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none of its staff is allowed to visit the floor of the exchange. That is all I can say. Mr. LEVER. Do you know whether or not 450,000 bales passed on that day? Mr. NEVILLE. I do not. Neither did this man. Mr. LEVER. You do not know and neither does this man? Mr. NEVILLE. No, sir. Mr. LEVER. It is shown, however, that a large amount of sales did pass there? Mr. CoNE. Pardon me, if it is information as to what occurred on the floor of the cotton exchange you desire, I live in North Carolina, and I rarely go to New York. Mr. LEveR. You are a member of that cotton exchange? Mr. CoNE. Yes; but I use it in just the way that I have told you gentlemen. It is information I think you want. I think you are after facts; it is knowledge that you want? Mr. LEVER. Yes. Mr. CoNE. And that knowledge you can gather far more satisfactorily from other gentlemen here than you can from me. Mr. Cocks. You said you could not see where all this cotton came from that was dumped on the market after the slump 2 Mr. CoNE. Yes. Mr. Cocks. That was unlimited, was it not, naturally? Mr. CoNE. It could not have been unlimited, because if it had been unlimited there is no telling how low it would have gotten, but it was dumped in enormous quantities. Mr. CoCKs. It was dependent on the desire of the individual to sell? Mr. Cone. Evidently so. Mr. BEALL. Mr. Cone, in cotton transactions, from the time that the cotton is gathered until it is made into cloth, there is a certain amount of risk due to fluctuations in the market and other causes 2 Mr. CONE. Yes. Mr. BEALL. I understand that the cotton dealer, the cotton merchant like yourself, hedges to eliminate that risk so far as he is concerned Mr. Cone. When he sells forward cotton; yes. Mr. BEALL. The mill man when he buys cotton hedges to eliminate the risk so far as he is concerned Mr. CoNE. To quite a degree, sir. Mr. BEALL. Now, who finally assumes that risk? It is shifted from the dealer who buys the cotton, it is shifted from the mill man who buys the cotton; upon whom does it finally fall ? Mr. CoNE. Pardon me; as I said awhile ago, there is in existence right now in the world some millions of bales of cotton; I do not know exactly how much, but statistics will show probably six or seven million bales, or maybe more. But the mill man hedges against that cotton to a very great degree, particularly the cotton that is held by the cotton merchants, particularly as to the cotton that is held by the mill against which it has no orders on hand, and in such cases he puts out his hedges. When he sells his cloth he buys in those hedges. There are at times millions of bales on which hedges are given. As against that, take myself. I represent the other side of the question. On the other hand I have cotton sold for March, April, May, June, and July shipment.

Mr. BEALL. Against which you have hedged!

Mr. CoNE. Against which I have hedged some of those futures which those men have sold. If the market goes down, the mill man who sold his hedges will have to reduce the price of his cloth, but he is protected in the price of his future. If the market goes down, I will lose on my future, but against that I have got my spot cotton. I can reverse the illustration and put it just the other way.

Mr. BEALL. In that event you will be protected through your

hedging 2 § &se. Yes. Mr. BEALL. And the mill man will be protected through his hedg

