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he attempted to market that cotton and sell that cotton, he would lose more than he would have made in his corner, and if you will read the history of all corners, you will find that when they did not have a short supply and a big demand-in fact, in ninety-nine cases out of one hundred—I believe the corner has failed. He might have temporarily succeeded in his corner, but if his ultimate profits were proven, you would see that they were on the wrong side. I was advised to buy coffee about four years ago because the Brazilian Government was going to buy about 10,000,000 bags of coffee. I said to my friends, “Gentlemen, that can not succeed. They have been making too much coffee in the world, and the very consciousness that the world has that that supply overhangs the situation will prevent the rise," and, gentlemen, if you will look up statistics that has been about four years ago—you will find there has been no hope for coffee until recently. But now I believe there is a spark of hope, because I believe this year it is generally believed they have made a short crop. But I doubt even now they can succeed in any rise unless they make another short crop on top of this short crop, which will put the whole coffee situation back on its feet again, perhaps.

Regarding town buyers dividing up their business, which a gentleman spoke of here yesterday, I would like to know how on earth the putting of exchanges out of business will help a situation of that sort. In fact, I would like to know how, if the exchanges were put out of business, you would prevent just the reverse of that. You take, for instance, the men who sell cotton in that town. If they will wire over to me or any other of the ten buyers they can always get a fair offer for their cotton, and I can point them to a thousand other buyers who will make them a fair offer for their cotton, for we are beholden to no one. If their own buyer will not offer them a fair price, they can go anywhere outside of their own town. But you would have very few buyers, eventually, in proportion to the amount offered, if you put the exchanges out of business. It looks to me like it would be mighty easy for a continuation of that sort of thing. Besides that, those men in that town know what cotton is worth, because they get all this information that is disseminated by these exchanges and by the brokers on the exchanges, and I find my experience in dealing with the average set of cotton men is that they know about as much about cotton as I do. Personally, I, or the buyers in my town, will buy from any merchant or dealer anywhere. I do not say “farmer," in that, because my experience, gentlemen, with the farmers has been mighty disastrous to me. I even compete with my own brothers in buying cotton, and they are my own best customers at the same time.

If we had no exchange to protect a farmer with figures and knowledge, and to make me be good, gentlemen, I am only human, and I think I would give way to temptation, and I think Mr. Parker would, too. I want to say—and I will bear evidence to what Mr. Webb told you gentlemen yesterday—that at least 90 per cent of the mill men are bears. They become, for some causes which I have never tried to analyze, so that they are always against the market. You leave the markets to them, gentlemen, and if we made a great big crop of cotton I think they would let Mr. Farmer carry the cotton until it tired him out anyhow, even in spite of his warehouse. As I said, the farmer can sell cotton any day, and he can find a buyer for it any day, as the situation now exists. I do not believe you would find a condition like that if you had no exchanges.

I buy from the South, speaking of contracts, even running contracts. I buy a great deal of cotton that is shipped to me from all over the South. I have cotton shipped to me from Texas, Arkansas, Georgia, Oklahoma, Alabama; there is not a State in the South from which I do not buy cotton, even outside of my own State. There is very rarely a shipment of that cotton that comes in of the grade sold me. We have to pay for cotton before we ever see it. They draw on us for that cotton, sight draft, bill of lading, and it is not one time in a thousand but that the draft gets in before the cotton.

Speaking of the number of grades deliverable on the contract, we have had in single shipments much more than ten grades of cotton delivered us on a contract. There are many people who are not judges of cotton, who do not understand some things about it. For instance, a lot of cotton may look absolutely white, but contain some yellow spots. It can be the finest sort of a grade of cotton, but if it contains those spots the value of that cotton is hurt. It is hurt much more materially, really, than the small amount that we claim it is hurt. For instance, you will see, perhaps, a lady's fine shirt waist; or take, for instance, the white shirts we wear, which require pure white cotton. The mills that use the cotton, if they find in the shipment of white cotton that is sold them some of this cotton with just these little spots in it, they are just as hard put to use that cotton as if it was all yellow cotton, or "tinges," as we call them. I think that is all I have to say, Mr. Chairman.

The CHAIRMAN. I would like to ask you a few questions, if I may. Mr. CONE. Certainly, sir.

