Q.D. AND H.P.

Evening Star, Issue 19788, 11 February 1928, Page 16

Q.D. AND H.P.

TO TEE EDITOR. Sir,—We have just received some cuttings from your issue of last October relating to Quarterly Dividends, Ltd., and National House Purchase, Ltd. First, let mo thank you for tho courtesy and fair play which you have manifested in giving equal prominence to correspondence, both for and against this work. I think tho testimonies of those members who have written concerning their experience must have at least equal value with theories propounded by two opposing critics. Dealing first with tho letter of Mr D. Moir. We confirm every word of his admirable letter. Ho is an honorary worker, and has no more knowledge concerning tho scheme than lie has been able to gather from published information, but he has studied that information carefully, whereas your correspondents, “Accountant” and “Solicitor,” have apparently just skimmed through a small portion of the literature, and thus formed quite erroneous conclusions. Mr Mofr’s conclusions are accurate.

If this scheme were only supported and approved by what 1 might term laymen, wc should not feel justified in speaking with so much assurance and authority, but our members number many professional people in various parts of tbc world—such as the members of one of tho loading firms of solicitors and barristers in New York, together with their staff, families, and friends, qualified accountants, schoolmasters, bank officials, etc., and it seems conclusive that men •of this standing would not make substantial deposits in a fund without critical investigation and analysis before doing so. One of the first persons to join was a mathematical and science master of a public school, and at tho conclusion of a meeting which I. recently addressed at Manchester, live university people were amongst the new members enrolled, each making substantial deposits. They in turn have written to friends in South Africa, whose forms came in by the post preceding tho last New Zealand mail, and yet another professor of tho sumo university enrolled himself and Ids daughter in no less than £l5O last week. These arc facts which cannot bo gainsaid. Next I will deal with “Acountant’s ” letters—one dated October 22, and the other undated. On reading the dated ono I gave “Accountant” credit for trying to be sincere, though his figures arc just about as incorrect as they could possibly be. Hut the undated letter (presumably of later date) makes me wonder whether I have misjudged “Accountant.” No one could possibly put down such absurd figures and yet bo sincere. For instance, ho states it is only a question of mathematics to find how many new depositors are required in 1027 to provide loans lor all who joined in 1925, after taking into consideration the repayments. No statement could bo more untrue than this, because it is beyond any human power to say what the repayments will amount to; consequently no calculation is possible to determine what new subscriptions are required. Wc have carefully analysed the 11. F. waiting list, and find that less than £500,0110, of either now deposits or repayments from loans already out, would entirely deal' tho present H.P. waiting list. His next statement is that by 1933 £415,211,000 of H.P. deposits ought to be, must be, or will be reached. His statement is so vague it is difficult t) tell which. As the loans applied for are always tenfold in excess of the deposits, “Accountant” is assorting that the value of the loans applied for by 1933 must bo ton limes that amount, or £4,452,140,000. No one loan can exceed £2,000; that is one of the rules; tho majority ot loans applied for are in the neighborhood of £lO to £IOO in the first instance. Consequently if wo take even £SOO per loan as an average, which is undoubtedly excessive, this brings ns to the concrete fact that in the next five 3'eurs no less than 8,864,280 new depositors would bo enrolled, each requiring a loan of £SOO. Frankly, I doubt whether any headquarters’ organisation could increase their office capacity sufficiently to deal with that number of applications, though we at headquarters are firm believers in the old adage, “ Where there’s a will there’s a way.” But this fact cannot be gainsaid, that if such a stupendous membership could be enrolled, Q.D. would have such a glut of money that the surplus reserve fund would be almost as colossal as the general reserve fund. I wonder whether “Accountant ” could even explain what the surplus reserve fund is or how it operates. Evidently it lias not occurred to him how lie contradicts his ' other figures by these suggestions, because if even the smallest fraction of the success suggested by ins figures, discussed above, were achieved, every present applicant on the H.P. waiting list would be cleared off Hint list in a single quarter. Here is another factor which I am sure “Accountant” has never realised—that 5U per cent, of every loan, except tho very largo ones, is put back into H.P. as a now deposit immediately the loan is granted (rule II.); yet 1 know “ Accountant ” has been laboring on figures based on the erroneous supposition that when a loan is granted it all goes out of H.P. into Q.D. Little does be realise that the 50 per cent, goes back forthwith, and yet the whole loan is repaid out of dividends in addition, and not merely 50 per cent, of the loan. If “ Accountant ” had asked a few simple questions befote rushing into print lie would not have made these blunders. He states ho is concerned about tho £83,219 in H.P. belonging to people who have not had loans, and for which there is no security. I suppose it will come as a surprise to “Accountant” to learn that probably three-quarters of those figures represent deposits made by old members reinvesting under H.P., rule 11.-—i.e., people wdio have already had prior loans and who have received substantial benefits from the other company. It never seems to dawn upon “Accountant” that each quarter the 'total repayments from those who have already had loans increases in amount, and that hundreds of now loans can be cleared off tho waiting list every quarter without the aid of any new 10 per cent, deposits. , C Thus, a person taking up a loan or £4OO, placing £2OO in Q.D. and £2OO back in H.P. for a further loan, becomes both a debtor and creditor at

