Short Limb

"Going short" is an ancient and accepted practice in securities markets. It is also such a hazardous endeavor that few market players save virtuosos are advised to try it, and sometimes they are sorry. Last week one such rueful expert was Wall Street's George Geyer, one of the nation's biggest dealers in insurance stocks, who closed the doors of his brokerage house "indefinitely" while he counted up the cost of going short.

Geyer became bearish in insurance stocks in a big way this year and accordingly went short (i.e., sold to his customers, at current prices, stocks which he did not own but hoped to acquire later on at lower prices). But the stocks did not drop, as Geyer had expected; instead they went bounding up (about 20% this year), as banks and pension funds sopped up the supply. When Geyer tried to cover his position, he found that he could not get the $3 million worth of securities that he owed his customers. Did this mean Geyer was doomed to go bankrupt? Said he: "If we do, it won't be voluntary." Many a Wall Streeter thought Geyer & Co.'s capitalization of $220,000 was too meager for its annual volume (well over $100 million). But at week's end some fellow brokers were rallying round, offering to help George Geyer along with capital until he made good to his customers.

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