Posted by Len on October 29, 1998 at 11:30:21:
-- All this talk about bull and bear markets
reminds me that it's a zoo out there, when it comes to investing. And, like
any zoo, there are quite a few species to be found down on Wall Street.
Most investors' favorite animal is clearly the bull. The term is used in
several ways. Referring to the stock market, it describes a period in which
prices rise for a lengthy period of time. When it comes to people, bullish
describes one who is optimistic.
How this usage came about is not entirely clear. A bullish investor is one
who buys a stock in the expectation that its price will rise. This could be
compared with bulls charging ahead, stampeding prices higher. Or it could
simply reflect the fact that bulls habitually toss their heads upward.
To be considered a bull market, prices need not rise continuously. There
can be days, weeks and even months in which prices fall. What matters is
the long-term trend. And as I pointed out in my column of Aug. 7,, this
bull market, which began in August 1982, is still alive — although
somewhat wounded.
Bears
Which brings me to the Street's least favorite animal, the bear. This term
is used to describe downers — both stock prices and individuals. It
originated from the old days, when traders used to sell bearskins before
the bears were actually caught. In the stock market, it applies to people
who expect prices to decline.
As for how much of a price decline constitutes a bear market, the rule of
thumb seems to be at least 20 percent. However, a lot depends on how
long the drop lasts. The quicker the rebound, the less likely that investor
psychology will turn from optimism to the pessimism that usually
accompanies a bear market.
You can find other animals down on Wall Street. For example, there are
dogs, as in Dogs of the Dow. This is an investment strategy that calls for
buying the 10 stocks with the highest yield among the Dow 30, altering the
portfolio annually as needed.
In the feline family, remember CATS (Certificates of Accrual on Treasury
Securities), LYONS (Liquid Yield Option Notes) and TIGRS (Treasury
Interest Growth Receipts)?
Arachnids
A recent addition to the Street's menagerie is SPDRS (pronounced
spiders), which enable investors to participate in the price performance
and dividend yield of the Standard & Poor's 500 Index by purchasing
shares at a price equal to roughly 10 percent of the value of this index.
While buying and selling stock, investors must be on the lookout for
donkeys and elephants, representing, of course, the two major political
parties. The government certainly plays a big role in Wall Streeters' lives.
Sometimes Washington even makes monkeys out of traders by changing
the rules in the middle of the game.
There are two other animals to keep watch for. Ostriches are investors
who stick to their old strategies, oblivious to changes in the world around
them. And then there are the hogs — as in the expression, bulls can make
money, bears can make money, but hogs, investors who are too greedy,
usually get slaughtered. |
