Knoxville daily chronicle. [volume] (Knoxville, Tenn.) 1870-1882, 1882-01-05
ii !" GDF.NER.|



The =" b,ar element" III the market
IRE all these who think that prices of
-eeurities are higher than they ought TO
'e, higher than they can permanently
nemaln. In order to take advantage Of
he unwarranted limitation of values"
IS they understand ii, they borrow
socks and sell them at the higl1 prices
prevailing, expecting 10 be able to buy
them IN at lower prices before it be-
comes necessary 10 return the borrowed
securities. For instance, A borrows
from 3 /, 600 shares Of Hannibal and St.
Joseph, which is selling at so. A pays
3 $50, o00 cash and agrees to return the
stock On demand, when, OF course, the
money viii be refunded to him. 1t Is
Tor BIS interest to lend the stock, be
cause he gets the interest on the $50, 600
duling the interval, or, at all events,
more interest than he would otherwise
aave TO pay for the use OF the money.
Under ordinary conditions, b, the lend
er ot the stock, will pay A. the borrower.
something for the use of the money, but
II the particular stock wanted by the
bears is scarce it all be lent "fiat :"
that is, tie borrower will receive moth
ing for the use Of the money while the
loan continues. In extreme cases the
lender may even get a commission for
rt.N1 Is l. ! Il
interest on the money which it repre-
sents. Ii the market fiuctuates while
tue loan continues, 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 tie stock.
When the bears, or any portion of
them, have discovered a weak spot in
the market thai Is, SECURITY selling
tor more than 1t is worth il their opin-
jon--they borrow and sell it literally.
Their selling has TIE same effect in put
ting down the price as though the stock
were absolutely their own, and their ex-
pactation Is that other holders, observ-
ing a decline i'll price, will become
alarmed and sell also, TINS putting down
tie price still more and frightening still
other holders. They intend, of course,
to buy enough at the lower scale of quo
tations to deliver back what they have
borrowed, pocketing the difference. It
sometimes happens, though rarely, that
d few persons, discovering what the
bears ore about, and believing that they
(tie bcars) 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
ia their loans. The bears are then COM
PEELED 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 "shorts"
must come up and settle on such telms
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 OF
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 general public. Most
commonly the cornering party, as we'll
as the cornered, lose money, which has
been gained meanwhile by the multi
tude, who have taken advantage of the
high prices to sell out. For this reason
corners have latterly been of rare occur
renee.