BULLS AND BEARS.

Auckland Star, Volume LXIV, Issue 283, 30 November 1933, Page 19

BULLS AND BEARS.

WAYS OF SPECULATION

FORCING PRICES UP OR DOWN METHODS OF THE «STAG." 1 L. What are bulla, bears and stags, and what are the ramifications of their operations In these days of wide public interest in Stock Exchange and economic affairs this question is common. All the "animals" named are speculators oil the Stock Exchange, but the bull and the bear may be found also in other markets in which it is possible for I them to buy and sell without restriction (says an Australian financial writer). A real bull attacks his enemy by tossing him in the air, and his countcipait on° the Stock Exchange buys shares to send prices upward so that he may make a profit. A real bear hugs his opponent down to the ground, and the market bear does the same with prices—he tries to force them down so that be may make a profit out of his sales of something he did not

liave. This speculator's operations are a little more difficult to understand than those of the bull. He knows somebody will give £100 for a parcel of shares. He lias none of the shares, but he enters into a contract to sell them, because lie expects the price to fall. The price falls to, say, £80. The bear the shares at £80 and delivers them for £100, pocketing the difference of £20. If the price had risen to more than £100 the bear would have lost. A stag is like a bull, but he is present only when new issues are being made. He applies for more than he intends to keep, hoping to sell the excess quickly at a profit. Part in World Affairs. Before the onset of the depression ill 1929 little world-wide notice was taken of the operations of market speculators, but now that most people have come to realise' the important part played by these dealers in world affairs, news that the "bulls" are buying this, or that the "bears" are raiding that share or commodity, is quickly seized on as a lever to adjust values throughout the world. A "bull" in the Chicago wheat market may suddenly lodge orders large enough to overwhelm the market and send prices soaring. This news is flashed to all parts of the world, and sellers immediately withdraw supplies and buyers raise their prices, with the result that the markets become very firm.

The effect, in turn, is communicated to the producer, and 24 hours after tlie "bull" has begun operating at Chicago a wheat farmer in Australia may be trying to convince a wheat buyer that he* should pay 2cl or 3d a bushel more than he was offering. The last Indian loan raised in London afforded another example of the ramifications of speculators' activities. The loan was heavily over-subscribed because of the large applications made by "stags," and Indian credit seemed to be rising much above the level at which the loan was offered. Other Indian stocks were affected in sympathy, and that section of the London Stock Exchange market became cheerful and buoyant. *" But. the day of reckoning came when the allotments of the loan were made and it was found that the "stags" had over-done their purchases. Selling began immediately, and the consequent fall in price proved that the rise in Indian credit had not been justified. There was a quick reaction in other Indian stocks, and persons who had bought on the strength of the over-subscription of the loan were left lamenting at being led astray by tha "stags."