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Letter Re: Of Bulls and Bears--Some History and a Glimpse at the Future
Dear Mr. Rawles,
Thanks for the great blog, and your "Patriots" novel.
Reading your site has become a daily routine for me.
One thing that I am finding amusing in today’s investment market is this
mythical line in the sand of when we are officially in a Bear market. At present
the market seems to be fighting to stay just above this line and almost daily
some market pundit states how one average or another has "officially’ entered
an intraday Bear Market.
Few people know, especially those in the investment market, the origins of the terms Bulls and Bears.
In my neck of the woods, the Gold Country of the Sierra Nevada mountain range,
Bulls and Bears have been battling it out since the early days of the Gold
Rush. This was sport for many of the local towns to bring to the town square
a large bear captured in the wild and put the bear to do battle with a local
prize bull. The men of the town would gather and wager on which of the two
behemoths would win out in a fight to the death.
One of two scenarios would play out. In the first scenario (a Bull Market)
the bull would gore the bear in the abdomen slashing the bear open in a spectacular
display of blood and guts. The bear would die fairly quickly and the townsmen
would head off to the bars to tell of their afternoon’s entertainment.
In the other scenario, (the Bear Market) the bear would gain position inside
of the bull’s horns placing the bull in the proverbial ‘bear hug’.
Then things would get ugly! The bear would then bite off the nose of the bull.
At this point all the bear has to do is hang on and let the bull bleed out – and
that is just what the bear would do. This takes hours of the bull bellowing
in pain, blood pouring from the bull’s face all the while. Once the bear
had achieved the inside position and the nose was bitten off, it was effectively over, but there were still the hours of bellowing
and blood until the bull finally died.
The reason for my writing you with this bit of history is because it is obvious
that in the investment arena the bear has gained the inside position, the nose
of the bull has been bitten off, and we are watching the bull bleed out (numerous
large cap companies reporting colossal, multi-billion dollar quarterly losses – now
in a row; the housing market crash; the dollar weakening; and the entire banking
industry teetering on complete insolvency to name a few. The efforts of the
Fed to gauze the wound will not prevent the inevitable outcome). What amazes
me is watching the pundits and talking heads make ridiculous statements about
how we are "not actually in a bear market" because we float just above a subjective
line in the sand; or my recent favorite, some reporter whining about “why
can’t we just get to the bottom of the bear market already and start
over”.
The history of Bulls and Bears shows, at least in symbolic reference, why a
bear market is not a quick, flashy downside where we ‘just get there
and start over’. This is a long, slow process and no matter how hard
the bull tries to pull away, he is not getting away from the inevitable outcome.
Jim, you, through your blog site, you offer us the opportunity to be prepared
for what may come. Those who sit ringside believing that the bull will somehow
win out in this scenario are fooling themselves and those around them. Keep
up the great work! - Dennis
JWR Replies: As reader Kevin A. recently mentioned to me,
the market terms are most often attributed as follows: Bulls gore head first
and then raise their heads and thus their horns upwards,
while bears fight by striking with their paws in a downward motion. But regardless of the specific origin of the terms, don't forget the old Wall Street saying: "Nobody beats the bear."
