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.”