51 AND TimmCE OF' A LOW OF MEM ffc--7
Why grain speculation
' ' Jr rJr'. : -I ! by me general public
Mrw:Va 4& .;mW t ' - I wOT . i J)
' ' mlllS&y . Ml
8 . .vxv 1 . , o . -; .. PfjtWfi .1 "k kiM;J' I
: -4,,r ' . At l -V M . II ' -- i
f t 11 i".! t - . " v , - lJ ' they used to when the market was active,. 1L . .MiMtMf"" j'- i - 3
. - I '--X'i mu-sjiJ-rt& fH V - X jf - I fSi 1 As a rule no actual wheat changes fiH v V , JnJ
t !" H 3S,l' 1. i--':? i r I I ' 2 rSli hands at all in these operations. None of fl! , Jv s
: j'sJ- l: I If' " ' . in' these dealers are technically bucket 8hop Uh SSw ''
,,v ; - ' I" " ' L - I t . ' X ' operators, yet in effect some of them IJ j j 7
' . ' , - ' -"V ' f? : fl are merely little gamblers in small fig- ,W 1 - . J( " 1 )
" . NO I t 5. - I urps on the rise and fall of the market. W g y" ""'wl wtomi t s '
v v s s s - IjCi li i I being delighted when a lucky swing of A tm'S j - If !
; I lp "7 l"',- -,iig',4wi7M' 'mjLy tZr I' S ' ' ! fW a cent or a fraction thereof nets JS or Bjl; S f I ' ' -i tl
BMlgj jjl f-S alld COrreSPnd'j1Sly dCPeSSed Wllen "'' if
" ' X yit f ll ' seen on the exchanges nowadays are of Jk s i , S
.O ir. vi WV r...r. .'. J I I this type; the legitimate market Is big IjS f J ? j
5 iS " J f- enough in Chicago, New York, Minne- pi ;fe ' -!awtwii nmm.mum. J
Pi itlfi-1, k T- - apolls or St. Louis for an operation in J s -tf f , ' ' '
I 1 O Wl ' Y '""'rjf ""ii""""'-.' JAr wheat amounting to as much as 1.000.000 fSfj "" '"""" mwtiinmmmm)ilmr -
LA ? 1 crowded as it would just after the, . , e4f($r&-, f XVV bushels to go through without attracting W J- w..' .. i 1 , - 535
.. cnlkipye of a big deal like Leiter's, for , . E-V jf jCSvvjt much notice, and operators of magnitude raj -"-SSZl I -X 5 4
V7 instance, for the shock would scare V- . ySS55s are represented on the wheat pits of the Iftt f -I , ! (
rV, s4PJ practically all "the amateur specula- ? SI JV 3"ax) country almost daily. But for all that. f ft iirr ,., ., . j L-s v x 4i w . i f IS
Cf JAVJ would foolishly cut rates. it was iST Ji evidence tnan any one eise an uiruugu J i ), I I I "u "v
GAMBLING in wheat isn't nearly
so common a way for amateur
speculators to risk everything
nowadays that they may "get rich
quick'- as formerly, the Stock and Cot
ton Kxchanges being more popular
with the lambs for several years than
the wheat pit.
But gambling In wheat Is still going
on among the professionals and plans
are now under way to bring back the
public interest therein to its old level.
If these plans work, the wheat-market
will be as lively as ever within
a few months.
Insiders laugh when you'ask if the
extension of the world's wheat belt
and the consequent inability of Amer
ica to control the world's markets are
the main reasons why so little is heard
about the wheat pit nowadays, and
aay the chief reason there has been
so little wheat Rambling, comparative
ly, within the last few years is that
the commission dealers haven't been
getting as much out of it recently as
formerly. .
"This main reason," said an author
ity in wheat a day or two ago, "isn't
often mentioned "to outsiders. It is the
little matter of compensation to the
lonicniaslon men. For some years it
has been more profitable for them to
ster their customers into stocks or
coff'e or cotton than into grain. It
is iiow proposed to bring back the old
conditions. Don't look for startling
developments too soon, though.
"Grain brokers like rising prices be
cause they mean a hvely market and
plenty of business, but the pay they
get for their work is just as much
for each bushel dealt in when prices
are going down as when going up.
