2.04
or that the maximum earnings allowable on
Ches. & O. ref, 31/25, "96 95
100sf
3.65
c4.63
The next columns in the table for serious
these valuations in either Columns I or K,
Colum. Ry.Pr.&Lt.1st4s,'65.10
10756
3.65
a3.59
consideration are Column I and K, under
using a 6% rate of return as fair, are, in either
Consol. Edison deb.
10234
2.75
a3.05
"Earning Equity". Here we have shown what
case, just what the Commissions or Courts will
Genl.Mtrs.Acc't.deb. 3s,'46.103
103
2.65
b2.86
the maximum earnings could be for holding
Narrag. EL 1st 31/28, 66 103
10734
3.30
a3.21
allow. But we do say that this study should
Penn. R.R. gen. 4% '84
N.C.
4.25
c1.33
company preferred and common stocks, if a 6%
give warning in a general way of the com-
Phila. EL Ist ref. 33/24, '67.106
107%
3.20
a3.89
return were all that would be allowed on a rate
panies whose earnings in the future may be
Shell Un. Oil deb.3}/1s, "51.100
1023/2
3.50
c10.29
base similar to that which we have used as
Sth's Cal. Ed. ref. 3341, 60.105
107%
3.50
a2.73
less than in the past two years.
described. In other words, if we assume that
Stand.Oil of N.J.deb.3s,'61.101
103
2,95
<15.00
Perhaps you may be interested to know that
Texas Corp. deb. '51 106
103
3.05
c15.00
a 6% return were all that State Commissions
this study has required the entire attention of
Un. Pac. deb. 31/25, 71
94
103'41
3.90
c2.19
or Courts would allow, then in Column I can
several members of our statistical staff for
12 months roding September 30, 1937.
12 months ending August 31, 1937.
be found our interpretation of the results of
some months. Consequently, you will appre-
Estimated 1937 interest coverage.
this assumption when applied to a rate base
Legal in New York State. 1 Unlisted.
ciate that there are at great many details in-
derived from the valuations we developed for
volved which we could not give in this com-
TABLE 2
use in Column F. Likewise, Column K repre-
munication. Furthermore, in a compilation of
GOOD GRADE BONDS
sents the results of this assumption when
this size and complexity, you can appreciate
Public Utilities
applied to the valuation which we developed
that errors of arithmetic may have crept into
Am. G. & E. deb. 5s, 2028 107
106
4.65
v2.04
for use in arriving at Column G.
our work despite our best efforts to the con-
Columbia Gas deb. 5s, "61 95
104
5.35
p2.13
Fed. L. & Tr. Ist 5a, "42 100
102
5.00
62.13
This then is what this study should mean to
trary. However, we feel that any such errors
III. Pw. & Lt. 1st 90
105
5.90
h1.36
you. Take the preferred stock of American
should not substantially vitiate the specific con-
J'my
104
4.30
pl.94
Power & Light. In Column E is found $144.50
clusions reached by you.
N.Y. St. El. & G.1st 41/28,'80 97
1021/2
4.65
pl.42
which is our computation of the total of the
Of course you will appreciate that there are
No. Ind. P. Ser.1st455a,70 94
104
4.85
c1.85
Ohio Edison 1st 3948, 72 98
110
3.85
g2.48
parent company's asset equities (applicable to
other important factors to be considered in
Ohio Pub. Serv. 1st 4s,'62.100
107%
4.00
p2.40
this security) in the subsidiaries We analyzed.
appraising the utility situation besides the valu-
Penn. Pr.&Lt. 1st 43/2a, "81
105
4.25
g2.29
This figure should be compared with the corre-
ation question, such as trend of Government
Saguenay Pw.Ist'A'4)s,66.101
105
4.20
c1.80
sponding figure in Column F, namely $91.80,
competition, taxes, wages, growth potentiali-
Industrials
Allied Stores deb. 455a, "50.. 91
100
5.50
a4.75
which is our computation of parent company's
ties, adequacy of depreciation charges, etc.
Armour & Co. 1st 4s, 55. 93
1023/sf
4.60
e5.27
asset equities under our first method of revalua-
Our own judgment on utility preferred and
H. F. Goodrich 1st 454,56.98
105
4.40
q3.35
tion based on our analysis of some 120 com-
common shares is evidenced by the fact that
G'dy'r T.&R.Ist&coll.5a,
102
4.65
k4.11
panies. In Column G is found $51.30 which
for months, we have not included any shares
Int. Agr. 1st & Coll. 5s, '42.100
103
5.00
b4.06
McCrory Stores deb.5a,'51.100
105
5.00
e10.60
we computed from applying our more drastic
from this group in our monthly letter tables
Mead Corp. 1st 6s, '45
$
104
6.05
j3.20
valuation test method (based on our analysis
of stocks.
Rep. Steel Gen'l 45/23, "56.. 87
104'41
5.65
13.61
of some 20 "low cost" companies). Skipping
U.S. Rub. 1st&Ref. 5a. '47.105
105
4,45
m4.57
over to Column 1, we see that American Power
OUR INVESTMENT POLICY
Wheel'g Steel 1st 41/25, "66
10255sf 5.05
r4.14
Yngston. Sh&T. 1st 4a, 61
102%sf 4.00
s4.02
& Light could earn as a maximum, under our
For the average long term individual in-
Railroads
assumptions, only $4.13 on its preferred stocks,
vestor (meaning not over six months), we
Atl. Coast Line 73
N.C.
6.60
c1.49
if we allowed a 6% return on a rate base de-
suggest that 25% of total investment funds
Can'd's Pac. perpet? deb.4s.. 88
N.C. w4.54
c1.39
1936
Approx.
Yield
TABLE 4
Earned
Interest
Approx.
Divi-
Yield
Year
Jan. 14th
Call
About
Cover-
MISCELLANEOUS BONDS
Jan. 14th
dend
About
Ended
Close
Price
*
age
(1) Convertible Bonds
Close
Rate
e
12-31-36
C.C.C.&St.L. 70 105'47 6.70
c1.15
(For price appreciation over long term)
+U. S. Smelt. ($50)
65
3.50
5.38
11.66
Gr. Nor. gen. 41/21, 76
90
N.C.
5.10
cl.61
Louisiana & Ark. 1st 5a, '69 71
1936
Allied Stores
51
5.00
9.80
a14.49
103
7.30
cl.46
Approx,
Yield
Interest
g20th Century
Fox
Film
31
1.50
4.84
7.68
L&N'shvl 80
4.75
c1.77
Jan. 14th
About
Cover-
Deere & Co.
Pere Marq'tte lst 456a, "80., 75
($20)
24
1.40
105
6.20
cl.55
Close
5.80
%
age
p7.48
105
6.35
uAllis Chalmers conv.deb. 4s, '52 105
3.81
mButler Bros.
21
1.50
7.14
So. Pac. O. L. 1st 4½ 77. 74
c1.04
y
-
hConsol. Oil conv. deb. 31/25, "51
Year ended Jan. 11, 1937.
- Year ending Jan. 31, estimated.
99
3.54
j10.40
b Year ended November 30, 1936.
I Year ending June 10, 1937.
kNat. Dairy deb. W.W. 34, "51 100
3.75
j5.45
0 Convertible into common at $27.50 per share up to July 1,
€ Entimated 1937 interest coverage.
e Fiscal year ending October 11, 1937.
cN. Y. Cent. CODY, sec. 3/41, '52 83
3.92
1.15
1939,
12 months reding November 30, 1937.
gPenn. R.R. conv. deb. 334s, 'S2 88
3.69
j1.33
. Each sh. conv. into I sh. common. f Includes $1.00 extra.
. Convertible into common on the basia of 1% shares of
12 months mding June 30, 1937.
mPhelps Dodge, c'v. deb. 106
3.30
6.18 times lat 36 works 1937,
a
common for each share of proferred.
8.14 times 1st half 1937.
The above represent Current Yields
h Year ended Oct. 11, 1937.
I Each share come. into I share common.
= 4,42 times 1st half 1937.
(2) Speculative Bonds
12 months ending Sept. 10, 1937,
Year ended Aug. 31, 1937.
(Defaulted issues for the long pull)
* Each share CODY. into 2.22 shares common.
4.71 times lat half 1937.
5.20 times Ist , months 1937.
Chi., Milw., St. P. Gen'l 4s, '89 35f
a
in Each share conv. inso two shares of common stock through
6.05 times las 9 months 1937,
Chi. & N. West'n 1st ref. 5s, 2037 12f
Dec. 1, 1938: thereafter and through Dec. 1, 1940 into IN
a
3.56 times lat 9. months 1937.
shares of common for each share of preferred.
Chi, Rock Island Gen. 4s, 88 19f
a
.
12 months coding October 11, 1937.
a Year ended Sept. 30, 1937.
Current yield.
Den, Rio Gr'de ref. imp. 5a, 78. 9f
a
.
e Year ended June 20, 1937.
K.C. Ft. Scott & Memp.ref.4s,". 35 271
a
. Year ended Oct, 31, 1936.
TABLE 3
Admitted - trading on N. Y. Carb.
Mo. Pae. 1st & ref. 5s, 77-81 23f
ar
.
1 Non-callable.
SECOND GRADE AND SPECULATIVE
Mobile & O. Mont.Div. 1st 5s, 47 20f
-
N. 0. T. & M. 1st 51/28, '54
36£
TABLE 6
INTEREST PAYING BONDS
ar
*j1.18
1936
Seaboard Air Line ref. 4s, '59 8f
a
DIVERSIFIED LIST OF LONG-TERM
Approx.
Yield
Interest
In process of reorganization. a Interest in default.
COMMON STOCK INVESTMENTS
Jan. 14th
About
Cover-
€ 30, Convertible 1947, into common stock e $60 per share to April
Close
*
Flat.
age
(Consideration being both Yield and Appreciation)
Bklyn-M. Tr. Coll. Tr. 41/25, '66 61
8.00
p1.68
E Convertible into common stock e 850 per share to April
L 1952.
Certaint'd Prod. deb. 53/2s, 48
$100 to $50-Group I.
63
11.35
a
h Convertible into common stock a $25 per share to 1941,
Childs Co. deb. 5s, '43
13.75
j1.68
increasing prices thereafter.
Liggett & Myers B
$100
a4.00
4.00
$7.25
65
Cities Service deb. 5a, "50
59
11.30
h1.27
I Estimated 1937 interest coverage.
*Aluminum Co. of Amer
82
-
-
8.65
Colo, Fuel & Iron inc.mtg. 5s, 70 60f
la Carries warrants for purchase of 10 shares of common
"Aluminum Ltd.
71
2.51
m
=
e $25 per share,
Colo. & South'n gen. 4½, "80
- Convertible into common e $50 per share. 1937 earnings
Amer. Tobacco B
71
5.00
7.04
3.71
44
10.40
s1.37
Con. Coal Mtg.cum. income 5s,60 54f
estimated $4. per share.
*Newmont Mining
68
a3.00
4.41
3.80
T
F
Cont'l Gas & El. deb. 5a, "58
a 10 months ming October 11, 1937.
Amerada
66
2.00
3.03
2.52
80
6.80
cl.63
1 No funded debt in 1936, Earnings would have covered
Elec. Pwr. & Lt. deb. 5a, 2030
Beth. Steel
64
65.00
71
7.05
present fixed charges over 16 times.
7.81
2.09
c1.47
Fed. Lt. & Tr. deb. 6s, '54
84
7.70
52.13
T Paid earliest defaulted coupos August 10, 1937,
Corn Products
64
3.00
4.69
3.86
Gen'l Water Works 1st 5a, "43
e Convertible into common stock @ 175 per share through
United Fruit
64
a3.00
4.69
77
4.88
11.10
c1.51
B. F. Goodrich deb. 6a, '45
97
Sept. 1, 1939, increasing prices thereafter. 1937 earnings
Cons. Can Ltd. 62
af1.00
1.61
6.55
u3.35
estimated $4.25 per share.
g2.37
III. Pwr.&l.ight deb. 51/2a, '57
No funded debt 12/31/26. Earnings last year would have
eNoranda Mines Ltd.
60
bf3.25
5.41
4.14
83
7.15
b1.36
Intern't'l Tel&Tel. deb. n
covered present fixed charges about 4 times.
*Colts Patent Fire Arms
57
b1.62
2.84
h4.13
=
ks2.00
Nati Pwr. & L. deb. 5a, 2030,
75
Underwood Elliott
57
a3.75
6.57
5.06
6.70
q1.46
TABLE $
New England G. & E. deb. 5a, '50 57
Dome Mines
56
b4.50
8.04
11.45
4.26
t1.19
N.Y. Central ref. imp. 456s,2013 61
DIVERSIFIED LIST SECOND GRADE DIVI-
*Lake Shore Mines
52
7.40
af4.00
7.69
s1.15
c4.15
N.Y., Chi., St.L., ref. 53/58, 74 69
8.15
s1.38
DEND PAYING PREFERRED STOCKS
$50
to
II.
S'eastern P&L deb. 6s, 2025
95
6.30
q1.38
International Nickel
50
a2.00
4.00
2.40
So. Pacific deb.4% '68, W or "81 63
Stocks Listed in Order of Prices
7.30
s1.04
Procter & Gamble
50
Earned
a2.00
4.00
c4.08
So. Ry. dev. & gen'l 6½, "$6
61
11.75
s1.07
Approx,
Divi-
Yield
Year
Standard Oil of N. J
50
a1.00
2.00
3.73
Walworth Co. 1st 4s, 1955
Earned charges fully os cash basis 1936 and 1.77 g2.46 times
65
7.75
Jan. 14th
dend
About
Ended
General Amer. Trans
44
63.50
7.95
2.92
Close
Rate
%
12-31-36
fUniversal Leaf Tob.
Penick & Ford
44
b1.50
3.41
3.52
1st 9 months of 1937. b 12 months ending June 20, 1937.
142
8.00
5.63
$o26.17
4 12 months ending October 11, 1937. f Flat.
+P. Lorillard Co.
133
McIntyre Pore'p'n Mines
42
2.00
4.76
j4.46
7.00
E Tax 9 months 1937 earned charges 5.71 times.
5.26
35.90
Texas Corp.
42
a2.00
t5o. Porto Rico Sugar
4.76
4.10
h 1.26 times lat , months 1937,
129
8.00
6.20
n50.75
tAm. Sugar Refin.
Kennecott Copper
41
a2.00
4.88
2.36
Earned charges lat 9 months 1937 1.87 times,
110
7.00
6.36
9.67
**Ohio Oil
**Gulf Oil
40
al.00
2.50
2.90
. tiosa, Excluding Postal Telegraph and Spanish subsidiary opera-
109
6.00
5.50
14.38
1J. I. Case (7%)
F. W. Woolworth
40
2.40
6.00
3.36
- Covered fixed Interest 9.63 times in fiscal year ming
107
7.00
6.54
30.28
kAncher Cap
*Heyden Chemical
38
2.00
5.26
3.56
June 30, 1937. Earned 17.54% on this issue. Paid 5%
105
6.50
6.14
14.78
Anaconda
35
interest April 1937.
Armour Del. (gtd.)
61.75
5.00
1.83
100
7.00
7.00
h22.00
. 1952 @ 19 yield 9.65% to maturity. Sa 1955 @ e
Pure Oil
Continental Oil
32
a1.00
3.12
2.05
98
6.00
yield 9.15% to maturity, 436a due June 1, 1939 @ 90
6.12
21.30
Colgate Palmolive Peet
Standard Oil of Calif.
32
a1.00
3.12
1.79
En current yield of 1.00%.
95
6.00
6.32
16.10
P Fiscal year ming June 10, 1917.
teHershey Chocolate
Continental Insurance
31
a1.60
5.16
k1.72
93
f5.00
5.38
14.69
e 12 months ending November 30, 1937.
Skelly Oil
Fidelity-Phenix Ins.
31
a1.60
5.16
k1.76
93
6.00
r Paid 1% 1936, 5% 1937. Arrears +%. Earned 4.2% on
6.45
73.16
**Gen. Tire & Rubber
*International Pet. Ltd
30
af1.50
5.00
c1.81
Issue 1936. 1937 estimate Indicates full 1% by fair margin.
