Orange County observer. [volume] (Hillsborough, N.C.) 1880-1918, 1884-05-03
4 "CORNER."
~ mt IT Is. and Hoac II In Eork<r2

That 1t Is. and Ho,r IT IL Worked.
Ihe " bear element" In the market
are ell those who think that prices OF
securities are higher than they ought to
I've, higher than they can permanently
remain. In order to take advantage of
the unwarran:ed "inhation 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 ] 900 shares of Hannibal and st.
Joseph, which is selling at 60. A pays
3 $50, 000tcash 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-
causo he gets the interest on the 100000
during the interval, or, ut all events,
more interest than he would otherwise
have to pay t']r the use of the money.
Under ordinary conditions, B, the lend
er 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 "fat :"
that is, the 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
the use of the 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, a security selling
for more than it is worth in their opin-
ion-they borrow and sell it literally.
Their selling has tile 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. 1t
sometimes happens, though rarely, that
a few persons, discovering what the
bears are about, and believing that they
the bears) are strong enough to stand a
l.oavy 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 oil, of
the particular stock that exists they call
in 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
80 to any figure at which the cornering
party choose to put it.. The "shorts"
must come up and settle on such terms
rs may be dictated to them. Tie last
resort is to leave the cornering party
Raddled 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 inphr in reselling
the stock to the general public. Most
comnonly the cornering party, as well
as the cornered, lose money, which has
been gained meanwhile by the multi
tnde, who have taken advantage Of the
high prices 10 sell out. For this reason
arners have latterly been Of rare occur
renee.