The Eaton Democrat. (Eaton, Ohio) 1875-1903, 1882-05-18
What a &c Corner - Is.

A stock corner is thus explained by
the New York EUening Post: The
''bear" element in the market consists
of all those who think that the prices of
securities are higher than they ought to
be, higher than they a permanently
remain. In order to take advantage of
the unwarranted ''infation 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 a lower price before it be-
comes necessary to return the borrowed
securities. For instance, A borrows from
B, 1000 shares of Hannibal and st.
Joseph, which is selling at 60. A pays
B $50, 600 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 interesto on the $50, 600 during
the interval, or at all events, more in
terest than he would otherwise have to
pay for the use of the money. Under
ordinary conditions, B, the lender of the
stock, will pay A, the borrower, some
thing for the use of the money, but if
the particular stock wanted by the
bears is scarce it will be lent "flat +"
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 the stock in addition to the interest
on the money which it represents. If
the market huctuates while the loan
continues, the borrower and lender set
tie with each other at the close of each
day, sc 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 q weak spot in the
market, that is, a security selling for
more than it is worth in their opinion
they borrow and sell literally. Their
| selling has the same effect in putting
down the price o. though the stock
were absolutely their own, and their ex-
pectation is that other holders observing
the decline in price will become alarmed
and sell also, thus putting down the
price still more and frightening still
other holders. They intend, of course,
to buy enough at the lower scale of
have borrowed, pocketing the difference.
1t sometimes, though rarely, happens
a few persons, discovering what the
OcdiS are dUOuty duO D6llofluS tudt Juicy
(the bears) are strong enough to stand a
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 themselves are
buying, they lend stock 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 nc
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.
That is what once happened in Hanni
bal and st Joseph. The "shorts ?" mus
come up and settle on such terms as may
be dictated to them. The last resort il
to leave the cornering party saddled with
the whole issue of the stock in question
Whether they may make or lose by the
operation, will depend upon whether
they can extort from the bears NOR,
than enough to compensate them for thu
loss they may incur in re-selling thu
stock to the general public. Most com
monty the cornering party, as well a
the cornered, lose money-which ha
been gained meanwhile by the multi
tude, who have taken advantage of tn,
high prices to sell out.