88
6.00
6.82
546.12
* Estimated 1937 interest coverage.
cTide Water Associated
Phelps Dodge
29
b1.60
5.51
m1.65
. 12 months ending September 30, 1937.
Oil (456%)
84
*Hudson Bay Mining &
4.50
5.36
. 4.71 times lat half 1937.
16.32
iWesson O. & Sn'drift
Smelting Co., Ltd.
27
bf1.75
6,48
1.34
74
4.00
5.41
j11.53
Central Aguirre Assoc. 26
a2.00
7.69
m3.42
$25 to $00-Group III.
TABLE 8
Earned
Earned
Approx.
Divi-
Yield
Year
Approx
Divi-
Yield
Year
STOCKS FOR LONG TERM HOLDING
Jan 14th
dend
About Ended
Jan. 14th
dend
About
Ended
Close
Rate
% 12-31-36
Close
Rate
/
12-31-36
(With Emphasis on Appreciation Possibilities)
hHard R'k Gold Mines Ltd. 1.21
Interchemical Corp.
24
2.00
8.33
3.02
hBankfield Cons Mines Ltd. 65
Seaboard Oil
24
1.00
4.17
2.00
Stocks Listed in Order of Prices
eBrit. Am. Oil Ltd.
21
af1.00
4.76
1.41
Not including extras.
Earned
Payable lie Canadian funds.
Burroughs Add. Mach.
19
ab1.00
5.26
1.39
Approx.
Divi-
Yield
Year
Year ended June 30, 1937.
Imperial Oil Ltd.
19
af .50
2.63
95
Jan. 14th
desd
About
Ended
Year ended Mar. 31. 1937.
Sperry Corp.
19
b1.20
6.31
1.32
Close
Rate
%
12-31-36
Year ended Aug. 31, 1937.
Curtiss Wright "A"
18
50
2.78
.88
*Aluminum Ltd.
71
2.51
PAid last year.
Listed Teronto Mining Exchange.
National Cash Register.
17
a1.00
5.88
1.76
Newmont Mining
68
a3.00
4.41
3.80
Admitted to trading on N. Y. Curb.
Shell Union Oil
17
b1.00
5.88
1.36
Amerada
65
2.00
3.03
2.52
Barnsdall Oil
16
1.00
6.25
1.01
Beth. Steel
64
b5.00
7.81
2.09
Information presented herein, while obtained from sources
Campbell,Wyant&Cannon
15
a1.00
6.67
3.04
Colts Patent Fire Arms
62
b1.62
2.61
c4.13
believe to be reliable, is not guaranteed.
Clueit, Peabody
15
1.00
6.67
1.84
Intern'l Nickel
50
a2.00
4.00
2.40
Socony-Vacuum
15
b.80
5.33
1.38
Stand. Oil of N. J.
50
a1.00
2.00
3.73
Ohio Oil
14
61.00
7.14
70
Gen'l Amer. Trans
44
53.50
7.95
2.92
Pure Oil
13
b 25
1.92
1.63
Kennecott Copper
41
a2.00
4.88
2.36
Eagle-Picher Lead
12
b 40
3.33
24
*Gulf Oil
40
1.00
2.50
2.90
January 17, 1938
Colgate Palmolive Peet.
11
50
4.04
1.27
Anaconda
35
b1.75
5.00
1.83
Wright Hargreaves
8
a 40
5.00
72
Fairbanks-Morse
31
al.00
3.22
3.81
The following securities were added to or
Teck-Hughts
5 at 40
8.00
.46
Phelphs Dodge
29
b1.60
5.51
g1.65
eliminated from our current monthly market
. Not including extras.
b Paid last year.
U. S. Rubber
28
3.31
tables:
e Year poded June 30, 1937.
e Listed on Toronte Stock Exchange
United Aircraft Corp
25
b1.00
4.00
,76
TABLE 1
I Payable in Canadian funda.
Seaboard Oil
24
1.00
4.17
2.00
Additions
Eliminations
« After depletion and adjusted to 5 for I split up.
Western Par. 1st, 3s, '46
20
(
e
Shell Union Oil deb.
5 Year ended Jan. 1, 1937.
Year ended Aug. 11, 1937.
Foster Wheeler
19
41.87
il Year ended Mar. 31, 1937.
31/28, "51
Chicago & E. III. 5s, 'SI
17
f
la Net Invostment income.
e
TABLE 2
= Year ended July 11, 1936.
Barnsdall Oil
16
1.00
6.25
1.01
Alter depletion,
Socony Vacuum
15
b .80
5.33
1.38
Public Utilities
Listed N. Y. Carb. Admitted to trading on N. Y. Carb.
Bell Aircraft
14
.07
Jersey Central Pr. & Lt. Ark. Pr. & Lt. 1st ref.
Wabash 41/28, 78
14
£
e
Ist 43/2% '61
5s, *56
TABLE 7
Chi, Mil. S.P. & P. 5s, 75
13
e
New York State El, &
East. Gas & Fuel 1st &
COMMON STOCKS YIELDING APPROXI-
Pure Oil
13
b 25
1.92
1.63
Gas 1st 45/28, "80
Coll. 4s, "56
MATELY 5% or BETTER
St.L.-S.Fr. 43/28, 78 Ctfs.
13
E
e
Ohio Public Service 1st
Tidewater Pr. Ist 5a, 79
(Appreciation Secondary)
N.Y., N.H. & H. 4s, '57. 12
f
e
4a, '62
Paramount Pictures
12
1.18
Stocks Listed in Order of Prices
Lockheed Aircraft
10
.15
Penn. Pr. & Lt. 1st 43/2a, '81
Amer. Tobacco B
71
5.00
7.04
3.71
Seaboard Airline 6s, '45 10
e
Industrials
Corn Products
64
3.00
4.69
3.86
Chi, Rock L & P. 4a, 34.
9
e
United Fruit
64
a4.00
6.25
4.88
B. F. Goodrich 1st 434s, "56 B. F. Goodrich deb. 6s, '45
Mo. Pae. 4s, 75
8
e
Sterling Products
58
a4.20
7,24
5.05
Denver & Rio Gr. Ss, '$5.,
7
f
e
TABLE 3
Dome Mines
56
a4.50
8.04
4.26
Int'l Tel. & Tel.
7
63
Lake Shore Mines
52
ab6.00
11.54
14.15
Chi. & N.W. cv. 4)(s, "49
6
B. F. Goodrich deb. 6s, '45 Erie ref. Ss, '67 or 75
e
Loew's Inc.
51
a7.50
14.70
h8.47
Mo. Pac. Ser. A 51/24, '49
6
€
Reynolds Tob. B
45
3.00
6.67
2.93
TABLE 4
Mil., St.P.&P.5x.2000
5
e
Mclntyre Preup. Mines
42
2.00
4.76
14.46
Int'l Gt.North's adj.6s,"52
5
e
Speculative Bonds
F. W. Woolworth
40
2,40
6.00
3.36
5
I
e
Central of Georgia Con-
Chesapeake & Ohio
37
ag5.80
15.67
5.72
7.88
Not including extras. b Paid last year.
sol. 5a, '45
Bristol-Myers
33
a2.60
3.31
€ Year ended Jan. 1, 1937, di Deficit, . Is receivership.
General Foods
33
2.00
6.06
2.71
Interest in delandt.
Internat'l Pet. Ltd.
30
ab2.50
8.33
f1.81
.f
After depletion.
TABLE 6
Listed N. Y. Curb.
Admitted to trading on N. Y. Curb.
2.00
6.90
Sperry Corp. (The)
United Air Lines Trans.
Amer. Sugar Refining
29
2.67
So. Porto Rico Sugar
27
a3.05
11.29
Corp.
e2.87
TABLE 9
Swift International
26
a2.50
9.62
3.13
Cent. Aguirre Asso,
26
a3.38
13.23
STOCKS FOR MODERATE TERM HOLDING
TABLE 8
c3.95
Sutherland Paper
21
a1.80
8.57
2.54
Dome Mines
55
g4.50
8.04
4,26
Newmont Mining Corp.
Boeing
Airplane
Co.
Imperial Oil Ltd.
19
ab1.25
6.57
95
Lake Shore Mines
52
ab4.00
7.69
e4.15
North American Avia-
Borden
19
1.60
8.42
1.80
McIntyre Porc'p'n Mines
42
2.00
4,76
e4.46
tion, Inc.
National Dairy
15
1.20
8.00
2.01
Alaska Juneau
12
a .60
5.00
1.52
Ohio Oil Co. (The)
a Including extras paid last year.
Wright Hargreaves
8
a .40
5.00
1.72
b Payable in Canadian funds.
TABLE 9
4 Year ended July 11, 1937.
. Year ended Sept. 30, 1937,
hl.it.LongLac GoldM's.I. 5.40
bg .40
7.40
.30
If Year ended June 30, 1937.
hPamour 3.90
,03
......
Alaska Juneau
. Stock dividend of $2.00 paid last year in new 1% nos-
hMcLeod-Cockshutt G.M. 1.40
comulative preference stock.
> Year ended Aug. 31, 1957. E Year ended Mar. 31, 1937.
hKirkl'd Lake G.M.Co.Ltd. 1.35
bg
.09
6.66
.06
Reasons for eliminations or additions furnished to
Admitted to trading on N. Y. Curb.
hBeattie Gold Mines Ltd. 1.28 bg .05
3.90
11
clients on request.
W.O.
PSF: Douglas
Hyde Park, N. Y.
Donglas
February 21, 1938.
Memorandum for Hon. W. 0. Douglas:
Thanks for yours of February
18th. I will take it up as soon as
I get back to Washington. I will call
you on Thursday or Friday.
F. D. R.
4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
THE CHAIRMAN
February 18, 1938
The Honorable Marvin H. McIntyre
The Nelson House
Poughkeepsie, New York
My dear Mao:
I wonder if you would be 80 kind as to hand
on to the President the enclosed memorandum. It is a
matter of some importance to us which I had intended
to take up with the President before he left, but the
pressure of other work prevented.
With warmest regards and best wishes, I am
Yours faithfully,
3)
William 0. Douglas
Chairman
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
OF THE CHAIRMAN
February 18, 1938
MEMORANDUM
TO: The President
FROM: Chairman William 0. Douglas
RE:
Federal Licensing Act for Corporations
We feel here at the Commission that it would be desirable
to have a Federal licensing or incorporation act for corporations.
Our idea is that such Act should be applicable to all
corporations engaged in interstate commerce whose securities are
so widely held and whose assets are sufficiently large as to
make them subjects of national concern.
It would also be our idea to require such corporations to
file with the government at regular intervals, periodical reports
on their financial condition and to keep such information current.
In that connection it is also our feeling that the government should
be empowered to establish accounting standards applicable to such
corporations.
The reasons why we feel such a simple statute would be
desirable are the following:
The Securities Act of 1933 and the Securities Exchange Act
of 1954 are directed, in large measure, towards securing the public
- 2 -
dissemination of financial information concerning corporations
whose securities are bought and sold by the investing public.
Marked progress towards this end has been made under the Securi-
ties Exchange Act with respect to securities listed on national
securities exchanges. Adequate information regarding the great
mass of securities publicly held but traded only on the over-
the-counter markets is at present largely lacking. Such infor-
mation is required only of companies which voluntarily subject
themselves to the requirements of the Securities Act by offering
new securities to the public. Even information thus made
available is required to be kept current only in the case of a
limited class of large corporations which have registered an
issue of securities under the Securities Act since August 25, 1936.
This disparity between the treatment accorded to listed
and that accorded to unlisted securities works an unjust dis-
crimination against the national securities exchanges and against
the issuers of listed securities. It also deprives the investor
in the over-the-counter markets of a much needed protection. It
has been conservatively estimated that financial and other pertinent
information with respect to some 57,000 security issues traded in
the over-the-counter markets is not now required to be filed with
this Commission. Furthermore, the inability of this Commission to
secure adequate information regarding securities traded only over-
the counter greatly hampers the Commission in its task of ensuring
- 3 -
to the investing public a free and fair over-the-counter market.
A corporation licensing law of the character I have mentioned
would serve to correct the inequity presently existing between the
exchange and the over-the-counter markets. It would also go far
towards restoring greater investor confidence in the capital
markets -- a matter of major concern, in my view. Furthermore, it
would provide a repository of information useful as a basis for
determining the precise extent to which the business and financial
practices of large corporations are proper subjects of further
Federal regulation.
As you know, Senator O'Mahoney has sponsored for sometime
8. bill for Federal incorporation. Our interest is at present
restricted to the few phases which I have mentioned above. What
else might be included in such a bill we do not purport to say.
But would it be agreeable to you if the Commission or myself
officially sponsorS such & measure, limited as above?
weerles
un
PSF:W. O,Douglas
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
OFFICE OF THE CHAIRMAN
file
November 14, 1938
Memorandum to: The President
The White House
From: William O. Douglas
Ed Eicher, who is back from the wars in Iowa, has just
talked with me. His personal plans are in such shape that he
could, if it still meets with your approval, start work at the
Securities and Exchange Commission immediately.
When I last discussed with you the prospect of his appoint-
ment to this Commission to fill the vacancy caused by the resigna-
tion of John Hanes, it was, as I recall, contemplated that he come
on to this Commission the first part of January. But in view of
the fact that he is now free from all pressing commitments, and
that we could use him right away, I wanted to bring the matter to
your attention in case you felt that his appointment at this time
would be wholly appropriate.
Uu 0 wongles
PSF: Wm. O. Douglas
Daing Dauglar
yen
Memo to Senator O'Mahoney
From the President
May 17th 1939
In re-0'Mahoney's plans on taking of testimony on the
Insurance phase of THEC
Memo to Leon Henderson attached-May 19, 1939
Also attached memo to the President--April 12, 1939
From Williem 0. Douglas
Re-Insurance Investigation
See: THEC folder-Drawer 2-1939 for the above correspondence
and other correspondence relating to the Temporary
Nat'l Economic Committee.
PSF, W.D. Douglos
your
Hyde Park, N. T.,
June 27, 1939.
Dear Bill:-
The thought behind the ball game
between the Nine Young Hen and the Cabinet 10
an excellent one, even though you eliminate
General Watson, Admiral MoIntire and Colonel
Early.
I come back with & counter proposal,
however. The Cabinet insists that the Chief
Justice pitch and Mr. Justice McReynolds catch.
Our battery will be The Secretary of State,
Pitcher, and The Secretary of the Interior,
who is away, these are our oldest members -
Catcher. Except for the Secretary of the Navy,
and, incidentally, it gives some advantage to
the Supreme Court because an experienced
battery counts and yours will be about ten
years older than ours.
We also suggest that no substitutes
be put in -- and we suggest further that the
Umpires be the President and the Speaker of the
House. This seems fair. Finally, we insist
that your "Nine" waive in advance any judicial
authority over unpires' decisions, and that in
publicity after the game no minority opinions
will be filed,
So far 80 good!
AB ever yours,
Honorable William O. Douglas,
Supreme Court of the United States,
Washington, D. 0.
Supreme Court of the United
Mashington, B.C.
CHAMBERS OF
June
JUN 24 JUN 24 THE WHITE HOUSE
JUSTICE WILLIAM O. DOUGLAS
RECEIVED 39
My dear Mr. President:
I have just received the original of a
cartoon drawn by Herbert Block and published a
month or 80 ago. It is entitled "The Nine Young
Men". It shows the members of this Court in a
huddle in the corridors of the Supreme Court
Building. One of the more spirited, whose iden-
tity is not disclosed, is saying, "Let's phone
the cabinet members and see if we can get up a
ball game."
I did not want to take this matter up
officially without first sounding you out informally
on the proposition.
Of course, all "ringers" should be ex-
cluded. I refer especially to General Watson,
Admiral McIntyre and Steve Early.
Yours faithfully,
hm 0 hearyla
the Presed dent
PSF: W.O. Doughs
THE WHITE HOUSE
N
WASHINGTON
Confidential
November 21, 1939.
Private
MEMORANDUM FOR
MR. JUSTICE FRANKFURTER:
I em secretly disturbed to find that
one BO young as Mr. Justice William 0. Douglas
has so soon taken advantage of the old subterfuge
of quoting from obiter diota of his colleagues
and law school professors, expressed through
letters, editorials in the New Republic and
1937 speeches by a recent Horverd Law School don.
