Connecticut western news., 1884-02-27
A "C0RNER. y
What 1t Is, nnd How 1t Is Worked.

The "bear element" in the market are all those who think that prices of securities are higher than they ought to be, higher than they can permanently remain. In order to take advantage of the unwarranted "inf1ation 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 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 SO. A pays B S60,000 cash and agrees to return the stock on demand, when, of course, the money will be refunded to him. It is for B's interest to lend the stock, be- cause he gets the interest on the $60, ,000 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 lend CT of the stock, will pay A, the borrower, something 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 noth- ing for the use of the money while the loan continues. In extreme cases the lender may even get commission for the use of tho stock in addition to the interest on the money which it repre- sents. If the market huctuates while the 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 the stock.
 When the bears, or any portion of them, have discovered weak spot in the market that is, security selling for more than 1t is worth in their opin- ion-they borrow and sell it liberally. Their selling has the same effect in put ting down the price as though the stock were absolutely their own, and their ex- pectation Is that other holders, observ- ing a 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 quo- tations to deliver back what they have borrowed, pocketing the difference. It sometimes happens, though rarely, that few persons, discovering what the bears are about, and believing that they (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 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 com pelled 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 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 o1 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 vel 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 ranoa