CREDIT TRANSACTIONS IN SECURITIES 181
create about our stock markets largely explains why it is that
certain newspapers and magazines which year in and year out
accept the yearly subscription price for their journals in ex-
change for their promise to complete the deferred delivery of
them to the subscribers a whole year afterwards, will so often
express horror at “short sales” on the Stock Exchange, be-
cause, forsooth, they involve “selling what one doesn’t own.”
Purchasing Securities on Credit.—In actual fact, then,
“buying on margin” is simply the financial phrase for purchas-
ing securities by employing credit to defer a payment of
money ; the same basic operation is known as “purchasing on
credit” in some branches of commercial business. “Selling
short,” on the other hand, is simply the phrase used in finance
to designate a sale of securities in which credit is used to defer
their delivery; in its economic essentials this operation corre-
sponds to what merchants and manufacturers often call selling
for “forward” or “future delivery.” An investor or speculator
who has bought stocks on margin is said to be “long” of stocks;
whereas if he has sold them but has not yet delivered them, he
is said to be “short” of stocks. Furthermore, the speculator
who buys stock on margin in the expectation of seeing a rise in
its price which will subsequently enable him to sell it at a profit,
is called a “bull,” while the name of “bear” is given to anyone
who sells a stock short in the anticipation that its price will
shortly decline so that he can buy it to “cover” his sale (i.e.,
make his deferred delivery of the stock) at a lower price and
obtain a profit.
Thus Stock Exchange transactions, when stripped of the
hectic and unfamiliar verbiage with which the financial scribe
so often invests them, resolve themselves into a few common-
place and immemorial practices of trade which exist just as
extensively, although unhonored and unsung, in every grocery
store and newsstand in the nation.
Margin Purchase of 100 Steel—That the principles in-
volved in purchasing securities on credit are fundamentally
