of an office has no trouble or difficulty on this account. He merely gives the order to sell, margins his account, and the broker arranges the terms of borrowing with his fellow brokers.

If there is a general impression that a stock is going to fall many people may sell it short at the same time. In this case, the borrowing demand may exceed the current supply. When this occurs the loaning rates fall. That is to say, A gives C the $10,000 as before described; but, on account of the demand for the stock, C does not pay as much interest. Assuming the money rate to be 4 per cent., the rate on borrowed stock under normal conditions might be 32 per cent., but if the demand to borrow were quite large, the lender of the stock would have to pay only 2 per cent. or even less for the money received as security.

If the demand to borrow were still greater, the stock would loan at what is called "flat," which means that no interest would be paid on the money deposited; or, with a still greater demand, A would be compelled not only to give C the use of the $10,000 without interest, but would have to give C an arbitrary sum, called premium, in addition for the use of the borrowed stock. Premiums range all the way from 1-256 up to 1 per cent. or more a day-the latter, of course, only in very extraordinary cases. A premium of 1-16 of 1 per cent. per day is as high as premiums often go even in a bear market. This means that A not only gives his money without interest, but pays C $6.25 per day for the use of 100 shares of stock. This premium is, of course, charged by the broker to the customer who is short of the stock.

Generally speaking, it is cheaper to operate on the short

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 råpid 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