MARKET COMMENT
The Origin Of Bulls And Bears

By David Kuo (TMFDragon)
August 2, 2004

Contrary to popular belief, stock market bulls did not get their name from the way that bulls attack by thrusting their horns into the air. Nor are stock market bears so named because of the way that bears swipe downwards with their paws. It's a nice idea though, and certainly us helps to remember that bulls like to push the market "up" and bears act by pulling the market "down".

In fact, stock market bears are so named because early American bearskin traders would sell their pelts to customers even before the bears had been caught. These bearskin jobbers would then hope to purchase the bearskins from trappers at a lower price and then deliver them to their customers for a profit. This is the basis of bear trading, or short selling on the stock market, namely to sell first and buy back later at a lower price.

The origin of the bull trader is less clear, though it is reckoned to originate from the fact that bull and bear baiting were once popular sports. Since they needed an opposite for a bear, the bull seemed like a convenient animal to represent the behaviour of someone who did the exactly the opposite of short selling.

I don't think of myself as a bull or a bear trader, though I do believe that over the long term the stock market should produce better returns than other forms of investments. For that reason, I tend to see falls in the stock market as just another buying opportunity.

It is important not to allow emotions to dictate the way that you invest, though that is sometimes easier said than done, especially when shares are in freefall and bulls and bears are engaged in furious debates. We need to remember that all businesses have an inherent valuation. That may be based on their profitability, asset value or ability to pay future dividends. One of the worst enemies of stock market investing is emotion and if there is one lesson that the stock market decline of recent years has taught us is that emotion and investing do not mix.   

A version of this article was originally published in June 2003.