Because of your seniority, I suggest
that you hold a seminar for Bill, asking him
to apply the vivid rules of life in place of
the musty rules of law and get him to answer
in language which even the President can under-
stand the simple query "Do Baptists play poker?"
In the utmost confidence, in view of
your recent assertion to no that you are about
to take a freshman course in that ancient and
honorable game, you will perhaps be good enough,
again in the utmost confidence, to tell no
whether we can muster five votes for the game
as the Court is now constituted. I am deeply
interested because, as you know, there 1s a
vacancy in your honorable body.
F.D.R.
Supreme Court of the Mitted States
Wnshington,B.O.
CHAMBERS OF
JUSTICE WILLIAM O. DOUGLAS
November 15, 1939.
My dear Mr. President:
I have your letter of November 11, in which you ask
for an advisory opinion on the question "Do Baptists play
poker?". I have made a hurried search of the subject of
advisory opinions and have come across a very respectable
authority which would seem to permit it in a very limited
class of cases. The authority on which I rely is Mr. Justice
Frankfurter, who, while professor of law at Harvard University,
published a casebook on Federal Jurisdiction and Procedure,
where I find, on page 72, the following:
S. Res. 103, 75th Cong., 1st Sess.
81 Cong. Rec. 3597 (1937).
Resolved, That the Supreme Court of the United
States is requested to adopt such amendments to
its rules and procedure as to enable the Congress
of the United States, on a majority vote of both
Houses of the Congress, to request and receive
from the Supreme Court of the United States advisory
opinions as to the constitutionality of legislation
pending before, and being considered by, the
1
Congress of the United States.
1 This resolution was introduced by Senator
Schwellenbach on March 29, 1937, following the
publication of a letter from Mr. Chief Justice
Hughes to Senator Wheeler who used the letter
in his opposition to President Roosevelt's pro-
posed legislation with reference to federal
judges who reach the age of 70 years. A part
of the letter was as follows (Hear. on 8. 1392,
&
Sess. Comm. on the Jud., 75th Cong., 1st Sess.,
(1937) 488, 491),
"My dear Senator Wheeler: In response to
your inquiries, I have the honor to present the
following statement with respect to the work of
the Supreme Court:
......
I understand that it has been suggested that
with more justices the Court could hear cases in
divisions. It is believed that such a plan would
be impracticable. A large proportion of the cases
we hear are important and a decision by a part
of the Court would be unsatisfactory.
I may also call attention to the provision of
article III, section 1, of the Constitution that
the judicial power of the United States shall be
vested 'in one Supreme Court' and in such inferior
courts as the Congress may from time to time ordain
and establish. The Constitution does not appear
to authorize two or more Supreme Courts or two or
more parts of a supreme court functioning in effect
as separate courts.
An editorial in the New Republic characterized
the quoted portion of the letter as "an advisory
opinion run riot, ... the final step in the
usurpation of judicial power--a statement in
advance to Congress of the kind of laws which the
Court intends to condemn. In giving this advance
notice, the Chief Justice violates every precedent
of his own tribunal against the giving of advisory
opinions." (April 7, 1937, at P. 254.) See the
remarks of Senator Minton, March 31, 1937, 81
Cong. Rec. 3763; and the letter from Solicitor
General Reed to Senator Ashurst, post, P. 624.
Compare the opinion given by Mr. Justice
Johnson, with the approval of other members of
the Court, to President Monroe, 1 Warren, The
Supreme Court in United States History (2d ed.
1928) 595-596. "This, of course, was extra-
official, but it is safe to say that nothing of
the sort could happen today." --Hughes, The Supreme
Court of the United States (1928) 31.
Thus spoke Professor Frankfurter in 1937.
In reliance on that eminent authority, research will
be at once started on the question which you propound. The
results of that research will be forwarded to you with as much
dispatch as possible, together with further observations on
other phases of your letter of November 11.
Yours faithfully,
un 0 wangles
The President,
The White House.
Supreme Court of the Huitted States
Washington,B.C.
CHAMBERS OF
THE Nov WHITE 10 RECEIVED 11 56 HOUSE 56 AM *39
JUSTICE WILLIAM O. DOUGLAS
November 10, 1939.
My dear Mr. President:
In answering your letter of September 28, 1939,
80 soon, I am probably violating some judicial precedents.
For the period of gestation for judicial pronouncements is
at least a couple of months.
I have reservations as to your proposal to make
the contest football rather than baseball. My reservations
arise because of the awful prospects which that calls up in
the mind. Take, for example, that salty, triple-threat back-
field of yours. Even within the rules of the game, the destruo-
tion to the morale and physical well-being of our team, of which
it would be capable, is quite appalling. Offsetting your back-
field, of course, is the "right" side of your line which would
probably be calling for time out rather continuously and would
rather settle the contest in the locker room than on the field.
But the "left" side of your line would more than make up for
that by covering each side of center equally well.
So viewing it objectively, I have great fear of the
consequences to our team -- not that it will be "licked" but
that it will be obliterated. In sum, I fear that the contest
would settle more than the issue of judicial supremacy.
You suggest that you can give us some additional men
of ability. You mention one possibility. What the merits of
the charges against him may be I do not profess to know. But
his reputation at present in the eyes of the public leaves
something to be desired. Hence, I am not sure that he should
now be "tapped". After all, it took baseball some little time
to live down the alleged goings-on of the old White Sox.
The President,
The White House.
-2-
Your intimation that you and I share the receipts
goes far towards swinging the balance the other way. That
appeals to me not because of any personal advantage involved
but because of the sheer pleasure in seeing one or two of your
linesmen sweating for once for somebody else. But even that
passing satisfaction does not still the humanitarian impulse
to keep our team from getting out of its own class.
So I wonder if it might not be better to test the
skill at poker. You can furnish the deck, thus ruling out all
marked cards - which have not been unknown. And with some
feeling I can say (and General Watson may be willing to confirm
it) that with me by your side you are pretty certain to win.
Yet in saying that I do not want to leave the impression that
no one on this side tops me in that ancient, wily game. We
do have a few fancy dealers and some who always seem to get the
wild cards.
Yours faithfully,
lew O Wangle
Supreme Court of the Muited States
Wushington.,P.
CHAMBERS OF
JUSTICE WILLIAM O. DOUGLAS
September 19, 1939.
The President,
The White House.
My dear Mr. President:
My neglect in answering your letter of June 27
has been due to my absence from the city; not to any waning
interest in the proposed ball game between the Nine Young Men
and the Cabinet.
I like your counter proposal. Certainly it has
some phases to which no possible objection by any fair-minded
person could be made. By reason of their temperaments and
experience, the President and the Speaker of the House are
eminently qualified to be the umpires.
The Cabinet's insistence that this "Nine" waive
any judicial authority over umpires' decision is also wholly
agreeable to me. But I fear that the point cannot be won with-
out a tussle. As you are well aware, the issue of judicial
supremacy has a long history. To be sure, there is nothing
in the Constitution about it. But it came to pass anyway.
Some, like Frank Hogan, are fearful lest we get back to the
Constitution and away from what has been said about the
Constitution. But that is another good reason for pressing
your point. In sum, I am for the proposal, tussle or no
tussle.
The Cabinet's insistence that in publicity after
the game no minority opinions be filed will be attacked as a
curtailment of freedom of speech. But, as I read your proposition,
there will be no cloture during the game. Hence, your suggestion
is wholly agreeable to me, though it will also be denounced as a
body blow to judicial supremacy.
-2-
That disposes of the minor phases of your
counter proposal. The major one remains; viz., who will
constitute the battery for this Nine? Your tribute to the
skill of our proposed battery doubtless is based not only
on our proposed catcher's ability to stop anything, but also
on our proposed pitcher's great change in pace -- slow balls,
fast balls, curves, spit balls, etc. That was a tribute
genuinely deserved. Furthermore, as you have said, the
proposed battery does have a rich experience.
But I would be derelict in my responsibilities
if I did not mention one item which you referred to so
casually as to lead me to think that I should call it to your
attention for further consideration. That is the question of
the age of our battery. Age brings experience; it also brings
physical frailty. Pitching and catching are quite strenuous.
We have no substitutes or replacements. Suppose one -- or
even both -- of our battery gave out completely!! You could,
of course, replace them. Yet some of the "Yes, but" group
will say, "Why take the chance? If, instead, younger men
constituted the battery, that risk would be avoided. By using
your candidates for pitcher and catcher in the outfield, they
could be preserved for many, many years!!"
That will be the argument against your proposal.
And I thought I ought to call it to your attention now, lest,
having started with a nice, friendly ball game, we be charged
with concecting (or we unwittingly end up with) 8. court plan.
Yours faithfully,
lun 0 hearylas
fill onal
November 11, 1939
Dear Bill:
As a fellow manager of two athletic
associations and as my partner in splitting the
gate receipts, I begin to wonder whether your
Nine old Men still have that dreadful inferiority
complex which settled upon them during the athletic
season of 1937.
Here is my club rarin' to go -- ready
last spring to stage the World Baseball Series
between the Administrative Oligarchy and the
Judicial Hierachy. At the very end of the base-
ball season when I had started my team throwing
passes and kioking goals, your aggregation is
still haggling over the game.
Now the same sort of thing develops
again. My football team 1s closing an undefeated,
untied season and I have started them into strict
training for ice hockey. The ground 1s getting too
hard for football anyway because neither your team
nor mine can stand the frost.
Ice hockey is different. The enclosed
rinks are nicely heated and the artificial ice is
soft -- and anyway, I have trained my team 80 that
when they fall down, they skid and don't bump. Can
you say as much for your Nine old Men?
That idea of reducing the contest to
poker would be all right in view of the enormous
salaries drawn down by your people. At least you
could afford to lose.
But, I ask you, do Baptists play poker?
As ever yours,
Mr. Justice William O. Douglas,
Washington, D. C.
fdr/tmb
September 20, 1939.
Dear Bill:-
I deeply regret that your team of the
Nine Young Men has seen fit to wait until the
baseball Beason is over before appearing to face
my Cabinet. Last week my Cabinet team, having
won the Federal pennant for the 1939 baseball
season, put on football uniforms and, with the
assistance of the three new Administrators,
awaits all comers. If the Supreme Court is
ready to take on the Gridiron Game, I suggest
that its nine members be supplemented by former
Senior Judge Manton and any other Circuit Court
Judge of similar ability.
In view of the fact that modern foot-
ball had not been invented at the time your
team was in college, you may prefer a game of
soccer with the Cabinet team. Every member of
my team 10 a soccer!
As over yours,
Honorable William 0. Douglas,
Supreme Court of the United States,
Washington, D. c.
W.O. Frigh Eary Folder OFFICE
UNITED STATES
DEPARTMENT OF THE INTERIOR
OF PETROLEUM COORDINATOR
Belle
FOR NATIONAL DEFENSE
WASHINGTON
May 19, 1942.
My dear Mr. President:
Here is a report that has just reached my desk on "The
Transportation of Petroleum to Eastern United States", that has
been prepared by the Transportation Division of the Office of
Petroleum Coordinator. It has some more or less pretty maps that
may intrigue you.
Sincerely yours,
Petroleum Coordinator for War.
The President,
The White House.
Enc.
Filed Library
friend
Special Bill
Supreme Court of the United JOH 12
THE PSF: w.o. Douglas 5-42 Folder
Mashington, D.C.
08
CHAMBERS OF
AM
HOUSE
JUSTICE WILLIAM O. DOUGLAS
Jian
1942
my dear her. Instruct
& talked with Jimmie
Byrnes about the watter we
deceased east Sunday Jimmi
promised to think t over. and as
9 told more on the telephone
before 9 left, 9 think Jummie
has some slants on the problem
which you should have directly
from him.
