The Ouachita telegraph. [volume] (Monroe, La.) 1865-1889, 1882-01-27
WHAT A CORNER Is.

n COTu0T Is lnuS cApAoAuSO ny NAo
New York Evening Post: The "bear
element" in the market consists of all
those who think that prices of securi-
ties are higher than they can perma-
ncntly remain. In order to take adj
vantage of the unwarranted tsinfiation
of values" as they understand it, they
borrow stocks and sell them at the high
prices prevailing, expecting to be able
to buy them in at lower prices before
it becomes necessary to return the bor-
rowed securities. For instance, A bor-
rows from b l, 200 shares of Hannibal
and st. Joseph, which is selling at Six
ty. A pays b $40, 900 cash and agrees
to return the stock on demand, when
of course the money will be refunded
to him. 1t Is for BIS interest to lend
the stock, because he gets the interest
on the 100000 during the interval, or,
at all events, more interest than he
would otherwise have to pay for the
use of the money. Under ordinary
conditions B, the lender Of the stock,
for the use of the money, but if the
particular stock wanted by the bears is
scarce, it will be lent "hat," that is,
the borrower will receive nothing for
the use of the money while the loan
continues. 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 fluctuates while the loan con-
tinues, the borrower and lender settle
with each other at the close of each
day, so that the amount of money shall
at all times be exactly equivalent to the
value of the stock.
When the bears, Or any portion OF
them have discerned weak point in
the market-that is @ security selling
for more than it is worth in their opin-
iou-they borrow and sell literally.
Their selling has the sane effect in
putting down the price as though the
stock were absolutely their own, and
their expectation is, that other holders
observing decline in the price will
become alarmed and sell also, thus put
ting down the price still more and
frightening still other holders. They
intend, of course, to buy enough Mt the
| lower scale of quotations to deliver
back what they have borrowed, pock-
citing the difference.
It sometimes, though rarely, hap.
pens that a few persons, discovering
what the bears are about and believing
that they (the bears) are strong enongt
to stand heavy loss without breaking
quietly buy up all of particular stool
that exists. In order that the pric
may not be forced up while they ar
themselves buying, they lend stool
freely to the bears, and thus encourag
the latter to sell. When they hav
secured all, or nearly all, of the partie
ular stock that exists they call in thei
loans. The bears are then compelle.
to buy, and since no stock, or very lit
tie, is for sale, the price can be forcet
up to any figure at which the corner
ing party choose to put it. The 'sstorts'
must come up and settle on such terms
as may be dictated to them. The las
resort is to leave the cornering part,
saddled with the whole issue Of thu
stock in question. Whether they MAKE
or lose by the operation will depend
upon whether they can eXtort from th'
bears more than enough to compensate
them for the loss they may incur il
reselling the stock to the general pub
lie. Most commonly the cornerini
party, as we'll as the cornered, los
money, which has been gained mean
while by the multitude who have tax
en- advantage of the high prices to sci
out. For this reason corners have lat
terly been of rare occurrence.