"Ill the palmy days of. wheat specu
lation, the .commission man received a
quarter of a cent for every bushel he
bought or sold.. No one dreamed of
cutting the rate. For placing Europ
ean orders he got half a cent a bushel
-sometimes a cent. Such orders were
then often enormous, the home public
was gambling freely in wheat, and it
is uo wonder, that the commission
houses grew rich rapidly.
"But when the business became over
crowded as it would just after
collapse of a big deal like Leiter's,
instance, for the shock would scare
practically all "the amateur specula
tors out of the market the brokers
would foolishly cut rates. It was
amazing. From a quarter of a cent a
bushel on domestic orders and from
haf a cent and a cept on foreign or
ders, the rate of commission sank
gradually under pressure till it got
down to one-sixteenth for orders of
both kinds.
"It is easy to figure out the cut in
the compensation coming to the com
mission dealers. From $25 on a 10,000
bushel transaction, $2.r0 on a 100,000
bushel deal and $2500 on a deal of
1,000.000 bushels, the commission sank
to $6.2."), $t2..0. $625. There could be
only one result. There was no longer
money enough In the business to suit,
so the big - commission houses eased
up in promoting grain speculation. Also
thev boueht seats on the Stock and
Cotton and Coffee Exchanges. When
their wheat customers outsiders,
amateurs with money they, wished to
double, without working for the profit
offered their cash for speculation in
wheat, the commission men would ask:
" 'Are you particular about dealing
in wheat? You can get quicker re
turns on stocks or cotton or coffee.
There isn't any such activity in wheat
as there used to be. and of course you
can't make money on a stagnant mar
ket ' -
"Naturallv. the amateur speculators
would pay" attention to this sort of
talk, and that is the real reason for
the falling off in wheat speculation.
"But the commission houses them
selves have never pot out of wheat.
Thev continue to hold their places on
the "Chicago Board of Trade and the
New York Produce Exchange in order
To do their regular business for the
legitimate merchandisers in wheat.
And these old-time commission houses
will be as ready as ever, by and by.
to steer their amateur customers into
the wheat pit again. Their plan for
making things right for speculative
wheat dealing is the exeremely simple
one cf putting the commission rate
back to a quarter of a rent.
-It would have been put back years ago
had it not been for the fear every com
mission man on every exchange in the
country had that It couldn't be held
there, and that any attempt to hold it
would befollowed by a regular cut
throat war for business, precipitated by
the weaker houses, that must have the
business or die.
'The feeling of distrust has now been
done away with somewhat. At all
events, the Chicago Board of Trade has
onita recently officially put the rate back
THE SUNDAY OREGONIAX, PORTLAND, MAY 13, 1906.
to a quarter of a cent. -Milwaukee has
followed Chicago's lead ,and efforts are
being made to bring New York. St: Louis,
and Minneapolis, the other strong wheat
dealing centers, into line. Within a day
or two after Chicago's action, commis
sion houses that had long been letting
wheat alone began to shake themselves
together, with the avowed purpose of
seeing that somebody should get busy in
grain speculation as soon as possible, and
now the professional market statisticians
are thanking their . lucky stars for the
renewed interest in wheat which gives
profitable employment to them."
The elimination of the mass of amateur
wheat speculators, caused by the .cut
throat rates for ..commission dealers,
steadied the market immensely and made
it more satisfactory for legitimate wheat
merchandizes. It benefited the con
sumers, the great bread eating public,
too.
Theoretically every fluctuation in wheat
must affect the price of the loaf. In fact,
however, minor fluctuations touch the
public very little, though abnormal and
sustained rises in prices, such as some
times come when there is much gambling
In wheat, are felt markedly by the pub
lic, especially that part of it whose in
come is just about big enough to meet ex
penses. It is the baker, not the consumer, who
suffers from a moderate rise In wheat.
One cent on a bushel ot wheat means five
cents on a barrel of flour, ten cents on
a bushel fifty cent. Ordinarily fluctua
tions do not Justify any rise in the price
of the loaf or any cutting of It down.
A rise simply means less profits and a
drop more profits for the baker, unless
the change is a big one. The consumer
invariably Buffers from a big rise, though
he doesn't often know it. The baker must
take care of himself or be crushed be
tween the wheat gambler's speculation
and the consumer's need, and he has
more ways of protecting his business
than raising the price of the loaf. He may
reduce the weight enough on each loaf to
save himself and nobody be the wiser.
