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What Should The Correct Bear Market Definition Be?Clearly, a bear market definition is required before these pages can help to offer suggestions about how to protect capital or even profit in such circumstances. Without any fuss or bluster, lets get straight to it. A bear market is depressed or declining. In fact, my Oxford English dictionary defines a bear market as, "a market with falling prices". Both seem equally good. It must go without saying that it is possible to have a bear market in almost anything. The value of property, precious metals, commodities, advertising and almost any other active business or financial sector that can be thought of, can go down - including the value of stocks, bonds and other financial instruments. From this, it is then quite easy to define a 'bear' - and we aren't talking about the grizzly kind... Once again to the Oxford English dictionary, "a person who sells shares hoping to buy them back later at a lower price" or "to speculate for a fall in price". Both seem reasonable enough, but we contend that perhaps these definitions do not quite go far enough. Therefore, we have found a possibly better suggestion. In his groundbreaking book, "After A Crash: Bear Market Money Making", trading and financial legend Harry D. Schultz suggests that a 'bear' is "an investor or trader who believes the trend of stock prices is down and trades or invests with that trend by selling his stock and / or selling short". Returning again to 'Uncle' Harry, in his most recent (1988) version of the book, he lists the bear markets in the United States stock market between 1900 and 1987. In total, he suggests that there were actually 21 in 79 years. He averages this to be a bear market every three and three quarter years, suggesting that for a 'long-term' investor, they "are frequent enough to be impossible to avoid them or to avoid their losses. Thus the investor must try to understand bear markets better. Otherwise, the profits from the previous bull market are usually wiped out." Sobering stuff. To read more about bull and bear markets, please visit:
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