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Cynics argue that the speculative trend is inevitable until the law of supply and demand is repealed and human nature changes. But responsible men have begun to worry. Both Funston and American Exchange President Ralph Saul have warned their member brokers not to abet ill-advised speculation; in some cases the exchanges have stopped trading in risky stocks temporarily or require 100% margin. Giant Merrill Lynch, Pierce, Fenner & Smith recently dusted off an advertisement that reminds investors that Wall Street runs two ways. Securities & Exchange Commission Chairman Manuel F. Cohen has his investigators scrutinizing for possible fraud 45 companies whose stock is actively traded; previously the Government had secured indictments against 22 brokers, bankers, lawyers and businessmen for allegedly rigging the stock of two small companies traded on the American Exchange. Alex C. Caldwell, administrator of the Agriculture Department's Commodity Exchange Authority, which supervises commodity trading, has asked Congress for stricter powers. And no less an overseer than Federal Reserve Chairman William McChesney Martin chose the 175th anniversary celebration of the New York Stock Exchange to warn against suspiciously speculative activity among professional traders, which Martin finds "disquieting." Last week, as market averages reached new highs, Martin sent up another warning rocket, telling the House Ways and Means Committee that there is "an unwarranted spree in stock prices and a lot of people chasing a fast buck."
The warnings were newsworthy but the game that prompted them is hardly new. Commodities traders wryly note, for instance, that the Old Testament's Joseph was the first man to corner the grain market. After all, when the seven fat years ended in Egypt and the seven lean years began, wasn't Joseph the only man with grain stacked in his barns? Seventeenth century Holland experienced one of the first of the futures markets. Dutchmen became so infatuated with tulips from Asia Minor that they stopped planting and began trading them. Prices rose to the point where one merchant paid $1,400 for a Semper Augustus bulb, which was eaten by an employee who mistook it for an onion.
It remained for the U.S. to hone speculation to its finest edge, and not surprisingly. "Of all the peoples in history," observed Economist J. Edward Meeker in 1930, "the American people can least afford to condemn speculation. The discovery of America was made possible by a loan based on the collateral of Queen Isabella's crown jewels, and at interest beside which even call-loan interest rates look coy and bashful. Financing an unknown foreigner to sail the unknown deep in three cockleshell boats in the hope of discovering a mythical Zipangu cannot, by the widest exercise of language, be called 'a conservative investment.' "