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INSIDE THIS ISSUE
1. Proving That Strength Comes From Honesty, Stability, and Care 2. ‘Legal Access’ Marks 15 Years on WMBF Real Maguire Law Firm Stories 3. A Guide to Auto Insurance Coverage Pumpkin Dump Cake 4. The Day Onions Crashed the Chicago Exchange
How 2 Men Peeled the System The Great Onion Market Meltdown
Many Americans like to invest in the stock market, hoping to earn supplemental income or get rich. But there’s always the fear that a hedge fund or an extremely wealthy influencer could manipulate the market, allowing them to get rich off their stocks while everyone else suffers and loses money. In theory, nobody should have the power to manipulate stocks, but it still happens. One of the most extraordinary market manipulations occurred in the 1950s. In 1955, onion futures became one of the most traded commodities on the Chicago Mercantile Exchange. For those unfamiliar with futures trading, someone could sell their product months down the line for the price it’s worth today, as long as someone buys the contract. For example, let’s say wheat is trading at $5.50 per bushel right now. You purchase a futures contract to lock in that price three months later. If the price rises, you still get wheat for the initial cost, or you can sell your contract for a profit.
New York-based investors Sam Siegel and Vincent Kosuga realized they could get rich quickly by manipulating the surging onion market of the 1950s. They purchased 30 million pounds of onions, almost all of Chicago’s inventory, to short-sell the stock. This meant they would sell the stocks at a higher price before rebuying them when the price dipped. They knew they could profit since they owned 98% of the inventory. After flooding the market with their onions and onion futures contracts, the price per bag dropped from $2.74 to 10 cents. Farmers were furious. Many lost their livelihood, but Siegel and Kosuga made millions. While market manipulation was unethical, it wasn’t illegal back then, so the two couldn’t be punished for their actions. To ensure this never happened again, Congress passed the Onion Futures Act in 1958, which completely banned trading in onion futures. President Eisenhower signed the bill into law. To this day, onions are the only commodity in America that is explicitly banned from futures trading.
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