ing: r. CoNE. Yes. Mr. BEALL. Is it not a fact that everybody that has to deal with cotton is in position to protect himself against these fluctuations except the man who produces the cotton on one side or the consumer of the cotton product on the other? Mr. CoNE. No, sir. Mr. BEALL. Have they any way of protecting themselves? Mr. CONE. Yes. Mr. BEALL. How? Mr. CoNE. In the first place, I buy every year in the spring of the ear—and in fact I will buy right now from these gentlemen, even if thought the market would go to 10 cents to-morrow—the cotton; that is, if they will give me a legal contract and show that they are able to stand up to their contract I would be glad to buy their cotton from them to-day, even though I believed—which I do not believe— that the market will go down. As I have on my books short contracts for spot cotton, just so I have on my books long contracts for spot cotton. At times I am able to pick up, down South, for forward shipment, some of this cotton. In fact, I bought just the other day at Vij some middling cotton at 153 cents. I balance that in my day's trading against my possession, and if my books do not make a balance with the spot cotton, I even it, up with futures. I bought that cotton from that man for March shipment. This buyer in Milledgeville, Ga., wired me that he had this cotton to sell. I wired him that I could use that cotton for shipment March 1. He wired back that he would accept my offer. That goes on the other side. Where I have got cotton sold I have got cotton bought. Mr. BEALL. As I understand you, you can protect yourself; but who finally accepts this risk? In the transaction you make you protect yourself É. hedging, but that does not lessen the risk that somebody has to assume. i. whom does that risk finally fall? Mr. ConF. The risk of what? Mr. BEALL. The risk of this fluctuation in the market, the very risk against which you guard when you hedge? Mr. CoNE. Pardon me; in the first place I do not believe farmers would raise cotton unless they could make money by raising it. Mr. BEALL. Were you in the cotton business in 1893, 1894, 1895, and 1896? Did they make money at that time? Mr. ConE. I was not in the cotton business at that time. Last spring I would not deal with the farmers themselves, but with merchants of standing. I have particular reasons, which nobody has questioned me about, but which I am itching to be questioned about, why I did not deal with the farmers. I dealt with merchants of standing and I bought a world of cotton last spring at 9.50 cents. I told those gentlemen “I believe cotton is going to 15 cents;” but the more I tried to tell them that I thought cotton was going up, the more they thought I had an ulterior motive in view—except a few who knew me well. The first 15,000 bales that I bought cost me less than 10} cents, and it looks to me like they would not have sold me that cotton unless they thought they would make money out of it. Mr. Boii. You think that answers the question as to where the risk finally falls? Mr. Cone. Well, as far as the risk is concerned, as I understand it, the exchange eliminates risks as much as possible. Mr. BEALL. As to whom? Mr. ConF. As applies to all men who will avail themselves of the benefit of that exchange. These gentlemen here can avail themselves just as I do. Mr. BEALL. Then the farmer in order to eliminate the risk would have to go onto the exchange and buy or sell future contracts as you do, to protect himself? Mr. CoNE. Not necessarily. He could come to me or go to the mill. If he will pay me the brokerage of 50 cents a bale I will sell his cotton for him to some mill, and I will sell his cotton to-day at 15.50 to 16 cents and let him have the mill contract. All I want is 50 cents a bale brokerage, and I do it in some instances for 25 cents a bale. He can eliminate his risk to-day if he wants to. Mr. HAUGEN. Is it not a fact that the risk falls on the speculator? Mr. CoNE. There is doubtless some money lost by speculators, but I think speculators deserve to lose. Mr. HAUGEN. That is not an answer to the question. Will you try to give an answer to the question asked by Mr. Beall, as to where the risk falls? Mr. CoNE. If it is the proportion you want to know, that falls on speculators. I do not think any living man can answer it or come anywhere near answering it. Humanity is humanity, and whether they invest in real estate or in cotton futures, or grain futures, or in the actual grain or cotton itself, either the one way or the other, they are going to take the chance for profit. he CHAIRMAN. It is the lambs that pay most of it, is it not? Mr. Cone. Of course, any man who loses, whether he be a smart man or not, is a lamb. The smartest man that I ever knew in my life went broke on futures; but he went to work and made another fortune, although he did not make it in futures, and he afterwards made a pile of money in futures. Mr. BEALL. How long would the cotton exchanges in New York and New Orleans last if they only bought and sold among themselves? Mr. CoNE. Well, sir, if we gentlemen locked ourselves in this room here and confined ourselves to trading among one another, I think we would soon lose the fun of it. Mr. BEALL. I rather think so, too. You are largely dependent upon the o supply of lambs in order for the exchanges to prosper, are you not Mr. CoNE. Well, sir, that does not necessarily follow. Mr. BEALL. Does it not take three kinds of people to make a prosperous exchange—bulls and bears and lambs?

Mr. ConF. As I showed you a while ago, this mill man can make money on his cloth, and I can make money on the cotton. The mill man can have sold and I can have bought that cotton, and we both make money, and yet at the same time he would have paid me the balance for his over profit by having hedged. I could show you transactions on the cotton exchange where we all made money; and it is not necessary to have lambs, and Mr. Neville or any of these cotton exchange men can prove that to you. There are propositions where they can all make money.

Mr. BEALL. I understood you to say that Mr. Patten could corner the spot cotton market. , Has anybody ever cornered the spot market?

Mr. CoNE. I believe there have been successful corners carried, but only once or twice. I think that Brown and Hayne some few years ago—I have forgotten the exact year—successfully carried cotton and maintained it up about 13.75, or somewhere up there, but they never could have done it if the supply and demand situation had not been with them.

