Wednesday, July 8, 2015

bear market - don't sell the bearskin before you've killed the bear

The etymology of "bear market" is not certain, but a plausible explanation involves a time in the 1700's when London bearskin "jobbers" would sell bearskins in advance of actually catching them. This goes against the proverb "don't sell the bearskin before you've killed the bear".

By 1721, the bear was associated with short selling because the jobbers would intentionally sell skins they didn't own in anticipation of falling prices later. They'd then buy the skins when the prices fell and give them to the folks that already purchased the skins from them at the higher price.

If market prices are going down then the bear skin sellers would make a profit. It's easy to see how a declining market would then be considered a bear market.

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