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Bulls and Bears

Updated: Jul 20, 2023

Ever wonder where the Bull and the Bear get their names?


Angus from the ND and Square B Ranch, MO; name Rainfall Bear:

President of the Minneapolis Federal Reserve; name Neel Kashkari

"Bear" and "Bull" are often used to describe an individual asset or the stock market's general actions, attitudes, or sentiments. Likewise, investors use the terms "bearish" or "bullish" to describe their market sentiment.

A bear market refers to a decline in the prices of a single security or asset, group of securities, or the securities market as a whole. In contrast, a bull market is when prices are rising. Typically, a 20% or greater move from a recent peak or trough triggers an "official" bear or bull market.

There are a few thoughts on how bulls and bears took on their current roles in the industry of finance.

From the bearskin trade, we know that “bearskin jobbers” were middlemen for the buying and selling of bearskins. Their strategy was to sell skins that they did not yet own at a high price in hopes that, before they had to deliver the skins, they could buy them at a lower price. In other words, they were short-selling.

The bearskin jobbers would speculate on the future purchase price of the skins from the trappers, hoping prices would drop, and they would profit from a spread— the difference between the cost and selling prices. Because short-sellers thrive in declining markets, these became known as “bear’s markets.”

A second theory behind bulls and bears has its origins in the London Stock Exchange of the 17th century. During this time, a bulletin board was used to facilitate the trading of stocks. When demand for stocks was high, the board would be full of bulletins, or “bulls” for short. When there was little demand, the board was “bare.”

Yet another theory is that the terms "Bear" and "Bull" were derived from how each animal attacks its opponents. A bull will thrust its horns into the air, while a bear will swipe downward. These actions were then related metaphorically to the movement of a market. If the trend was up, it was considered a bull market. If the direction was down, it was a bear market.


Morgan Stanley, JP Morgan, Bank of America, UBS… everybody’s swiping down lately. BofA US equities strategist Savita Subramanian expects fourth quarter earnings results from S&P 500 companies to miss expectations by 1%, even though analysts already lowered their estimates. And then JP Morgan’s Mislav Matejka wrote last week, “Even if companies do not disappoint for the fourth quarter 2022, we do not believe EPS upgrades will come in the first half of this year.”

Mike Wilson of Morgan Stanley issued a note last week reiterating his expectation for weakening economic data and earnings well into 2023.

And BofA’s Chief Investment Strategist, Michael Hartnett, who has been arguably the Street’s best strategist over the last couple of years, said what we’ve been preaching here in Insights for quite some time, writing on Friday, "Positioning says pain trade in stocks has further to go on upside; but fade any move toward S&P 500 [at] 4,200; we think 4.5% [yields] in cash [is] a more sensible trade than chasing new highs in stocks." (Thanks for reading last week’s Insights, Mike!)

It's an interesting time to be evaluating all of these strategists’ work. The reality is that 2023 thus far has seen a strong upward move in cyclical stocks relative to defensive ones, and that seems to have convinced some investors that they’re missing the bottom. It has been a helluva rally-- some 12%-- but we also recognize that bear markets have a way of making fools out of the most people possible before they're done.

There are several reasons why the final stages of bear markets are always the trickiest. In bear markets like last year, when just about everyone loses money, investors lose confidence. Most should work with an advisor.

Suffice it to say we're not marrying anything in this recent rally. We’ve been enjoying our share of one-night stands, but we’ve been essentially bearish for what feels like an eternity.


And I don’t want this to seem like a political thing-- because it’s purely a humanitarian concern-- but one of the most significant economic problems we have is a broken job market, and all the White House does all day is brag about low unemployment.

It is not anything to brag about. Let’s be clear: The reason unemployment is so low is because 2.6 million people are missing from the pre-2020 work force, and a whopping 440,000 of those people are missing because they are dead.

In 2020, Covid-19 took many lives, especially among those with comorbidities such as diabetes. However, Covid did not take very many lives of healthy young and middle-aged people, most of whom are employed at companies that have group life insurance. Group life insurance benefit payments in 2020 were barely higher than in 2018.

However, we saw a dramatic spike of natural, non-Covid-19 deaths among working age people beginning in the spring and summer of 2021. (So, what did the CDC do? They stopped publishing the breakdown of the causes of death, of course.)

The problem didn’t go away, though. Oh, no. In fact, we know that it got much worse because the life insurance companies told us so. On a December 30, 2021, videoconference with the Indiana Chamber of Commerce, OneAmerica CEO Scott Davison reported: "What we saw just in third quarter, we’re seeing it continue into fourth quarter, is that death rates are up 40% over what they were pre-pandemic. ...40% is just unheard of… It may not all be COVID on their death certificates, but deaths are up just huge, huge numbers.”

Several months later, Lincoln National reported its 2021 payouts were $1.4 billion, up 164% from 2020. 164%!

According to Ed Dowd, former Blackrock portfolio manager and author of "Cause Unknown: The Epidemic of Sudden Deaths in 2021 & 2022,” just a 10% increase in excess deaths would have been a 1-in-200-year event.

We’re seeing a 40% increase. In other words, our job market numbers are morbid. Literally morbid.


As for the other couple of million people who are currently unemployed, there continue to be many, many more available jobs than willing workers among them, and all of those jobs are sitting there open because no one wants them. The people who once filled jobs like that don’t want to work, or they’re dead. The labor market is no longer able to supply labor; it is broken.

…Which is probably no big deal. Over the last couple of years, we have broken Afghanistan, chickens, federal aviation, our nation’s balance sheet, the southern border, the DEA, the Strategic Petroleum Reserve and Treasury bonds. So, jobs are probably no big deal. …Right?

Right. After all, ChatGPT, the viral chatbot that has raised concerns from teachers and academics over its ability to cheat on essays and exams, has now passed a Wharton MBA final exam, the United States Medical Licensing Exam, and components of the bar exam. The bots will be taking over this asylum in no time.


Given that we’re very much in Mike Hartnett’s camp that we’re in for a real recession and that it’s “likely a biggie,” it’s no surprise that our current recommendations are very similar to his. Of course, we’ve been singing this refrain since the end of October, suggesting that there would likely be trading opportunities within the ongoing bear market but that, for most investors, attempting to time the market would feel like picking up pennies in front of a steamroller. In terms of overriding asset allocation, though, this is where we’ve been for a quite some time:

· Commodities, especially oil

· Alternatives with volatility-reducing characteristics

· Cash

Here at RG, we don’t ever deviate too terribly much from clients’ primary asset allocations, which we have stress-tested versus their goals. We do, however, occasionally overweight a little here or underweight a little there, and we’ve definitely been overweight these three asset classes for many months now. We’ve also been overweight gold, but it’s up around 15% from when we first recommended it here in Insights, so we’re slightly less enthusiastic about it at these levels. Please call or email anytime you’d like to discuss.

Click here to invest with Chad.

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