The Democratic advocate. [volume] (Westminster, Md.) 1865-1972, 1881-12-24
What a Corner Is.

A stock corner is thus explained by the
New York Erening Post The "bear ell
ement'' in the market consists Of all those
who think that prices of securities are high
er than they ought to be, higher than they
can permanently remain. In order to take
advantage of the unwarranted Imitation OF
values" as they understand it, they borrow
stocks and sell them at the high prices pre-
vailing, expecting to be able to buy them
in at lower prices before it becomes neces-
sary to return the borrowed securities. For
instance. A borrows from B l 900 shares Of
Hannibal and St. Joseph, which is selling
at sixty. A pays B $50, 900 cash and agrees
to return the stock on demand, when, OF
course, the money will be refunded to him.
It is for BIS interest to lend the stock, be-
cause he gets the interest on the S6O,OOO
during the interval, or at all events, more
interest than he would otherwise have to
nav for the use of the money. Under or
dinary conditions B, the lender of the stock,
will pay A, the borrower, something for
the use of the money while the loan con-
tinues. In extreme cases the lender may
even get a commission for the use of stock
in addition to the interest on the money
which it represents. If the market fiuc-
tuates while the loan continues, the borrow
er and lender settle with each other at the
close of each day, so that the amount OF
money shall at all times be exactly equiva-
lent to the value of the stock.
When the bears, or any portion OF them,
have discerned weak spot in market-that
is a security selling for more than it is worth
in their opinion-they borrow and sell it lib
orally. Their selling has the same effect in
putting down the price as though the stock
were absolutely their own, and their expec-
tation is that other holders, observing de-
cline In the price, will become alarmed and
sell also, thus putting down the prices still
more and frightening still other holders.
| They intend, of course, to buy enough at
the lower scale of quotations to deliver back
what they have borrowed, pocketing the diff
ference.
1t sometimes, though rarely, happens that
few persons, discovering what the bears
are about and believing that they (the bears)
are strong enough to stand heavy loss
without breaking, quietly buy up all of a
particular stock that exists. In order that
the price may not be forced up while they
are themselves buying, they lend stock
freely to the bears, and thus encourage the
latter to sell. When they have secured all,
or nearly all, of the particular stock that
exists they call in their loans. The bears
are then compelled to buy, and since no
stock, or very little, is for sale, the price
can be forced up to any figure at which the
cornering party choose -to-put it. The
''short" must come up and settle on such
terms as may be dictated to them. The
last resort is to leave the cornering party
saddled with the whole issue of the stock
in question Whether they make Or lose
by the operation will depend upon whether
they can extort from the bears more than
enough to compensate them for the loss they
may incur in reselling the stock to the gen.
eral public. Most commonly the cornering
party, as the cornered, lose money, which
has been gained, meanwhile, by the
multitude who have taken advantage of the
high prices to sell out. For this reason
corners have latterly been of rare occur
renee.