He may use a cheaper grade of flour. He
may add deleterious or useless substances
In mixing his bread. It Isn't until the
price of wheat has been put away above
the normal that he has to raise the price
of the loa sufficiently, as he did in IS'JS,
.-otiiiB V i T the past Winter and Spring; their thin - " Xk
? t ly in the space that used to be jammed I I :Tr-
to make tho consumer sit up and take
notice. .
Wheat Pits These Stagnant Days.
Most of the time, ever .since Joseph
Leiter's great operations, the Armours
have been the controlling influence in
wheat, putting the market up and down
from time to time, and taking more or
less steady tribute from dealers less pow
erful or less skillful than themselves.
But the general public has kept out, as a
rule, though there was something of an
influx of amateurs into the market in
1902, when the Armour interests got the
price of September wheat up to 96 cents.
There was another influx of outsiders
last year when John W: Gates was boost-
Ine the market, but it didn't last long.
and at its best wasn't to compare with
what the commission men are now hop
ing for. ,
It is not the policy of the Armour in
terests to make the general public so
wrought up as to create thousands of
amateur grain speculators. No qne knows
so well as the Armours that, once the
general public gets Into the market, it
may become uncontrollable any day, when
the loss or winning of millions is likely to
be merely a matter of accident.
In their recent wheat operations, then,
the Armour interests have not made a
vast amount of money out of the ama
teurs. It has been the smaller legitimate
buyers and sellers of wheat, the milling
men. exporters ,and the like who have
suffered, besides the rather mournful old
guard or smaller commission dealers who
cannot afford to buy seats on the Cot
ton. Stock or Coffee Exchange. They
are now to be seen grouped in the wheat
pits of Chicago, St. Louis, New York
and other wheat centers on every work
ing exchange day in the year. Perhaps
they are .more anxious than any other
of the wheat-dealing elements that the
old commission rate of a quarter of a
cent- shall be restored and maintained.
but .it is from their weakness that its
integrity is in greatest danger.
There are from 50 to 100 of them in
New York, a small number only being In
evidence on ordinary days, and their
full force is never called out except when
the dispatches show considerable changes
in the market. Some of these men do
not deal much in wheat for others, as
they used to when the market was active,,
but solely for their own account.
As a rule no actual wheat changes
hands at all in these operations. None of
these dealers are technically bucket shop
operators, yet in effect some of them
are merely little gamblers In small fig
ures on the rise and fall of the market,
being delighted when a lucky swing of
a cent or a fraction thereof nets $25 or
$1(K, and correspondingly depressed when
there is a loss of like amounts. .
Don't understand that all those to be
seen on the exchanges nowadays are of
this type; the legitimate market is big
enough in Chicago, New Y'ork, Minne
apolis or St. Louis for an operation in
wheat amounting to as much as 1.000.000
bushels to go through without attracting
much notice, and operators of magnitude
are represented on the wheat pits of the
country almost dally. But, for all that,
the small traders have been more In
evidence than any one else all through
the past Winter and Spring; their thin
and Irregular ranks look pathetic" in
deed as they stand about and deal tame
ly in the space that used to be jammed
and crowded with a frenzied, excited
mob of yelling,' hulloolng men whose in
articulate sounds, whose very gestures
were of the utmost significance to them
selves and those about them, though
insanely meaningless to every one else.
The Gates Deal of 1005.
It was believed last year that John W.
Gates had a possible corner In his mind
and he actually did go into a big wheat
deal, which brought a bigger contingent
of the public into the pit, figuratively
speaking, than had been seen there since
1S98. Gates started In on this deal when
May wheat was quoted somewhat above
$1; Its highest quotation last year was
$1.18; then it broke, ana many
1 ket observers believed that he had lost
. a lot of money. There were rumors that
he had acquired from 15.000,000 to 20.000,
000 bushels, and as the market went as
low as SWi on the break, the belief in
his heavy losses was apparently justi
fied. Later, however, there were indications
that Gates and his crowd were hurt very
little by the market's collapse; many
shrewd students of the situation, in fact,
believe he was really well ahead of
the game by the middle of May. They
admit that -he was apparently heavily
long on wheat In the months between
January 1 and May L 1305, and that he
sold out when prices were lower than
those at which he bought a large part of
his holdings, but that he recouped him
self atter all. Here Is the story so far
as known, as outlined by an observer
outside the Gates crowd:
"There were . rumors in Chicago
around midwinter that a Wall-street
combination had been formed to put the
price of May wheat to $1.50. The whis
pered tips were worked into paragraphs
In the slips sent out by the commission
houses and found their way Into the
newspapers. By and by it was said that
John W. Gates was 'back of It." Then
It was admitted that he held a large
quantity of wheat and was 'long1 in the
market because he believed the supply
would be so short of the demand that
the price would advance to near the dol
lar and a half mark.
