If I, with my limited knowledge of economics, understand this correctly, there are bulls: people who want to see stocks go up; and bears: people who want to see stocks go down. But why are there people who want to see stocks go down? Isn't this bad for the economy?
2007-04-23 02:08:25 · 6 answers · asked by pomosimulacrum 2 in Social Science ➔ Economics
Normally in the stock market, there is a pattern of ups and downs. The market will always reach a peak before plunging down and then recovering again. So, people would want to see stocks go down as that would be the best time to enter the market and buy stocks at low prices before the market recovers, thus earning some profit.
2007-04-23 02:17:46 · answer #1 · answered by snowypowers 2 · 0⤊ 0⤋
Stocks - Ownership
Bonds - Debt
There is an inverse relationship between stocks & bonds. So people who are owners want Bull markets ... while those loaning money want Bear markets.
Morgage companies are praying for the Bear market so they can continue in their enviroment of loaning for mortages. Once the stock market starts to run with the Bulls, the real-estate markets will start to devaluate (inverse relationship). So, there's your team players in a nut shell.
2007-04-23 06:10:22 · answer #2 · answered by Giggly Giraffe 7 · 0⤊ 1⤋
Shortsellers like to see stocks drop. Its called the short squeeze. Investors borrow stock from a brocker and sell them on the market with the understanding that shares will be bought back at a later date and returned to the broker. When the stock falls the investor buys them back at a cheaper price making money on the deal.
2007-04-23 02:22:51 · answer #3 · answered by Adam G 2 · 0⤊ 0⤋
Yes, it is very bad for the economy but there is always someone who will somehow profit from the bear market just as there are those who profit from the bull market. Personally, I like the bull and hope it keeps up. Good question!!!
2007-04-23 02:17:20 · answer #4 · answered by roritr2005 6 · 0⤊ 0⤋
There are people who think earnings potential/current valuations (P/Emultiples) are too high on stocks and they short the stocks believing they are going to go down. Those who typically, short stocks are bearish and can make money on particular stocks when the share price goes down.
2007-04-23 02:17:37 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Not if you are selling short and/or are planning to purchase at the bottom of the next cycle. Cycles are normal. Large cycles are more dangerous to the economy than small cycles.
2007-04-23 02:17:07 · answer #6 · answered by Clown Knows 7 · 0⤊ 0⤋