Why Do We Call Ourselves Bulls or Bears? by Fred Fuld III, author of Stock Market Trivia: Special Section on the Weird Words of Wall Street
With the recent huge plummet and partial recovery in the stock market, many investors are bullish, believing that we have had our selloff and the market will continue its upward movement. However, there are plenty of bears that believe that this rise is just temporary, and the recent market drop is just the beginning of a much bigger fall.
But did you ever wonder where the terms “bull” and “bear” came from? As a financial historian, I have collected all kinds of interesting and unusual financial tidbits and trivia over the years and compiled them all into a book called Stock Market Trivia.
The book contains such topics as the stock that owned a rock with George Washington’s graffiti on it. (Actually, he carved his initials in a large rock while he was a surveyor; I would call that 18th century graffiti.) Did you know that there was a stock that traded for over a million dollars a share? (Hint: it was not Berkshire Hathaway.) Also, there is a billionaire investor who appeared in a soap opera a couple times. Plus, one country has a stock exchange that trades only two stocks. And I can’t forget the stock that went up 259,934.34% in one day. So you can see the types of weird facts I like to collect.
Of course, the first chapter in the book is called No Bull About Bulls and Bears. Since the fear of a crashing stock market is on the minds of many investors, let’s start with the term “bears”. Bears make money by shorting stocks. For novice investors who are not familiar with the concept of selling short, it is a way of making money on a stock that is going down. In simple terms, it involves borrowing stock through the brokerage firm, immediately selling it, hoping to buy it back at a lower price, and then returning the stock that was borrowed. The difference between the price you sold the shares at and what you buy them back at is your profit or loss. This all happens electronically.
This practice of selling something you don’t actually own has been going on for centuries. In the 1700’s, European bear hunters would pre-sell their bear skins, almost like short selling. However, these bear hunters would sometimes come up short (no pun intended) by not killing enough bears, which was the derivation of the term short sellers. This situation generated the saying at that time, “Don’t sell the bear-skin before you have killed the bear.”
One of the books in my collection, Every Man His Own Broker by Thomas Mortimer, was published in 1775. It contains the first usage of the word “bull” as someone who believes the market is rising and “bear” as an investor who believes the market will decline The words bulls and bears are mentioned many times throughout the book. Here is an example of a great quote from the Preface:
“Act for the better preventing the infamous practice of Stock-jobbing; by which the most palpable and glaring frauds then in vogue, were indeed suppressed: the Bubbles burst, and the Racehorses of Exchange Alley, expired with the date of that act; but BULLS and BEARS still exist in full vigour.”
Short selling actually took place in the 18th century, and yes, many times, the short sellers couldn’t fulfill their obligations. In addition to bulls and bears, Mortimer also mentions another animal, “lame duck.” He describes lame ducks as “those who refuse to fulfill their contracts.” In other words, the short sellers who shorted a stock that ended up rising and were not able to buy the borrowed shares back to return them. So this brought about a new saying, “He who sells what isn’t his’n, must buy it back or go to prison.”
Finally, what about bulls? Just like donkeys and elephants for Democrats and Republicans, there had to be an alternative animal to the declining market bears. Many investors thought that the bull and bear terms came about because a bull knocks you up in the air (rising market) and a bear knocks you down (falling market). The real story is that a bull seemed to be a natural contrast at the time, a powerful animal that moves forward and charges ahead, just like a strong stock market.
Hopefully you found this information interesting and informative, and will begin to appreciate the strange and bizarre stock market and investment trivia that makes up the fun side of Wall Street (besides making money).
Fred Fuld III, is a financial historian. He was a former executive in the financial services industry who started out working as a stockbroker, and later as a market maker on the options floor of the Pacific Stock Exchange. He started collecting antique stock certificates and other financial service industry collectibles many years ago, then began selling antique stock certificates through his firm, antiquestocks.com. He is the publisher of the investment blog, Stockerblog.com and has written several stock market and financial history related books, including Stock Market Trivia. He has been interviewed on CNBC, Fox Business News, and Globo TV.