"The market broke on April 5. when
Gates sold wheat in quantities at Chi
cago. Prices dwindled every minute
thereafter. But before the break had
gone very far news came, in that some
one. no one knew who, was offering a
big quantity of wheat for future deliv
ery at Minneapolis, St. Louis and other
places outside of Chicago. The decline
was checked, but later more wheat flood
ed the market. Then the resulting slump
was again checked in Chicago. This was
repeated several times till April 29. when
low-water mark for May wheat was
reached, the total drop being 324 cents,
or $322.60 on every 1000 bushels.
"Now. if Gates had lost at tho rate
between the high mark of $1.18 sm April
5. when the market broke, and the low
mark 86Vsc on April 29. his total losings,
had he held 2O.0CO.000 bushels, would have
amounted to $6,150,000. Nobody supposed
he lost any such big sum. for he' sold a
large proportion of his wheat at much
higher figures than 86Vic, but until the
mystery of. the offerings following each
of the breaks was figured out his losses
were supposed to be somewhere in the
millions at least. .
"But, when it was reasoned that these
outside offerings of May, July and Sep
tember wheat were probably short sales
by Gates himself, who was able to buy
for delivery at the lowest figures. 864c,
It was easily seen that in that way he
could have covered his losses and even
made a net profit, as everybody now be
lieves he did.
"The hindsight of the losers was won
derfully clear. When they bought they
had no notion that, they were buying
from. Gates, the sales being made
through different brokers in different
places and often In small lots. It is
doubtful whether the brokers who served
Gates in April, 1805. had any idea them
selves that he was their principal. .
"It is believed that Gates went into this
operation honestly convinced that the de
mand would so overleap the supply that
the market would rise to high figures. His
reasoning was much like Joseph Leiter's
when he bean the corner which closed
him out a heavy loser eight years ago
next week. In 1S97 he believed the supply
of wheat would be away under the de
mand and acted accordingly. But Lelter
din't know when he had enough and
'overstayed the. market,' while Gates saw
39
just when he had acquired a sufficiency
and didn't 'overstay.' Charles Gilbert
Gates. John W.'s son, took quite a hand
in his father's big wheat deal."
Gates' deal lasted less than half a year,
and Its high record lasted hardly long
enough either to raise the price of the
loaf or lessen its size. Leiter's deal lasted
more than a year and put the price up so
high and for so long that It actually did
Influence the price of the loaf, its quality
or ita size at nearly every breakfast table
in this country, and .possibly across the
sea,
Leiter's deal was ' heralded so widely
that he became one of the best known
men In the country; In the entire world
of trade and finance, for the matter of
that. Undoubtedly this man. then only
about 30. who had achieved nothing
whatever except by the aid of the dollars
his daddy had accumulated, was taken
as an American type by the outside
world.
Lelter began operations on April 10, 1897,
with wheat "low" at 64 3-4 cents. Be
tween then and July 1, 1898. he bought
8.000,000 bushels for July delivery at an
average of 68 cents. - He sold It at an
average of 75, and on July 31 had made a
net profit of half a million dollars.
The young man went into a new deal
in September wheat almost before the
settlements of his earlier operations had
all been made. On this September deal
he was said to have cleared $720,0000; on
a December deal, $330,000, and on a deal
in wheat for delivery the following May
(lb9S) his profits were announced as
$1,840,000, making a total of $3,850,0j0.
Right on top of his wonderful profit
taking of May, 198, ho went Into a fresh
deal. He seemed to think he could go on
forever, following one suceeBsf ul deal
with another, but he wasn't to wait long
for enlightenment on that point. On
June 14 wheat broke and everything
closed in on him at once. A day or two
later It was known that his losses ha'd
more than wiped out the millions he had
made In all his previeus deals.
Luckily for him there were more Leiter
millions where the first million given to
him by his father had come from. The
(Concluded on Fare . 40. j