the same time, and H.P. can and dots loud that £2OO out to quite a number of people, who in their turn halve it and reinvest. The total 10 per cent, deposits received up to the date of writing this letter amount to £124,423. The value of the loans granted in the last eleven months exceeds £60,000; while the grand total of loans granted is £223,907—approximately a quarter of a million. How it has been possible to lend out double its deposits is something which appearently “ Accountant ” cannot answer. I notice ho is absolutely silent on the vital question of mortality of life. As tho scheme grows and members who are in class 5,000 (the maximum) die, leaving in tho reserve fund £2,500 each as an absolute gift to their surviving co-depositors, this fund must grow colossally rich. He shuts his eyes to the fact that tho death of even one member a month in tho maximum class—and that is surely a moderate estimate if the membership is to run into millions —would represent a voluntary gift of £30,000 every year to the reserve fund, while tho dividend liabilities would diminish by 15,000 claims per quarter, or 60.000 annually. “Accountant” says that in working up to £5,000 each depositor provides £250 for working expenses. Try as wc will, no one at headquarters can make tho sum greater than £125. The rules clearly say that 2i per cent, of the income is to be allowed for working expenses. Now, 2!j per cent, on £s°ooo is £125. What “ Accountant ” has done is to misread rule IX., which says that 5 per cent, of each 10s shall ho set aside for tho expenses of the company. Ho has either carelessly or wilfully road 5 per cent, of £1 instead ot 5 per cent, of 10s. But is a man who would make such a blunder entitled to rush into public print? And could he ■name' any other institution in New Zealand efficiently administering a largo organisation on a 2! s per cent, basis. If there were paid officials', or if tho company existed for profit, it could not be done at this rate,‘but there is not a word_ in his letters recognising that all officials arc honorary. . , , 1 am further impressed by one very flagrant absurdity. “Accountant” says that if the same rateof increase of'deceased units continues it will be at least 100 years before a certain position is reached. Now, not one depositor lias yet died in the maximum class. In fact, tho heaviest death that has yet occurred was a member in class 1,900. Up to that point only one depositor had died with more than £IOO to his credit in Q.D.—viz., £135, and one with £93. Ail the others represent small deposits. Cannot “Accountant” therefore perceive that even three class 5,000 members dying in one quarter would considerably eclipse the total unit mortality of over seven years working? To suggest that the unit mortality rate remains tho sumo for a lengthy period makes mo wonder whether the writer is really an accountant. ft took six years for 5,75-1 units to die. It lias taken exactly one year to increase that number to 10,003, or 4,909 in ono year, and yet, as already stated, there lias not yet been a dcatli in any class as high as 2,000, though many living members have reached that class. 1 would now like to deal with “Solicitor’s” letter. He starts by making tho absurd suggestion that the scheme promises 20 per cent, per annum, and asks how £2 can possibly yield 20 per cent, on £ll. It seems incredible that anyone can have carefully road the literature and rules and write such utter nonsense.

