Reimagining Bull Markets

Carter Thomas
6 min readSep 24, 2022


In the middle of the GFC, Ben Stein penned one of the greatest essays I have ever read - Lessons in Love, By Way of Economics.

He used boring, technical financial models to explain how love and relationships work. Men everywhere rejoiced, women shook their heads. The only thing missing was an Ayn Rand reference and a few dad jokes.

What stuck with me about this essay is the ability to connect one part of our lives (finance) to another (love). This has been an ongoing mental model I use, one that tries to connect the laws of nature to the socio-financial experience.

2022 has been a wild year to say the least, forcing all market participants to rethink what was previously common knowledge. We face record inflation and black swan level bond moves. We see enormous sell offs in risk assets and energy supercycles. It’s all one giant clusterfuck of repricing that we all secretly hope leads to the safe home of Up Only courtesy of Jerome Powell. Please sir, just cut those rates already.

This has given me time to think about what actually makes bull markets, specifically in the equity world. Why does the stock market go up and to the right over time? What actually drives that performance?

The short answer is 1) Earnings and 2) Liquidity. We are experiencing a severe withdrawal of both right now. But if we dig deeper, we see what’s really under the hood.

Eventually stocks will reach a price that is fair market value at whatever the terminal interest rates are. Let’s say they are 4.5% — at that rate, companies need to prove that they are more valuable than bonds or cash. That’s how price is (should be?) set.

Once a stock finds that price via buyers and sellers, it needs to perform as expected. The company needs to create value, more than it consumes, for the price to go up. A healthy company does this over time. The stock price goes up.

Taking it a step further, the company needs to do things that are actually valuable. It needs great management running the show. It needs to spend carefully. It needs employees who each produce more than they cost. If a company does all these things, it grows and the stock price goes up. This is why productivity is the most important factor in our world and why a decline in productivity is the biggest threat to our future. But that’s a different post.

What this means it that bull markets require a majority of companies to be producing more than they spend. In a competitive world, that is no easy feat. Add in 4.5% rates and it’s REALLY hard.

Think about it this way — let’s say you want to put on 15 pounds of muscle. You need to 1) eat more food and 2) lift heavy ass weights (among other things). You are doing this and it’s hard. You’re making small but marginal progress over time.

Then you walk into the gym and your buddy hands you a bottle of creatine. You start taking it. A few days later you notice your lifting has gotten much better and you can recover faster. All the same work + food, but your gains are supercharged. This is the equivalent of adding in things like buybacks and other financial tools to help boost stock prices.

A month later your buddy hands you some growth hormone. You start taking that. All of a sudden your progress is exploding. You begin to tell yourself how easy this is, how you can control your body with ease. Anyone who tells you getting jacked is hard simply doesn’t understand this new strategy. Life is so good. You feel amazing. This is your version of cutting interest rates and injecting huge amounts of cash.

But then your buddy stops showing up to the gym. You no longer have access to the growth hormone and the creatine. For a week or so, you convince yourself that by eating well and taking vitamins you can still achieve that level of progress…but it doesn’t happen. You put in the same amount of effort but your body isn’t changing. In fact, you’re LOSING muscle.

The effort you put in to grow during the creatine/HGH phase is not what’s required for long term progress. You created your own mini-bubble of hype. Now you are reverting back to the mean.

You are faced with realization that, without enhancements, progress requires hard, consistent effort. Kinda sucks, yah?

This is what bull markets are really built on — that hard, consistent effort. People who make real progress in life usually have strong value centers. They have clear strategies and execute their plans. They show up each day and put in the work. They don’t rely on short term wins and they focus on playing the long game.

The same is true with the stock market. True bull markets are built around companies and employees adding real value to our lives. They are not built on buybacks and liquidity injections and cheap money.

We deviated so far from the mean that we started to believe a drawdown was a “crash” instead of the system getting back to normalcy. We saw enormous inflation numbers but the US Dollar has outperformed everything for this very reason — everything else was WAY too overpriced. Once stocks get cheap enough, the US Dollar will begin to underperform.

For bull markets to have staying power, we need real productivity. We do not need more shitty Netflix TV series. We do not need a bigger, more rugged Apple Watch. We do not need a Peloton rowing machine.

We need viable solutions to our biggest problems. We need nuclear power that costs 1/50th of what coal costs. We need reusable rockets. We need to find and produce 100x more drinking water than we have. We need to 3D print houses for $50k a piece.

Most importantly, we need to believe in something bigger.

We all have the ability to create a bull market in our own lives. It is build on time tested principles — eat healthy, exercise, sleep, reduce stress, improve relationships, work hard, be better. Bull markets are not built on hacks, optimizations and tactics. Focus on the fundamentals, play the long game.

The markets will continue to flounder until it agrees what the true cost of capital is. It’s sad that many companies will fail because it’s more attractive to get 4.5% returns from a 2 year bond than to invest in their company. But if you walked around their offices, maybe we’d understand why. We have all become so soft.

When thinking about your financial future, invest in companies that will produce more than they spend. Invest in management that knows how to win and employees that are filled with inspiration. Identify places where energy is created, not consumed, by the people who operate the business.

When thinking about your own future, invest in long term games like exercise, healthy food and great relationships. Invest in things that compound over time, that focus on delayed gratification vs immediate upside. Think in 5 or 10 year blocks and not monthly time frames.

Nobody knows when the bull market will return but one thing is for sure — we are in the final inning of how the system currently works. This is why I write these blog posts, to remind people that the system is no longer coming to save them and that the only option left is to take control of their own lives.

It is hard. It is important. It is the only game that matters anymore.