Tuesday, August 24, 2010

What is the History Behind... the term "bear" and "bull" market

The Charging Bull of Wall Street, created by Arturo Di Modica in 1989, has become synonymous for growth in the stock market and our economy. It is a symbol of charging ahead and taking the bull by its horns and making it big. If we as a country are in what we call a "bull market" we are doing well. However where did this term come from and why is a downturn in the stock market known as a "bear market?"

Bear skin used to be one of the top money makers in the early years of this country. Speculators on the coasts would sell bear skins before they even had them in stock to people from all over the world. Their hope was that in a short period of time the price of the bears skins would drop thereby allowing them their profit. These men became known as "bear skin jobbers." It was eventually just shortened to "bear" which defined short sellers of stocks. If "bear" began to define the term of price drops in the market then how did the contrast between that and the bull come about?

In the early days of California's existence, when gold rushers where arriving in mass, a desire and need for entertainment was sought. Sundays became the day where everyone would gather for the great fight between a grizzly bear and raging bull. Since a vast majority of the population in California was still of Mexican heritage it is no surprise that the use of a bull in a fight would draw many of them in to watch. The value of capturing a grizzly bear was enormous, so the bull would actually have their horns shaved down to avoid direct killing of the bear. Once the bear was placed in the ring the bull was put into place to be released in the arena with him. A small cut was made on the bull's nose and lip to enrage the bull and have him start to fear for his own life. Once the gate opened his opponent stood before him, the great bear. As the bear population in the area decreased the fights were held less and less until they eventually became a footnote of history.

As people started to associate price dropping with the term "bear" it was naturally for them to use the term "bull" to define price increases. For years there has been that battle in the markets between a rising economy and falling one. It all goes back to those fights that occurred which entertained those "49ers" in the California frontier.

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