Word: marketing
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Dates: during 1940-1949
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...professionals, the market has another side (the short position), in which many of the biggest killings are made. Usually only professionals sell short, chiefly because the ordinary investor is vaguely suspicious of the process. Shorts (bears) sell stock which they do not own, hoping that the market will go down and that they can buy the stock later at a lower price. Meanwhile they borrow stock from brokers, sometimes paying a small fee, to turn over to the buyer. Eventually, of course, the short trader has to replace the borrowed stock by actually buying equivalent shares...
...fastest and most dangerous market ride is in "puts & calls," which is much like betting that a crapshooter does or doesn't make his point. For as little as $137.50 a speculator may buy a "call," i.e., a 30-day option to buy 100 shares of stock at the price prevailing on the day he bought the call. If the stock rises, he exercises the option and takes his profit. A "put" is the reverse: a trader buys an option to sell stock, cashes in if the price falls. (Both puts & calls are used as hedges to protect paper...
Brokers also trade on their own accounts, like every other speculator trying to outguess the market. If they succeeded with any regularity, they obviously would not have to sit around waiting for commissions...
Snoop & Jiggle. Though the Street always purrs with "inside information," the days of great market rigging schemes and of pools operated by "insiders" are dead & buried. (In 1929, there were 105 pools in which insiders ran up the price of the stock by buying heavily, then sold to outsiders and left them holding the bag.) The Securities & Exchange Commission keeps too close a watch now for any such shenanigans...
Working on the theory that "it takes a snoop to catch a jiggle," SEC has 1,100 employees watching all market operations, keeping a constant check on the ticker tape, looking for any unusual buying or selling. (In Manhattan, SEC's tape watcher is an old pool operator of the '20s who knows all the tricks.) If SEC smells something suspicious, it questions the traders, the officials of the company and, if need be, follows up with subpoenas and injunctions. Stock Exchange members, who once bitterly hated the reforming SEC, have learned to live with...