than upon the long side of the market. The interest account always runs against the operator for a rise, while the operator for a fall, selling a non-dividend stock, has no interest to pay, unless the short interest creates a premium. Some houses allow customers a part of the interest received on account of short sales. Traders usually operate more heavily upon the short than upon the long side, as it does not take as much capital, the money required in borrowing stocks being furnished by the buyer.

All this suggests the meaning of the term "squeeze of shorts." If a large number of people are borrowing stocks, those who lend the stocks know who the borrowers are, and in a general way, something of the amount which is being borrowed. The rules provide that the borrower can any day return the stock borrowed and receive back his money. The lender can any day return the money deposited and get back the stock loaned, in which case some other lender must be found.

When a bear campaign is under way, the owners of stocks see their property depreciate in value. They then sometimes form combinations for the purpose of calling in a large part of the stock loaned in some one day. The consequence is that the borrowers, being notified to return stock, look about for other lenders, and, finding the supply insufficient, are obliged to buy stock in order to get it for delivery, and this buying, coming suddenly, is apt to make a rapid advance in prices, especially as the bulls who have called in the stock usually join in advancing quotations.

This would seem to be a very dangerous position for the bear, but in practice squeezes do not usually last very long or cause very great fluctuations. There have been cases

where a squeeze of shorts has sent the price of a stock up 30 or 40 points in one day. There have been a considerable number of squeezes which have advanced prices as much as 10 points in a day. Ordinarily, however, the total advance in a squeeze is not more than 4 or 5 points because the owners of stock, who understand the reasons for decline as well as anybody, take advantage of the rise to sell and the bulls, therefore, supply their bear friends with stock enough to make the required deliveries. The possibilities of this kind always make the short interest watched with more or less attention as containing the germs of advance not founded on value, but on the necessity of having stock to deliver.

A corner is a disastrous affair, very seldom occurring. It means that the bears in over confidence have sold more of a certain stock than there is in existence. It is, therefore, impossible for some of the bears to obtain stock for delivery and the bulls therefore are able to bid the price up to any figure which they like. It is theoretically possible for a bear to be absolutely ruined in a close corner, but such a thing is almost impossible in these days of large capitalization. The last close corner in the market was in Northern Pacific. A corner usually inflicts great loss upon the people who make one as well as upon the bears who are caught, and knowledge of this fact has led the great market leaders time and again to refuse to permit corners when the oversold condition of the market would have justified it. Mr. Gould could undoubtedly have made a close corner in Missouri Pacific in 1884, but he absolutely refused to permit anything more than a well sustained squeeze of shorts.

Broadly speaking, there is no more danger in being short of the market than in being long, although care should be taken to sell only stocks of large capital, which are known to have been distributed and in which trading is active. There is a little more difficulty in selling fractional lots short on account of the fact that it is sometimes necessary for the broker to borrow 100 shares in order to deliver 20 or 30 shares. Ordinarily, however, this is arranged with the odd lot dealers without difficulty.

The public as a whole avoids the short side, partly through not understanding it and partly through what seems to be a natural feeling against operating for a fall. Even among professional traders, there are many who have an instinctive feeling against the short side of the market. This, however, should be overcome by anyone dealing in stocks, inasmuch as the bear period is usually longer than the bull period and, in recent years an operator should have been a bear through at least half of every decade.

It has been said occasionally that bears never make fortunes. There are exceptions to this rule, and, so far as it is a rule, it is due to the fact that the general development of the country has had a tendency to bring out whole people who stayed long of securities even through a reorganization. This will probably be true to a certain extent in the future. Nevertheless a great deal more money has been lost on the long side of stocks than was ever lost on the short side. There is no sound reason against operating for a fall, when a bear period is under way.

CHAPTER XXX.

STOCK MARKET MANIPULATION.

The machinery of a "pool" in stocks and the process of "working" the market is described as follows by an experienced manipulator.

"It is only fair to say that the public rarely sees value until it is most markedly demonstrated to them, and the demonstration comes generally at a pretty high price. It is easier for them, as experience shows, to believe a stock is cheap when it is relatively dear, than to believe it is cheap when it is more than cheap. A Stock Exchange operator or group of operators decides, we will say, that a certain stock is selling cheap-that is, below value. Value means, in Stock Exchange speculation, intrinsic value, plus future value, plus the additional Stock Exchange value. A large holder of the stock begins by going around to other large holders. Ownership is counted, and the outstanding stock in public hands fairly estimated.

"The first necessary detail is to 'tie up' in a pool these known holdings, in order to prevent realizing sales by larger interests. If such large holdings cannot be kept off the market, hands are joined in certain direction, and a long and patiently worked-out plan of accumulating the stock at low prices, before tying it up, is devised. This takes the form of manipulation within a certain range of prices. It may be assisted by natural stock-market con

ditions, which encourage sales by outsiders at a sacrifice. Frequently persistent attacks on the stock by the people who wish to buy it are undertaken, which bring out miscellaneous public holdings, and which, if carried sufficiently far, dislodge even important inside holdings. To accomplish the decline, matched orders are frequently used, whereby the pool really sells to itself. Large offerings of the stock are also continually placed on the floor with. no takers, resulting in the gradual lowering of commissionhouse selling limits, and the securing of cheap stock thereby.

"The question of borrowing money is important. A pool can rarely do the whole thing with its own capital. It is assumed that the money-market outlook favors a stable condition, for it is idle to suppose such operations would be conceived were conditions pointing otherwise. Money brokers have, of course, been employed by the house handling the pool, to borrow from the banks large amounts of time and short-time call money, termed 'special loans,' on which the collateral is largely to be the security in question, and on which loans a liberal rate is paid and liberal margins given.

"The 'publicity department' must also have been covered. Practically all important pool operators keep on hand this appendage to their work. The 'gossip' affecting the stock must be printed, and this department is systematized to a degree few suspect. It is generally in charge of a man intimately connected with newspaper channels, covering every important city, if need be, and this person receives a large compensation for the duty performed of dis