Cedar Rapids Gazette, June 19, 1974, Page 9

Cedar Rapids Gazette

June 19, 1974

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Issue date: Wednesday, June 19, 1974

Pages available: 144

Previous edition: Tuesday, June 18, 1974

Next edition: Thursday, June 20, 1974

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Publication name: Cedar Rapids Gazette

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All text in the Cedar Rapids Gazette June 19, 1974, Page 9.

Cedar Rapids Gazette (Newspaper) - June 19, 1974, Cedar Rapids, Iowa ____They'll Do It Every Time THE RIGHT MAN FOR THE THANKLESS cum POST- mm HE'S OWA THEHOOrASO Hey.11 NOMlWATfc AHSON3WTS Of THE MOOSE By Sam Shulsky Q Why don't ynu like municipal bunds? You refer to yields of "about 514 percent" when you know that yields are considerably higher. A 1) Right off the bat, let me say that 1 do like municipal bonds and consider them an excellent investment for, firstly, those in a high (30-35 percent and above) income tax bracket and, secondly, for '.hose who don't want to put' money, or more'money, into :he equity market. 2) The column you refer to appeared about a month ago and I think you'll admit that money rates have climbed materially, in the interim. And so have tax-exempt yields. Example: I've dug out a lead- ing dealer's offering sheet as of the time of that column, and find that current yields of "A" grade bonds selling around par at that time were either side of the percent level. Discount bonds yielded more to ma- turity. In the most recent list, I find these equivalent yields up to 5.8, etc., etc. It is always dangerous to say that "a municipal bond yields 5.65 or 5.72 percent" because someone can always find another which yields 5.85 or 5.9 percent. 3) But perhaps" the most im- portant reason for assuming a conservative stance on tax- exempt yields if, in fact, I have done so is simply this: Municipal bonds once the investment preserve of the ul- tra-wealthy are now being widely offered across the board, you might say to the general public. And the general public, angry at the rising cost of living and heavy taxes, seems more than ready to thumb its collective nose at the tax collector whether the municipal bond makes finan- cial sense in any particular case or not. Part of this broad promotion of municipal bonds (and a small part, I'm happy to say) seems to imply that you can get just about as good a return from tax-exempts as you can from taxable Treasuries and corporates. Every sophisticat- ed investor knows that is malarkey there is no free lunch. But I continue to get letters, in alarmingly increasing amounts, from clearly un- sophisticated investors, often living in areas where they can't check it out, telling me that they have been offered lax- exempts yielding 8 percent and even more and are inclined to buy them (or have already bought them) because, they say, "after all, tax-exempts are the safest" and why take percent taxable when you can get that much tax-free? So, if I should happen to un- derstate the yield on tax- exempts (and how can you not understate yields when interest rates climb day by it is because I want a red warning flag to go up in the mind of any would-be investor reading this column. When he is offered a tax-exempt yielding 8% per- cent he is being offered a "bargain" which may contain a degree of risk so high that he can't live with it. I know this may seem like boring repetition to sophis- Healed investors. But I cannot stress enough: I) All tax-exempts do not enjoy the same safety. Their ralings go from triple-A down, just as do corporate bonds. 'I) The tiix-exempt market is constantly watched by traders and dealers with some of the sharpest pencils In Wall Street. If one bond yields 5.47 percent and the other .'i.HK, there Is a reason. .'I) All liix-cxciiipl.s do not have the siimc barking. Some Sam Shulsky are endorsed by the full faith and credit and taxing power of a state or city or town. Others are backed only by the money taken from motorists crossing the bridge built by the proceeds of the bond issue. And still others are backed only by the earning power of a private corporation for which a plant was built with money raised through a city or town's tax- exempt bond issue. 4) Tax-exempt issues backed only by specific project revenues can default and have defaulted. (Although, I admit, the over-all record is good.) 5) There is always a differential between yields of taxable and tax-exempt bonds of the same quality. No one in his right mind pays taxes if he doesn't have to unless, of course, he has more left, net, after paying a tax on corporate bond income than he would have from accepting a lower tax-free return. 