The sun. [volume] (New York [N.Y.]) 1833-1916, 1883-01-07
The Evil of Corners.

Futures, or future contracts, about which
there Is now SO much talk are compare
lively recent device Of the greatest value to
trade They are simply method Of facii-
tating and insuring transactions. Their use
has increased as necessity has demanded,
until they have been introduced into all the
business on the commercial exchanges.
Butthese very facilities have encouragedth the
growth Of speculation on the exchanges. 1t
is, of course, far easier to speculate with q
contract that can be sold out like stock
certificate, and without the labor and ex-
pense Of handling the merchandise, than it
was when the actual stuff was delivered.
Besides, the operations in our crops are no
longer confined to regular dealers pursuing
calling useful to the producer and the con-
sumner, but anybody who has a turn for spec
ulation and the means to indulge it can take
part In them. The consequence Is that the
market is manipulated by bulls and bears
after the fashion of Wall street.
Moreover, because Of these futures and the
rules OF the exchanges, which limit deliveries
in contracts to specific grades OF merchan-
disc, what are called corners are OF more fire.
Quent occurrence than WIS possible before
futures were invented. Not that corners did
not occur under the old methods, and with
their logical accompaniment OF wild specula-
| ton, for corners may occur naturally or
accidentally as we'll as from artificial causes.
For instance, in 1874 the leaf tobacco crops
Of Kentucky, Virginia, and the adjoining
States failed almost entirely, owing to a
severe drought during the planting season,
which lasts from May to July. AS no
such disaster had ever before occurred, it
WIS not until the middle OF June that the
buyers for export, the home trade. and the
European Government contractors appre-
cated tho gravity OF the calamity. People
living in those States, however, had seen the
impossibility OF planting, and men OF all
classes poured into the interior markets and
bought tobacco on advances obtained from
New York merchants. When the Western
markets had been driven too high, scores Of
these spectators came to New York and
competed with the regular buyers In the
market. SO that prices advanced in less than
five months over one hundred per cent. Lots
were sold over and over again, some having
changed hands as many as ten times. Ex-
cept the New York speculative purchases, the
transactions were all made In the regular
way. for there was then and Is now no
trading in futures in tobacco; and yet the
legitimate buyers were cOrnered.
| The result, however, was disastrous to the
spectators. The foreign Governments ex-
tended the time for the futllment OF their
contracts into the next year, and mailufnc-
turers and exporters almost ceased buying.
Prices accordingly declined nearly fifty per
cent, bankruptng many Of the owners OF tho
tobacco held on speculation, while the COM
mission merchants who had made advances
on their stock suffered large losses. The Wild
est and most disastrous speculation, we see,
therefore, can occur In articles where the use
OF futures is unknown. Even II future con-
tracts were abolished tomorrow, speculation
would go on just tho same. 1t might be tenn
porarly hampered, but it would force its way
against opposing legal obstacles.
In tho instance we have given the corner
was induced by actual disaster to the crop.
Corners arc also often brought about by the
very uneven distribution of a crop But what
is generally understood in the exchanges BY
a corner is something quite different 1t does
not necessarily depend at all on natural
causes, though 1t Is usually undertaken
when some opportune circumstances are
present. The cornering clique simply induces
or takes advantage OF sales Of future con-
tracts 50 large that the stock in the market
is only n small percentage OF the contracts 1t
has bought. Then, when the time Is ripe, the
clique will begin to advance the market price.
Those who have sold what they do not pos
sess at the moment, though 1t may be ON tho
way to them. become alarmed and rush In to
buy. or course, the price goes up still
higher, until tho manager OF the corner
simply dictates his own terms; and ON that
basis q final settlement is made.
Now, the price Of IN article at any one
time, il these days. depends. under normal
conditions, ON what 1t is generally believed
will be the future supply and demand. But
a corner upsets all the calculations Of legitl-
mate trade, and Is az bad for the dealer as 1t
ID for the consumer. Az matter OF self-pro-
] lection. therefore. the msioyity Of the menu