your basic idea
has went. But my present
it 9 probably should resign
feeling is Rot if 9 ties its
Junie was walined to Rot
from the Count. 9 think that
new So was the C.J. with
whom 9 discussed the watter
quite finally The thought
undertaking m my part to
was that 7 the work was
non out difficulties between
to he effective, The one who
department heads and others
ded it should he able to
who have authority and who
work finally with some
in many instances have a
authority and respecibility
real bostility would not from
as you him, 9 think
to he helpful and wight
only lumiss of D day. Since
the was effort is the first and
injure the Count
But Fuil think to
last December 9 have often
matter was some more while
thought that 7 should enter
9 finish my my augan and
the away or the many. Eagt
to next two weeks. apcounse
Cobfornia assegnments during
for such a major was more,
7 thought 9 should stay on 9
twant to be helpful. my
the Count for the maxim 9
fave you. But unless
present new haveng is hat
resign from the Count and
if your tentature suggestion
take - administrative post
was to work out, it should
9 am maluted to the
be done through sprific
new that my real
designation of say the
~ fair wen on a fermanent
basis with defents authority
and responsibility Ken they
department heads anyet to
unight be able to do what
do in their over 90 To or were
1 to time without any
interession 91 that freend
really clicked. 9 theretr you
would jet defunte relef. and
at is very, very important
that you fet at
as wer -
Bill
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"ocrText": "PSF: NY William O. Douglas\nRETIRED FOR PRESERVATION\nPSF\nBox 144\nP5F: full Doriglas\nTHE WHITE HOUSE\nWASHINGTON\n11-27-37\nMemorandum for Mr. McIntyre:\nChairman Douglas dictated the following\nmemo over the 'phone:\n\"Mr. Jerome N. Frank, of New York City,\nis agreeable to an appointment on the\nCommission. I am very enthusiastic to\nhave Frank. Frank would like to know\nthat if there is available at some future\ntime an appropriate Federal Judgeship\nthat he would be given consideration, as he\nis interested in permanency of tenure in the\nFederal Government, as he has to leave a\nvery good law practice and does not want to\nreturn to it if he comes down.\n\"John Haines, of C.E. Barney & Co., Member\nof the New York Stock Exchange, is a very\ngood prospect. I am planning to have a\nconference with Haines, if agreeable, in\nthe very near future, to size him up further.\n\"At the present time I feel that Frank and\nHaines would be an excellent combination and\nI will report the results of my conference\nwith Haines in a few days.\"\nW.O.\nPSF: Douglas\nSECURITIES AND EXCHANGE COMMISSION\nWASHINGTON\nOF THE CHAIRMAN\nFebruary 5, 1938.\nThe President\nThe White House\nMy dear Mr. President:\nIn view of your interest in a recent compilation pre-\npared by Goodbody & Company, purporting to set forth certain\nvalues for public utility securities, I have had our Public\nUtilities Division investigate and analyze the results of this\nstudy.\nThe \"Goodbody Study\" represents an attempt to measure\nthe assets and earning power underlying holding company securi-\nties. The physical assets of the subsidiary operating companies\nwhich form the base of the whole security structure have been\nrevalued on the basis of figures derived from averaging the\ndetailed property accounts of 120 public utility operating com-\npanies. Earnings were then computed on the assumption of a\n6% rate of return on the property values 80 calculated. The\ncalculated values and earnings based thereon were substituted\nfor book values and actual earnings of each individual company\nin arriving at Goodbody's computed values and earnings applicable\nto the securities of the holding companies listed in the study.\nThe calculated asset figures were derived from an\naveraging process of the detailed property accounts of one hun-\ndred and twenty public utility operating companies examined.\nTo clarify just how the averaging process was developed,\nI have obtained from the files of the Public Utilities Division\na copy, which I am inclosing, of the Goodbody Market Letter and\nindicated in red penoil the portion which shows, by specific\nillustration, how the method was employed.\nThe method is admittedly only for test purposes and\ndoes not profess to develop \"original oost\" or \"prudent invest-\nment valuations\" for any given company. The application of\naverage computations to specific cases has the usual weakness\nthat is inherent in any averaging process. For that reason, I\nbelieve that the \"Goodbody Study\" does not necessarily indicate\nthe extent of \"write-ups\" or \"water\" present in the various\nholding-company systems. It would however indicate the companies\n2\nwhere inflated values probably exist and thus serve as a rough,\nthough not accurate, measure of their extent. In other words\nit does not necessarily give a reliable measure of such inflation.\nThe study was designed primarily to warn investors in\na general way of the companies whose earnings in the future might\nbe less than in the past. I believe it is of value in distinguish-\ning the better holding companies from the poorer ones from the\npoint of view of investors who are contemplating putting their\nmoney into holding company securities.\nThe following appears to be the way in which they may be\nclassified on the basis of the \"Goodbody Study.\"\nMaking the best showing:\nNorth American Company\nColumbia Gas & Electric Company\nAmerican Gas & Electric Co. (Electric Bond & Share System)\nUnited Gas Improvement Company\nMaking the next best showing:\nNiagara Hudson Power Company\nElectric Power & Light Co. (Electric Bond & Share System)\nNational Power & Light Co. (Electric Bond & Share System)\nEngineers Public Service Co. (formerly Stone & Webster\nSystem)\nCommonwealth & Southern Corporation\nAmerican Water Works & Electric Company, Incorporated\nMaking a poor showing:\nUnited Gas Corporation (Electric Bond & Share System)\nNorth American Light & Power Co. (North American System)\nUnited Light & Power Company\nCentral & South West Utilities Co. (Middle West System)\nAmerican Power & Light Co. (Electric Bond & Share System)\nStandard Gas & Electric Company\nI shall be happy to supply any other additional informa-\ntion you may desire.\nYours faithfully,\n4m 0 wayla\nWilliam 0. Douglas,\nInc.\nChairman.\nThis letter is not to be deemed a\nsolicitation of orders or a prospectus.\nMONTHLY\nMARKET LETTER\nUtility Valuation Yardsticks\nJanuary 17, 1938\nGOODBODY & Co.\nMembers\nNew York Block Exchange\nNew York Ourb Exchange\nChicago Board of Trade\nNew York Cellen Exchange\nChicago Btock Exchange\nDetroit Block Exchange\nPittaburgh Stock Exchange\nCommodity Exchange, Ins.\nNew York Come Exchanga,Ina.\nNew York Produce Exchange\nDallas Cotton Exchange\nMARCUS GOODBODY\nJOHN L. GOODBODY\nA. LAWRENCE PEIRSON\nROBERT GOODBODY\nW. W. PHELPS\nD. L MOORE\nHAROLD P. GOODBODY\nFREDERIO H. HAHN\nIL VAN BRUNT M.KEEVER\nLimited Partners\nM.J. GOODBODY\nCHARLES A., KOLLSTEDE\nD. GOODBODY\nROBERT 000DBODT (2nd)\n115 Broadway, New York, N. Y.\nTelephone: BArclay 7-0100\nBell Teletype: N.Y. 1-672\nCable Address: \"Accurate\"\nUptown Office:\n60 East 42nd Street\nTelephone S. Micray Thill 2-6353\nPUBLIC UTIGITIES DIVISION\nPMON\nBeffalo, RECEIVED a. Cess. Cons.\nGenera, N.\nMass.\n25\nOleg. N.Y.\nMich\nCity, Mr\nBradford Pa.\nPA\nX.J.\nPresion RY\nOR\nTerento, Onl.\nDMM\n'EM'\nDISPOSITION\nInformation presented berein, while obtained from sources\nwe believe to be reliable, is not guaranteed.\ncommon stock will be for the next year or the\nBUSINESS AND PRICE INDICES\nyear after, under a political system which is\nClosing\nconstantly-trendwise-trespassing on corpo-\nTimesha Annalist\nDow, Jones averages\nBusi-\nCom-\n30\nratè, management's freedom of action, which.\nnose\nmodity\nIndus-\nad\n40\ngradually, but persistently, in its primary aim\nIndex\nIndex\ntrigle\nRails\nBonds\nJan.\n17,\n1938\n80.8\n64.9\n132,49\n31.01\n91.45\nof seeking more power for the Federal Govern-\nDec. 16, 1937\n85.0\n85.9\n125.75\n31.68\n93.42\nNov. 17, 1937\n93.7\nment, is deadening the hopes and ambitions of\n88.9\n127.54\n32.73\n93.19\nOct.\n18,\n1937\n100.2\n91.4\n125.73\n30.55\n94.26\nthe country's brains, which for tax and many\nSept.\n15,\n1937\n106,6\n94.7\n162.85\n41.45\n98,41\nAre.\n16,\n1937\n111.2\n94.8\n189.34\n53.62\n101.26\nother reasons scares capital away from ventur-\nJuly\n15,\n1937\n110.1\n95.4\n179.71\n53.82\n101.63\nJune\ning into new projects or from expanding old\n16,\n1937\n107.1\n93.2\n165.86\n53.57\n101.18\nMay\n14,\n1937\n109.0\n93.0\n169.15\n17.76\n101.18\nplants, which through a policy of an unbalanced\nApr.\n16,\n1937\n107.4\n94.1\n180.75\n60.26\n101.47\nMar.\n16,\n1937\n106.9\n95.1\n189.95\n63.06\n102.61\nbudget and É political philosophy that believes\nFeb. 15, 1937\n102.3\n92.5\n188.39\n57.37\n104.23\nJan. 18, 1937\nthe national income should be distributed widely\n105.2\n92.7\n184.95\n$5.86\n105.89\n1937 High\n111.2\n95.6\n194.40\n64.40\n105.89\nis causing those with capital to prefer safety\n1937 Low\n84.3\n85.0\n113.64\n28.91\n91.54\n1936 High\n106.8\n91,2\n184.90\n$9.89\n106.01\nrather than assume the risks of profits, and\n1936 Low\n89.9\n79.6\n143.11\n40.66\n98.92\nwhich broadly, as a result of all its policies, puts\na premium on inferiority and a discount on\nJanuary 17, 1938.\nsuperiority?\nIt is a new year, and the world presents a\nIf business is to be good or normal in any\nghastly picture of unworkable ideas and policies,\ncountry, somebody must spend money on the\nof nature thwarted by the temporary rise to\ncapital goods industries. In this country, it\npower of the masses and of individual men with\nappears that something like $3,000,000,000 to\nalmost unprecedented political powers, greedy\n$5,000,000,000 of new money issues is neces-\nand itching for more. It is a unique picture for\nsary annually to secure fairly good business or\nthis generation. Consequently, it has a most\nbetter. In the 1920's, it came from private\nimportant bearing on investment and specula-\nsources. For the past 43/3 years, it has come\ntive advices.\nlargely from the Government, either directly or\nWe must appreciate fully the awe. and fear-\nindirectly from a forcing process through the\ninspiring changes that are occurring not only\nconsumers' goods industries. Does any intelli-\non our own political, economic, and social front,\ngent person suppose that, after 435 years of\nbut also throughout much of the world. We\nshrinking, private capital will now come for-\nmust expect that it is going to be very difficult\nward confidently? Do not most business men,\nto convince those who have lived through the\nat least, the so-called monopolists, know that\nhoneymoon stage and the early marriage era of\nthey are in somewhat the same position now as\nthis country that those days can never be re-\nthe Jews of Germany were several years ago--\ncalled, that an investment program fif for the\nscapegoats? Isn't it self-evident that there is a\n1920's and all earlier years can no loriger be\nworld-wide tendency, including this country, to\nfollowed if capital is to be preserved. A policy\ncentralize and give. more power to Govern-\nof buying a cross-section of the market, putting\nments? By giving this power to Governments,\ndoesn't it mean more control over business\nit away, and forgetting about it is as passé as\nthe horse and buggy.\nbecause growth of power means use of power?\nAll this dampens business confidence increas-\nNow let's see why any long-term investment\ningly. Doesn't it follow then that the burden of\nprogram does not seem at all feasible for the\nstimulating business must fall more and more\nyears just ahead and that only a short range\non Government action? If so, then any invest-\npolicy, six months or so, is all that seems logic-\nment policy must depend largely on what the\nally possible at best. Basically, It is because we\nGovernment does or does not do. Under such\nare shifting from a free economy to a managed\nconditions, how can you have a long-term in-\neconomy - just as some half the world's popu-\nvestment program? As a consequence of all\nlation has completely shifted to a managed\nthe above. will not safety supersede appreciation\neconomy. Can we, or anybody, tell at all accu-\nas by far the most important consideration\nrately or with reasonable probability what the\nInvestment-wise? If so, won't most common\nearnings of any company or the price of its\nstocks sell gradually at lower and lower levels\nin relation to earnings-say, eventually, at 5 to\nWe cannot condone their continuance.\" This\neffect on the earnings of some utility companies\n10 times earnings instead of 10 to 25 times?\nthought was reiterated in his Press Conference\nmight be quite adverse where rates were re-\nThe decline in business over the past four\nof January 14th, last. Moreover, it is common\nduced so that earnings were equal to only 6%\nmonths has probably been more drastic, per-\nknowledge that the Federal Power Commission\non a rate base determined through the use of\ncentage-wise, than for any comparable period\nhas espoused such a theory, for immediately\nthe \"prudent investment\" theory.\nin our history. This fact raises a presumption\nfollowing a recent Supreme Court decision in\nthat business is apt to improve moderately be-\nregard to the Pacific Gas & Electric Co., Acting\nIt is to be noted that even if the \"prudent\nfore growing worse. Firmness in commodity\nChairman Seavey of the F.P.C. announced\ninvestment\" valuation theory should be accepted\nthat the Commission would use the Prudent\nthroughout this country, the rate of return al-\nand high grade bond prices in the past month\nInvestment Plan for valuing the property of\nlowed on such valuation would probably vary\nhelps to increase that feeling or hope. Although\nas between States or sections. Due to local or\nthere is little evidence as yet in business figures\n292 electrical utilities. We fear the possibility\nto substantiate any such opinion, we think some\nthat the Courts will accept ultimately this\nsectional differences, some companies would be\nupturn businesswise may occur in this first\nvaluation method.\nallowed somewhat higher or lower returns, de-\nTherefore, now that the whole matter of\npending on how much is necessary to attract\nquarter, barring unexpected political develop-\nments. At least in sporadic cases, wage scales\nvaluation is receiving current Federal consid-\ncapital to the enterprise.