Plans like this are, however, sometimes thwarted. Markets get sick. More stock presses for sale than the "inside" has money to pay for. Stocks break in price. Then the promoter can't make any money and might lose a lot of it. Since money-making is his primary object, and stock distribution secondary, he has got to do some close figuring when markets are subject to the price-breaking habit. That's where B. H. Scheftels & Company, through its brokerage business, found, after a short period, that it held within its grasp the power to insure itself against declining markets.
Without promotion stocks on hand--obtained by wholesale at lower figures than values warranted--in which it could profit to the extent of hundreds of thousands of dollars on a rising market, the million-dollar annual expense of the Scheftels company would not have been justified. Once the market sought lower levels and no profit could be made on the promotions, it meant a discontinuance of the business on the large scale.
The corporation's insurance was the open market in stocks on the general list and its brokerage business.
From time to time it openly shorted tens of thousands of shares of stocks in which it had no promoter's interest whatever, by going out in the open market and selling them to all bidders against future delivery, by borrowing them from brokers and selling them for immediate delivery, and by short sales generally.
Speculators play the market and so did the Scheftels company, but never against its own stocks. Speculators, however, buy mining shares outright or on margin because they want to gamble. The Scheftels company played the market for just the opposite reason. It didn't want to carry its eggs in one basket and wanted insurance against market declines to cover promotion losses that must ensue if a general market slump occurred.
And the Scheftels company did not inaugurate any fake bookkeeping system or otherwise hide behind any bushes in doing this.
Moreover, the corporation didn't take advantage of anybody. The cards were not marked. The deck was not stacked. There was no dealing from the bottom. Market opinion for which the corporation was directly or indirectly responsible was genuine to the last utterance. No news was suppressed on any stock. The corporation divulged to its customers and to the general public every piece of important outside or inside information regarding any stock on the general list that was in its possession. At the very moment when it was going short of stocks in greatest volume its market prognostications were winning for it a reputation for accuracy never before recorded.