Above average results: how bears eventually dominate bulls

Dominance

Is there such a thing as competition? If so, what is the healthiest way of relating to it?

Some people may be so terrified of competition that they deliberately focus away from it or even dismiss it as “an illusion.” Of course, it is useful to be calm about a subject if we wish to learn something new. Distress does not correspond to logical precision, right?

We could talk for a while first about how to promote a calm alertness through slowing the rate of breathing. However, if we are already calm enough about a subject to proceed immediately, then let’s consider the simple reality of the existence of competition.

Raging Bulls

Among creatures that are famous for their aggressiveness, bulls may be the most famous. In fact, the word “bully” comes from the way that bulls (adult male cattle) interact with each other.

Here is a picture of a bull in Asia (Thailand). This bull is several times larger than the man standing next to it. Some bulls are much larger than this one.

The above bull was paired with another bull of similar size. When two bulls are placed near each other, their natural tendency is to compete, to fight each other.

The bulls typically present threatening warnings to each other, then charge in to each other, ramming their heads in to each other, locking horns, stabbing, gouging, pushing, shoving. Again, this pattern of behavior is where we get the term “bully.”

So the two bulls are placed together (by humans who are gathering to watch the bulls fight and to bet on the outcome). Because they react to compete with each other, it is very easy to start a fight between bulls. Just put them near each other and a fight will naturally erupt. Rage is their natural experience around another bull.

They are very competitive. Once they notice the other bull, they will generally fight, unless one is clearly much bigger than the other.

After 40 minutes in to this fight, the lighter-colored bull fled from the center of the ring to the outer fencing. The handlers put a rope through the nose ring of the winning bull and paraded that bull around for the crowd to cheer.

Further, in regard to financial investments, the term “bullish” refers to a reactive aggressiveness, as in jumping in blindly. As prices rise in a particular market, more and more investors tend to pile in more and more aggressively, typically with less and less caution about possible risks if prices continue to rise. While “bullishness” ultimately refers to the blind “enthusiasm” of a raging bull, we can also consider the term “bullish” to simply mean optimism.

However, notice that when something is getting popular, we may say that it is “becoming the rage.” There is sense of a blind mania or madness behind the one “bull” observing another “bull.” There is a reflexive competitiveness.

Without any calm use of logic, once buyers start to pour in to a market, such as for a particular brand of jeans, the “bulls” (buyers) quickly form in to a herd of reflexive reactivity. The small fad becomes a trend and then “all the rage.” With little concern for details such as the eventual resale value of the item, buyers pour in.

There is a “buying panic.” Bulls are reactive buyers. They buy based on a speculation (which is typically unexamined) of continued increases in popularity. (In contrast, the word for sellers or people who are cautious about a particular market is “bears.”)

Here is a picture of crowd gathered around a bull and a bear. The bear has to be tied up or else it’s first reaction to danger may be to withdraw or flee. Bulls are much more aggressive than bears. The bear will fight back when the bull charges it.

Markets: bulls competing against bears

So part of the nature of organisms is to compete. In regard to investment markets, the basic, obvious function of investment markets is that people can voluntarily speculate (gamble) in regard to the future resale value of various alternatives. In other words, markets are systems for redistributing wealth.

There are two other primary systems for redistributing wealth involuntarily (through coercion or bullying). One is coercion that is legally monopolized in a particular region. That is called a system of taxation (or tariff, tribute, tithing, etc). In contrast, any other coercive system for redistributing wealth within that region will be criminalized and then punished as an unauthorized, unlicensed extortion racket.

Bears beat bulls in the long run

Back to voluntary systems of redistributing wealth, we notice that different investment choices produce different results. We can say that some investment choices are rewarded and others are punished.

The naive are punished for their naivete. The prudent are rewarded. “Raging bulls” who are just reacting to the fact that a lot of other people are buying something are among the most likely to be punished by markets (and most severely).

In a sense, markets are systems for rewarding prudent bears and punishing raging bulls. Because of the blind competitiveness of a herd of raging bulls, they enter trends indiscriminately and only exit after their losses are so large that they panic.