We suy that it' the dividends only yield 2y per cent, per annum this is still the greatest scheme the world has ever had before it; and does anyone suggest that 2j per cent, is not an easily sound possibility I 1

The whole trouble with “ Solicitor ” is that he is bringing the two funds into one, instead of keeping them, as they are, two separate companies. Never by any possible chance could a person investing £2 in one company convert it into £ll and draw eleven dividends per quarter; yet this is what “Solicitor” calmly suggests is possible, and calls it a miracle. It would indeed be one. The rules clearly prove that a person investing £2 could not possibly in the first instance create that into a larger deposit in Q.D. (ban £(i, the process being as follows:—£1 in Hi’, would earn a loan of £lO, half of which would have to be reinvested in 11,P. for a second loan of £SO, and there would be a lengthy period of waiting between each of these two loans; nothing of the get-rich-quick element about it. It is true the other £6 would go at once to Q.D., and thus place the member in class G, because ho would have deposited six sovereigns in that fund. Now, half of that £5 would be in the reserve i mid, invested in some sound investment, such as war bonds or mortgage security, earning 5 or (3 per cent, interest, while the other half would have gone to the benefit account to kelp to provide a dividend on the original £l. Now, (3 per cent, on £3 is Ms 7id per annum, so there is positive proof that, without taking into account any new deposits or any increase of benefits arising out of deceased members’ investments, etc., i; is possible for £2 to bring in ds ?td per annum on the three invested pounds, totalling ignoring the other £3 in which all the other depositors would share.

When the £SO loan matured and was again halved, as is compulsory under H.P. rule 11, the depositor would have £3l in Q.D.. or £ls 10s in actual sovereigns in the reserve fund, invested, say, at 5 per cent, (though they would more probably be at C per cent.). That would earn an income of 15s per annum on solid sound business lines. Is there anything of a miracle in thisp And so the process continues up to class S,UUO,_ when tho poorest person wonid have invested by the aid of the lending fund, which provides the capitaT £2,GUO in tho reserve fund, and won lei have made a donation of another £2,500 to swell tho coiumni benefit fund for all, and if tho £5,000 only yielded 2£ per cent., which can U practically guaranteed if half of it is invested at 5 per cent., where is there anything mysterious or worthy of “(Solicitor’s” foolish criticismP

1 feel “ Solicitor ” has deliberately calculated this untruth when he says that it is plainly impossible for all to get returns far in excess of their investments. That might have been so in the early quarters, before many deaths had taken place, but tp-day and ever after it becomes more nd more certain that persons can receive out more, because so many thousands of pounds’ have already been liberated in Q.D. by death, and in H.P. by gifts from depositors who have ceased to have any further connection with the H.P. Myself as a case in point; I have subscribed £4BO to H.P. for Joans of £4,800 to place mo in the maximum class in Q.D., where I now am. I have no longer any claims on H.P., but my deposits to that company remain there in perpetuity, and, speaking generally, every Q.D. depositor gives a gift to H.P. of something between £4OO and £SOO. Tb ese are facts which “Solicitor” entirely ignores. With regard to the ‘ John Bull ’ cuttings, writs have already been issued against that paper on behalf of each company and myself personally. These are due to be heard at the next Bristol assizes The statement that the company was only partly successful in the County Court action for enforcement of a mortgage was a misstatement on the part of ‘ John Bull.’ At the time that paragraph appeared the judge had partly heard the case, and ordered the defendant to pay us 12s a week. At the resumed hearing we were given immediate possession of the house. Needless to say, it is also incorrect to suggest that I' was plaintiff in the action. The action was taken by Quarterly Dividends, Ltd. ; in its corporate capacity, and the simple facts were that the defendant had been in the bouse since 1921. under a contract i/a

deposit 32s ncr week in Q.D. ami H.P., and so get her house practically as a gift. She had deposited only £27 in six years, and had failed to pay limine insurance, ground rent, solicitors’ expenses, etc., and we should not have been doing our duty to the depositors if we had allowed her to go further into debt.—X am, etc., Wxr.T.mt Lawrence, Managing Director. London, December 2(3, 1927.