The CHAIRMAN. The whole drift of your argument, as I have caught it, has been to the effect that a future market was necessary in order that cotton dealers might hedge, and in that way be able to buy cotton whenever it is offered, with the assurance of suffering practically no loss. You stated that a future market has made it possible for you to sell on a rising market and buy on a falling market. You stated that in some recent cases your profits had been even inordinate, in view of the peculiarities of the future market. Can you give any reason why a dealer in cotton should have a future market, in order to protect himself against loss, that does not apply also to a dealer in wool, or a dealer in iron, or a dealer in cattle? To give you a concrete illustration: A friend of mine last fall went to Texas and bought 700 or 800 head of young cattle, borrowing the money necessary to carry them over the winter, and shipped them up into Kansas, with the expectation of feeding them and turning them off on the June market. He made the deal absolutely on his own judgment. There is no future market in cattle whereby he can protect himself, and he stands to make a profit if the market is right, and he stands to lose a large sum of money if the market goes off. Is there an reason why he ought not to have a future market in order to protect himself ?

Mr. CONE. Mr. Chairman, in the first place, in speaking of this question as applied to the hedge dealer, I have done my duty but poorly if I have created the impression on you that this market was

of value—that its principal value was—to the hedge dealer in cotton. The great value .Pthe hedge market is that it enables the placing of a crop, the value of which is about a thousand million dollars, or in that neighborhood. It places that crop—the future markets of the world -have placed it—so that there can be no great forces for depression at any time against that market, because you can spread these things, owing to the thousand ramifications that surround us dealers, as well as the mill men and the hedgers all over the world. We can spread our business; we can go right in and spread the thing over a whole long period of time. To answer your question as applied to wool, I can only remember back to the time I was a drummer on the road in the wholesale grocery business in Baltimore, and I bought dried blackberries from farmers. When I bought them I used to go out and sell groceries and buy berries—we did not have any exchanges at that time—and I bought them pretty cheap. If the market went down. I would sell for a reasonable margin to guarantee me against possible decline before it could reach the price at which I would suffer loss. The CHAIRMAN. Then, I gather your suggestion of the future market in the cotton trade is that it creates a steadier market for cot. ton, for one thing, and, on the average, a higher market? Mr. CoNE. Human nature, sir, is essentially optimistic, and human nature at the same time is essentially selfish. If you leave this matter between the intelligent mill men—for on an average they are more intelligent than the farmers by far with whom I have come in contact—if you leave this question simply between those two, I know who will lose. The CHAIRMAN. That is hardly an answer to my question, but it conveys your reason, and I am glad to have it. Just one word further on the matter of this hedging business. You stated that in one of your transactions you made an inordinate profit. It was common report some weeks ago that Mr. Patten had come down to New York and with the laurels of his Chicago wheat deal fresh upon him, ha picked $5,000,000 out of the New York cotton market. Assuming that to be so—and I will not say whether it is true or not, because I do not know—but assuming that to be so, and remembering your own statement about your own profit, who paid the $5,000,000? Who was the fellow on the other side, and who suffered the inordinate loss that enabled you to make an inordinate profit? Mr. CoNE. In the first place, Mr. Chairman, I want to say this, that I regard Mr. Patten as one of the ablest merchants of the age. Mr. Patten, from the best of my observation, and I have observed the actions of that man for years, is most generally a bull on the market—occasionally a bear. I have noticed his action in movements in oats and corn—oats is a favorite of his. Last year was the first time that any big operation of his in wheat came under my observation. Mr. Patten sees an opportunity, and, as a great merchant, avails himself of it. It is a matter if he can buy more futures, more May cotton, and, candidly, I believe Mr. Patten is going to give you a little corner in May cotton; that is my honest conviction. He is a Smart man. The CHAIRMAN. Could he give us that corner if there was no future market? Mr. CoNE. Yes, sir; he could corner the actual stuff.

The CHAIRMAN. But it would take a good deal more money to do it, would it not?

Mr. CONE. Mr. Patten, as a man of great wealth—for he must be a multimillionaire-could borrow within $10 a bale easily of the value of cotton, and it would not take so much wealth as would appear on the surface in that way.

The CHAIRMAN. Dropping the question of the corner, I do not want to get away from the question of his profit. If he had been able to actually buy, say, 5,000,000 bales of cotton, and had sold that cotton at a profit of a dollar a bale, nobody would have questioned the transaction, and nobody would claim that somebody else had lost the money he made. But, as a matter of fact, we know that he did not in all probability transfer and did not deliver a bale of cotton, and no one who bought his contracts received a bale of cotton. It was purely a transaction in margins. Does it not follow, therefore, that somebody must have lost the money he made ?

