The “bull” and “bear” in the stock market
What does “a bull” mean? It is a term that is used to refer to an investor who expects stock prices to rise. “bulls” buy in anticipation of the market going up.
Of course , the marker will not always rise, sometimes stocks drop and remain low for extended periods of time. Those investors who expect stock prices to decline are known as “bears”. During the Great Depression, the bears made a great deal of money. While the bulls were “buying long” the bears were “selling short”.
Buying long means buying stock for the purpose of reselling it at a higher price. If the marker is going down the only way to recover your investment is to hang in to the stock and wait for it to come back. Selling short means selling stock that you do not own with the intention of replacing it later at a lower price. For example, of you heard that IBM was going to announce very low earnings and felt that the price would drop from $70 to$65 you could sell IBM short by telling your broker to borrow this stock from one of the brokerage’s customer accounts and replace it when it drops to $65 . Keep in mind, of course, that if the stock goes up instead of down , you will have to replace the stock at a higher price and will lose the difference between the selling and the replacement price. Thus selling short can be very risky. That’s all difference between the bull and bear.