Are YOU a Bear?

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First, bankers and investors need to be able to see some timescale for the crisis. Otherwise they will continue to hunker down in safe havens of cash and gold and perpetuate the cycle. One important development this month -- drowned out by panic surrounding the Bear Stearns rescue -- was that credit rating firm Standard & Poors said the end was in sight for writedowns of the subprime mortgage assets that sparked the crisis.

A long-time reader asked us to define what it means to be a bear. Well, for one, they are not prophets of doom. Without getting into the finer nuances of what a bear on one or another specific asset looks/sounds like, let's look at a couple of eloquent descriptions of bubbles, bulls, and bears, as offered by Edward Chancellor, a true maniac of manias, bubble trouble expert, and noted Financial Times writer:

"Bubbles occur when speculators drive asset prices far above their intrinsic value. The collapse of a bubble is frequently accompanied by an economic crisis. Who gets the blame for this crisis? Not the bulls, who were responsible for the bubble and the various frauds and manipulations perpetrated to keep shares high, while cashing in their profits.

No, it is invariably the bears who are blamed for the post-bubble crises and are the main objects of anti-

speculative legislation. Yet during the bubble periods it is the bears who are generally the lone voice of

reason, warning people of the folly of investing in overpriced markets. In the aftermath of a bubble, they

continue their forensic work of exposing unsound securities and bringing prices back in line with intrinsic values, a point which must be reached before the recovery can start.

Bulls always have been more popular in this [the US] country because optimism is so strong a part of our heritage. Still, over-optimism is capable of doing more damage than pessimism since caution tends to be thrown aside. To enjoy the advantages of a free market, one must have both buyers and sellers, both bulls and bears. A market without bears would be like a nation without a free press. There would be no one to criticize and restrain the false optimism that always leads to disaster. "

In the meantime, more nervousness is the order of the day. Even if you might not be ready for a replay of 1929 just yet. Whether you are a bull or a bear.

Happy Trading.