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Mr. WEBB. No, sir. The CHAIRMAN. Why is it not just as necessary for the wool factor to have a future market in which to hedge his sales as it is for you as a cotton factor? Mr. WEBB. I do not know how the wool market is controlled. I am not familiar with the wool market. I am only familiar with the spot end of the cotton business. I am not familiar with the future market. I do not speculate. The CHAIRMAN. How was the business handled before there was future market in cotton? Mr. WEBB. That goes back too long. I have been in the spot business for twenty-five years, and we have always handled it in that

WaV. oie CHAIRMAN. There must have been a time when you handled it some other way. The future market has only been in existence since 1870, I believe. Mr. WEBB. Yes, sir. Back beyond that time there was very little cotton raised, though. Now we are getting up to thirteen and fourteen million bales a year, and we have got to take care of it some

WaW. oie CHAIRMAN. There must have been relatively large crops before that. Mr. WEBB. Of course, there were large crops of cotton, but nothing like what we are having now. The CHAIRMAN. And whatever was grown had to be marketed and sold 7 Mr. WEBB. I do not know how they took care of it back there. The CHAIRMAN. Woolen cloth is worth more than cotton cloth. Mr. WEBB. Yes. The CHAIRMAN. Therefore a woolen manufacturer who makes sales for future delivery must invest a great deal more money than a cotton manufacturer. Mr. WEBB. Yes. The CHAIRMAN. If it is necessary for the cotton manufacturer to hedge against the delivery of his goods in the future, it would seem to be all the more essential for a woolen manufacturer to hedge; and pari passu, if the cotton dealer is obliged to hedge against his future sales, you would think that the wool dealer would also have to hedge. Mr. WEBB. I can not answer any question about the wool business. I am not in that business. Mr. Cone. May I have your attention a while ! I may be able to give some explanation to this wool question. The CHAIRMAN. You will be before the committee to-morrow, Mr. Cone. I do not want to protract this hearing this evening. I only thought that Mr. Webb, being in business as a cotton dealer, had had his attention called to the manner in which the wool business is carried on. Mr. WEBB. No; I do not know anything about that. N Mr. LEveR. I understand that you represent the firm of Weld & eville. Mr. WEBB. No, sir; I seli cotton for Weld & Neville. I sell cotton for 15 different concerns. Mr. LEVER. You represent New York houses?

Mr. WEBB. I represent more southern houses than New York floused. They are the only New York house I represent. Mr. LEVER. I only take your illustration to get at one point that I am not clear on. Mr. Parker telephones you that he wants 6,000 bales of cotton, to be delivered to him from January to July 7 Mr. WEBB. Yes. Mr. LEVER. You telegraph Mr. Neville, you say, and he telegraphs back to you to sell that cotton 60 points on May. That means 60 points on futures, did I understand you? M. WEBB. Yes. If May cotton is 15, that means 15.60 for six months, figuring carrying charges and all. Mr. LEveR. Then, am I right in my deduction that futures make the price of spots? o WEBB. Futures make the price of spots? Mr. LEVER. Yes. Mr. WEBB. I do not know whether futures make the price of spots or not. They are willing to sell him this cotton at 15.60. They fix the price, and the only way that they could afford to do that, I would say, is this. I do it myself. We will leave out Weld & Neville, and suppose that I do it myself. Last fall a mill in my territory called me up and wanted 4,000 bales of cotton, January to July. I knew what cotton was selling at, and I so a profit in the business and made him a price—60 points on May, January to July shipments. He says, “I will take it.” I wired and bought the 4,000 bales at 60 points on. That fixed the price with him. Mr. LEVER. Yes. Mr. WEBB. Now, I was to deliver to him that cotton along each month, an equal number of bales each month, from January to July. I was hedged, and when I would buy 100 bales I would wire to my broker in New York to unhedge and close me out of 100 bales. had the spot cotton then and put it in the warehouse, and I have bought all of that cotton in and am out of the future market entirely. That enables me to do, a spot business that I could not have done without a contract market. Mr. LEVER. But you did not buy the spots until you had got a line on the futures? Mr. WEBB. No; I had a line on spots, and I got a line on futures. Mr. LEVER. You had a line on the spots, but you did not dare to buy until you got a line on futures? r. WEBB. No. The trade with the mill man was made and then I got those futures. He was to pay 60 points on. I phoned to him that I had bought the 4,000 bales in New York, say, at 15 cents for May. Then he says, “All right; send me a contract at 15.60;” so I sent him a contract at 15.60. Mr. LEveR. But your spot transaction was based entirely upon your future proposition? Mr. WEBB. I could not have carried out the spot transaction unless I had had the future market to go into. Mr. LEVER. That is what I was getting at. Mr. WEBB. I would have had to give up the trade. I would have had to say: “I can not sell it to you.” Mr. PARKER. At Greenville in the fall you were able to buy spot cotton at about 30 points under December quotation?