Bears not only are concerned with caution, but precision and logic. They are targeting above average results. In contrast, bulls are targeting the average results of doing whatever the majority of people are doing (and that bullish reactivity often produces below average results).

Bears are open to “turning bullish” in regard to a certain market, but only selectively. They will quickly exit on a profit or even to minimize a loss (rather than negligently letting a loss grow across hours, weeks, and years).

It is also notable that two groups of people tend to be bears. First is people who are not especially wealthy. They are too motivated by profit to blindly rage along with the optimistic bulls.

The second group that tend to be bears are the most wealthy of all. Some of them used to be poor bears and accumulated sudden fortunes by using far above average methods.

The big bears cultivate bulls

Bulls tend to be modestly wealthy (such as “upper middle class”). They are wealthy enough that they feel comfortable financially (whether that is based on realism or not).

They do not pay much attention to their investments. They “buy and hold” (or “buy and hope”).

They may look at their account balance every year at tax time or in a quarterly statement. However, they have no plans for ever changing strategy because they really do not have any specific strategy.

Of course, this presentation so far is only creating two very broad categories. There are also “quasi-bulls” who have certain presumptions (which typically they never examine or even consider as presumptions) and then based on those unexamined presumptions they pursue a specific strategy (such as “value investing”). Those “quasi-bulls” ARE targeting above average results. Sometimes they get it- even typically.

But most mainstream “retirement investors” simply pour money in to a fund with no attention to the competitive nature of markets. They are not targeting above average results. They are complacent. They are basically funding the future affluence of the most prudent investors.

Recall that markets redistribute wealth. That is their only function.

Investment markets do not manufacture any products or mine any natural resources. Markets simply redistribute wealth voluntarily (in contrast to involuntary systems of taxation by governments and extortion by gangsters / unrecognized governments).

bulls over cliff

Further, the biggest players cultivate bullishness amongst the naive. Why? Because the wealth of the raging bulls is the source of the future profits.

How do “the biggest bears” do this? They use private media and government regulations to “fan the flames of bullish enthusiasm.”

When the bulls lobby for a taxpayer-funded program to subsidize the real estate market for first-time buyers, they know that kind of incentive will raise prices temporarily. A final wave of naive bulls will be drawn in to the market (prior to a dramatic collapse in prices).

There can also be tax incentives for buying real estate (or stocks, etc), then special subsidies for veterans, for first-time buyers, and so on. The taxpayers can subsidize the profits of real estate lenders as well, which also contributes to the bullish “feast.”

However, “the feast of the bears” is much bigger. The bears feast from feeding off of the bulls. The bulls gallop in a hysterical herd right over the cliff that they were going too fast to notice.

Why don’t the biggest bears exclusively use coercive methods (taxation AKA licensed extortion) to redistribute wealth? Markets are simply more efficient (safer)!

When people voluntarily pour their assets in to bullish hysterias and delusions, they are much more compliant than they would be with something like a 50% sales tax. However, it is not unusual for bulls to occasionally lose 50% of the value of their retirement investments in a few years or even less.

Bears respect the fact that complacency is eventually punished. Bullish naivete is what funds the rewards received by the prudent. The raging bulls voluntarily take actions (influenced by various kinds of programming) which ultimately benefit the bears.

“Big bears” set up those sudden redistributions by lobbying for specific kinds of pro-bullishness government programs and other pro-bullishness marketing campaigns (taxpayer-funded subsidies in combination with privately-funded publicity). “Little bears” (in contrast to “big bears”) simply notice the various patterns of behavior and the widely varying results from the different forms of speculation. All of the bears position themselves to benefit from the naivete of the raging bulls.

Some bears are so cautious that they do not rely on governments to protect them. They know that if two groups encounter each other in the wilderness, one with loaded guns and one with lots of gold (or other forms of wealth), it is predictable that one group will leave with all the guns and all the gold too. The other group may or may not leave (not alive).

