Thanks to the absurd overemphasis in the news of even the most insignificant fluctuations in “the stock market” (there’s not really “the stock market;” there are lots and lots of them), most people have heard about both a “bull market” and a “bear market.” Sometimes the terms are about the traders themselves, and whether they’re “bullish” or “bearish.”
The “bulls,” as you probably know, believe that valuations are going to rise, while the “bears” think the opposite. A poll of actual bulls and real bears can’t be conducted without quite a bit of bother, and despite decades of scientific study it’s never been conclusively demonstrated that either bulls or bears (or, for that matter, wolverines, cats, or squirrels) have any particular interest in corporate stocks, not to mention opinions about their future values. So why “bulls” and “bears”?
The standard story you’ll hear — especially in the world of finance, where you can see (by watching the markets) that the people involved are not paragons of rationality — involves two old banking families in England, the Bulteels and the Barings. There really were banks by those names — Barings was founded 1762 by Francis Baring, and Harris, Bulteel and Co. was the first bank in Plymouth, England, begun in 1773.
Barings, by the way, is a little bit famous. If you remember a story about 20 years ago about a “rogue trader” in Singapore who lost over a billion dollars, thus destroying the bank he worked for — that was Barings. Bulteel may or may not still exist, but never achieved that kind of notoriety.
But back to the story — supposedly the Barings’ (the “bears”) approach to trading was cautious and based on the possibility that values would decline, while the Bulteels (the “bulls”) took a more optimistic and aggressive stance.
It’s a nice story but it’s complete nonsense. The exact kind of thing you’re likely to encounter when somebody tries to sell you some stock. “Bull,” as an approach to trading, was mentioned in 1714, quite possibly before the banking Bulteel was even born. As for “bear,” that may be the source of the whole idea of “bulls and bears.”
A good clue to this use of “bear” comes from 1709: “…the major, wanting to buy a promotion, speculated by selling some stock short. When the transaction went wrong, the story goes on, the major described his fellow officer as a bear-skin man, among other epithets…” The first thing to take from this report, of course, is a reminder that back in those days the way to get ahead in the military was simply to pay cash for a promotion. And before you judge too harshly, remember that the British military bested all its opponents for longer than the United States has even existed. But regardless, we’re more interested here in the “bear-skin man.”
The term “bear-skin man” comes from the old proverb “don’t sell the bear’s skin before you’ve killed him” — the same message as “don’t count your chickens before they’re hatched.” A “bear-skin man” would sell shares he didn’t own, hoping to use the money from selling them to actually buy them — expecting them to go down in value, thus keeping the difference. This practice is still popular today. It’s so common that the derogatory “bear-skin man” has been dropped in favor of the value-neutral “short selling.” “Short selling” is where you actually do sell shares you don’t own and then use the money to buy them. Reputations have been laundered and now it’s considered not a scam but a legitimate practice.
That’s almost certainly where “bear” comes from. As for “bull,” well, if one approach to trading had an animal mascot, the other approach needed one too, and real bulls have been known to relentlessly charge forward. Besides, “bull” and “bear” both start with “b,” and you should never underestimate the power of alliteration. Even in the stock market.
