The Animal Farm

The Bulls
A bull market is when prices are moving up in the market. There is a lot of optimism in the market which drives the prices up.

The short term bulls are driven by good earnings of companies and announcements of positive future prospects of the company. Announcements such as mergers (CFC-Stanbic), Acquisitions ( Olympia, Scangroup, KPLC, EA Cables), Expansions ( KQ ) etc.

Long term bulls are driven by good economic sentiments. Lower inflation rates ( from double digits in 2006 to 5.9% in March 2007), growing GDP( 6% 2006), Increased investments both local and foreign which we are seeing currently in this country-Kenya.

When the bulls come home, it’s nothing but a party!!

However, one should watch for extended bull runs that result in overpriced stocks and corrections are inevitable.

Remember the 1st quarter of the NSE 2007?


The Bears
A bear market is when stock prices are moving down. There is a lot of pessimism in the market. Short term bulls are caused by poor earnings from companies ( Sameer Africa), negative publicity such as scandals and internal fraud ( Portland Cement), poor future earnings projections ( Eveready) etc.

Long term bears are driven negative economic sentiments. The converse of the Long term bulls.

When the bears come home, its trouble. But the party continues.

One can change positions from a long position to a short position. Short selling is not yet possible on the NSE but we are getting there.

Short selling is a technique used to sell high and buy low. On more sophisticated markets this can be done. Such as the NYSE now NYSE-EURONEXT.

Bears also present an opportunity to buy stocks that were previously overpriced from the bull runs.

After the correction at the NSE in the first quarter, opportunities to buy were present in abundance.

Remember, You haven't lost until you've sold.

Chickens

Chickens are just that. Chicken. They are afraid to lose anything so they opt to make investments in the money market.
They invest in bonds and T-Bills.

Pigs

Pigs are high-risk investors looking for the one big score in a short period of time. The speculators.
They are characterized by greedy and emotional decisions about their investments.

They are very impatient.
Informed traders love the pigs, as it's often from their losses that the bulls and bears reap their profits.

The bear run in the 1st quarter was absolute massacre of the pigs.

"Bulls make money, bears make money, but pigs just get slaughtered!" –investopedia.

Where do you stand?

Choose your investment strategy wisely.