"Futures" and the Wool Market.

Manawatu Herald, 30 October 1900, Page 2

" Futures " and the Wool Market.

It may not savor of Christianity to rejoice in the misfortunes of others, but we confess to a feeling of gratifica- c tion at the heavy losses experienced by certain French speculators in connection with the wool market. A cable message recently reported that several wool-buying firms had suspended payment with enormous liabilities. The natural conclusion out here was that they had bought large qnanties of wool at the high prices ruling towards the end of last year, and had had to sell at the much lower prices which prevailed only a few months later. But our exchanges to hand show that they did not bay any- wool at all, but merely speculated in " futures." That is to say, they nominally bought or sold wool for delivery on a certain date, but when the date arrived they merely paid the difierenoe in the market price then and the price they had fixed; This dealing in " futures" has been the curse of the wheatgrower for years past, but hitherto it has been unknown, at any rate oil n large scale, in the wool market. That the first attempt ended so disastrously is fortunate for the woolgrowers of Australasia, for it may prevent future experiments of the same kind. Only one firm went into liquidation, but its liabilities alone were 80,000,000 francs (say £3,300,000), and five others were heavily involved and had to ask their creditors for time. It is to this speculative movement that the extraordinary rise and fall in wool in a short period was largely due. All sections of the wool trade expected a rise towards the close of last year, especially in merinos, owing to the shortage in the supply. It was this which led the French brokers into buying at enhanced prices for future deliveiy. It became known that enormous purchases in advance had been made, but it was not known that they were " dummy " purchases, and did not involve the handling of any wool at all. It.was reported that practically all the merino wool in themarket had. been bought, and the result was wild bidding on the .part of the manufacturers, which .sent ; uj> prices by leaps and bounds. The speculators— that is, the buying section — of course made large -profits, and they went more deeply into the game. But when it became apparent that the seeming demand for merino wool was fictitious, prices came down with a run, and the speculators lost all they had made and a great deal more. It may be urged that this speculation, in sending up prices, benefited Australasian woolgrowers. No doubt it put money temporarily into the pockets of some. But it struck manufacturers heavily, killed enterprise, and the I present "slump" in prices is the result. It would have been far better, for the growers if there had been less of a rise with a steady market. " Booms " are always followed by reactions, as sure as night follows day, and it will.be bad for these colonies if the wool market becomes the sport of the speculators.— H.B. Herald.