\nmay decline and labor conditions generally\neration, it is important that utility holding com-\nUp to the present time, utility stockholders\nshould show improvement from the employers'\npany stockholders, particularly, should know\nhave remained almost completely in the dark\nviewpoint. Politically the news is likely to be\nhow vulnerable their respective positions might\nas to what this \"prudent investment\" method\nmore appetizing, as the Senate may be expected\nbecome. For, even though the actual outcome\nmight mean to them in dollars and cents when\nto assume a reasonably independent attitude in\nis clouded, stockholders should realize that the\ntranslated specifically into a possible effect on\nlegislative matters. Inflation psychology, al-\nresults of the adoption of \"prudent investment\"\ntheir own security holdings, especially if these\nready aroused by the President's budget mes-\ncould reflect themselves in two ways: (1) A\nsecurities were the preferred or common stocks\nsage and his comments on a rearmament pro-\npossibility that the actual asset value (as finally\nof holding companies. But now, probably for the\ngram, may readily grow in this first quarter-\nallowed) behind each share of stock might vary\nfirst time, there is available to the small and\nif not as a result of actual developments, then\nconsiderably from the price which they paid\nlarge investor a rather unique method for test-\nfrom a spreading conviction that Government\nfor the security; (2) a possibility that a ceiling\ning, under some assumptions as to \"prudent\nspending must increase fairly soon. Thus,\non earnings, based on a fair rate of return at\ninvestment\" and a fair rate of return, asset\nbusinesswise, laborwise, politically and infla-\nor below present levels, might be imposed on\nvalues and earning power behind his securities.\ntionwise, we think the news or its anticipation\nthose assets. Certainly, they are justified in\nWe emphasize that the method is only for test\nwill supply a sufficient stimulus for a rally in\nseeking impartial guidance in this matter.\npurposes and does not give us the original cost\nstock prices over the next month. However,\nUnder this \"prudent investment\" theory, as\nor prudent investment valuations for any given\nthis does not mean any change in our advices\nwe understand it, the original cost of the var-\ncompany.\nto investors.\nious elements of a utility's physical property\nSuch a method, call it a yardstick if you\n(plus the use of reasonable judgment in deter-\nUTILITY VALUATION YARDSTICKS\nwill, has heretofore not been generally used,\nmining certain values open to question) is by\npossibly for the following reasons: (A) Utility\nIt has been believed for many years that the\nfar the major factor in arriving at a proper\nexecutives have generally believed that their\nproperty valuations of some utility companies\nrate base upon which to predicate a fair rate\nlocal conditions were \"different\" enough to\nwere carried at too high a figure on their books.\nof return. Two other important factors usually\nIn the past few months, the President has advo-\nmake such a method inapplicable to their sit-\nconsidered are depreciation and working capi-\nnation. (B) The enormous amount of work\ncated the use of a so-called \"prudent invest-\ntal. If State Commissions and Courts should\nrequired to develop the method has discouraged\nment\" theory in valuing public utility proper-\nhold that 6% was a fair rate of returnt the\nefforts to attempt it. (C) Only in very recent\nties, and only very recently in his Jackson Day\n+ Considering the liberal trend of Court opinion, we\nmonths have there been available for public\naddress, the Chief Executive, it appears to us,\nhave allowed in our computations a 6% rate of\nfurther alluded to this theory when he said:\nreturn which may be low temporarily for some\ninspection, in the files of the Federal Power\ncompanies. In 1934 the case of Dayton Power &\nCommission, reports of operating companies\nThousands of investors have lost money\nin buying holding company securities which\nLight vs. Ohio Public Utilities Commission (292\nwith sufficient detail from which to work up\nS. 290). Mr. Justice Cardozo held that a return\nhad blue sky above them instead of tangible\nthe necessary data. Nevertheless, because we\nset at 61/2% was adequate. However, in 1935 in\nassets behind them. That evil of utility holding\nthe case of West Okin Gar Company vs. Public\nfelt that these objections, while valid within\nUtilities Commission of Ohio (294 U. S. 63), the\nlimits, were not insurmountable and believed\ncompany control will not grow in the days to\ncome, because this Government has now passed\ndissenting opinion of the Supreme Court held that\nthat the implications of the study would be\na 4.91% return upon reproduction value determined\nlaws to prevent similar occurrences in the\nhelpful to investors, we proceeded to set up two\nas of March 31st, 1928 was not unreasonable. These\nfuture. but we have not yet corrected the exist-\nand other cases that could be cited show there is\nyardsticks with which to test asset values and\ning evils that flow from mistakes of the past.\nconsiderable leeway in what the Courts may judge\nearning nower of certain companies as shown\nto be a fair return.\nin the following table.\nA\nB\nC\nD\nE\n7\no\nH\nI\nX\nNormal\nTotal of Individual Accruss to Parent Company as computed for us from the Own-\nA 1936 figures were used by LII, for the most part, in developing the results shown here.\nenship of Securities and Surplus in its Respective Subsidiary Operating Companies\n(Which We Have Analyand), per Share of Parent Company Stock Specified.\nB In compiling the figures for this column the following exceptions were made: Where\nthe adjusted plant account was higher than the present me, the asset equity figure\nwas based on the present plant account. This issumes improbability of official value\nASSET EQUITY\nEARNING EQUITY\ntions being sanctioned higher than those based on present book figures.\nC Where the present return was less than 6% - the present rate have (as deter-\nAfter allowing 6% return\nmined by us) and the adjusted plant account - higher than the present one, then\nDeterminel by us, as\non our rate base which we\n. 6% return was allowed on the present base; where the adjusted plant account\nexplained is text, after\nderived from plant account\nwas lower than the present one, and 6% on the assumed adjusted rile base showed\napplying la various\nadjusted by - - explained\nallowed. an earning equity higher than the present earnings equity, the higher figure was\ndements of plant aver-\nin text. by applying to vari-\nage unit costs derived\nour elementa of plant ever-\nD d-deficit.\nfrom analysis of\nAs deter-\nage unit costs obtained from\nAs deter-\napproximately:\nmined by\nanalysis of approximately\nE To the case of North American Light & Power Co., our\nLatest 12\nminet by 13\nus from\nReseres are after adjusting for reorganization of Illinois\nmonths\nApprox.\nfrom reports\n20 Selected\nreports of\n20 Selected\nPower & Light Corp.\nConsolidated\nMarket\nof Individual\n120 Operating\nLow Cost\nIndividual\n120 Operating\nLow Cost\nEarnings\nPrice of\nCompanies\nCompanies\nCompanies\nCompanies\nCominanies\nCompanies\nName of Company\nIssue\nper Share\nStock\nSee Note a\nSee Note Il\nSee Note C\nSee Note C\nAmerican Cas & Detrie Co.\nis Cum. Pld.\n$38.26\n110%\n$ $58.00\n$ 427.00\n$331.00\n$ 33.30\n# 21.70\n$ 12.75\nCommon\n2.56\n2614\n37.00\n26.50\n18.90\n2.18\n1.26\n0.54\nAmerican Power & Light Co.\n$6.00 Cum. PIL\n6.36\n1436\n144.50\n91.80\n51.30\n5.87\n4.13\n2.56\n$5.00 Cum. Pfd.\n6.36\n28\n144.50\n91.80\n51.30\n5.87\n4.13\n2.56\nCommon\n0.54\n5%\n17.80\nd 13.30\n137.00\n0.25\ndi 0.78\n4 1.70\nAmericas Water Works & Electric Co.\n$6.00 Cum. PM.\n22,14\n87\n246.60\n102.50\n78.80\n23.73\n7.14\n6.09\nCommon\n1.38\n1136\n12.50\n0.22\n1.81\n1.51\n0.10\n0,01\nBeston Edison Co.\nCom. $100 Par\n8.86\n122\n169.60\n169.60\n136,30\n8.38\n8.38\n8.38\nCentral & 5. W. Utilities Ca.\n$7.00 Cum. Prior Lies PM\n16.27\n95-99\n205.00\n146.83\n28.20\n15.32\n7.12\n1.59\n$7.00 Cum. PM.\n9.06\n1014-12\n74.20\n17.75\n496.60\n8.17\n0.17\ndi 5.16\nCommon\n0.08\n1%\nd 2.04\n4.28\n48.80\n0.05\n4 0.27\n40.48\nColumbia Car & Electric Corp.\n0% Com. \"A\" PM\n13.96\n79\n327.00\n253.00\n220.00\n13.52\n16.07\n12.88\n5% Cum. Pid.\n13.96\n64%\n327.00\n253.00\n220.00\n13.12\n16.07\n12.88\n5% Cum. Casy. Pref.\n64.29\n1856\n1,815.00\n1,233.00\n963.00\n60.50\n80.10\n55.50\nCommon\n0.57\n1H\n17.10\n11.29\n8.62\n0.55\n0,76\n0.51\nCommonwealth Edison Co.\nCom. 125 Par\n2.21\n26%\n29.30\n29,30\n29.30\n1.75\n1.63\n1.63\nCommonwealth & Southern Corp.\nPM way 0095\n10.62\n3736\n210.00\n140.00\n64.80\n8.90\n9.43\n4.12\nCommon\n0.31\n14\n4.64\n1.53\nd 1.84\n0.13\n0.15\n4 0,08\nConsolidated Edison Co. of N. Y.\n$5.00 Cum. PM.\n16.90\nH\n353.00\n320.50\n259.00\n17.77\n20.05\n16.98\nCommon\n2.17\n214\n48.10\n40.23\n30.80\n233\n2.83\n2,19\nDetroit Edison Ca.\nCom. 1100 Par\n8.38\n105%\n119.60\n118.10\n91.60\n8.39\n8.15\n6.57\nElectric Power & Light Corp.\n$7.00 Cam. Pfd.\n12.33\n38\n274.00\n230.00\n141.60\n10.05\n15.25\n10.52\n$6.00 Cum. Pld,\n12.33\n36\n274.00\n230.00\n141.60\n10.06\n15.25\n10.52\n$7.00 Com. M PM.\n$2.54\n35\n1,160.00\n954.00\n138.00\n31.54\n79.60\n15.80\nCommon\n1.10\n11%\n29.80\n19.91\n4.0.13\n0.60\n1.76\n0,70\nEngineers Public Service Co.\n$5.00 Cum. Come. Pld.\n8.80\n4836\n179.00\n170.00\n117.00\n7.53\n5.65\n4.47\n$5.50 Cum. PM.\n8.80\n53\n179.00\n170.00\n117.00\n7.53\n5.65\n4,47\n$6.00 Cum. PM.\n8.80\n62\n179.00\n170.00\n117.00\n7.53\n5.65\n4.47\nCommon\n0.76\n3\n16.92\n15.05\n3.04\n0.48\n0.05\n4 0.21\nNational Power & Light Ca.\n$6.00 Cum. PM\n31.86\n14\n160.00\n254.20\n160.50\n25.00\n10.00\n6.26\n13.30\n8.10\n3.10\n0.97\n0.21\n0.01\nCommon\n1.32\n7M\nNisgare-Hudson Power Carp.\n5% Cum. let PM.\n25.42\n73\n465.00\n460.00\n285.50\n19.37\n28.20\n10.48\n5% Cum. 2d Ptd.\n76.14\n66\n1,360.00\n1,337.00\n693.00\n53.60\n86.50\n20.44\nCommon\n0,88\n.\n13.96\n13.72\n6.56\n0.54\n0.90\n0.17\nNorth American Co.\n0% Cum. Pfd. $50 Par\n32.01\n11%\n196.00\n360.00\n282.00\n27.40\n21.96\n19.57\nCommon\n2.05\n1116\n24.35\n21.90\n16.30\n1.74\n1.62\n1.17\nNorth American Light & Power Ca.\n6.54\n37\n88.65\n49.90\n47.70\n$6.00 Cum. Hd.\n8.53\n8.35\n4.68\nSee Note E\nCommon\n0.03\nIN\nd1.83\n43.91\n4.02\n0.14\n0.12\n40.73\nPublic Service Carp. of New Jersey\n122.00\n7.72\n5.27\n1% Com. Pfd.\n15.01\n140\n182.00\n166.50\n15.30\n7% Cum. Pfd.\n15.01\n123\n182.00\n166.50\n122.00\n15.30\n7,72\n5.27\n5% Cum. Pfd.\n15.01\n10416\n182.00\n166.50\n122.00\n15.30\n7,72\n5.27\n$5.00 PM.\n15.01\n9716\n182.00\n166.50\n122.00\n15.30\n7.72\n5.27\n6.70\n2.67\n0.45\n4 0.26\nCommon\n2.60\n33\n24.00\n19.75\nSouthern California Edison Ca.\nCommon\n2.26\n24\n29.00\n29.00\n20.70\n2.17\n2.07\n1.67\nStandard Gas & Electric Ca.\n8.86\n22%\n297.00\n168.50\n28,00\n8.55\n3.86\n4 6.11\n$7.00 Com. Pr. Pr. PM.\n$6.00 Con. Pr. Pr. PM.\n8.86\n21%\n297.00\n168.50\n28.00\n8.55\n3.86\ndi 6.11\n4 58.80\n4 6.57\n4 7.97\n$4.00 Cum. Pid.\n1.28\n9%\n109.50\n29.42\n1.09\nCommin\n40.95\n4%\n14.30\n4 13.80\n4 44.30\ndi 1.02\nif 3.70\nIf 4,19\nUnited Gas Corp.\n24.67\n\"\n396.00\n334.00\n317.00\n24,29\n22.25\n21.85\n$7.00 Cum. in Pid.\nCommon\n0.22\n«\n0.56\ndi 3.17\n4 4.26\n0.20\n0.08\n0.06\nUnited Gas Imp. Ca.\n39.50\n105\n436.00\n412.00\n294.00\n37.85\n25.07\n20.10\n$5.00 Cum. PM.\nCommon\nLM\n10N\n11.08\n10.31\n6.47\n1.08\n0.66\n0.51\nUnited Light & Power Ca\n8.34\n25%\n167.00\n110.00\n34.20\n7.51\n3.00\n0.83\n$6.00 Cum. PIL\n336\n6.68\n4 3.14\n4 16.25\nCommon\n0.41\n0.26\n4 0.52\n0.89\nBut, the relationship of subsidiary operating\nby the corresponding number of units of each\ncompanies to holding companies must be under-\ncompany. Suppose it had been found that the\nstood first. As a rule, the holding company does\ntotal miles of a certain size of transmission line\nnot generate or sell any electric power of its\nfor all 120 companies was 100,000 miles and the\nown, it is merely a directory company-a \"hold-\ncorresponding aggregate book value of these\ning company\". The bulk of its assets usually\ntransmission lines was $500,000,000. Then the\nconsist of securities of its subsidiary operating\naverage unit value would have been $5,000 per\ncompanies. Thus, it is evident that the value of\nmile. Applying this to Company A, having\nthe parent company securities depends mainly\n100 miles of this size of transmission line on\nupon an appraisal analysis of a portfolio,\nthe books at $550,000, we would obtain as our\nitem by item, of subsidiary company securities\nappraisal value, 100 X $5,000 = $500,000, in-\n(representing for the most part the parent's\nstead of the $550,000 as shown. Similarly the\nownership of practically all the assets it pos-\nother types of equipment belonging to Company\nsesses). The results of this, in more technical\nA would be appraised, after which all the sun-\nlanguage, are referred to as the \"total of indi-\ndry appraisals would be totaled to obtain our\nvidual accruals to the parent company from its\nfinal yardstick value for this company. Thus\nownership of securities and surplus in its re-\neach operating company had its various kinds\nspective subsidiary operating companies.\" And\nof property appraised at values which we found\nmoreover it is obvious that the value of these\ngenerally prevailed in the industry.\nsecurities making up the holding company port-\nThe first yardstick was derived from a study\nfolio depends upon the value of the most impor-\nof about 120 operating companies (equivalent\ntant assets of the subsidiary companies. There-\nto approximately two-thirds of the electric\nfore an analysis of these most important assets\npower industry), while the second yardstick\nwas necessary.\nwas derived from a study of about 20 selected\nThese consist of their plant and property\noperating companies (including one from each\naccounts (usually 75% to 85% of their total\nholding company system studied) whose equip-\nassets). Thus, the values found for these assets,\nment appeared to be lowest in cost. While\nwhen translated, first, into what is behind the\nneither of the two valuations we arrived at\nsecurities of subsidiary operating companies in\nshould be considered a prudent investment\nrespect to the proportion owned by the parent\nvaluation for any given company, our lowest\ncompany, and then, further translated into what\nfigures may be taken as a rough guide as to\nis behind each share of parent company stock\nthe worst that probably could be expected if\nshown in the tabulation, is referred to as the\nthe prudent investment method should be\n\"asset equity\" accruing to the individual se-\napplied.\ncurity shown. In simpler words, we use the\nThe important columns in the table for\nterm \"asset equity\" to mean the value of the\nserious consideration are, first of all, Column F\nassets (such as generators, transmission lines,\nand Column G under \"Asset Equity\". Column\nnet working capital, etc.) which we found in\nF shows what effect a comparatively mild\nback of, or belonging to, each share of the stock\nadjustment to the book value of fixed property\nshown in the tabulation. Similarly, the term\n(or plant) of subsidiary operating companies\n\"earning equity\" means the earning power of\nwould have on the specified securities of the\nthese assets which we found in back of each\nparent holding company. We arrived at these\nsuch share (according to our assumptions).\nadjusted values by applying yardstick, or aver-\nIn developing our yardstick valuation method\nage unit, values derived from the group of 120\nwe took each type of equipment (such as miles\ncompanies.