Cotton

Commodity markets differ from stock markets in that the commodity market is more obviously susceptible to the law of supply and demand. Last week, for example, cotton futures (March) advanced from 20.45 (cents per pound) to 21.39. Large Wall Street interests were reported long on cotton. Cotton Exchange seats advanced to the high mark of $41,000. Like copper (TIME, Feb. 18) cotton was bullish. And, also like copper, cotton prices showed the result of an excellent "statistical condition." The statistical condition of a commodity is simply the relation between the supply of it and the demand for it. During February, sales of cotton amounted to 116.3% of production--that is, cotton was being sold more rapidly than it is being produced. Actual shipments were 105.5% of production, and unfilled orders on Feb. 28 were 7.2% greater than on Feb. 1. So cotton demand was exceeding cotton supply and the cotton prices were going up. There was also a bullish factor in the cotton situation which came not from production, not from consumption, but from the statement and the reputation of a man. That man is Jesse Lauriston Livermore. Famed as a large-scale speculator in both stock and commodity (but especially commodity) markets, famed also for his astonishingly accurate predictions concerning which way the markets will move, Mr. Livermore last week foresaw a speculative scramble for cotton. "I would recommend to any manufacturing concern using raw cotton," said Prophet Livermore last week, "to cover their requirements for the next few months immediately before the speculative public realizes the future possibilities of a big advance in the price of cotton." So spoke Mr. Livermore, adding new strength to strong cotton. It has been some years since Mr. Livermore has been a market oracle. Older speculators still remember, however, that in 1923 he foretold a marked cotton rise; in 1924 he not only predicted a rise in wheat but also accurately placed the high wheat point and predicted the eventual falling off. At the age of 14, when just out of grammar school, Jesse Livermore got a job as quotation-board boy in a brokerage house. All day long he watched the changing figures on the tape, gradually learned how a stock usually behaved before a rise or a fall. After about six months as a quotation boy, Mr. Livermore discovered that one of the other boys, who had $5 capital, was going to invest in a railroad stock. The two pooled resources, made their play; Livermore netted $3.12 profit.* By his fifteenth birthday Mr. Livermore's shoe-string trading netted him $1.000, much to the horror of his mother, who thought there was something diabolical in such affluence in one so young. At 20 he had $10,000. They called him the Boy Terror of the Bucket Shops. He went to New York, ran his capital up to $50,000--then lost every cent. He was trading with legitimate houses now and price fluctuations during the time spent in executing his orders was ruining his bucket-shop system of watching the ticker instead of the market. Finally he learned to play basic conditions instead of momentary fluctuations. His first big profit, however, came largely on a hunch. The hunch was to sell Union Pacific short and after he had been selling it short for a few days the San Francisco earthquake wrecked the whole market, U. P. included. His profit was $250,000. Thereafter he had many an up and many a down. Mr. Livermore's later reputation rested chiefly on his ability to foretell commodity futures. At 50, Mr. Livermore is an excellent refutation of the theory that the market cannot be beaten. Tall, slender, blond, he sits in his Manhattan office, the meticulous centre of a luxurious setting. He smokes cigars, but does not use them for chewing or for gesturing. He does not bother with mental transactions--to have an interest in a stock with him is to trade in it. and when he trades, he trades hard. Mr. Livermore's hobby is not golf. It is fishing. Stuffed fish adorn his office walls. Fish less than seven feet long do not interest him. Once he hooked a whip-ray which towed his yacht five miles before it was landed. Whipray statistics: Weight, 590 lb.; spread. 22 ft.; length, 30 ft. He has two sons, Jesse Lauriston Jr.. 13 and Paul, 7.

*Five dollars capital was not too small some 36 years ago. That was the bucket-shop era, when many a little bucket shop would accept any investment, however small, on even less than a one-point margin. Nobody bothered to cover any margin. If, on a one-point margin, the stock went down a point, the speculator was wiped out.