Corner

A corner (or 'cornering the market') is a high-stakes, illegal market manipulation scheme. Imagine a real-life monopoly game where one player buys up all the properties of a single color. In the financial world, a corner occurs when an individual or a group secretly acquires such a massive portion of a specific asset—be it a commodity like silver, a company's stock, or other security—that they effectively control its supply. The goal is to create an artificial scarcity. Once they have this stranglehold, they can dictate the price, forcing anyone who needs to buy the asset (especially those who have short sold it) to pay an exorbitant price. This is the financial equivalent of being the only person selling water in a desert. While it sounds like a fast track to riches, cornering the market is incredibly risky, requires immense capital, and is strictly prohibited by regulators like the SEC because it completely distorts the principles of a free and fair market.

The mechanics of a corner are like a predator setting a trap. It’s a deliberate, multi-stage process designed to squeeze other market participants.

This is the “quiet” part. The manipulator, or group of manipulators, starts buying up the target asset. They do this as discreetly as possible to avoid tipping off the market and driving up the price prematurely. They aim to control a huge percentage of the available supply, known as the float. This isn't just about buying the physical asset; they might also snap up futures contracts or options to lock in control over future deliveries, tightening their grip even further. Their goal is to own so much that there's practically none left for anyone else to buy on the open market.

Once the trap is set, the squeeze begins. The manipulator now holds all the cards. Those who bet against the asset by short-selling are in deep trouble. A short seller borrows shares and sells them, hoping the price will fall so they can buy them back cheaper, pocketing the difference. But now, when they need to buy back the shares to return them, they find there are none available—except from the manipulator, who can now name their price. This is famously known as a short squeeze. The desperate buying from short sellers trying to cover their positions sends the price skyrocketing, further enriching the manipulator.

History is littered with failed attempts to corner markets, but few are as spectacular as the story of the Hunt brothers.

In the late 1970s, Texas oil billionaires Nelson Bunker Hunt and William Herbert Hunt decided to corner the global silver market. Believing that inflation would devalue paper currency, they began stockpiling immense quantities of physical silver and silver futures contracts. Their aggressive buying sent the price of silver from about $6 per ounce in 1979 to a peak of nearly $50 in January 1980. For a moment, it seemed they had succeeded. However, their scheme attracted the attention of regulators. The commodity exchange COMEX and the Federal Reserve intervened, changing trading rules to “liquidation-only” and raising margin requirements. This broke the back of the corner. Panicked selling ensued, and on March 27, 1980—a day now known as “Silver Thursday”—the price of silver crashed by over 50%. The Hunt brothers lost over a billion dollars, faced regulatory investigations, and eventually filed for bankruptcy.

As a value investor, you’re not looking to manipulate markets; you’re looking for solid businesses trading at a discount to their intrinsic value. So, why should you care about corners? Because they are the ultimate expression of market mania, a perfect example of what to avoid. A stock price rocketing upwards due to a squeeze has nothing to do with the underlying company's performance.

• Distorted Valuations: A corner can make a terrible company look like a superstar or make a fairly-valued company seem wildly overpriced. It creates a “false signal” that can trick unwary investors into buying at the peak of a bubble.
• Focus on Fundamentals: The story of the Hunt brothers is a powerful reminder to trust fundamentals, not hype. A prudent investor would have seen the silver price detach from reality and stayed away. A price spike without a corresponding improvement in a company's earnings, assets, or competitive position is a massive red flag.
• Risk Management: Understanding market manipulation tactics helps you spot them. If you see a stock with extremely high short interest and a sudden, violent price surge, you might be witnessing a short squeeze. It’s not an opportunity; it’s a sign of extreme volatility and risk, a game best watched from the sidelines.

In short, knowing about corners reinforces the core principles of value investing: do your due diligence, trust the business and not the market's mood, and never confuse a manipulated price with true value.