\nof transmission lines) and totaled it for our\nColumn G on the other hand, shows what\ngroup of 120 companies, and divided this total\neffect a more radical revaluation of the book\nby the aggregate investment of those companies\nvalue of fixed property or plant of subsidiary\nin this particular item. Thus, we arrived at\noperating companies would have on these same\naverage unit values. In the case of transmission\nparent company securities. Again we arrived\nlines, the average unit value was expressed in\nat these adjusted values by applying our sec-\ndollars per mile of line (according to size).\nond set of yardstick or average unit values\nWe then went back and multiplied these values\nderived from the group of 20 selected \"low\ncost\" companies. Once more we should warn our\nrived from our first method of valuation, which\nshould be in gold shares, and the balance\nreaders that this is in no way to be construed\nwe used in getting Column F. Column K\nshould, be in cash or in very carefully\nas representing \"prudent investment\", for it is\nshows $2.56 as the earnings equity figure we\nselected good grade bonds, if yield is essen-\nobvious that this method bears no relation to\nfound for the preferred stock. This was de-\ntia) or insisted upon.\nwhat would be called for in an examination of\nveloped from our assumption of a 6% return\nHowever, if this program of elíminating\noriginal costs and \"prudent investment\" result-\non a rate base derived from our more drastic\nall common stocks except gold shares has\ning therefrom for any particular company. But\ntest method of valuation (which we used in\nnot yet been completed, we would defer\nit is our judgment that the application of the\ngetting Column G).\nfurther liquidation until a rally, which we\n\"prudent investment\" theory would result in\nThe principal purpose of this study was to\nexpect will occur over the next month.\nasset equity figures per share for any company\nattempt to show which properties might be sub-\nTABLE 1\nwithin the range established by Column E\nject to rate reductions and how much share\n(which we developed for comparative purposes\nHIGH GRADE DOMESTIC CORPORATION\nearnings might be reduced under our assump-\nBONDS\nto reflect, in so far as we were able, the present\ntions, because of too high earnings, as tested\n1936\nbook values of the operating companies we\nby what might be considered a fair return on\nApprox.\nYield\nInterest\nJan. 14ch\nCall About Cover-\nstudied) and Column G-with the distinct\nour valuations. We do not say that the val-\nClose\nPrice %\nage\npossibility that the figures would fall within the\nuations given by us in Columns F and G\nA.T.&T.deb.354s, '61 or 66.101\n10736 3.20\na5.53\nColumn F-Column G range.\nA., T. & S. Fe gen. 4s,\nN.C.\n3.65\nc2.04\nor that the maximum earnings allowable on\nChes. & O. ref, 31/25, \"96 95\n100sf\n3.65\nc4.63\nThe next columns in the table for serious\nthese valuations in either Columns I or K,\nColum. Ry.Pr.&Lt.1st4s,'65.10\n10756\n3.65\na3.59\nconsideration are Column I and K, under\nusing a 6% rate of return as fair, are, in either\nConsol. Edison deb.\n10234\n2.75\na3.05\n\"Earning Equity\". Here we have shown what\ncase, just what the Commissions or Courts will\nGenl.Mtrs.Acc't.deb. 3s,'46.103\n103\n2.65\nb2.86\nthe maximum earnings could be for holding\nNarrag. EL 1st 31/28, 66 103\n10734\n3.30\na3.21\nallow. But we do say that this study should\nPenn. R.R. gen. 4% '84\nN.C.\n4.25\nc1.33\ncompany preferred and common stocks, if a 6%\ngive warning in a general way of the com-\nPhila. EL Ist ref. 33/24, '67.106\n107%\n3.20\na3.89\nreturn were all that would be allowed on a rate\npanies whose earnings in the future may be\nShell Un. Oil deb.3}/1s, \"51.100\n1023/2\n3.50\nc10.29\nbase similar to that which we have used as\nSth's Cal. Ed. ref. 3341, 60.105\n107%\n3.50\na2.73\nless than in the past two years.\ndescribed. In other words, if we assume that\nStand.Oil of N.J.deb.3s,'61.101\n103\n2,95\n<15.00\nPerhaps you may be interested to know that\nTexas Corp. deb. '51 106\n103\n3.05\nc15.00\na 6% return were all that State Commissions\nthis study has required the entire attention of\nUn. Pac. deb. 31/25, 71\n94\n103'41\n3.90\nc2.19\nor Courts would allow, then in Column I can\nseveral members of our statistical staff for\n12 months roding September 30, 1937.\n12 months ending August 31, 1937.\nbe found our interpretation of the results of\nsome months. Consequently, you will appre-\nEstimated 1937 interest coverage.\nthis assumption when applied to a rate base\nLegal in New York State. 1 Unlisted.\nciate that there are at great many details in-\nderived from the valuations we developed for\nvolved which we could not give in this com-\nTABLE 2\nuse in Column F. Likewise, Column K repre-\nmunication. Furthermore, in a compilation of\nGOOD GRADE BONDS\nsents the results of this assumption when\nthis size and complexity, you can appreciate\nPublic Utilities\napplied to the valuation which we developed\nthat errors of arithmetic may have crept into\nAm. G. & E. deb. 5s, 2028 107\n106\n4.65\nv2.04\nfor use in arriving at Column G.\nour work despite our best efforts to the con-\nColumbia Gas deb. 5s, \"61 95\n104\n5.35\np2.13\nFed. L. & Tr. Ist 5a, \"42 100\n102\n5.00\n62.13\nThis then is what this study should mean to\ntrary. However, we feel that any such errors\nIII. Pw. & Lt. 1st 90\n105\n5.90\nh1.36\nyou. Take the preferred stock of American\nshould not substantially vitiate the specific con-\nJ'my\n104\n4.30\npl.94\nPower & Light. In Column E is found $144.50\nclusions reached by you.\nN.Y. St. El. & G.1st 41/28,'80 97\n1021/2\n4.65\npl.42\nwhich is our computation of the total of the\nOf course you will appreciate that there are\nNo. Ind. P. Ser.1st455a,70 94\n104\n4.85\nc1.85\nOhio Edison 1st 3948, 72 98\n110\n3.85\ng2.48\nparent company's asset equities (applicable to\nother important factors to be considered in\nOhio Pub. Serv. 1st 4s,'62.100\n107%\n4.00\np2.40\nthis security) in the subsidiaries We analyzed.\nappraising the utility situation besides the valu-\nPenn. Pr.&Lt. 1st 43/2a, \"81\n105\n4.25\ng2.29\nThis figure should be compared with the corre-\nation question, such as trend of Government\nSaguenay Pw.Ist'A'4)s,66.101\n105\n4.20\nc1.80\nsponding figure in Column F, namely $91.80,\ncompetition, taxes, wages, growth potentiali-\nIndustrials\nAllied Stores deb. 455a, \"50.. 91\n100\n5.50\na4.75\nwhich is our computation of parent company's\nties, adequacy of depreciation charges, etc.\nArmour & Co. 1st 4s, 55. 93\n1023/sf\n4.60\ne5.27\nasset equities under our first method of revalua-\nOur own judgment on utility preferred and\nH. F. Goodrich 1st 454,56.98\n105\n4.40\nq3.35\ntion based on our analysis of some 120 com-\ncommon shares is evidenced by the fact that\nG'dy'r T.&R.Ist&coll.5a,\n102\n4.65\nk4.11\npanies. In Column G is found $51.30 which\nfor months, we have not included any shares\nInt. Agr. 1st & Coll. 5s, '42.100\n103\n5.00\nb4.06\nMcCrory Stores deb.5a,'51.100\n105\n5.00\ne10.60\nwe computed from applying our more drastic\nfrom this group in our monthly letter tables\nMead Corp. 1st 6s, '45\n$\n104\n6.05\nj3.20\nvaluation test method (based on our analysis\nof stocks.\nRep. Steel Gen'l 45/23, \"56.. 87\n104'41\n5.65\n13.61\nof some 20 \"low cost\" companies). Skipping\nU.S. Rub. 1st&Ref. 5a. '47.105\n105\n4,45\nm4.57\nover to Column 1, we see that American Power\nOUR INVESTMENT POLICY\nWheel'g Steel 1st 41/25, \"66\n10255sf 5.05\nr4.14\nYngston. Sh&T. 1st 4a, 61\n102%sf 4.00\ns4.02\n& Light could earn as a maximum, under our\nFor the average long term individual in-\nRailroads\nassumptions, only $4.13 on its preferred stocks,\nvestor (meaning not over six months), we\nAtl. Coast Line 73\nN.C.\n6.60\nc1.49\nif we allowed a 6% return on a rate base de-\nsuggest that 25% of total investment funds\nCan'd's Pac. perpet? deb.4s.. 88\nN.C. w4.54\nc1.39\n1936\nApprox.\nYield\nTABLE 4\nEarned\nInterest\nApprox.\nDivi-\nYield\nYear\nJan. 14th\nCall\nAbout\nCover-\nMISCELLANEOUS BONDS\nJan. 14th\ndend\nAbout\nEnded\nClose\nPrice\n*\nage\n(1) Convertible Bonds\nClose\nRate\ne\n12-31-36\nC.C.C.&St.L. 70 105'47 6.70\nc1.15\n(For price appreciation over long term)\n+U. S. Smelt. ($50)\n65\n3.50\n5.38\n11.66\nGr. Nor. gen. 41/21, 76\n90\nN.C.\n5.10\ncl.61\nLouisiana & Ark. 1st 5a, '69 71\n1936\nAllied Stores\n51\n5.00\n9.80\na14.49\n103\n7.30\ncl.46\nApprox,\nYield\nInterest\ng20th Century\nFox\nFilm\n31\n1.50\n4.84\n7.68\nL&N'shvl 80\n4.75\nc1.77\nJan. 14th\nAbout\nCover-\nDeere & Co.\nPere Marq'tte lst 456a, \"80., 75\n($20)\n24\n1.40\n105\n6.20\ncl.55\nClose\n5.80\n%\nage\np7.48\n105\n6.35\nuAllis Chalmers conv.deb. 4s, '52 105\n3.81\nmButler Bros.\n21\n1.50\n7.14\nSo. Pac. O. L. 1st 4½ 77. 74\nc1.04\ny\n-\nhConsol. Oil conv. deb. 31/25, \"51\nYear ended Jan. 11, 1937.\n- Year ending Jan. 31, estimated.\n99\n3.54\nj10.40\nb Year ended November 30, 1936.\nI Year ending June 10, 1937.\nkNat. Dairy deb. W.W. 34, \"51 100\n3.75\nj5.45\n0 Convertible into common at $27.50 per share up to July 1,\n€ Entimated 1937 interest coverage.\ne Fiscal year ending October 11, 1937.\ncN. Y. Cent. CODY, sec. 3/41, '52 83\n3.92\n1.15\n1939,\n12 months reding November 30, 1937.\ngPenn. R.R. conv. deb. 334s, 'S2 88\n3.69\nj1.33\n. Each sh. conv. into I sh. common. f Includes $1.00 extra.\n. Convertible into common on the basia of 1% shares of\n12 months mding June 30, 1937.\nmPhelps Dodge, c'v. deb. 106\n3.30\n6.18 times lat 36 works 1937,\na\ncommon for each share of proferred.\n8.14 times 1st half 1937.\nThe above represent Current Yields\nh Year ended Oct. 11, 1937.\nI Each share come. into I share common.\n= 4,42 times 1st half 1937.\n(2) Speculative Bonds\n12 months ending Sept. 10, 1937,\nYear ended Aug. 31, 1937.\n(Defaulted issues for the long pull)\n* Each share CODY. into 2.22 shares common.\n4.71 times lat half 1937.\n5.20 times Ist , months 1937.\nChi., Milw., St. P. Gen'l 4s, '89 35f\na\nin Each share conv. inso two shares of common stock through\n6.05 times las 9 months 1937,\nChi. & N. West'n 1st ref. 5s, 2037 12f\nDec. 1, 1938: thereafter and through Dec. 1, 1940 into IN\na\n3.56 times lat 9. months 1937.\nshares of common for each share of preferred.\nChi, Rock Island Gen. 4s, 88 19f\na\n.\n12 months coding October 11, 1937.\na Year ended Sept. 30, 1937.\nCurrent yield.\nDen, Rio Gr'de ref. imp. 5a, 78. 9f\na\n.\ne Year ended June 20, 1937.\nK.C. Ft. Scott & Memp.ref.4s,\". 35 271\na\n. Year ended Oct, 31, 1936.\nTABLE 3\nAdmitted - trading on N. Y. Carb.\nMo. Pae. 1st & ref. 5s, 77-81 23f\nar\n.\n1 Non-callable.\nSECOND GRADE AND SPECULATIVE\nMobile & O. Mont.Div. 1st 5s, 47 20f\n-\nN. 0. T. & M. 1st 51/28, '54\n36£\nTABLE 6\nINTEREST PAYING BONDS\nar\n*j1.18\n1936\nSeaboard Air Line ref. 4s, '59 8f\na\nDIVERSIFIED LIST OF LONG-TERM\nApprox.\nYield\nInterest\nIn process of reorganization. a Interest in default.\nCOMMON STOCK INVESTMENTS\nJan. 14th\nAbout\nCover-\n€ 30, Convertible 1947, into common stock e $60 per share to April\nClose\n*\nFlat.\nage\n(Consideration being both Yield and Appreciation)\nBklyn-M. Tr. Coll. Tr. 41/25, '66 61\n8.00\np1.68\nE Convertible into common stock e 850 per share to April\nL 1952.\nCertaint'd Prod. deb. 53/2s, 48\n$100 to $50-Group I.\n63\n11.35\na\nh Convertible into common stock a $25 per share to 1941,\nChilds Co. deb. 5s, '43\n13.75\nj1.68\nincreasing prices thereafter.\nLiggett & Myers B\n$100\na4.00\n4.00\n$7.25\n65\nCities Service deb. 5a, \"50\n59\n11.30\nh1.27\nI Estimated 1937 interest coverage.\n*Aluminum Co. of Amer\n82\n-\n-\n8.65\nColo, Fuel & Iron inc.mtg. 5s, 70 60f\nla Carries warrants for purchase of 10 shares of common\n\"Aluminum Ltd.\n71\n2.51\nm\n=\ne $25 per share,\nColo. & South'n gen. 4½, \"80\n- Convertible into common e $50 per share. 1937 earnings\nAmer. Tobacco B\n71\n5.00\n7.04\n3.71\n44\n10.40\ns1.37\nCon. Coal Mtg.cum. income 5s,60 54f\nestimated $4. per share.\n*Newmont Mining\n68\na3.00\n4.41\n3.80\nT\nF\nCont'l Gas & El. deb. 5a, \"58\na 10 months ming October 11, 1937.\nAmerada\n66\n2.00\n3.03\n2.52\n80\n6.80\ncl.63\n1 No funded debt in 1936, Earnings would have covered\nElec. Pwr. & Lt. deb. 5a, 2030\nBeth. Steel\n64\n65.00\n71\n7.05\npresent fixed charges over 16 times.\n7.81\n2.09\nc1.47\nFed. Lt. & Tr. deb. 6s, '54\n84\n7.70\n52.13\nT Paid earliest defaulted coupos August 10, 1937,\nCorn Products\n64\n3.00\n4.69\n3.86\nGen'l Water Works 1st 5a, \"43\ne Convertible into common stock @ 175 per share through\nUnited Fruit\n64\na3.00\n4.69\n77\n4.88\n11.10\nc1.51\nB. F. Goodrich deb. 6a, '45\n97\nSept. 1, 1939, increasing prices thereafter. 1937 earnings\nCons. Can Ltd. 62\naf1.00\n1.61\n6.55\nu3.35\nestimated $4.25 per share.\ng2.37\nIII. Pwr.&l.ight deb. 51/2a, '57\nNo funded debt 12/31/26. Earnings last year would have\neNoranda Mines Ltd.\n60\nbf3.25\n5.41\n4.14\n83\n7.15\nb1.36\nIntern't'l Tel&Tel. deb. n\ncovered present fixed charges about 4 times.\n*Colts Patent Fire Arms\n57\nb1.62\n2.84\nh4.13\n=\nks2.00\nNati Pwr. & L. deb. 5a, 2030,\n75\nUnderwood Elliott\n57\na3.75\n6.57\n5.06\n6.70\nq1.46\nTABLE $\nNew England G. & E. deb. 5a, '50 57\nDome Mines\n56\nb4.50\n8.04\n11.45\n4.26\nt1.19\nN.Y. Central ref. imp. 456s,2013 61\nDIVERSIFIED LIST SECOND GRADE DIVI-\n*Lake Shore Mines\n52\n7.40\naf4.00\n7.69\ns1.15\nc4.15\nN.Y., Chi., St.L., ref. 53/58, 74 69\n8.15\ns1.38\nDEND PAYING PREFERRED STOCKS\n$50\nto\nII.\nS'eastern P&L deb. 6s, 2025\n95\n6.30\nq1.38\nInternational Nickel\n50\na2.00\n4.00\n2.40\nSo. Pacific deb.4% '68, W or \"81 63\nStocks Listed in Order of Prices\n7.30\ns1.04\nProcter & Gamble\n50\nEarned\na2.00\n4.00\nc4.08\nSo. Ry. dev. & gen'l 6½, \"$6\n61\n11.75\ns1.07\nApprox,\nDivi-\nYield\nYear\nStandard Oil of N. J\n50\na1.00\n2.00\n3.73\nWalworth Co. 1st 4s, 1955\nEarned charges fully os cash basis 1936 and 1.77 g2.46 times\n65\n7.75\nJan. 14th\ndend\nAbout\nEnded\nGeneral Amer. Trans\n44\n63.50\n7.95\n2.92\nClose\nRate\n%\n12-31-36\nfUniversal Leaf Tob.\nPenick & Ford\n44\nb1.50\n3.41\n3.52\n1st 9 months of 1937. b 12 months ending June 20, 1937.\n142\n8.00\n5.63\n$o26.17\n4 12 months ending October 11, 1937. f Flat.\n+P. Lorillard Co.\n133\nMcIntyre Pore'p'n Mines\n42\n2.00\n4.76\nj4.46\n7.00\nE Tax 9 months 1937 earned charges 5.71 times.\n5.26\n35.90\nTexas Corp.\n42\na2.00\nt5o. Porto Rico Sugar\n4.76\n4.10\nh 1.26 times lat , months 1937,\n129\n8.00\n6.20\nn50.75\ntAm. Sugar Refin.\nKennecott Copper\n41\na2.00\n4.88\n2.36\nEarned charges lat 9 months 1937 1.87 times,\n110\n7.00\n6.36\n9.67\n**Ohio Oil\n**Gulf Oil\n40\nal.00\n2.50\n2.90\n. tiosa, Excluding Postal Telegraph and Spanish subsidiary opera-\n109\n6.00\n5.50\n14.38\n1J. I. Case (7%)\nF. W. Woolworth\n40\n2.40\n6.00\n3.36\n- Covered fixed Interest 9.63 times in fiscal year ming\n107\n7.00\n6.54\n30.28\nkAncher Cap\n*Heyden Chemical\n38\n2.00\n5.26\n3.56\nJune 30, 1937. Earned 17.54% on this issue. Paid 5%\n105\n6.50\n6.14\n14.78\nAnaconda\n35\ninterest April 1937.\nArmour Del. (gtd.)\n61.75\n5.00\n1.83\n100\n7.00\n7.00\nh22.00\n. 1952 @ 19 yield 9.65% to maturity. Sa 1955 @ e\nPure Oil\nContinental Oil\n32\na1.00\n3.12\n2.05\n98\n6.00\nyield 9.15% to maturity, 436a due June 1, 1939 @ 90\n6.12\n21.30\nColgate Palmolive Peet\nStandard Oil of Calif.\n32\na1.00\n3.12\n1.79\nEn current yield of 1.00%.\n95\n6.00\n6.32\n16.10\nP Fiscal year ming June 10, 1917.