Every industry has it’s jargon. These could be traditional words they’ve redefined, or words that are only words because that particular industry invented them.
Having only ever worked in the advisory business, I’m not sure how we compare to other industries. Then again, I’m pretty sure we’re in the top 3.
And by top 3, I mean the top 3 most ridiculous.
Although I do my best when talking with clients to avoid words that make no sense, I know I slip up from time to time. Having said that, if you ever hear me utter any of the following, please smack me.
Indicators – There are many common indicators of the future direction of the stock market. A few like the direction of interest rates, jobless claims, and quarterly corporate profits come to mind.
Apparently, broad economic indicators aren’t enough for Wall Street. Here are a sampling of the more interesting “indicators”:
- Hot waitress indicator – the assumption is that pretty people have an easier time finding, and keeping a job. If you buy that logic, then if your favorite restaurant sees an uptick in attractive help, the economy may be taking a turn for the worse.
- Soccer mom indicator – listening to what other parents are saying at soccer practice, or other event, is a good way to know what has happened in the economy. Keep in mind this is a “lagging” indicator.
- Leading lipstick indicator – when consumers are less optimistic about the future, they indulge on less expensive things, such as lipstick. Apparently sales doubled after the September 11th attacks.
Market descriptors – Although there is often a reason for a market move, explaining the daily gyrations is often a silly undertaking. Then again, with names like these, why not:
- Dead cat bounce – based on the saying that even a dead cat will bounce if dropped from high enough. This describes a temporary recovery during a prolonged decline, after which the decline continues.
- Santa Claus rally – when stocks rise during the week in between Christmas and New Years day. Some theories suggest this is a result of positive emotions, investing of year end bonuses, tax considerations, and also our next descriptor:
- January effect – occurs when people who sold stocks in December to take a tax loss, buy them back a month later. The surge in buying causes stocks to rise.
- Capitulation – when investors sell stocks in an attempt to get out of stocks and buy less risky assets. Typically steep losses and heavy volume are seen. The theory is that once this occurs, anyone who was going to get out has, and true bargains are available to those ready to buy.
Non-traditional indexes – indexes such as the S&P 500, or the Dow Jones Industrial Average are among the more widely known among investors. Not content with the mainstream, Wall Street, CNBC, or someone, has invented a few more:
- Angelina Jolie stock index – based on the mega-celebrity of Angelina Jolie, this index tracks production companies and movie studios connected to the actress. Sony, Viacom, and Time Warner are among the stocks in this index.
- Paris Hilton index – along the lines of the Jolie index, this one tracks companies that produce the products she buys or endorses. Some investors think her influence is so great, that just seeing a product in her hands is enough to lead to above average sales for that company.
- Cardboard box index – investors will track the production of cardboard boxes as a predictor of non-durable goods sales.
These examples are just a drop in the bucket when it comes to ridiculous jargon and techno-speak by some in the investment world.
I’ve left out words such as ankle biter, bid whacker, big uglies, cockroach theory, eat your own dog food, the Oprah effect, quadruple witching, sucker rally, and pac-man defense to name a few.
I wish I was making these words and phrases up. I really do. For more amusement, you can see a full catalog of “buzz words”, in the dictionary section of investopedia.com. Just don’t bet the house on any theory or practice you find, no matter how historically successful.
