Second Wave

BUSINESS & FINANCE

The flood of selling which had washed the props out from under the high price of grain swept on last week. Day after day the weary traders crowded the grain pits to sell, and sell again. At week's end the Chicago Board of Trade had witnessed the worst ten days in its existing records. May wheat had now fallen a total of 52 1/4-c- to $2.34 3/4 a bushel, and May corn 54 1/2-c- to $1.96 1/2.

The wave washed over into the stockmarket. The Dow-Jones industrial average fell 4.17 points Tuesday, the worst one-day break since last April. The rail stocks had their sharpest drop since the big break of September 1946. Utility stocks also slumped badly. At week's end, the Dow-Jones industrial average was down to 166.18, a drop of 8.87 points in the fortnight, and rails were down to 48.36, a fall of 3.3 points.

Seek the Devil. The drop in grains pulled down livestock prices; they had their worst drop in the history of the Chicago stockyards. By week's end, the average price for hogs was down to $21.35 a hundred pounds, a 22% slump from the January high. The week's average price for cattle was down to $26.75, a fall of 10.6%. The ripples from the wave spread out into almost all commodities. Spot cotton, which had sold at 34 1/2-c- a pound only two weeks ago, was down to 31-c-.

By week's end, all the markets had steadied and a few commodities were even up a little. But this week a good many bears decided not to push their luck too far. They "covered" by buying grain to make good on the bushels they had sold short. The market rallied. Corn, which had started the break, rose the limit: 8-c-. Wheat & cotton rose too. The optimism spread into the livestock market where hog and cattle prices edged up. A few traders went so far as to murmur cautiously that the worst might be past. But no one knew for sure whether the wave had spent itself.

The break, if good news for consumers, was bad news for U.S. farmers (see NATIONAL AFFAIRS). As might be expected, some Farm Bloc Congressmen bayed off to try to find a personal devil with "inside information" who had loosed the floodgates. With a tallyho from Secretary of Agriculture Clinton P. Anderson, the hunt led to the 38th floor of the Chicago Board of Trade Building and the small office of Edwin Taylor Maynard, 62, a trader ensconced behind four telephones and a ticker.

Maynard, said Secretary Anderson, had been a big short seller on the first day of the big price break. (Traders thought he had been the biggest individual seller.) Maynard cheerfully admitted that he had made a killing: in one day he had sold short 1,000,000 bushels of wheat and covered it later in the week. In the process he had cleaned up nearly $200,000.

Maynard pooh-poohed the idea of "inside information." Said he: "Anyone who kept his eyes open and watched what was going on could get the same inside information. . . . The market looked like a groggy boxer. It needed just a little push to knock it down." No trader thought that Maynard alone had caused the break. Thanks to stricter regulations, the days were past when bull & bear raids alone could control the markets.*

The markets were full of Maynards. On the New York Cotton Exchange, another big trader said candidly: "Sure, I'm a bear. I'd sell my grandmother. I could see this thing coming in December. That's when I wrote all my customers to get out."

Defy the Fiend. This week, the big question was how far the shakedown in prices would go. Everybody still thought the drop a good thing. But could the U.S. have too much of a good thing? There were few signs last week that the commodity scare was spreading. Consumers showed no desire yet to hold off for lower prices all around.

Merchants showed no haste to cut prices except for small reductions in food and a few other items (the big soap companies cut prices 5%). American Woolen Co. even raised its prices (8 to 10% on worsteds). Department store dollar sales had gone up 10% over the same 1947 period the week of the big break. Even with the slump in meat prices, cattlemen had started no rush of cattle to the markets. The steel industry went ahead with its $565 million expansion plans for 1948. Some companies stood to lose on inventories. But inventories in general were not out of line as long as production--and demand--stayed up. And most companies had already protected themselves by huge reserves against such losses.

There had been no panic. And even the traders who had sold short were well aware of one big if: everyone was assuming that this year's crops would be bumper ones. On the basis of present estimates, they should be. But it was a long time till harvest.

* Regulations barred anyone from trading more than 2,000,000 bushels in one day. In the 1880s, big traders like Benjamin Peter Hutchinson often unloaded as much as 10,000,000 bushels, breaking the market. At such times, traders sadly sang:

I see Old Hutch start for his club;

Goodbye, my money, goodbye.

He's given us all a terrible rub;

Goodbye, my money, goodbye.

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