\nteHershey Chocolate\nContinental Insurance\n31\na1.60\n5.16\nk1.72\n93\nf5.00\n5.38\n14.69\ne 12 months ending November 30, 1937.\nSkelly Oil\nFidelity-Phenix Ins.\n31\na1.60\n5.16\nk1.76\n93\n6.00\nr Paid 1% 1936, 5% 1937. Arrears +%. Earned 4.2% on\n6.45\n73.16\n**Gen. Tire & Rubber\n*International Pet. Ltd\n30\naf1.50\n5.00\nc1.81\nIssue 1936. 1937 estimate Indicates full 1% by fair margin.\n88\n6.00\n6.82\n546.12\n* Estimated 1937 interest coverage.\ncTide Water Associated\nPhelps Dodge\n29\nb1.60\n5.51\nm1.65\n. 12 months ending September 30, 1937.\nOil (456%)\n84\n*Hudson Bay Mining &\n4.50\n5.36\n. 4.71 times lat half 1937.\n16.32\niWesson O. & Sn'drift\nSmelting Co., Ltd.\n27\nbf1.75\n6,48\n1.34\n74\n4.00\n5.41\nj11.53\nCentral Aguirre Assoc. 26\na2.00\n7.69\nm3.42\n$25 to $00-Group III.\nTABLE 8\nEarned\nEarned\nApprox.\nDivi-\nYield\nYear\nApprox\nDivi-\nYield\nYear\nSTOCKS FOR LONG TERM HOLDING\nJan 14th\ndend\nAbout Ended\nJan. 14th\ndend\nAbout\nEnded\nClose\nRate\n% 12-31-36\nClose\nRate\n/\n12-31-36\n(With Emphasis on Appreciation Possibilities)\nhHard R'k Gold Mines Ltd. 1.21\nInterchemical Corp.\n24\n2.00\n8.33\n3.02\nhBankfield Cons Mines Ltd. 65\nSeaboard Oil\n24\n1.00\n4.17\n2.00\nStocks Listed in Order of Prices\neBrit. Am. Oil Ltd.\n21\naf1.00\n4.76\n1.41\nNot including extras.\nEarned\nPayable lie Canadian funds.\nBurroughs Add. Mach.\n19\nab1.00\n5.26\n1.39\nApprox.\nDivi-\nYield\nYear\nYear ended June 30, 1937.\nImperial Oil Ltd.\n19\naf .50\n2.63\n95\nJan. 14th\ndesd\nAbout\nEnded\nYear ended Mar. 31. 1937.\nSperry Corp.\n19\nb1.20\n6.31\n1.32\nClose\nRate\n%\n12-31-36\nYear ended Aug. 31, 1937.\nCurtiss Wright \"A\"\n18\n50\n2.78\n.88\n*Aluminum Ltd.\n71\n2.51\nPAid last year.\nListed Teronto Mining Exchange.\nNational Cash Register.\n17\na1.00\n5.88\n1.76\nNewmont Mining\n68\na3.00\n4.41\n3.80\nAdmitted to trading on N. Y. Curb.\nShell Union Oil\n17\nb1.00\n5.88\n1.36\nAmerada\n65\n2.00\n3.03\n2.52\nBarnsdall Oil\n16\n1.00\n6.25\n1.01\nBeth. Steel\n64\nb5.00\n7.81\n2.09\nInformation presented herein, while obtained from sources\nCampbell,Wyant&Cannon\n15\na1.00\n6.67\n3.04\nColts Patent Fire Arms\n62\nb1.62\n2.61\nc4.13\nbelieve to be reliable, is not guaranteed.\nClueit, Peabody\n15\n1.00\n6.67\n1.84\nIntern'l Nickel\n50\na2.00\n4.00\n2.40\nSocony-Vacuum\n15\nb.80\n5.33\n1.38\nStand. Oil of N. J.\n50\na1.00\n2.00\n3.73\nOhio Oil\n14\n61.00\n7.14\n70\nGen'l Amer. Trans\n44\n53.50\n7.95\n2.92\nPure Oil\n13\nb 25\n1.92\n1.63\nKennecott Copper\n41\na2.00\n4.88\n2.36\nEagle-Picher Lead\n12\nb 40\n3.33\n24\n*Gulf Oil\n40\n1.00\n2.50\n2.90\nJanuary 17, 1938\nColgate Palmolive Peet.\n11\n50\n4.04\n1.27\nAnaconda\n35\nb1.75\n5.00\n1.83\nWright Hargreaves\n8\na 40\n5.00\n72\nFairbanks-Morse\n31\nal.00\n3.22\n3.81\nThe following securities were added to or\nTeck-Hughts\n5 at 40\n8.00\n.46\nPhelphs Dodge\n29\nb1.60\n5.51\ng1.65\neliminated from our current monthly market\n. Not including extras.\nb Paid last year.\nU. S. Rubber\n28\n3.31\ntables:\ne Year poded June 30, 1937.\ne Listed on Toronte Stock Exchange\nUnited Aircraft Corp\n25\nb1.00\n4.00\n,76\nTABLE 1\nI Payable in Canadian funda.\nSeaboard Oil\n24\n1.00\n4.17\n2.00\nAdditions\nEliminations\n« After depletion and adjusted to 5 for I split up.\nWestern Par. 1st, 3s, '46\n20\n(\ne\nShell Union Oil deb.\n5 Year ended Jan. 1, 1937.\nYear ended Aug. 11, 1937.\nFoster Wheeler\n19\n41.87\nil Year ended Mar. 31, 1937.\n31/28, \"51\nChicago & E. III. 5s, 'SI\n17\nf\nla Net Invostment income.\ne\nTABLE 2\n= Year ended July 11, 1936.\nBarnsdall Oil\n16\n1.00\n6.25\n1.01\nAlter depletion,\nSocony Vacuum\n15\nb .80\n5.33\n1.38\nPublic Utilities\nListed N. Y. Carb. Admitted to trading on N. Y. Carb.\nBell Aircraft\n14\n.07\nJersey Central Pr. & Lt. Ark. Pr. & Lt. 1st ref.\nWabash 41/28, 78\n14\n£\ne\nIst 43/2% '61\n5s, *56\nTABLE 7\nChi, Mil. S.P. & P. 5s, 75\n13\ne\nNew York State El, &\nEast. Gas & Fuel 1st &\nCOMMON STOCKS YIELDING APPROXI-\nPure Oil\n13\nb 25\n1.92\n1.63\nGas 1st 45/28, \"80\nColl. 4s, \"56\nMATELY 5% or BETTER\nSt.L.-S.Fr. 43/28, 78 Ctfs.\n13\nE\ne\nOhio Public Service 1st\nTidewater Pr. Ist 5a, 79\n(Appreciation Secondary)\nN.Y., N.H. & H. 4s, '57. 12\nf\ne\n4a, '62\nParamount Pictures\n12\n1.18\nStocks Listed in Order of Prices\nLockheed Aircraft\n10\n.15\nPenn. Pr. & Lt. 1st 43/2a, '81\nAmer. Tobacco B\n71\n5.00\n7.04\n3.71\nSeaboard Airline 6s, '45 10\ne\nIndustrials\nCorn Products\n64\n3.00\n4.69\n3.86\nChi, Rock L & P. 4a, 34.\n9\ne\nUnited Fruit\n64\na4.00\n6.25\n4.88\nB. F. Goodrich 1st 434s, \"56 B. F. Goodrich deb. 6s, '45\nMo. Pae. 4s, 75\n8\ne\nSterling Products\n58\na4.20\n7,24\n5.05\nDenver & Rio Gr. Ss, '$5.,\n7\nf\ne\nTABLE 3\nDome Mines\n56\na4.50\n8.04\n4.26\nInt'l Tel. & Tel.\n7\n63\nLake Shore Mines\n52\nab6.00\n11.54\n14.15\nChi. & N.W. cv. 4)(s, \"49\n6\nB. F. Goodrich deb. 6s, '45 Erie ref. Ss, '67 or 75\ne\nLoew's Inc.\n51\na7.50\n14.70\nh8.47\nMo. Pac. Ser. A 51/24, '49\n6\n€\nReynolds Tob. B\n45\n3.00\n6.67\n2.93\nTABLE 4\nMil., St.P.&P.5x.2000\n5\ne\nMclntyre Preup. Mines\n42\n2.00\n4.76\n14.46\nInt'l Gt.North's adj.6s,\"52\n5\ne\nSpeculative Bonds\nF. W. Woolworth\n40\n2,40\n6.00\n3.36\n5\nI\ne\nCentral of Georgia Con-\nChesapeake & Ohio\n37\nag5.80\n15.67\n5.72\n7.88\nNot including extras. b Paid last year.\nsol. 5a, '45\nBristol-Myers\n33\na2.60\n3.31\n€ Year ended Jan. 1, 1937, di Deficit, . Is receivership.\nGeneral Foods\n33\n2.00\n6.06\n2.71\nInterest in delandt.\nInternat'l Pet. Ltd.\n30\nab2.50\n8.33\nf1.81\n.f\nAfter depletion.\nTABLE 6\nListed N. Y. Curb.\nAdmitted to trading on N. Y. Curb.\n2.00\n6.90\nSperry Corp. (The)\nUnited Air Lines Trans.\nAmer. Sugar Refining\n29\n2.67\nSo. Porto Rico Sugar\n27\na3.05\n11.29\nCorp.\ne2.87\nTABLE 9\nSwift International\n26\na2.50\n9.62\n3.13\nCent. Aguirre Asso,\n26\na3.38\n13.23\nSTOCKS FOR MODERATE TERM HOLDING\nTABLE 8\nc3.95\nSutherland Paper\n21\na1.80\n8.57\n2.54\nDome Mines\n55\ng4.50\n8.04\n4,26\nNewmont Mining Corp.\nBoeing\nAirplane\nCo.\nImperial Oil Ltd.\n19\nab1.25\n6.57\n95\nLake Shore Mines\n52\nab4.00\n7.69\ne4.15\nNorth American Avia-\nBorden\n19\n1.60\n8.42\n1.80\nMcIntyre Porc'p'n Mines\n42\n2.00\n4,76\ne4.46\ntion, Inc.\nNational Dairy\n15\n1.20\n8.00\n2.01\nAlaska Juneau\n12\na .60\n5.00\n1.52\nOhio Oil Co. (The)\na Including extras paid last year.\nWright Hargreaves\n8\na .40\n5.00\n1.72\nb Payable in Canadian funds.\nTABLE 9\n4 Year ended July 11, 1937.\n. Year ended Sept. 30, 1937,\nhl.it.LongLac GoldM's.I. 5.40\nbg .40\n7.40\n.30\nIf Year ended June 30, 1937.\nhPamour 3.90\n,03\n......\nAlaska Juneau\n. Stock dividend of $2.00 paid last year in new 1% nos-\nhMcLeod-Cockshutt G.M. 1.40\ncomulative preference stock.\n> Year ended Aug. 31, 1957. E Year ended Mar. 31, 1937.\nhKirkl'd Lake G.M.Co.Ltd. 1.35\nbg\n.09\n6.66\n.06\nReasons for eliminations or additions furnished to\nAdmitted to trading on N. Y. Curb.\nhBeattie Gold Mines Ltd. 1.28 bg .05\n3.90\n11\nclients on request.\nW.O.\nPSF: Douglas\nHyde Park, N. Y.\nDonglas\nFebruary 21, 1938.\nMemorandum for Hon. W. 0. Douglas:\nThanks for yours of February\n18th. I will take it up as soon as\nI get back to Washington. I will call\nyou on Thursday or Friday.\nF. D. R.\n4\nSECURITIES AND EXCHANGE COMMISSION\nWASHINGTON\nTHE CHAIRMAN\nFebruary 18, 1938\nThe Honorable Marvin H. McIntyre\nThe Nelson House\nPoughkeepsie, New York\nMy dear Mao:\nI wonder if you would be 80 kind as to hand\non to the President the enclosed memorandum. It is a\nmatter of some importance to us which I had intended\nto take up with the President before he left, but the\npressure of other work prevented.\nWith warmest regards and best wishes, I am\nYours faithfully,\n3)\nWilliam 0. Douglas\nChairman\nSECURITIES AND EXCHANGE COMMISSION\nWASHINGTON\nOF THE CHAIRMAN\nFebruary 18, 1938\nMEMORANDUM\nTO: The President\nFROM: Chairman William 0. Douglas\nRE:\nFederal Licensing Act for Corporations\nWe feel here at the Commission that it would be desirable\nto have a Federal licensing or incorporation act for corporations.\nOur idea is that such Act should be applicable to all\ncorporations engaged in interstate commerce whose securities are\nso widely held and whose assets are sufficiently large as to\nmake them subjects of national concern.\nIt would also be our idea to require such corporations to\nfile with the government at regular intervals, periodical reports\non their financial condition and to keep such information current.\nIn that connection it is also our feeling that the government should\nbe empowered to establish accounting standards applicable to such\ncorporations.\nThe reasons why we feel such a simple statute would be\ndesirable are the following:\nThe Securities Act of 1933 and the Securities Exchange Act\nof 1954 are directed, in large measure, towards securing the public\n- 2 -\ndissemination of financial information concerning corporations\nwhose securities are bought and sold by the investing public.\nMarked progress towards this end has been made under the Securi-\nties Exchange Act with respect to securities listed on national\nsecurities exchanges. Adequate information regarding the great\nmass of securities publicly held but traded only on the over-\nthe-counter markets is at present largely lacking. Such infor-\nmation is required only of companies which voluntarily subject\nthemselves to the requirements of the Securities Act by offering\nnew securities to the public. Even information thus made\navailable is required to be kept current only in the case of a\nlimited class of large corporations which have registered an\nissue of securities under the Securities Act since August 25, 1936.\nThis disparity between the treatment accorded to listed\nand that accorded to unlisted securities works an unjust dis-\ncrimination against the national securities exchanges and against\nthe issuers of listed securities. It also deprives the investor\nin the over-the-counter markets of a much needed protection. It\nhas been conservatively estimated that financial and other pertinent\ninformation with respect to some 57,000 security issues traded in\nthe over-the-counter markets is not now required to be filed with\nthis Commission. Furthermore, the inability of this Commission to\nsecure adequate information regarding securities traded only over-\nthe counter greatly hampers the Commission in its task of ensuring\n- 3 -\nto the investing public a free and fair over-the-counter market.\nA corporation licensing law of the character I have mentioned\nwould serve to correct the inequity presently existing between the\nexchange and the over-the-counter markets. It would also go far\ntowards restoring greater investor confidence in the capital\nmarkets -- a matter of major concern, in my view. Furthermore, it\nwould provide a repository of information useful as a basis for\ndetermining the precise extent to which the business and financial\npractices of large corporations are proper subjects of further\nFederal regulation.\nAs you know, Senator O'Mahoney has sponsored for sometime\n8. bill for Federal incorporation. Our interest is at present\nrestricted to the few phases which I have mentioned above. What\nelse might be included in such a bill we do not purport to say.\nBut would it be agreeable to you if the Commission or myself\nofficially sponsorS such & measure, limited as above?\nweerles\nun\nPSF:W. O,Douglas\nSECURITIES AND EXCHANGE COMMISSION\nWASHINGTON\nOFFICE OF THE CHAIRMAN\nfile\nNovember 14, 1938\nMemorandum to: The President\nThe White House\nFrom: William O. Douglas\nEd Eicher, who is back from the wars in Iowa, has just\ntalked with me. His personal plans are in such shape that he\ncould, if it still meets with your approval, start work at the\nSecurities and Exchange Commission immediately.\nWhen I last discussed with you the prospect of his appoint-\nment to this Commission to fill the vacancy caused by the resigna-\ntion of John Hanes, it was, as I recall, contemplated that he come\non to this Commission the first part of January. But in view of\nthe fact that he is now free from all pressing commitments, and\nthat we could use him right away, I wanted to bring the matter to\nyour attention in case you felt that his appointment at this time\nwould be wholly appropriate.\nUu 0 wongles\nPSF: Wm. O. Douglas\nDaing Dauglar\nyen\nMemo to Senator O'Mahoney\nFrom the President\nMay 17th 1939\nIn re-0'Mahoney's plans on taking of testimony on the\nInsurance phase of THEC\nMemo to Leon Henderson attached-May 19, 1939\nAlso attached memo to the President--April 12, 1939\nFrom Williem 0. Douglas\nRe-Insurance Investigation\nSee: THEC folder-Drawer 2-1939 for the above correspondence\nand other correspondence relating to the Temporary\nNat'l Economic Committee.\nPSF, W.D. Douglos\nyour\nHyde Park, N. T.,\nJune 27, 1939.\nDear Bill:-\nThe thought behind the ball game\nbetween the Nine Young Hen and the Cabinet 10\nan excellent one, even though you eliminate\nGeneral Watson, Admiral MoIntire and Colonel\nEarly.\nI come back with & counter proposal,\nhowever. The Cabinet insists that the Chief\nJustice pitch and Mr. Justice McReynolds catch.\nOur battery will be The Secretary of State,\nPitcher, and The Secretary of the Interior,\nwho is away, these are our oldest members -\nCatcher. Except for the Secretary of the Navy,\nand, incidentally, it gives some advantage to\nthe Supreme Court because an experienced\nbattery counts and yours will be about ten\nyears older than ours.\nWe also suggest that no substitutes\nbe put in -- and we suggest further that the\nUmpires be the President and the Speaker of the\nHouse. This seems fair. Finally, we insist\nthat your \"Nine\" waive in advance any judicial\nauthority over unpires' decisions, and that in\npublicity after the game no minority opinions\nwill be filed,\nSo far 80 good!\nAB ever yours,\nHonorable William O. Douglas,\nSupreme Court of the United States,\nWashington, D. 0.\nSupreme Court of the United\nMashington, B.C.\nCHAMBERS OF\nJune\nJUN 24 JUN 24 THE WHITE HOUSE\nJUSTICE WILLIAM O. DOUGLAS\nRECEIVED 39\nMy dear Mr. President:\nI have just received the original of a\ncartoon drawn by Herbert Block and published a\nmonth or 80 ago. It is entitled \"The Nine Young\nMen\". It shows the members of this Court in a\nhuddle in the corridors of the Supreme Court\nBuilding. One of the more spirited, whose iden-\ntity is not disclosed, is saying, \"Let's phone\nthe cabinet members and see if we can get up a\nball game.\"\nI did not want to take this matter up\nofficially without first sounding you out informally\non the proposition.\nOf course, all \"ringers\" should be ex-\ncluded. I refer especially to General Watson,\nAdmiral McIntyre and Steve Early.\nYours faithfully,\nhm 0 hearyla\nthe Presed dent\nPSF: W.O. Doughs\nTHE WHITE HOUSE\nN\nWASHINGTON\nConfidential\nNovember 21, 1939.\nPrivate\nMEMORANDUM FOR\nMR. JUSTICE FRANKFURTER:\nI em secretly disturbed to find that\none BO young as Mr. Justice William 0. Douglas\nhas so soon taken advantage of the old subterfuge\nof quoting from obiter diota of his colleagues\nand law school professors, expressed through\nletters, editorials in the New Republic and\n1937 speeches by a recent Horverd Law School don.