Bulls and Bears

You often hear people describe the financial markets as either a bull market or a bear market. This can be confusing and people often mistake one for the other. Let me try to unravel this a little bit for you.

A bull market is when investor confidence is high, and the masses are making money. People are feeling as though the market will continue to produce capital gains. It is called a bull market because the "herd", the term used to describe the majority, is in agreement that the markets are good. The bull is a herding animal, and thus the term bull market.

A bear market describes a financial environment where there is widespread pessimism. A bear market is when things aren't going well in the financial markets and people don't feel positive about the immediate future. I have no idea why they call it a bear market, and frankly the bull market reasoning is dumb too. So I created my own story.

Wanna hear it? Here it go.

Back in the middle ages, there was an evil wizard who was also a tax collector. His names was The Great Bernanke He would ride through the streets of the village and collect taxes. Since there were no mopeds back then, he rode one of the animals from his petting zoo. Let's for the sake of argument call it an evil petting zoo. The wizard had two favorite animals that he would typically ride though the streets. He had his work vehicle, a bear, and he had his recreational vehicle, a bull. When he rode his recreational vehicle, the bull, he wouldn't collect taxes. This made the villagers happy; thus the term a bull market. When he came through the streets on his bear, then the villagers were forced to pay taxes and were subjected to an occasional mauling. Thus the bear market.

See. That was a much better story. Just remember: bears can maul you, and that is bad. Bulls could run over you, and possibly gore you, but if you avoid Pamplona then you should be fine.

I'm bearish right now. Grrrrrr.