Darden Home - University of Virginia

List of Favorite Scrip

  1. 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.
  2. 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.
  3. 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.
  4. ‘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.
  5. 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.
  6. 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.