New Ulm review. (New Ulm, Brown County, Minn.) 1892-1961, 1892-04-20

1T would tend to raise the price of wheat
here, although the report might be false.
and this In spite of the further fact that
favorable season in Russia might more
| than offset the loss In India if the repert
We're true. The much talked of wheat
circular of last fall undoubtedly led
thousands of farmers to hold their wheat
and this would have tended to raise the
price of it for consumption if other fac
tors had not come into play TO counter
act this tendency. In other words price
IS largely fixed and exists '.in your mind"
1t IS very much like commercial conf
dence' IN that respect This is illustra-
ted by the town lot boom and bv the
panic Competition among buyers makes
higher prices Competition among sell
lers lower. The self interest of seller and
buyer offset or cancel each other in ordi
nary sales so that the price agreed upon
IS usually the equivalent value of the
commodity sold, as compared to Others.
but II this self interest is wanting Oh
either side, as in child's bargain. the
price IS apt to be abnormal To apply
these general ideas to the case in hand |
will briefly follow my load of wheat on
Its way for export or consumption and
show the influence that would be active
IN liking its price if the practice of deal
ing In futures or options did not exist.
The elevator company buving nv wheat
not doing business for fun-wouId use
every endeavor to make Il profit on it.
1t could only do so on an advance in the
market price. The next and every sue
cesslve buyer would be actuated Iy the
same self-interest. In other words. every
owner OF that wheat, from its cradle to
It's grave, would be q bull He could
only profit by a rising market: never by
a falling one. An amount of capital prob
ably approximating one-third of our cir
culatlng medium would be invested in
our crop and interested in sustaining and
advancing prices. How is it under the
insurance" system! Is the owner equally
interested in an advance. How can he be
when he Is insured against a decline! A rise
or fall is a matter of Indifference to him.
But this Is not all, nor the worst feature
OF the option system. When | sell my
actual wheat, that ends my interests in it.
My purchaser is the only one interested
IN 1t so long as he holds it, and self-in-
terest impels him to bea ..bull.'' as have
shown. The only -.'bear' influence that
my wheat can become subject to, under
the conditions in a natural market. is
that of an intending buyer who natural
y seeks to buy as cheaply as he can.
Now look at the other side Suppose
that A sells 900. 900 bushels of 0ntiop
May wheat to B. The only way 3 can
make a profit is by sale to C at an ad-
vance. The conflicting self interests of
and c in negotiating this sale can safe
ly be relied on to neutralize each other.
as we have already seen. After that sale
Is made we have a right to assume that
Gbecomes '.bull." But what's the sta
tus of A and B after the sale? In an or
dinary transaction Of that character they
would become disinterested spectators
after the sale, their profit or loss hav-
ing become fixed by the price paid. But
here It is different. Their profit was not
fixed by the sale. On the contrary, it
depends upon the ability of A and B TO
beat down the future price of the COM
modify sold. This, as I have already
said, is the feature of options dealing
| that presents factors of forces influence
ing the formation of price that | have.
| looked in vain for in any kind of COM
mercial transactions. Their operation is
in the direction of lowering prices. To
what extent is problematical, but l be-
! lieve it great.