The Bossier banner., 1922-11-30

speculative selling Is certainly ABUSIVE
to the interests Of the cotton grower.
The trader may ''shOrt sell any
amount of cotton he so desires, pro-
vided he has sufficient funds to margin
the sale. For instance, Mr.. A requests
a broker to sell 1000 bales for Decem-
her delivery at 2O1l cents a pound. The
broker makes the sale on the Exchange,
and then gives Mr.. A statement, read
ing: I'VE have this day sold for your
account 1000 bales, December delivery,
2O1ac" On the back Of the statement,
the following condition is printed: "All
orders for the purchase or sale Of any
article are received and executed with
the distinct understanding that actual
deliuery is contemplated :. -" Thus,
the transaction is given the flavor Of a
legitimate trade and is made within
the law.
Although Mr.. A has made tentative
pledge to deliver 1000 bales in Decem-
her, he has no intention whatsoever Of
doing so. as he probably never owned a
hale in his life. ANY moment during
trading hours, before the month Of De-
cemher arrives, he can close his trade
take his profit or loss, and be relieved
Of the obligation to deliver in Decem-
ber, simply by buying back as many
bales as he sold.
Short selling, although conducted on
paper, has as much weight in depress-
ing prices as though actual cotton were
being sold. Mr.. A exercises as much
weight upon the price level when he
''short sells" 1000 bales as a farmer
does when he sells 1000 bales that he
has produced by the sweat of his brow,
on 5000 acres at cost of some S75,O 600.
Mr.. A is allowed to "short sell " 1000
bales on capital of $500, which is
the usual margin required by brokers,
and which is exactly one-tenth of the
amount the planter has to pay to pro-
duce and sell 1000 bales. No wonder
the planter is discouraged. when the
whole world can sell cotton, specula-
lively. at One-tenth the cost of pro-
duction.
That is the serious reason why short
selling distOrts the basis Of supply and
demand. The cotton world looks to fu-
ture exchanges to register prices that
truly reflect supply and demand, but
when nine-tenths of the turnover on
these exchanges are paper sales, f1cti-
tious cotton, supply and demand be-
come mockery, since spurious price
prevails that falsifies true values.
If crop of 10,OOO,OOO bales is raised,
how may planters receive Legitimate
price for it, when spectators are al
lowed to ''short sell I" 25.OOO.OOO bales,
and paralyze the price and demand?
Selling Of this nature spreads dis
content throughout the economic world.
Farmers become depressed, refuse to
raise bumper crops, and emergency or
ganizations spring up and spread prop
aganda urging farmers to hold down
acreage and automatically force up
prices. The evils of short selling should
not be tolerated by the Federal Gov
ernment. In fact, in 1918, the United
States Department Of Agriculture
temporarily stopped short selling, af-
had short sold 2 ZOO, ,OOO bales on the
New York Cotton Exchange, and had
broken the price 10 cents pound, or a
loss Of a half-billion dollars to the
South.
HANDLE LITTLE COTTON.
Short selling represents the "short
side of the market, which is usually
the side on which professional traders
operate, as quicker profits can be made
on this side. Prices fall faster than
they rise Therefore, it is the shortest
way to profit. The other side Of the
market is called the long, or buying
side
Short selling should be permitted
only as protective measure, to enable
growers to hedge and insure the price
Of their crops. It then makes the cot
ton-future exchange what it should
bean insurance market and not a
gambling hell. But as weapon in the
hands of the speculator, it too frequent
" means stab in the back to the cot
ton grower.
If speculation could be eliminated
from exchanges, the great spot mar
l. ~ u r.