Mr. BEALL. What happened to Brown?

Mr. ConE. I do not know, sir. What happened to him?

Mr. BEALL. Yes.

Mr. CoNE. I do not know what you mean. Did he go broke afterwards?

Mr. BEALL. Yes, he did.

Mr. ConF. If he did, I do not know it.

Mr. BEALL. I thought somebody of that name once attempted to raise the price of the cotton market and met with sudden disaster.

Mr. CoNE. I will tell you, some of the smartest men I have ever known have tried to corner the cotton market and went broke at it. As smart a man as far as classical intelligence goes, as ever lived, tried it and went broke at it. I do not think any man ever was Theodore Price's superior, and I have heard of him going broke on more than one occasion.

Mr. LEVER. You have spoken during your remarks of the law of "No. and demand 7

r. Cone. Yes.

Mr. LEVER. Do you think that the law of o and demand had anything to do with the transactions on the New York Cotton Exchange during the month of January 7

Mr. CoNE. Yes; if it had not been for the law of supply and demand there is no telling how low cotton would have gotten. For instance, take the mills that I sell cotton to. Knowing that that cotton was too cheap, they bought cotton from me at a price that I could afford to sell them that cotton at because we dealt with the law of supply and demand. In other words, we felt, we knew, we could get cotton cheaper right there than anywhere in the world. I could not buy from these farmers for 15 cents, but they wanted cotton for March, April, May, and June shipment. I sold them cotton at 14% cents that I could not buy at that time, and I never have been able to buy it at that price.

Mr. LEveR. So that you have not got the cotton now?

Mr. ConF. I have not got the cotton now, except in such instances as I mentioned, where I bought that cotton in Milledgeville; but I bought that cotton on the New York market because that New York contract meant a certain thing to me and I knew that that meant actual cotton, and I sold actual cotton; and that is what that contract means, when you look at it face to face, in all its trueness.

Mr. LEVER. I understood you to say that you did not have the cotton; and if you were called upon this moment to deliver that cotton, could you do it?

Mr. CONE. My contract does not specify for shipment in the month of February; but if that mill were to ask me for that cotton to-day I would be delighted to give it to them. And why? Because I can buy the cotton cheaper proportionately to-day, probably, than I can later on. Anyway, one thing I do know, that that cotton I sold at 14} cents I can pay 15.75 cents for to-day-in fact, I can pay 16 cents for it to-day and make money on it.

Mr. LEVER. But in the meantime you have got to go out and scrape up that cotton and get it somewhere to be delivered at a time in the future?

Mr. CONE. Yes; and that puts me at the mercy of these gentlemen, and I am glad to be at their mercy.

Mr. LEVER. And the only guaranty you have with the man with whom you have your contract is your own financial standing?

Mr. CONE. Yes; I suppose so. I do not know the reverse. I do know that they are glad to have my contracts, and they know that when the time comes, if I have to pay 40 cents a pound for that cotton, thay will get the cotton.

Mr. LEVER. Yes; they risk you because you are a man of financial standing.

Mr. CONE. I know some men of financial standing in my community that could not get the contracts I could get, that are worth, maybe, more money than I am.

Mr. LEVER. That is due, of course, to your good moral standing, then. Now, the Government's estimate of the cotton crop was made along about the 1st of December and it gave us a crop of 10,000,000 bales. Upon that estimate the cotton went up in January to 16.50, or approximately that. During the month of January there was a tremendous drop in cotton of $15 a bale. Your proposition is that this law of supply and demand governs the situation. You had, all through the month of January, one side of it. You knew the supply. The only question involved was the demand. Yet cotton broke $15 a bale.

Mr. CONE. I beg your pardon, cotton did not break $15 a bale; futures broke.

Mr. LEVER. Were these future transactions legitimate or illegitimate transactions ?

Mr. CONE. I could not say that, but I do know that it paved the way for future transactions that are of unquestioned benefit for cotton. It enabled me to sell the mills cotton and to sell futures against it which, if the market had not righted itself, I would have gone to New York and demanded the cotton on my contract.

Mr. LEVER. We have understood that your hedging is in actual cotton.

Mr. CONE. Yes.

Mr. LEVER. Do you mean to tell the committee now that all of the enormous fluctuation in the month of January of this year, when cotton was fluctuating from 100 to 150 points a day, was due to hedging ?

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