Staunton vindicator. [volume] (Staunton, Va.) 1860-1896, 1886-06-18
What a Corner Is.


A stock corner is thus explained by the
New York .EUeniaag Post: The "bear''
element in the market consists of 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
Imitation of values,'' as they understand
1t. they borrow stocks and sell them at
the high prices prevailing, expecting to
buy them in at 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 so. A pays B 100000
cash and agrees to return the stock on de-
mand, when, of course, the money will be
refunded to him. It is for BIS interest to
lend the stock, because he gets the inter
est 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, will pay A, the
borrower, something for the use of tn e
money, but if the particular stock wanted
by the bears is scarce it will be lent "fat;"
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 commission for the use of
the stock in addition to the interest on
the money which it represents. If the
market fluctuates while the loan contin-
ues, 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 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 as
though the stock were absolutely their
own, and their expectation is that other
holders observing the decline in the price
will become alarmed and sell also, thus
putting down the price still more and
frightening still other holders. They in
tend. of course, to buy enough at th.
lower scale of quotations to deliver bacl
what they have borrowed. peck citing TIT
difference. It sometimes, though rarely.
happens that few persons, discovering
what the bears are about. and believ-
ing that they (the bearsl are strong
RI to stand q hoayy loss withou
preaking. quietly buy up all of particu-
lar stock that exists. In order that thu
price may not be forced up while they are
themselves buying, they lend stock to the
bears. and thus encourage the latter t.
sell. When they have secured all, or near
ly all, of the particular stock that exists
they call in their loans. The bears are
then compelled to buy, and since no stock,
or very little, is for sale, the price can b
forced up to any figure at which the col
nering party choose to put it. That is whal
once happened in Hannibal and st. Joseph
The s'shorts" must come up and settle on
such terms as may be dictated to them
The last resort is to leave the cornerine
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 more than enough to compensate
them for the loss they may incur in re-
selling the stock to the general public.
Most commonly the cornering party, as
well 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.