New Ulm weekly review. [volume] (New Ulm, Minn.) 1878-1892, 1880-03-03
'sFutares.~


Mass, have become defaulters by spec
ulating in {" futures" This is . very
common form Of specializing, that may
be described in brief as the buying or
selling Of articles for future delivery.
The speculation may be in any article,
such, for instance, as cotton, grain,
petroleum or corporation stocks.
This is the way it is done. Suppose,
IN the month of March, 1880, wheat of
certain grade sells in Chicago at one
dollar bushel. The indications at that
time show that the wheat harvest of tho
summer of 1880 will be very heavy
throughout the country. OF course, Il
the harvest should fulfill its promise, the
price of wheat will decline largely a.
soon ~ the harvest is gathered. Basing
their calculations on the prospect of
full crop, some men would agree to sell
and others to buy a given quantity Of
wheat for certain amount-say ninety
cents, to be delivered in July or August.
That would be ten cents lower than it
was selling at the time the contract was
made. This is what 10 called buying
and selling cultures As time goes
on, we will suppose that there is bad
weather in. 1880, which threatens the
crops. Then the price of July futures
would be raised. The man who agrees
to buy may sell again, transferring his
Purchase to another, and putting the
profit in his own pocket.
Again, should the weather improve,
20 also would the prospect of q good
crop. Then the man who had sold July
wheat at ninety cents would perhaps be
able to buy at ei ghty-seven cents, and
he would get profit of three cents on
each bushel.
OF course, where there IL q profit to
one Spectator there 10 a loss to an
other. The only persons who make
money, whether wheat goes up or
down, are the brokers. These men
have commission both for buying and
for selling; and as the business is large
~ transacted on margins they also
receive interest on the money they lend.
For example, a speculator wishes to
buy ten thousand bushels of wheat. He
gives the order to a broker, VINO charges
him price for doing the business. The
speculator is required to deposit with
the broker, as security against the bro
ker's loss, a certain amount of money,
say per cent. Of five cents q bushel for
the one thousand bushels, or five hum
dred dollars in all, which would be
called . Margin" The broker lends
the speculator the rest of the money, so
that If the wheat is one dollar bushcl,
he lends him nine thousand five hun
dred dollars. If the price of wheat
goes down, the speculator must advance
more margin or be sold out, and lose
the whole or portion of the money he
has paid.
When the sale is made, another COM
mission Is charged, 80 whether the
speculation results in a profit or loss,
the brokers' two commissions and the
interest on the amount he has loaned
the speculater must be paid. In the
Que case they diminish the profits,
and in the other they add to the loss.
Dealing in futures is sometimes legit.
innate. TO illustrate: Here is cotton
mill which has an ample supply of raw
material for two months, but in NOvem-
Der it will need more. The directors
believe that business is to revive, and
euoV IA A>OVCAUCK CttSA VI SpOUi
cotton will sell for higher price than
i can now be bought for delivery in
November.
In that case they will save money for
ne owners by buying Futures 10 be
sure they ran q risk. Cotton may de-
cline instead of advancing, and in that
ease they will lose. Yet It is their duty,
N looking out for the interests of the
stockholders, to use their best judg-
nent, and to buy when the market
seems to them most favorable.
The Fall River treasurers who became
defaulters were not guilty because they
Bought Futures" but because they
speculated on their own account with
the money placed in their keeping that
belonged to other people.
In nine cases out of ten dealing in
futures is simply gambling. The buy
ers and sellers do not base the prices
they take and give on any knowledge OF
the causes that may make prices higher
or lower; nor do they have the goods to
deliver if they are sellers, or need them
for any purpose if they are buyers.
They merely bet upon a future price.
And if betting is evil in any case, so are
sllpurely speculative dealings in futures.
-To~&h's Companion.