chapter  XLI
7 Pages


The available quantity of any security or of any kind of produce is definitely limited, whereas the available quantity of money, against which this security or produce is being traded, is practically unlimited. It follows, therefore, that a person who sells in anticipation of a fall in prices runs much greater risks of being " squeezed" than the person who buys in anticipation of a rise; for the" bear," when he sells, contracts to deliver part of a limited supply which may be unavailable when he comes to buy, whereas the" bull" contracts to deliver money which is practically always available at a price. The fundamental facts of the market, therefore, already give the bull a predominance in the market, and this predonilnance is reinforced by the persistent habit of the public of operating mainly on the bull side. This inequality is met in part on Produce Markets by allowing sellers to deliver other grades of produce than that in which they trade, at a fixed difference in price. But Mr. Brace, writing of the American market in his book on Organized Speculation, gives it as his opinion that, in spite of this device of increasing the number of grades of wheat which are a good delivery, the bull side of the market is distinctly stronger than

the bear. The bears, he thinks, are able occasionally to force prices down to what one may call the" true" value of the wheat; but, he says, this level is the minimum, the base from which prices are continually being forced upwards by the bulls. The unequal forces on the two sides of the markets result, therefore, in average prices being markedly higher than would be justified by statistics of production and consumption. If this result occurs in a market where the bears have such a vast supply from which to make delivery it seems likely that the same cause acts even more strongly on the Stock Exchange where the amount of anyone security is strictly limited. It seems, at any rate, to be a safe inference that the average prices of speculative securities are maintained at a level appreciably higher than their investment values.