6) Finally your tax bracket, only, can determine whether you are a customer for tax-exempt bonds. And if it does indicate tax-free bonds, keep firmly in mind that there are millions of other, perhaps more expert, investors shop- ping the same market. Be wary of "bargains." NEW ISSUE: Shares or bonds sold by a corporation for the first time. Proceeds may be used to start up a new com- pany, or added to the funds of a company already in operation, to retire outstanding securi- ties, acquire new plant or equipment, or be added to working capital. Expects U. S. Speculators To Feel Sting in Gold Mart By Uenard Curry WASHINGTON (UI'J) If American citizens get the right to own gold bullion for the first lime in 40 years, gold specula- lion probably will become as glamorous as frozen pork bellies, iced broilers and orange juice "Tbe average guy who rushes iiitu the gold market when and I when because it's a certainly the government approves it will have his pockcl says Charles Stahl, Princeton, N ,1 publisher of (Irccn's Com- modity Market Comments. Simon Spur Treasury Secretary Simon, who has spurred the gold fever in speeches lo foreign finance ministers and congressional committees in ihe pasl few weeks, says Americans should be allowed to "trade in gold the same as lead." Simon says he will recom- mend lo President Nixon that he exercise his authority to end the ban on privale ownership of bullion by American citizens. Stahl says Ihe "shrewd buyers" are already in the market, either legally or illegally, wailing to sell when the American surge sends prices up. After the gold rush, prices will fall again and the shrewd buyers will bargain hunt back into the market. Thomas Wolfe, director of the treasury department's Of- fice of Domestic Gold and Silver Operations, also predicls "a little flurry in gold markets. But it will end quickly." Will legalizing gold send Americans rushing west to pan streams and dig in mountains for the precious metal? "Deepest Holes" laughs Wolfe. "The deepest holes in the world now are gold mines There just isn't enough gold left to mine." Americans actually can own gold now in Hit- fui in of jewelry, coins and placer gold the nuggels that started the ('aiiformu gold l UMI in and Most in Texas Speed, but Not By Much: AAA HOUSTON (AP) A stale survey by Ihe American Au- lomobile Assn. reveals most Texas iflotorisls were speed- ing, bul slill came close to obeying the 55 mile per hour speed limit imposed to save gasoline. Using a radar unit, the AAA checked 1.4B6 cars on four-lane U. S. highway 59 Monday. The AAA found 02 percent of tiie vehicles clocked were exceed- ing 55 mph. But the average of the speeding vehicles was 60 mph. Texas highway patrolmen seldom issue speeding tickets unless motorists exceed the limit by more than 5 mph. The AAA found more pas- senger cars than trucks going faster lhan the speed limit and women more likely In speed than men. Of the males checked, 58 percent were speeding. But of the 295 females, 76 percent were going faster than the limit. The survey revealed 70 per- cenl of all passenger cars were speeding, compared wild 58 percent of pickup trucks and 43 percent of large commercial trucks. ON THIS DATE in 1754, a congress of seven American colonies was held in Albany, N.Y., to discuss union for defense. Special Selling! Women's Wedge Sandal by Clifter 7. Regularly 11.00 A Summer soft show built for comfort. Softest upper with a cushioned sole for support. Available in beige ombre combo. Sizes are 5 through 10. Cedar Rapids: Downstairs Budget Store and Lindale Iowa City: Mall Shopping Center on Six at Sycamore Killian's Women's Famous Brand Shoes 6.90 10.90 14.90 Regularly 12.00 to 14.00 Joyce Rod Crois Personality Socialite Beverly Cobbles It's a grand slam snlo of shoos! A great selection of patent or calf styles. Vari- ety of colors in sizes 5'A-IO. Cedar Rapldn Downtown Third Floor and Lindale Plena Iowa Cllyi Mall Shopping Center on Six at Sycamore still are found in limited quan- tity in some western streams. The change would be to allow Americans to hold gold bullion, a buck Ihal usually weighs lot) ounces or more. The S banned bullion ow i-piliip in (o prevent Iml eis from reaping windfall pn fits when Hie dollar de alued by I'rcsidem Ho sevell lo stimulate the PCI noniy from depression Ho SPVPI! lowered Mil- the dollar from the equivalent of fur one ounce of gold li per ounce, a premiun winch remained unti I'rcMdcnt Nixon reduced it ti Ihe current in 1971. Wolfe says the major com modity exchanges such as UK rhieago Bo the New Yo now contracts in way that sil urange jui bellies (I broilers an rd of Trade am. k Mercantile an i trade future'. old in the sunn er, lead, copper. e, pork con) and iced ruded. ItroktraKf Houses Don Bass, a commodity trader for Merrill Lynch, Pierce. Kenner Smith, says it is "no secret" that the bin brokerage houses have been preparing for gold sales for ihe past six lo 18 months. "It's a commodity, like any other. It was only a matter of time before the federal government allowed trading." says Bass. Stahl, who is considered an expert on gold and silver, says there is no financially secure fu'.yre for Amrrii'tins who h'iy gold whether in the form of bullion or coins. "A lot of people think they can hedge against inflation by buying says Stahl, "but it's no better hedge than soybeans or any other com- modity. The investor musl watch the market and know- when to move." Stahl says the real losers in the gold market will be Americans who have bought gold coins for speculation. The price of the coin already ex- ceeds the value of the gold content by about I'l percent Legalizing gold bullion ow- nership would drop coin values another 5 percent. dllian Flattering swimwear at tremendous savings! Famous Make Swimsuits what is a kill IIONITS? A Wl EKLY .StftllS Of f.i NSA- IlONAL VALUES I'lANNH) If-l COOI'FRAIION WITH ONIY 8 t S 1 OF MANUF-ACHIR EAi'H BONUS HIM Ml f IS t RIGID STANDARDS Of i.MIAt AND Will Bi SOlO Al It RS. Sr'LClAl A 10.99 VALUES TO 30.00 First Quality swimsuits in an exciting assort- ment of prints and solids. Choose from bikinis, waistriders, maillots, sheaths and tunics. Nylon, Antrort nylon and Lycra" nylon combos. 8 thru 20. AS! from famous makers. Tremendous Cedar Rapids: Downtown Second Floor and Lindale Plata Iowa City: Mall Shopping Center on Six at Sycamore ;