WELLINGTON NEWS

Hokitika Guardian, 2 March 1931, Page 3

WELLINGTON NEWS

SLUMP AND SPECULATION. (Spcci a 1 Correspondent.) WELLINGTON, February 27. The psychology of the human mind is such that a slump no matter how severe it may be cannot entirely put a stop to speculation. Gambling, that is taking risks on events such as horse racing, or the .throw of dice or the shuffle of cards is world-wide, but speculation is a shade different, 'f lu; speculator buys something in the hope that the article he buys will appreciate in value and yield a profit. In all markets win ■ I'uturcs” are dealt in there are professional speculators, and they perform a very useful function. In the wheat, cotton and metal markets there is always extreme trading in futures. A speculator agrees to pay a certain prices lor a certain quantity, say of wheat, oil a certain date three .whs ahead. A great 1 many tilings may happen to improve the price or lower it, hut he bus to take his chances. If lie finds that he has bought more than lie requires or that other conditions exist making it inconvenient to take delivery he can “hedge,” that is he can sell,' the whole or a part of his" purchase to some o"- else either at profit or loss as he thinks fit. There is no futures dealing in wool in Bradford or London, hut such dealing exists, in France and Belgium and speculation cannot be crushed by a slump, but it affects the. volume of. speculation. It is rather, singular or significant that most of us are always for a speculation, each according to his means. Investment is a higher attribute, that is t'o say the prime consideration for the investor is the safety of. his capital and therefore, the investor is exceedingly cautious in putting out his money. The investors’ • •••’•o’s are usually confined to the. stock exchanges for there he can find the class ot securities, lie prefers. Generally the cautious investors buy gilt-edged securities, at all events that is what trustees mostly do, .and they are limited in their choice ol such securities, for we are told again and . ga.n that such and such stocks are trustees securities. Investment and speculation are to be seen in stock exchanges and some of the shrewd professional speculators on the exchanges manage to make money and some to amass fortunes. Just now business on the N.Z. stock exchanges .is mostly speculative, and this almost extends to the gilt-edged securities. Most of the industrial shares in which there is any trading, cirp bought by speculators and the same;, may be said of bank shares.

. The speculators hope that tiie .shares that, they ar© now buying will improve in value as the economic position improves and consequently there will b<a profit on resale, it is always good to see healthy , speculation on tile stock exchanges, but the feverish frenzied speculation witnessed in Now York in 1929 must always be condemned. Although there is speculation on N.Z. exchanges its volume-; is-.small, .because the . shares that speculators can consider suitable. for a “flutter” arc restricted.

At present such business as is passing is being done by those who have some idle or loose money available, and the small man is not in the picture, and yot if business is to recover on the stock exchanges something must ,be done for the small speculator. Ijliat something will be dene seems certain, .and the line of action appears to be in introducing reasonably good goldmining ventures.

Oil bearing areas are already being exploited and explored, and if by any good fortune a company manages to hit upon an oil well with a life of a year or two there would immediately follow a boom in oil shares. Mining ventures offer a better scope to the small investor, but promoters would be well advised to make exhaustive investigation before presenting a mining proposition to the public, and the companies should bo formed on the “no liability’’ principle as far as possibles The mining shark will get his chance when a boom is in full swing, and speculating- develops into a gamble.

. Just now tire small man will require to be assured that he will get a clean run for his money. If ever there is to he a revival of the Stock Exchanges here for legitimate business it. must be preceded by a mining boom. The flotation of industrial and other companies is just now at a stand still but this is just the psychological moment for promoting new concerns that would have- chance of growing into profitable undertlTkings. Many of the soundest concerns in the Dominion were established during dull times.

In the early eighties of the last century when this young colony was suffering from depression there was enterprise enough in the community to establish the .freezing industry. Whatever is introduced now. whether a mining venture or an industrial concern it must have a reasonable chance of success.