\nBecause of your seniority, I suggest\nthat you hold a seminar for Bill, asking him\nto apply the vivid rules of life in place of\nthe musty rules of law and get him to answer\nin language which even the President can under-\nstand the simple query \"Do Baptists play poker?\"\nIn the utmost confidence, in view of\nyour recent assertion to no that you are about\nto take a freshman course in that ancient and\nhonorable game, you will perhaps be good enough,\nagain in the utmost confidence, to tell no\nwhether we can muster five votes for the game\nas the Court is now constituted. I am deeply\ninterested because, as you know, there 1s a\nvacancy in your honorable body.\nF.D.R.\nSupreme Court of the Mitted States\nWnshington,B.O.\nCHAMBERS OF\nJUSTICE WILLIAM O. DOUGLAS\nNovember 15, 1939.\nMy dear Mr. President:\nI have your letter of November 11, in which you ask\nfor an advisory opinion on the question \"Do Baptists play\npoker?\". I have made a hurried search of the subject of\nadvisory opinions and have come across a very respectable\nauthority which would seem to permit it in a very limited\nclass of cases. The authority on which I rely is Mr. Justice\nFrankfurter, who, while professor of law at Harvard University,\npublished a casebook on Federal Jurisdiction and Procedure,\nwhere I find, on page 72, the following:\nS. Res. 103, 75th Cong., 1st Sess.\n81 Cong. Rec. 3597 (1937).\nResolved, That the Supreme Court of the United\nStates is requested to adopt such amendments to\nits rules and procedure as to enable the Congress\nof the United States, on a majority vote of both\nHouses of the Congress, to request and receive\nfrom the Supreme Court of the United States advisory\nopinions as to the constitutionality of legislation\npending before, and being considered by, the\n1\nCongress of the United States.\n1 This resolution was introduced by Senator\nSchwellenbach on March 29, 1937, following the\npublication of a letter from Mr. Chief Justice\nHughes to Senator Wheeler who used the letter\nin his opposition to President Roosevelt's pro-\nposed legislation with reference to federal\njudges who reach the age of 70 years. A part\nof the letter was as follows (Hear. on 8. 1392,\n&\nSess. Comm. on the Jud., 75th Cong., 1st Sess.,\n(1937) 488, 491),\n\"My dear Senator Wheeler: In response to\nyour inquiries, I have the honor to present the\nfollowing statement with respect to the work of\nthe Supreme Court:\n......\nI understand that it has been suggested that\nwith more justices the Court could hear cases in\ndivisions. It is believed that such a plan would\nbe impracticable. A large proportion of the cases\nwe hear are important and a decision by a part\nof the Court would be unsatisfactory.\nI may also call attention to the provision of\narticle III, section 1, of the Constitution that\nthe judicial power of the United States shall be\nvested 'in one Supreme Court' and in such inferior\ncourts as the Congress may from time to time ordain\nand establish. The Constitution does not appear\nto authorize two or more Supreme Courts or two or\nmore parts of a supreme court functioning in effect\nas separate courts.\nAn editorial in the New Republic characterized\nthe quoted portion of the letter as \"an advisory\nopinion run riot, ... the final step in the\nusurpation of judicial power--a statement in\nadvance to Congress of the kind of laws which the\nCourt intends to condemn. In giving this advance\nnotice, the Chief Justice violates every precedent\nof his own tribunal against the giving of advisory\nopinions.\" (April 7, 1937, at P. 254.) See the\nremarks of Senator Minton, March 31, 1937, 81\nCong. Rec. 3763; and the letter from Solicitor\nGeneral Reed to Senator Ashurst, post, P. 624.\nCompare the opinion given by Mr. Justice\nJohnson, with the approval of other members of\nthe Court, to President Monroe, 1 Warren, The\nSupreme Court in United States History (2d ed.\n1928) 595-596. \"This, of course, was extra-\nofficial, but it is safe to say that nothing of\nthe sort could happen today.\" --Hughes, The Supreme\nCourt of the United States (1928) 31.\nThus spoke Professor Frankfurter in 1937.\nIn reliance on that eminent authority, research will\nbe at once started on the question which you propound. The\nresults of that research will be forwarded to you with as much\ndispatch as possible, together with further observations on\nother phases of your letter of November 11.\nYours faithfully,\nun 0 wangles\nThe President,\nThe White House.\nSupreme Court of the Huitted States\nWashington,B.C.\nCHAMBERS OF\nTHE Nov WHITE 10 RECEIVED 11 56 HOUSE 56 AM *39\nJUSTICE WILLIAM O. DOUGLAS\nNovember 10, 1939.\nMy dear Mr. President:\nIn answering your letter of September 28, 1939,\n80 soon, I am probably violating some judicial precedents.\nFor the period of gestation for judicial pronouncements is\nat least a couple of months.\nI have reservations as to your proposal to make\nthe contest football rather than baseball. My reservations\narise because of the awful prospects which that calls up in\nthe mind. Take, for example, that salty, triple-threat back-\nfield of yours. Even within the rules of the game, the destruo-\ntion to the morale and physical well-being of our team, of which\nit would be capable, is quite appalling. Offsetting your back-\nfield, of course, is the \"right\" side of your line which would\nprobably be calling for time out rather continuously and would\nrather settle the contest in the locker room than on the field.\nBut the \"left\" side of your line would more than make up for\nthat by covering each side of center equally well.\nSo viewing it objectively, I have great fear of the\nconsequences to our team -- not that it will be \"licked\" but\nthat it will be obliterated. In sum, I fear that the contest\nwould settle more than the issue of judicial supremacy.\nYou suggest that you can give us some additional men\nof ability. You mention one possibility. What the merits of\nthe charges against him may be I do not profess to know. But\nhis reputation at present in the eyes of the public leaves\nsomething to be desired. Hence, I am not sure that he should\nnow be \"tapped\". After all, it took baseball some little time\nto live down the alleged goings-on of the old White Sox.\nThe President,\nThe White House.\n-2-\nYour intimation that you and I share the receipts\ngoes far towards swinging the balance the other way. That\nappeals to me not because of any personal advantage involved\nbut because of the sheer pleasure in seeing one or two of your\nlinesmen sweating for once for somebody else. But even that\npassing satisfaction does not still the humanitarian impulse\nto keep our team from getting out of its own class.\nSo I wonder if it might not be better to test the\nskill at poker. You can furnish the deck, thus ruling out all\nmarked cards - which have not been unknown. And with some\nfeeling I can say (and General Watson may be willing to confirm\nit) that with me by your side you are pretty certain to win.\nYet in saying that I do not want to leave the impression that\nno one on this side tops me in that ancient, wily game. We\ndo have a few fancy dealers and some who always seem to get the\nwild cards.\nYours faithfully,\nlew O Wangle\nSupreme Court of the Muited States\nWushington.,P.\nCHAMBERS OF\nJUSTICE WILLIAM O. DOUGLAS\nSeptember 19, 1939.\nThe President,\nThe White House.\nMy dear Mr. President:\nMy neglect in answering your letter of June 27\nhas been due to my absence from the city; not to any waning\ninterest in the proposed ball game between the Nine Young Men\nand the Cabinet.\nI like your counter proposal. Certainly it has\nsome phases to which no possible objection by any fair-minded\nperson could be made. By reason of their temperaments and\nexperience, the President and the Speaker of the House are\neminently qualified to be the umpires.\nThe Cabinet's insistence that this \"Nine\" waive\nany judicial authority over umpires' decision is also wholly\nagreeable to me. But I fear that the point cannot be won with-\nout a tussle. As you are well aware, the issue of judicial\nsupremacy has a long history. To be sure, there is nothing\nin the Constitution about it. But it came to pass anyway.\nSome, like Frank Hogan, are fearful lest we get back to the\nConstitution and away from what has been said about the\nConstitution. But that is another good reason for pressing\nyour point. In sum, I am for the proposal, tussle or no\ntussle.\nThe Cabinet's insistence that in publicity after\nthe game no minority opinions be filed will be attacked as a\ncurtailment of freedom of speech. But, as I read your proposition,\nthere will be no cloture during the game. Hence, your suggestion\nis wholly agreeable to me, though it will also be denounced as a\nbody blow to judicial supremacy.\n-2-\nThat disposes of the minor phases of your\ncounter proposal. The major one remains; viz., who will\nconstitute the battery for this Nine? Your tribute to the\nskill of our proposed battery doubtless is based not only\non our proposed catcher's ability to stop anything, but also\non our proposed pitcher's great change in pace -- slow balls,\nfast balls, curves, spit balls, etc. That was a tribute\ngenuinely deserved. Furthermore, as you have said, the\nproposed battery does have a rich experience.\nBut I would be derelict in my responsibilities\nif I did not mention one item which you referred to so\ncasually as to lead me to think that I should call it to your\nattention for further consideration. That is the question of\nthe age of our battery. Age brings experience; it also brings\nphysical frailty. Pitching and catching are quite strenuous.\nWe have no substitutes or replacements. Suppose one -- or\neven both -- of our battery gave out completely!! You could,\nof course, replace them. Yet some of the \"Yes, but\" group\nwill say, \"Why take the chance? If, instead, younger men\nconstituted the battery, that risk would be avoided. By using\nyour candidates for pitcher and catcher in the outfield, they\ncould be preserved for many, many years!!\"\nThat will be the argument against your proposal.\nAnd I thought I ought to call it to your attention now, lest,\nhaving started with a nice, friendly ball game, we be charged\nwith concecting (or we unwittingly end up with) 8. court plan.\nYours faithfully,\nlun 0 hearylas\nfill onal\nNovember 11, 1939\nDear Bill:\nAs a fellow manager of two athletic\nassociations and as my partner in splitting the\ngate receipts, I begin to wonder whether your\nNine old Men still have that dreadful inferiority\ncomplex which settled upon them during the athletic\nseason of 1937.\nHere is my club rarin' to go -- ready\nlast spring to stage the World Baseball Series\nbetween the Administrative Oligarchy and the\nJudicial Hierachy. At the very end of the base-\nball season when I had started my team throwing\npasses and kioking goals, your aggregation is\nstill haggling over the game.\nNow the same sort of thing develops\nagain. My football team 1s closing an undefeated,\nuntied season and I have started them into strict\ntraining for ice hockey. The ground 1s getting too\nhard for football anyway because neither your team\nnor mine can stand the frost.\nIce hockey is different. The enclosed\nrinks are nicely heated and the artificial ice is\nsoft -- and anyway, I have trained my team 80 that\nwhen they fall down, they skid and don't bump. Can\nyou say as much for your Nine old Men?\nThat idea of reducing the contest to\npoker would be all right in view of the enormous\nsalaries drawn down by your people. At least you\ncould afford to lose.\nBut, I ask you, do Baptists play poker?\nAs ever yours,\nMr. Justice William O. Douglas,\nWashington, D. C.\nfdr/tmb\nSeptember 20, 1939.\nDear Bill:-\nI deeply regret that your team of the\nNine Young Men has seen fit to wait until the\nbaseball Beason is over before appearing to face\nmy Cabinet. Last week my Cabinet team, having\nwon the Federal pennant for the 1939 baseball\nseason, put on football uniforms and, with the\nassistance of the three new Administrators,\nawaits all comers. If the Supreme Court is\nready to take on the Gridiron Game, I suggest\nthat its nine members be supplemented by former\nSenior Judge Manton and any other Circuit Court\nJudge of similar ability.\nIn view of the fact that modern foot-\nball had not been invented at the time your\nteam was in college, you may prefer a game of\nsoccer with the Cabinet team. Every member of\nmy team 10 a soccer!\nAs over yours,\nHonorable William 0. Douglas,\nSupreme Court of the United States,\nWashington, D. c.\nW.O. Frigh Eary Folder OFFICE\nUNITED STATES\nDEPARTMENT OF THE INTERIOR\nOF PETROLEUM COORDINATOR\nBelle\nFOR NATIONAL DEFENSE\nWASHINGTON\nMay 19, 1942.\nMy dear Mr. President:\nHere is a report that has just reached my desk on \"The\nTransportation of Petroleum to Eastern United States\", that has\nbeen prepared by the Transportation Division of the Office of\nPetroleum Coordinator. It has some more or less pretty maps that\nmay intrigue you.\nSincerely yours,\nPetroleum Coordinator for War.\nThe President,\nThe White House.\nEnc.\nFiled Library\nfriend\nSpecial Bill\nSupreme Court of the United JOH 12\nTHE PSF: w.o. Douglas 5-42 Folder\nMashington, D.C.\n08\nCHAMBERS OF\nAM\nHOUSE\nJUSTICE WILLIAM O. DOUGLAS\nJian\n1942\nmy dear her. Instruct\n& talked with Jimmie\nByrnes about the watter we\ndeceased east Sunday Jimmi\npromised to think t over. and as\n9 told more on the telephone\nbefore 9 left, 9 think Jummie\nhas some slants on the problem\nwhich you should have directly\nfrom him.\nyour basic idea\nhas went. But my present\nit 9 probably should resign\nfeeling is Rot if 9 ties its\nJunie was walined to Rot\nfrom the Count. 9 think that\nnew So was the C.J. with\nwhom 9 discussed the watter\nquite finally The thought\nundertaking m my part to\nwas that 7 the work was\nnon out difficulties between\nto he effective, The one who\ndepartment heads and others\nded it should he able to\nwho have authority and who\nwork finally with some\nin many instances have a\nauthority and respecibility\nreal bostility would not from\nas you him, 9 think\nto he helpful and wight\nonly lumiss of D day. Since\nthe was effort is the first and\ninjure the Count\nBut Fuil think to\nlast December 9 have often\nmatter was some more while\nthought that 7 should enter\n9 finish my my augan and\nthe away or the many. Eagt\nto next two weeks. apcounse\nCobfornia assegnments during\nfor such a major was more,\n7 thought 9 should stay on 9\ntwant to be helpful. my\nthe Count for the maxim 9\nfave you. But unless\npresent new haveng is hat\nresign from the Count and\nif your tentature suggestion\ntake - administrative post\nwas to work out, it should\n9 am maluted to the\nbe done through sprific\nnew that my real\ndesignation of say the\n~ fair wen on a fermanent\nbasis with defents authority\nand responsibility Ken they\ndepartment heads anyet to\nunight be able to do what\ndo in their over 90 To or were\n1 to time without any\ninteression 91 that freend\nreally clicked. 9 theretr you\nwould jet defunte relef. and\nat is very, very important\nthat you fet at\nas wer -\nBill"
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