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Cedar Rapids Gazette (Newspaper) - May 15, 1974, Cedar Rapids, Iowa _2A The Oi'dar Rapids Gazelle! Wed.. May 15. 1974 SEVENTEEN by Bernard Lansky "How did your first day on the job at the pizza parlor go, Rising Interest Rates Make Bonds Alluring By Sylvia Porter Perhaps before this oppres- siva upsurge in interest rates ends, the U.S. treasury will be forced to set an interest coupon even higher than the 8% percent it placed last week on new notes due in less than five years; perhaps the highest-grade cor- porations of this country will have to pay even more than today's 11-12 percent for short- term bank loans and more than 9V4 to pei-cent for long-term money in the open market; per- haps our top-rated states ant cities will soon be issuing se- curities with tax-exempt cou- pons of more than 6 percent (equivalent to more than 12 per- cent to all those in the 50 per- cent income tax bracket.. Top Priority Perhaps. In today's explosive atmosphere of double digit infla- tion and excessive demands for money, many crucial goods and essential commodities, our mon- etary policymakers are giving lop priority (o curbing the sup- ply of credit which fuels our murderous inflation spiral and paying little attention to the stupefying interest-rale spiral. Sylvia Porter quality, fixed-income invest- ments in the obligations of the U.S. treasury, federal agen- cies, states and cities, U.S. cor- porations take on some of the characteristics of "growth se- curities." If you invest in bond that pays you 9 percent and if you reinvest the ac- cumulated interest at the same rate, your investment will dou- ble in about eight years; if you invest at 8 percent and reinvest the accumulated interest, your nestegg will double in about nine years. At these rates, high- grade bonds are rivaling the long-term growth record for common stocks. In sum, an in- vestment that can. double in eight to 10 years is growing by any definition. A generation ago, yields on stocks were about twice those on bonds. Since the start of this decade, yields on highest-grade bonds have been more than twice those on common and today's 9 percent They are making it clear that they vdli take the blame for business failures which might result from a shortage of funds if, as they turn the credit screws, they succeed in bringing inflation under some control. They insist they will not of 3_to Percent not E< verse their painful money-tight- ening policies just to bail out plu; rates compare with typical rates on top-rated corporate isolated bankruptcies, no matter what the size of the bankrupt companies. Their function, the monetary policymakers stress, is not to preserve inefficient businesses. I have spent my adult life specializing in the money and bond markets and I am far too much aware of the complexities to make a guess (in public) about the precise dates and pre- cise levels at which the historic peaks in interest rates finally will be reached for this night- mare economic era. Upper Ranges Nevertheless, if you believe- as I we will have the brains, the courage and, eventu- ally, the leadership to get out double-digit inflation down into at least the single-digit range as (he months roll on and that this horrible period will not perma- nently distort our lives, then you also must believe that interest rates are moving into the upper ranges. If you I over the lifetime of millions of dollars of the highest-grade se- curities now being sold, today's interest rales will turn out to be what Wall Street calls a "living many years ago. If you buy these high rates of return, you can count on them every year until your bonds are called or finally mature and that can be five, 10, 15, 20 or even 30 years from your pur- chase date. You have the ad- vantages of fixed annual rates of return and of greater protec- lion againsl adverse economic conditions than in riskier stocks. Whether these are near or at the rate peaks, I repeat I am not fool enough to guess out loud. But the lures are very real. then you also must be- lieve it is time to start putting at least part of your nestegg in highest-grade bonds at these levels. (A living wage means that interest coupons of 8-10 per- cent over the long-term should more than cover the anticipated annual rise in living costs.) Right now, with the cost of living rising at an utterly intol- erable annual rale of U to 15 percent, just about any invest- ment gives you a negative rale of return meaning Ihe erosion from today's inflation plus the bile from taxes more than eat up what you earn in interest. But ray assumption is that Ihis will not persist indefinitely. (And if it does, our cnlire econ- omy well may be heading straight for destruction, a depth of despair that rny natural op- timism won't accept.) At these interest rules, high- Collector Fair This Weekend at Hawkeye Downs An All-Iowa antique and col- lector fair sponsored by the S o r o p t i m i s t club of Cedar Rapids and Marion will be held Saturday and Sunday in the Farm Youth Center building at Hawkeye Downs. Hours will be 10 a.m. to 8 p.m. Saturday and 10 a.m. to 5 p.m. Sunday. According to a club spokes- man, dealers, some of whom have not previously shown in Cedar Rapids, will be present from all over Iowa. They will-be buying, selling and trading. No reproductions or crafts will be shown. An admission price of 75 cents will be charged. Proceeds will be used for the club's community projects. In- cluded are such things as a youth citizenship award, an emergency fund for the Council on Aging, Christmas baskets for needy families, camperships, and work at the county home and with retarded children. he (foliar Kapite fetic Established In 1B83 by Th- Gazette i. -..I j-ir.. 1 Iowa paid at Subscription rotes toy corrltr o week. By mall: Night edition ond Sunday liiuei 17.15 a men In, S34 o year; Afternoon editions and Sunday 7 iiluAi S7.SO o month. MS a year. Other y- stole! No IT i.S, iflrrltoflei W o year, .crlptions accepted In DAYS! Enjoy all the fun Friday, May 16th and 17th. 90 PENNIES ON THURSDAY! PLUS FREE BIGGYBANK WRISTWATCHES! Off with the banking blahs! Come on in to the Merchants National Downtown Motor Bank and have a "little fun. There's something to put a smile on every face new and old customers alike. Take a look There's a shortage of pennies. So next Thursday only, bring your pennies to the Merchants National office nearest you. For every 90 pennies you bring, we'll give you a dollar bill. Plus, the person turning in the most pennies will receive a free Biggybank wristwatch. That's Thursday, May 16th only one free watch will be given away at each of MNB's five locations. ADULTS ONLY FREE Biggybank note pad or ruler, while they last. Youngsters (under 15) banking at the Motor Bankwill receive a FREE Biggy Pencil. SIDEWALK SALE ITEMS mmmmm FREE coffee or soft drinks for everyone. Real, honest-to- goodness Biggybank Piggy Banks ea Authentic Biggybank mugs SOP ea. FREE Biggybank helium-filled balloons for everyone. Genuine Biggybank steins (15 SLOOea. (Supply is limited.) having Gazette carrier service. Merchants National Bank m A'BANKS OF IOWA'BANK Main Bank Motor Bank Vernon Village Office Kingston Office Amana Office
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