Mr. CONE. Mr. Chairman, a great deal of that money is lost in a way I call legitimate, according to my judgment, and a great deal is lost in a way I consider illegitimate, but illegitimate in the way that commerce runs. Wherever there is a chance to gain, right there you will see the selfish human being actuated either through one motive or another, most of which are not for the best, trying to make profit/or many of which are not for the best. To illustrate: I frequently buy in the spring of the year a great deal of cotton for fall delivery. I was unselfish enough last fall—and I can bring you affidavits to prove that, if you wish—to advise my friends in the country not to sell their cotton. Yet, in spite of that, about May, when it got up to about 11 or 12 cents, they could not resist it. They said, “We want to sell it, anyway." They felt they could make a profit. I told them then that I thought cotton was going to 15, and I can bring you affidavits to that. When cotton was bringing 9 and 10 cents I thought it was going to 15, for various reasons which I could give you. Last fall I did not hedge against that until the price got above 12, although I thought it was going to 15. I still put my futures out against it at 12 and a fraction cents. Ordinarily I do not wait to put my hedges out, but I was so dead sure that cotton was going higher, and at that time the cotton was so cheap, my first 6,000 bales of spot cotton cost me less than 103 cents a pound. Ordinarily I sell those hedges at once, and in that way there is a great deal of confusion on the short side going into the market, and, in fact, to-day there exist in the world I don't know how many bales, probably six or seven billion bales of cotton, in the hands of mills, in the hands of dealers, and in the hands of farmers. The farmers rarely hedge; the mills and the dealers do hedge. For instance, I represent one mill that has now short hedges against its cloths and against its cotton on hand of more than 10,000 bales. In New York somebody has bought that cotton; I do not know who has bought it. It is a legitimate transaction on the part of the mill, because it is against its cloths which it has unsold, and it is against its cotton which it has not spun. Like myself as a dealer, that mill tries to preserve an equilibrium. In fact, that mill has pursued a system of hedging that way, and it has probably sent to New York; it made big money last year in spite of the fact that it constantly sends to New York a great deal of money. If it had not hedged, its

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profits last year would have been simply fabulous. It sends to New York constantly against these hedges money. I send it for them myself in many instances, and that money went to the man who had the other side of the deal.

As regards speculation, as I say, what proportion represents speculation and what proportion represents dealing is past me to say.

The CHAIRMAN. To come right down to brass tacks, we all know, I think, that whatever sum Mr. Patten won—to use that term just as if we were playing poker—whatever Mr. Patten won in the cotton market somebody lost—some other man who was a speculator just the same as he was.

Mr. CONE. Pardon me, Mr. Scott; just as in the instance I mentioned, no one has lost. That mill has sent to New York, as I know of, more than $100,000, and still I am a stockholder in that mill, and it made dividends I was proud of.

The CHAIRMAN. It will be admitted, I think, that the cotton exchange, as now administered, has some evils. You said yourself that, in your judgment, it was an ethical and a moral question, to a considerable extent. Can you give any reason why an institution which admittedly has some evils, which permits men to speculate with money which they do not own, or with money which they can not afford to lose, which involves men in bankruptcy sometimes, and sometimes is worse than bankruptcy-can you tell me why such an institution should be maintained in order that you, as a cotton dealer, or your brother as a cotton manufacturer, should be able to protect himself against a mistake in judgment ?

Mr. CONE. I would like to answer that by a question. Can you tell me, on the other hand, why the best should suffer by the action of the worst, Mr. Scott ?

The CHAIRMAN. Pardon me; that is not the question; at least, it is not what I am trying to get at, and I am asking in all good faith, because I want to get your views upon it. Men engaged in other businesses do not have any future market on which to hedge. I am in the newspaper business. I can not go somewhere and protect myself against a falling off in the business somewhere along the line. An iron manufacturer who must take his orders a year or more before he can deliver the goods can not go into the market somewhere and guard himself. What peculiar divinity hedges about the cotton business that should make it necessary to maintain this institution in order that the man engaged in that trade should not take the chances that men engaged in other businesses take?

Mr. CONE. Mr. Scott, you are speaking of the newspaper business. I do not know much about it, but I think I have read a little something in the papers about these big profits you are paying on paper that you buy.

The CHAIRMAN. "If we do that it is because our judgment is good and our management is good. It is not because we can go into some market and protect ourselves with a future of some kind. _Mr. CONE. Mr. Scott, it is simply a matter of evolution, as it were. This question impresses me as being whether we are going to have an evolution forward or an evolution backward. If you were to put the exchanges out of business, to the best of my knowledge and belief it would be like the conditions when I used to travel on railroads, and in a lot of counties in which I traveled there was great

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