Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-02
BY DR.. MAI WINKLER.

Special Dispatch to The Star
NEW YORK, october D. Short sell
ing is universally decried al the mo-
ment. 1t Is held responsible 'or the
discouraging decline which has chcrac-
terized the New York securities markets
for almost two years.
A great deal OF mystery surrounds
those who are supposed to be operating
on the short side, and stories told COIL
corning their activities assume an al
Representatives and politicians Of lesser
prominence are greatly exercised at the
alleged viciousnesS with which the shorts
are understood to select one stock after
another, hammering at it necessarily
until their aim is achieved.
The public has formed such an exag-
gerated idea regarding the power of the
shorts that, in the course of the past
week, when weakness in the market was
, especially pronounced, kilograms were
dispatched to the President calling upon
the country's Chief Executive TO save
the United States from the menacing
bear clique. 1t was suggested that the
President ask the heads of the various
securities and commodities exchanges
TO prohibit selling for short account.
OA OHOEk
To begin with, what is short selling
and who are the principal "culprits" ;?
One who has sold stock which he does
not possess and has borrowed the stock
for delivery to the buyer, is short OF
that stock. The object of selling short
Is. Of course, to repurchaSe subsequently
at lower figure.
The rules of the New York Stock
Exchange enforce the completion of
each transa ction entered into in the
regular way on the day following
| the transaction. Hence, the speculator
who has sold short. is forced to borrow
| the stock he has sold but does not
own, and make actual delivery of Il
: next day To the purchaser. This he
accomplishes through his broker by
paying the market value of the stock
to the one from whom he borrowed it
| and then returning the borrowed stock
to the lender when he has covered
that is, bought back the stock.
When a Spectator is short Of stocks
| on which a dividend becomes due he
has to pay the amount of the dividend
| TO the person from whom he borrowed
the stock to make delivery to the one
to whom he sold the stock.
1t Is obvious that there Is nothing
| radically wrong with short selling As
| such. Just as there are people who
| anticipate higher quotations, there are
| others who look for lower levels and
desire to take advantage of their belief.
The difficulty. however. arises when
spectators. committed to the short
side, resort to various methods not
| entirely ethical, provided they achieve
what>they set out to accomplish. Some
such spectators are blamed for spread
ing rumors of all kinds, mostly of an
adverse character, pertaining to the
| companies whose stocks they are
bearing" Very often. such rumors are
unfounded, but, by the time they are
| denied. irretrieyable damage has been
done and scores Of innocent owners Of
shares may be wiped out. 1t Is the
method ordinarily employed by some
spectators which is Objectionable,
rather than the business of short
selling.
A halo is often created around the
Wall Street bears. One does not def
!, nitely know them, because their &C
tivltieS are not public information. 1t
Is largely for this reason that these
mystery men are believed to be en-
dowed with much more power than
| they actually possess.
Washington also seems to have sue
cumbed, and the Republican floor
leader OF the Senate, James E. Watson
| OF Indiana, expresses the belief that
steps would be taken to bring about q
thorough and searching investigation OF
short selling practices. According to
| Mr.. Watson, there are many Senators
who believe that all short transactions
should be thrown open to the public