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How Traders Handle the Market Like Real Bears

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Our trading techniques are extremely relatable to hunting tactics used by polar bears.

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This is an essay that I wrote in January of 1987, but its perspectives have become pertinent once again. I've pulled excerpts from Barry Lopez's Arctic Dreams that describe various ways in which bears approach "hunting," and I've related them to shorting the market. (My commentary is in bold.) It was originally written in relation to the bond market. Bonds went nowhere for three or four months before going from 7.11% to 10.20% in six months. The dollar was also weak, even precipitously so for that period. These developments set off the infamous 1987 stock market crash. The views expressed here relate to the current psychological state of the US equity market. However, this market is likely not yet in the "kill zone."

Trading Techniques -- Or How to Be a Bear

To follow a bear, or simply to follow its tracks, is to really learn something, as the Eskimos say, smiling. Not only about where a bear went, but how it dealt with what happened along the way. The wide walk of a fat bear in June, you would see, differs from the walk of a thin bear in October. Bear tracks would show a consistent avoidance of deep snow; in spring they would not cross melt pools, where needle ice can puncture a bear's foot. On a sheet of thin ice so thin it would not support a human step, you would see traces where a bear had crossed with skating steps like a water strider, sprawled neatly on its chest.

Stalking the seal from the polar bear's perspective, the seal is a swift, alert animal [not unlike the bond market] that can be taken advantage of only at that moment of vulnerability -- when it breaks the surface of the water to draw breath [like the final throes of a rally].

Probably no other predator employs as many hunting strategies with one animal as the polar bear does with the ringed seal. It may take a half an hour to patiently approach a seal resting on the edge of an ice floe, surfacing quietly to reconnoiter, then submerging again. A bear may drift, toward a seal like an innocuous piece of ice; when it reaches the floe edge it explodes from the water and smacks the seal dead all in one motion. When it stalks seals over the ice, it flattens itself on its forequarters and slides slowly along its chest and forelegs, taking advantage of every piece of cover. It will scrape away the sea ice at a breathing hole until there is just a thin layer left, and then cover the ice with its body to cut off sunlight, so it looks to the seal below as if the thick crust of ice and snow are still present.

Older Bears


Older bears [like some partners we know] have exceptional patience. They will wait for three or four hours at an ice hole, lying downwind of the hole on their chests, out of the seal's line of sight. Just before it surfaces, the seal exhales, [an exhaustion gap after a buying panic?] and the sight or sound of the bubbles alerts the bear. When it charges a basking seal [a complacent market that's rolling over is often an easy prey], the bear does not seem to run as much as pounce. A noted polar bear biologist gives this description: "Cats. They are like big cats." Fast? "It is absolutely unbelievable how fast they are -- oh, do they come fast." [Professional traders tend to double up positions almost immediately if they get the edge.] Shrewd? "Yes, they are making judgments at every point about what to do. And they are patient."

When a single bear finds a good hunting ground, 10 or 15 other bears are likely to show up at the same place within half a day or so. "They just get to a place where something is happening and they get there quickly." [The smart money moves together and it moves fast.]

Young Bears

Young bears apparently understand the basic skills of stalking and still-hunting, but require patience. Their initial attempts to catch seals are frantic and impatient. A young bear may give up its watch at an ice hole after only 10 minutes [small speculators are easily shaken out]. Or they may charge wildly across an ice floe and dive headfirst into the water. Bears seem occasionally to lose their temper when they are hunting. "I have seen a polar bear watch a seal for half a day," wrote a traveler, and failing to catch it by any stratagem, "it roared hideously, tossing snow in the air, and trotted off." Other observers have seen bears smash off projections or smack the water repeatedly in frustration after just missing a seal. Eskimos rarely lose their temper, and almost never when they are hunting. The usual response to failure in these circumstances is laughter. [A sense of humor is an essential ingredient for successful trading.]

Deep Patience

The arctic is characterized by long stillness broken by sudden movement. The silent arrival of caribou in an otherwise empty landscape. The long wait at a seal hole for prey to surface. The river you have been traveling over by dogsled every week for eight months, and have come to think of as a solid piece of the earth, you wake one day to find a heaving jumble of ice [not unlike a sudden change in perception at the end of a long price trend that precipitates a major reversal]. The Eskimo have a word for this kind of long waiting, prepared for a sudden event; quinutuq: deep patience.


This is the ultimate attribute of the seasoned speculator: biding ones' time, ever-alert, looking for a break that signifies the end of a major market movement. Buy the bust. Sell the boom. Bull markets die hard.
No positions in stocks mentioned.

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