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two persons trading through a commission house in this way. One would buy a stock at a price and the other sell it short at the same price and yet both lose money. For example, A bought 100 shares of Sugar at 124% and B sold short 100 shares of Sugar at 124%, and for the moment this was the high price. Sugar the following day declined to 123, at which point A, becoming nervous, sold and lost $212.50 plus one day's interest. B, elated over the keenness of his judgment and his beautiful foresight, made his trade with the idea of securing a 1 per cent. profit, but success emboldened him and he changed his plan and determined to hold on. Two days later Sugar had not only recovered its loss but had advanced to 12812, where the short stock was bought in at a loss of $362.50. So much for the judgment of the amateur speculator.

Again, it is to be observed that a manipulated stock breaks sharply. The object of the break may be to force out margin traders to dislodge their holdings when the advance will be resumed. The margin trader will grimly contemplate the decline and finally, when a serious loss. confronts him, will sell out. He has too much "company," for other speculators in the same predicament are doing precisely the same thing-selling out at a loss, which is exactly what the manipulators playing with known conditions want. The manipulators having secured the desired stock and resumed the advance the speculator reasons with himself after this fashion: "There, I told you so. I knew I was right about that stock. Didn't I say to myself that it would sell up to? Wasn't I convinced by what I knew that I had the right idea? Just my infernal luck.

If I had only held fast and sat through the decline I would have been all right." Delusions again. There were many others who bought and sold under the same conditions. The decline would have been continued until all or most of the stock in question had been liquidated. The purchases of the margin speculators caused the manipulated decline. Their forced liquidation was necessary before the rise could be resumed. His sale of the stock induced the rally, or was at least a prerequisite. His purchase at the "top" helped check the rise and furnished fuel for a decline profitable to the manipulators. And yet in his own reasoning he has not considered himself as a factor contributing to the decline and aiding the subsequent recovery. In other words his judgment is wholly at fault; his conclusions were in error when the commitment was made and again following its consummation. He deceives himself so cleverly that the sophism of the manipulator is hardly necessary to add attractiveness and fascination to the struggle for money.

To stand in the office of a commission firm all day and hear the market opinions expressed and the reasons for making commitments is to understand why so much money is lost. The man who "guesses," who has a "fancy for a particular stock," "who wishes to make a bit," who has "a tip," is in the majority. He has the speculative fever, and having contracted the disease he has not the time nor the mood to adopt the reasoning dictated by ordinary common

sense.

"Buy," says a customer to his broker, "100 shares of Metropolitan at 150."

The stock is bought at a cash cost of $15,000. The customer's equity in the stock is $1,000. The stock is capable of wide fluctuations.

"What did you buy it on?" the customer is asked.

"My friend Smith told me that it is going up." "Who is Smith ?"

"Oh, a neighbor of mine. He heard it was a good thing from Jones, whose cousin is a director in the company."

Would this man, who is a type, have invested $15,000 (equity $1,000) in his own business (mercantile) without a most careful investigation of conditions, and consequences, profits and losses, present and prospective? Would Smith and Jones influence him in such a transaction? Certainly not. And yet thousands of stock market ventures are made annually without any more justification.

Therefore if about to speculate in stocks, it behooves you to ask yourself if you possess the temperament and accurate and swift reasoning powers necessary to cope with the ablest money getters in the world. If you do, you will find that hardly a day passes that Wall Street does not present, great opportunities for your skill in money making.

CHAPTER XXIX.

AN INTERESTING INQUIRY.

A correspondent asks for an explanation in detail of the meaning of "a large short interest," "a squeeze of shorts," "loaning rates for stocks," etc.

This inquiry implies some lack of comprehension of the principles involved in short selling, and as it comes from a banker, it is possible that others may be interested in a statement of how it is practicable to operate for a fall. The present form of operating for a fall is a modern device. It was preceded by a system of "buyers and sellers options" by means of which a buyer or seller acquired a right to deal at specified prices at dates more or less distant from the date of the contract. This, however, was a rather awkward method of trading and has ceased to exist in this market, except when it is unusually difficult to borrow stock.

In operating for a rise, only two parties are necessary for the contract. One buys and one sells. Delivery of the stock is made by the seller to the buyer; payment is received and the transaction is closed.

An operation for a fall, as carried on in the New York Stock Exchange, require three parties for its completion. Let us suppose that People's Gas is selling at par. A, although not the owner of any People's Gas, believes that

the price will go lower. He, accordingly, offers a hundred shares of the stock at par. B accepts this offer and acquires the stock. A thereupon goes to C, who owns People's Gas, and borrows 100 shares, which A then delivers to B. B pays A $10,000, the price of 100 shares, and the transaction, as far as A and B are concerned, is at an end. But A, in order to obtain the use of the stock owned by C, has to deliver to C $10,000 as security for the return of the borrowed stock. Time elapses when it may be supposed that People's Gas has fallen to 95. A then buys of D 100 shares at 95, and, receiving the stock from D, returns it to C, the previous lender, and receives back from C the $10,000 deposited as security for the loan of the stock. A has, therefore, made $500 as the result of the operation for a fall begun with B.

A number of questions may be anticipated. Can A with certainty borrow stock from C? If C has the stock, and some one always has it, he is willing to lend it because there is little risk in so doing and because C gets the use of A's money, deposited as security, at lower rates of interest than C would have to pay for the use of the same amount of money if borrowed from a bank. Furthermore, if C borrowed $10,000 from his bank, he would be obliged to give as collateral securities valued at perhaps $12,000, whereas by loaning his stock to A he, in effect, procures a loan of $10,000 from A by the use of only $10,000 collateral.

The practice of borrowing and lending stocks is so universal that it is as much a part of the business to borrow stocks as it is to borrow money at the banks. The customer

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