Monday 23 October 2017

Review: The Futures: The Rise of the Speculator and the Origins of the World's Biggest Markets by Emily Lambert

Published by Basic

James Pressley

THE Irish played a big role in creating Chicago's famous futures market in the middle of the 19th Century according to the bouncy historical jaunt through the city's trading pits called The Futures, by US writer Emily Lambert.

Lambert, who writes for Forbes, interviewed around 100 people involved in trading contracts for future deliveries of commodities for her book which contains a raucous parade of characters who witnessed the making and remaking of a business symbolised by swarms of floor traders flashing manic hand signals.

"All of these men seem to know each other, and they tell a version of the same story," she writes.

"The details vary, mangled by time, whiskey, egos and personal grudges. But it's all about how their simple, overlooked business called futures grew into something far larger."

The story begins in the mid-19th Century, when Chicago became a hub of rail and water transport.

In the late autumn and winter, farmers along the river sold grain to merchants, who hauled it to town for sale, Lambert says.

If waterways froze early, the merchants would converge on Chicago after the thaw, driving down prices. So they began signing contracts to deliver corn in the future at prices below today's.

Exchange

Over time, the exchange known as the Board became associated with Irish members. Theirs wasn't the only show in town.

A few blocks away stood their "embarrassing little sister," the Chicago Mercantile Exchange. The Merc, which specialised in eggs, was known for its Jewish members.

"The joke was that if Murray was your last name, you belonged at the Board," Lambert writes. "If Murray was your first name, you belonged at the Merc."

Like grain, eggs were seasonal in the days before growers tricked hens with light and heat. Eggs kept the Merc busy from September through January. Trading got slow after that.

Looking for other things to trade, members hit on pork bellies, the hog meat used for bacon. Forget Jewish dietary law; Merc members "were not the types to let religion get in the way of business", Lambert says.

James Place, the Elvis fan, started in the Merc's pork-belly pit, moved on to stock futures, and then slid into Eurodollars. After making $1m one year, he built himself a 10,000-square-foot home and a tennis court with PLACELAND painted on it, Lambert says.

Eventually, rivals began matching buyers and sellers on computers, not in pits.

Jolted by the threat, the Board and the Merc fought back with their own electronic trading and a deal under which the Merc cleared transactions for the Board. In 2007, the two merged into CME Group, the world's largest futures exchange.

Lambert's characters capture the dynamism of a city that progresses by "building, breaking, rebuilding", as poet Carl Sandburg said.

What will happen next? Who knows? Predictions are very difficult, especially about the futures.

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