Imperial Chinese Government, 5% Hukuang Railways Sinking Fund Gold Loan of
1911. A brilliantly orange certificate with a vignette of a
steaming railroad engine, and large signatures in Mandarin characters at
the bottom. The item in my collection shows that the Chinese Government
ceased paying interest in mid-1930, presumably reflecting combined effects
of the incipient depression, civil war, and later, the Japanese invasion.
The regime of Mao Tse Tung repudiated foreign debt obligations, of which
this issue was a part.
Boston, Hartford & Erie Rail Road Company 7% bond, 1863. This
intricate certificate has green and orange engraving with two vignettes, a(nother) steaming railroad engine, and Ms. Columbia with an eagle on her
shoulder. Coupons are still attached showing that the company ceased
paying interest in 1874, 18 months after three famous robber barons
(Daniel Drew, Jim Fisk, and Jay Gould) were ousted from the real Erie
Railroad (i.e., not the same as the BHE). See the following three books
about the checkered history of railroad finance in the 19th century:
Matthew Josephson, The Robber Barons, Thomas McCraw, Prophets of
Regulation and Maury Klein, The Life and Legend of Jay Gould.
Josephson is too blatantly anti-business to be taken seriously, but when
read with the other two books lends colorful highlights to an
understanding of the era.
Northern Pacific Railroad Company, reorganization certificate of common
stock, 1986. This detailed green certificate shows a simple
vignette of a seated woman holding a quill pen. J.P. Morgan attempted to
consolidate all railroads serving the Pacific Northwest in an attempt to
resolve a destructive rate war. He persuaded the warring operators to swap
the shares in their respective lines for these shares in a trust, which
would hold the common stock of the operating companies. The Justice
Department under President Theodore Roosevelt successfully busted up this
trust in the famous case argued before the Supreme Court, the Northern
Securities Trust case.
‘B’ Share of Common Stock in Krueger & Toll, 1928. Ivar Krueger, a
Swede, was the famous “match king” who acquired monopolies to sell matches
in various countries around the world. He controlled various operating
companies through a pyramid-based holding company. When the pyramid
tottered at the start of the Great Depression, Krueger took his life. The
story of Krueger’s decline and fall is told in John Train’s Famous
Financial Fiascos, a book I highly recommend for entertainment and
warning to the giddy investor.
7%
Cotton Loan of the Confederate States of America, 1864. Issued in
1864 in Paris and London, this bond issue raised cash for the South. It is
remarkable both as an expression of investor optimism about the South
(which, at the time, was already beginning to fail), and as a piece of
financial engineering. This bond is a commodity bond, on which
interest could be paid either in cash or in cotton. Since it was
unlikely that the South would have sufficient cash in the near term, in
effect this was a cotton futures contract: the acquisition of
future quantities of cotton was fixed at a price known as of the date the
bond was issued. Commodity bonds are rare. Sunshine Mining issued bonds
payable in gold and silver in the late 1970s; Peru issued sovereign debt
payable in copper.
Emprunt de 720 millions, Compagnie Universelle Du Canal Interoceanique,
1888. This is loan to the first Panama Canal Company, one
organized by French entrepreneurs to dig a canal through Panama. Orange
engraving with 12 issuance stamps, and lots of interesting fine print in
French. In essence, the company failed because of cost overruns and
probable fraud—John Train (Famous Financial Fiascos) also describes
this episode. After the French company went bankrupt, Teddy Roosevelt
stepped in to have the U.S. Government complete the job.