New-York tribune., 1920-12-12
Recouping Loss
In Business
By'Hedging'
Textile Manufacturers in
Some Cases Are Reported
to Have Profted in
Stock Market Operations

"-..' ~"'-'t. 'eo = a%lou ana IOrtltuO0,
writing off depreciations and turning
toward the future With hopefulness.
there is evidence that some of them.
with foresight and good Judgment, have
managed to take the decline without
serious impairment of their financial
reserves by the method of "hedging"
or going short on certain commodities
or stocks
In Wall Street 1t Is rumorcd that
some of the manufacturers in the tex
tile Industry, particularly, who were
close to the general industrial sirua-
ton and saw the fall in values COM
ing, were wise enough to sell stocks
short on the stock market and thus
IN part recoup the losses they suffered
IN their own business. Confirmation Of
such deals is difficult, and up to the
present no business man has been will
ing publicly to admit that he pursued
such a course.
An interesting incident Of the at
tempts of cotton goods manufacture
er, one of the largest in the business,
to soften the shock of decreasing values
OF cotton cloth by selling the raw cot
ton market short is related by an off,
clal OF a selling agency, who is ready
to vouch for the facts in the case.
Wanted to Sell Cotton
The cotton manufacturer, according
to this selling agent, several months
ago decided to take a flyer on the
short end of raw cotton to the extent
of 100000. Armed with a certified
check for this amount, he visited his
broker and declared his intention. The
broker, however, assured him that q
bear pool was operating in the raw
cotton market and would not sanction
outside Interference.
''If the pool saw 100000 thrown on
the short side of the market at pres
ent,' the broker is reported to have
around, boost the price up sufficient to
wipe out your margin and then let it
sink back again. What you intend
do is too dangerous"
Upon this advice the manufacturer
gave up attempting to make any money
in the raw cotton market, but is
thought to have switched his short
selling schemes to industrial stocks,
with which he was more or less IA
miliar, on the exchange.
Manufacturer Saw Danger
A year ago one of the most level
headed manufacturers of women's gar
ments in this market decided that it
was time to insure himself against the
losses which almost every one declared
were bound to come some dav. He felt
that the reaction against high prices
was due within a year. At that time
business was going ahead in high gear,
with apparently not q cloud on the hor-
izon
He took an inventory Of his plant.
1t revealed that he had $4,000 worth
of woolens, silks and madeup garments
hCn Il VII l. ~ Il
gone long on raw materials. Most Of
his stock was in silks and woolens,
the demand for finished garments at
that time being so keen that it was
almost impossible to keep up a reserve
stock of any size. Gradually and quiet
ly the garment man began cutting down
his surplus stock of raw materials, by
Offering them to other manufacturers
ut five or ten cents below the open mar
ket prices.
Against the advice Of one Of the best
known woolen agents in the country he
refused to buy another dollars worth
tions pointed to higher prices and a
scarcity. He continued liquidating his
raw material stocks, and when the
actual slump began last spring he was
in fair shape. The acceleration Of tho
decline in woolens and silks was met
by still greater price cuts on the part
OF this manufacturer. He has pursued
the policy relentlessly and now has a
stock of piece goods and finished gar
ments on hand of not more than $4,000.
He now is working on hand-to-mouth
basis. When he receives an order Of
garments he goes into the open mar
ket and buys the raw material from
wEich to fashion them. Already he has
I, y ~. do
he sold earlier in the year for $3.50
a yard.
Not Making Money Now
He admits that he is not making any
money now. In fact, his sales are SO
few and his profits so small that they
do not pay his overhead. However, he
has large cash reserve, built up by
liquidation, and feels that he can
weather the storm safely. When he
feels that bottom has been reached he
will have the money again to stock up
In normal quantities.
"a year ago." he said, ~ figured that
the day of reckoning was coming. I
didn't know just when. but felt 1t
stood to lose from 100000 to s2oo, 900
on my piece goods In stock, If anything
happened to destroy their value.
determined to liquidate. On the other
hand, il business continued good
figured that l could replace the goods
had sold at slight advance, for at
that time price increases were being
made frequently and in small amounts.
estimated that at the most / would
have to pay a premium Of SIG, 900 to
replace the piece goods sold, If there
we're no let-up in business. In addi-
tion to this ! stood a good chance Of
passing that extra $4,000 on to my
customers should the demand for an
ished garments continue at the pace
then being set. No matter whether
the slump came, or the rapid pace Of
business continued, felt that liQuida-
tion was the only safe policy"
Against these examples are many Of
an opposite nature. Many business
men who felt the depression In their
own lines Of trade we're Of the opinion
that the slump would not spread to
other industries. Cotton goods men
tell Of continually playing" tho long
side of the steel stocks. One wooden
goods man was partial to leather
stocks. and a prominent silk manufac-
turer confesses to having dropped a
small sized fortune through plungins
on American Woolen.
nn%Du nF R:~+l Eo1A