The Futures

 


This is a good history on the development of the futures industry in Chicago...

1808 : Fort Dearborn built for fur trade
1812 : Fort Dearborn massacre
1816 : army returned
1818 : Illinois admitted to the Union
1830s : canal was built to connect Chicago and Illinois rivers, linking the Great Lakes
1835 : Odgen arrived in Chicago from New York , and saw a land bubble in the making
1837 : land prices crashed
1848 : the canal opened. Railway tracks laid, telegraph came.

Chicago was built halfway between the North Pole and the Equator. When winter came the rivers froze, and corn cannot be delivered. In spring when the rivers thawed, sellers converged in Chicago and pushed prices down. Traders "dump their corn in the river "

Traders saw an opportunity to guess the price of corn, and a futures market was born.

1856 : business flourished on the back of the Civil War
 1865  : contracts were "standardized"

Traders are slightly different from gamblers. Gamblers created risks to bet on  ... they threw dice that didnt have to be thrown, they ran horses that do not have to run.

In the futures, they do not have to manufacture the risks because the risks would present themselves. Farmers would not be able to deliver the corn, and the traders provide "insurance".

Futures took off in chicago because everybody was speculating in Chicago; hopeful businessman constructed warehouses, homes , railroads. Risk and opportunities were plentiful.

Futures then became a game ... a speculative sport that captured headlines as rich men of Chicago played it between their business dealing and pursuits.

"corner " : buying the futures until there is no more to buy, thus driving up prices to a corner
"burying the corpse " : selling the corn at a loss to drive down the price
" market is like the Niagara Falls " : something men could influence but never truly control
" high prices is like fertiliser " : they make crops grow



... " they tell a version of the same story. The details vary, mangled by time, whiskey, egos, and personal grudges..."

"... they're like the last guests at a party, tipsy, full of stories, and not quite sure how to get home."


More nuggets of wisdom :

(1) " When a man lost money, it was best to take the loss and move on. That was surprisingly hard to do. "   ( pg 19)