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Lately, under the twin spurs of threatened inflation and easy credit, speculators have been especially active in two most traditional fields: the stock market and the commodities exchanges. "October, this is one of the peculiarly dangerous months to speculate in stocks," said Mark Twain. "The others are: July, January, September, April, November, May, March, June, December, August and February." His caution is widely ignored. No fewer than 22 million people own common stocks, far more than ever before, and few among them do not have some sort of speculative ambition. Daily trading on the New York Stock
Exchange has reached 9,800,000 shares—a level that former Exchange President Keith Funston had not expected until 1975. Some of the records being set are disturbing. Margin requirements are presently 70% for most stocks; yet loans from brokers to cover that remaining 30% have now reached a record $5,580 billion, and shrewder speculators can still get loans for as much as 100% of their purchase price from unregulated lenders.
In the commodity pits, where the action is faster, the risks greater and the rewards fatter, records have piled up also. Helped by the lower margin requirements—5% to 15% v. the stock market's 70%—speculators are busily buying or selling 37 kinds of commodities ranging from wheat and sugar to orange juice and torn turkeys. Last year a record 10,460,000 contracts were bought and sold; the rate this year is almost the same. Traders lured by the idea of making $10,000 out of pork bellies on a $700 investment constitute a surprising cross section of America. A survey of corn futures not long ago showed that, along with the professional speculators, contracts were also held by lawyers (178), clerks and stenographers (122), housewives (339) and students (66). Unfortunately, in a fast-moving market like commodities, most of the amateurs hesitate too long about closing out losing contracts. Another survey, this one of 418,000 commodities transactions, turned up the fact that 75% ended in losses. So strong is the possibility of loss that brokers do not want to do business with women speculators because they "cry about it." In this specialized market, says University of Illinois Professor of Agricultural Economics T. A. Hieronymus, "speculation is a zero sum game in which speculators vie with each other for profits that they, in the aggregate, cannot achieve."
Supply, Demand and Human Nature