Did you know that a Bear Market actually existed outside the minds of doom and gloom CNBC analysts? The history behind the stock market term Bear Market can be traced back to the underlying animal (not so for Bull Market). Back in the day, London “jobbers” used to trade bear skins. A “jobber” was the equivalent of a modern day market maker on the NYSE. The “jobbers” used to sell bear skins before the bears were actually caught. This practice morphed into short selling, as the skins were sold in anticipation of a softening market and subsequent declining prices. When the bears were caught, the “jobbers” would cover their short with these now (hopefully) cheaper skins. Thus, the term Bear Market would go on to become synonymous with declining prices. I wonder if there is a correlation between trends in missing circus animals in the late 1800’s and successful short selling?
Comments provided by guest writer Matt Santini, CLS Portfolio Manager