Mr. WEBB. Thirty points under May is what I bought it at.

Mr. PARKER. Now, when this break occurred the other day, that cotton which he had bought from the farmer at 100 you were able to sell to the spinner at over 100 points on May, were you not ?

Mr. WEBB. I think there was some cotton sold that way.

Mr. PARKER. Yes; the spinner got it at 100 points on May. You bought it at 60 points under May?

Mr. WEBB. But, Mr. Parker, listen to me one minute. You said here a while ago that when cotton went up the spot people wanted to depress the spot market. Now, gentlemen, the higher the future market gets the cheaper basis we can buy spot cotton on. Is not that so ?

Mr. PARKER. When futures in New York went the other day to 16.47, I think it was—somewhere along in there--spot cotton in the South, for instance, at Greenville, was bringing from 15 to 15.75.

Mr. WEBB. Fifteen and fifty one-hundredths was the highest.

Mr. PARKER. In other words, spot cotton there was 100 points under the future, to the farmerIt was 100 points then under the future ?

Mr. WEBB. Yes.

Mr. PARKER. In less than three weeks after that the same spot cotton, the very same cotton that you bought from the farmer at 100 points under the future, you were selling to the spinners at 100 points on futures ?

Mr. WEBB. Yes; because the future market broke down.

The farmer did not pay any attention to what was going on and did not turn his cotton loose when it was up. He swung on to it. He said: “I am going to get 20 cents.” You can not take it away from the farmer. [Laughter.] But Mr. Parker and his spinner friends down there would not pay them 15 cents. They would offer it to them, but he would say, “No; I can not do it.” If he could not do it, I can not do it. If you put the spot men out of the way and put them where they can not get any place to hedge, Mr. Farmer will have to go to the mill men, and they are the best organized people in the world to-day. They have a South Carolina association and they have a North Carolina association, and they have the American Cotton Spinners' Association, and their Liverpool association, and they are organized in Europe, and they know what is going on; and I want to tell you, if you want to take and put away the cotton exchange, and fix us so that we can not go in and buy the farmer's cotton and protect him, you will turn it over to the spinner. Mr. Parker will bear me out. I must say that he has been a bull this year, but in nine cases out of ten he is a bear. He wants to get it as cheap as he can; and it is natural for a man to want to buy as cheap as he can, and that is the way with the spinner.

The CHAIRMAN. Your idea is that the abolition of the future market would depress the price of the cotton to the producer, as a general proposition ?

Mr. WEBB. It certainly would.

Mr. BURLESON. Then how do you explain the fact that the producers of cotton are so universally in favor of destroying this gambling in cotton ?

Mr. WEBB. I do not think they understand it. I do not think you understand how these people handle it.

The CHAIRMAN. I would like to call the attention of the gentleman to this morning's mail to the chairman of this committee, in which there were in the neighborhood of 200 letters asking for the passage of this legislation. Mr. WEBB. Yes. The CHAIRMAN. From men who claim to be producers of cotton. Mr. WEBB. Now, gentlemen, I want to say another word on something else.'

Mr. BURLESON. Just one other question. You spoke about buying 100 bales of cotton. You had no purchaser for it. You immediately sold 20 bales on the New York Exchange. Now, in order for that hedge to be successful, there must be a parity maintained between the price of futures and the price of middling cotton, must there not?

Mr. WEBB. Yes.

