WELLINGTON NEWS

Hokitika Guardian, 4 October 1927, Page 4

WELLINGTON NEWS

SPECULATION

(Special to “ Guardian ”.) WELLINGTON, Sept. .‘lO. There are quite a lot of people who seem to regard the speculator as very little removed from an exploiter or a. swindler. Few think the speculator is entitled to any consideration, and this view is based on the erroneous belief that the speculator makes huge prolit s and makes them very consistently. A speculator makes profit, if he did not he would not continue as a speculator, but he also makes losses and the losses arc sometimes very heavy, just as the profits are on occasions very large. Speculation is the rule rather than the exception in every commodity market. In all the grain and dairv produce markets, fibre maiket, coltou market, jute market, meat market and dairy produce market speculation is carried on to a very considerable extent. It goes under various names such as forward buying, f.o.b. and ci.l. business, futures, and so on, but all these forms of buying are iust speculation. It is generally when a market is depressed that the speculator comes in. and then his opeiations are a boon. A depression in a market generally means difficulty in doing business except at a concession in price, and even when a concession is offered the legular buyer stands off from sheer nervousness. The speculator, oil the other band, is not worried with any nervous disorders; be calculates bis chances as carefully as possible then makes bis bid for future delivery. " Hulls” andj ■' bears " abound in all markets and the rivalry between these two is constant and tends to fix the price. The “ bull ” buys what he does not require. or more than he really does need, while the ‘’bear” undertakes to sell what lie does not possess, and to i give delivery at some future date. A “bull” is interested in seeing the; market rise, for having bought what J lie dues not want at a price, lie is j naturally anxious to sell what he has j bought at n higher price than he has given so that he can make a profit.. A '■ bear” on the other hand is inter- ( ested in seeing prices drop. Tie has sold what he does not possess at a price, and he hopes to pnrhca.se the actual goods at a lower price than that nt which he sold, the difference between his Inlying and selling prices being the measure of his profit. There is a good deal oi the element of gamble in this, hut that cannot he eliminated, and perhaps it is the gamble that induces the bulls and bears to operate. " Hulling the mar, ket ” means that ” bulls ” are working to force up prices, and “ bearing the market” means the opposite. When a London firm buys butter or cheese f.o.b. there is the element of speculation for it must be many weeks before the produce can bo landed in store in London, and in a fluctuating market it is impossible to say wliat the- prices will he when the goods are actually on the spot. The buyer it must be obvious, is keenly interested in seeing prices advance, for lie lias made the f.o.b. deal based on bis knowledge and judgment in the hope of reselling at a profit. The f.o.b. buyer of New Zealand butter and cheese is a “ bull ” operator. The smartest and cleverest of these operators for forward buying cannot avoid making losses on occasions. and equally so there are occasions when they make a tidy profit, but taken over a long series of years, an average profit will be earned. Speculation is not confined to the commodity markets, but exists in a very thorough manner oil the Stock Exchanges of the principal cities of tlie world. On the London Stock Exchange settlements are effected usually twice in the month. An investor can buy for cash, in which ease ihe transfers are made immediately, or he can buy lor settlement day; in this way the shares may change bands many times before tile settlement day when buyer and seller are actually known. The late James White, who committed 'suicide, was a bull operator in Hritish Controlled Oilfields shares. He kept- on buying the shares which be did not want, and calculated that when the bears bad oversold bo would press for delivery. Unfortunately be bad to pay for a big parcel of shares before bis scheme matured, and be did not have the funds to meet bis commitments. If lie could have met this obligation and continued his game he would have won handsomely, for his line of action was to buy more shares than were held by nil the shareholders and then press for delivery. The sellers could only deliver a proportion, and they would have had to buy hack the balance at the- price fixed by White. There is the spire of gamble in all markets and that is inevitable for life itself is a gamble.