The History of 'Bull' and 'Bear'

I expect the markets to be comatose again Tuesday, right up until the Federal Open Market Committee announces how much -- dare I say if? -- it will cut interest rates.

My call is that nothing the FOMC is likely to do will bring much cheer to the stock markets, which have already run up tremendously since their lows in late March and early April. A 50 basis-point cut will be a relief at best, and a 25 basis-point cut will be a catastrophe. No cut at all will be a deathblow. This is still a bear-market rally.

The only thing the Fed could do to ignite the markets at this point would be either to cut 75 basis points or to make a lesser cut accompanied by a statement unambiguously indicating its strong commitment to further easing. Don't get your hopes up.

While we wait nervously, nerves fray and tempers flare. Bulls and bears, each in equal ignorance of a future even more uncertain than usual in this risky biz, pretend certainty at the top of their lungs and show even more contempt than usual for each other's fantasies.

A Matter of Semantics

Perhaps that's why, seemingly out of the blue, I've received no fewer than three emails this past week -- two from outside the U.S. -- asking me if I knew the origin of the expressions "bull" and "bear."

I can't tell you for sure when those expressions were used for the very first time. But based on a little research in my library of stock-market antiquariana, I think I can get pretty close.

As far as I can determine, "bull" and "bear" were explained for the first time in print in an English book called Every Man His Own Broker, or, A Guide to Exchange Alley, by Thomas Mortimer. I own an excellent copy of the 10th edition, printed in 1785.

London's 18th century Wall Street was called Exchange Alley, or simply "the Alley." If the Internet had been available then, Mortimer's book -- intended as an inside guide to trading for the common man -- would probably have been a Web site called TheAlley.com.

According to Mortimer's definitions, it would appear that "bull" and "bear" had much more specific meanings in 1785 than they do today. A bull wasn't just someone who thought -- and hoped -- that the market would go up. He was the equivalent of a modern investor who uses margin -- and lots of it! The bull of 1785 bought stocks with no money at all and hoped to sell them at a profit before payment became due.

In Mortimer's words,

a man who in March buys in the Alley 40,000 pounds [of stocks for settlement] in May, and at the same time is not worth ten pounds in the world ... [he] is a Bull, till such time as he can discharge himself of his heavy burden by selling it to another person, and so adjusting his account, which, if the whole house be Bulls, he will be obliged to do at a considerable loss; and in the interim (while he is betwixt hope and fear, and is watching every opportunity to ease himself of his load on advantageous terms, and when the fatal day is approaching that he must sell, let the price be what it will) he goes lowering up and down the Stock Exchange, and from office to office; and if he is asked a civil question, he answers with a surly look, and by his dejected, gloomy aspect and moroseness, he not badly represents the animal he is named after.

In Mortimer's day, a bear wasn't just a pessimist -- he was a short-seller. A bear was

a person who has agreed to sell any quantity of the public funds more than he is possessed of, and often without being possessed of any at all, which, nevertheless, he is obliged to deliver against a certain time: before this time arrives, he is continually going up and down seeking whom, or ... whose property he can devour; you will find him in a continual hurry; always with alarm, surprise, and eagerness painted on his countenance; greedily swallowing the least report of bad news; rejoicing in mischief, or any misfortune that may bring about the wished-for change of falling the stocks, that he may buy in low, and so settle his accounts to advantage.

Mortimer claimed that you could tell bulls and bears apart just by looking at them. He wrote,

[The Bear] is easily distinguished from the Bull, who is sulky and heavy, and sits in some corner with a melancholy posture: whereas the Bear, with meager, haggard looks, and a voracious fierceness in his countenance, is continually on the watch, seizes on all who enter the Alley, and by his terrific weapons of groundless fears -- and false rumors -- frightens all around him out of property he wants to buy; and is as much a monster in nature, as his brother brute in the woods.

It's been 216 years since Mortimer wrote Every Man His Own Broker. But it sounds to me like he could show up on 21st century Wall Street and find his way around just fine.

Does anyone out there know of an earlier explanation in print of the expressions "bull" and "bear"? Let me know.