Mr. BURLESON. Suppose that for some reason, either because of the difference of values that has been arbitrarily fixed by the committee or some other reason, the price of your futures goes up and the price of your spots goes down, and there arises a great disparity, what becomes of that hedge ?

Mr. WEBB. If the futures go up and the spots go down, I make more money than ever.

Mr. BURLESON. You make more?

Mr. WEBB. Yeş; because I have got futures bought against the spots.

Mr. BURLESON. You said you sold futures ?

Mr. WEBB. Yes; you are right there. When I buy 100 bales of spots I sell 100 bales of futures. Mr. BURLESON. Then you take it back that you make more money? Mr. WEBB. Yes. Mr. BURLESON. What do you do, then ? Mr. WEBB. I lose. Mr. BURLESON. You lose ? Mr. WEBB. Yes. Now, if futures go down and spots are up, I am bound to lose.

Mr. BURLESON. Yes. Does not that frequently happen on the New York Stock Exchange? Mr. WEBB. No, sir.

Mr. BURLESON. Has it not frequently happened in the last few years?

Mr. WEBB. No; only once in my experience. .
Mr. BURLESON. Only once?

Mr. WEBB. It happened the other day, and it happened in that break; and the year that we had the bad crop year, I was into that myself, and I was with those people and I know all about it.

Mr. BURLESON. What do these spinners mean, then, when they adopt resolutions saying that the disparity between the prices of future contracts and spots has become so much that they can not safely go to New York to hedge ? Are they ignorant, too? Mr. WEBB. No, sir.

Mr. BURLESON. If they adopted resolutions of that kind, were they ignorant, too?

Mr. WEBB. I do not say that the spinners are ignorant. I say the farmers are ignorant.

Mr. BURLESON. Did they understand the situation?
Mr. WEBB. I do not think they understand the situation; no.

Mr. BURLESON. The spinners have adopted a resolution of that kind. If the farmer was ignorant, would he ask for the abolition of gambling? Now, who is it that is wise in this transaction ?

Mr. WEBB. I do not know.

Mr. BURLESON. Is it the men who represent firms in New York who belong to the cotton exchange and the members of the exchange; are they the ones who are wise ?

Mr. WEBB. I am telling you, sir, exactly what I know about spot cotton and how I have been in the spot business for twenty-five years, and I do say that if you cut out the exchange, the place where I can go to hedge my spot sales, you take me out of the market; you take everybody out of the market from South Carolina to Texas, and you put the market in the hands of the spinners.

Mr. NEVILLE. Mr. Burleson asked you, in case you bought 100 bales of spot cotton and sold 100 bales of futures, if futures should go down and spot cotton should stay where it was, if you would lose money.

Mr. BURLESON. No; I said if futures go up and spots go down. I put it exactly right.

Mr. NEVILLE. Well; I will take your correction. I had the result of the proposition in mind. You bought 100 bales of spot cotton and sold 100 bales of futures. If the worst came to the worst, you could sell that 100 bales and deliver it on contract, could you not?

Mr. WEBB. Yes.

Mr. NEVILLE. So that the only money you would lose would be the difference between the price you bought that cotton, off the contract that you sold, and the freight and delivery expenses on the contract ?

Mr. WEBB. Yes.

Mr. NEVILLE. Your loss, then, would be determined by your judgment as a merchant in buying spot cotton at a price and the selling

price?

you the freight and ththe case put by the transaction

Mr. WEBB. Yes, sir. Mr. BURLESON. Then, if you make a loss it ceases to be a protection for you?

Mr. WEBB. No; when I close out, the transaction is closed.

Mr. BURLESON. On the case put by Mr. Neville he says your are to lose the freight and the difference in price and other items. Then, if you lose, your transaction on the exchange did not afford you protection, did it ? Mr. WEBB. Not that particular transaction; no, sir.

Mr. PARKER. You recollect the sale that I refer to, where you sold me 5,000 bales of cotton ?

Mr. WEBB. Yes.
Mr. PARKER. At 110 points on May, in the spring of 1908 ?
Mr. WEBB. Yes.

Mr. PARKER. To be delivered January, February, March, April, and May ?

Nr. WEBB. Yes. Mr. PARKER. You remember that I fixed 9.90 on May. That made the cotton cost me 11 cents ?

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