Governments are systems of coercion. The most prudent bears respect this fact. Those bears may even be the ones who organize governments or take actions to influence governments (lobbying/bribery, diplomacy, political blackmail and assassinations, etc).

Back to very simple examples, when two male lions encounter each other, a few outcomes are possible. Both may fight and both die. Both may fight and one dies. Both may fight and one withdraws. Or, one may withdraw successfully without fighting.

Would the “big bears” ever create a situation in which they gather two bulls in to an arena, knowing that the bulls will fight? Could the bears use such “bull vs. bull” contests to weaken the bulls and thin their numbers, letting them destroy each other for the most part?

 
What about in the case of these two dogs pictured below? Is it a paranoid conspiracy theory to think that some people would set up a contest between two near equals just for the entertainment of the audience? Even without any tangible benefit through promoting injuries among the dogs, people gather aggressive creatures together for no other purpose than to spectate or observe (to study the combat).

Would people set up contests between other people? Again, even without any direct benefit from “thinning out the competition,” people may enjoy watching competitions. (While if the goal is to thin out the competition, such as if Switzerland provokes Germany to invade France, then watching the combat is not important- nor who wins. The Swiss just wait for the Germans and French to fight, then lend money to both sides so that both sides can buy weapons from the Swiss. Whoever wins a particular battle, the Swiss lenders always win the war.)

sumo wrestling

When a circus event is created so that profitable tickets can be sold to the public, there can be an image of fairness presented. The actors in the performance (such as the famous actor Dwayne “The Rock” Johnson shown below) can be presented as sincere opponents (even if all of the “combatants” are operating according to the same script as accomplices to “deceive” the public).

The herds of bulls can be distracted by various kinds of controversies and circuses. They can be sold subsidies (as if any subsidy is ever going to be lasting). They can fight over which subsidies to vote for (as in a subsidy for $500,000 homes or $500,000,000 skyscrapers or a $5,000,000,000 fighter jet).

The herds of bulls can be distracted from the basic, simple reality of what investment markets are and why people created them. Markets are systems for efficient redistribution of wealth. Markets are systems for rewarding prudent bears at the expense of naive, raging bulls.

Markets are competitive. Humans are competitive. Indoctrinating massive numbers of humans to be guilty about competition is perfectly logical. Repressing the competitiveness of the masses is one possible investment.

In fact, sports and sport rivalries “promote” certain specific kinds of competitiveness (trivial ones). Democratic elections may have a similar function.

When voluntary systems of redistribution are most favorable to those creating the system, those methods will be used. When coercive systems are most favorable to the rulers, whatever method or combination of methods that is most favorable is what will naturally flourish, at least for a while.

See if you can identify the pictures below and why they are here. There are a few more comments at the very end.

The last three images feature Jesse “The Body” Ventura. He was a pro wrestler, then actor, then the governor of Minnesota, and so on.

From the movie “Idiocracy,” above we see the character of President Dwayne, who is also a pro wrestler (in the fictitious story). That actor is now the host of the game show “Who wants to be a millionaire.”

 

 

Here is Barack Obama (then still a Senator) campaigning for US President on the wrestling TV show “RAW.” The above image is from a real video. Hard to believe? No problem….

Tim wrote: “The last day I felt unreservedly good about Barack Obama was April 20, 2008. The next day, then candidate Obama, along with Hilary Clinton and John McCain, made special taped appearances on the WWE Monday Night Raw wrestling program.”

You may wish that this was not a true story. However, below is a link to the actual footage used on the TV show for WWE (World Wrestling Entertainment).

Hillary Clinton reads the teleprompter which says: This election is… a lot like “King of the Ring.” [a scripted, staged, fake competition in which all of the “combatants” are co-conspirators in creating an exciting spectacle for the audience.] The only difference: the last man standing may be a woman. [Ah, so that is the ONLY difference, is it?]

Barack even uses a classic line made famous by “The Rock.” Of course, it is probably just a coincidence that “The Rock” and “Barack” sound so much alike, right? RIGHT?!?!

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