(biz spek) n. 1 The language of finance, often influenced by popular culture or news events [the stock suffered from Enronitis] 2 The jargon investors should know to stay ahead

July 04, 2004|By Eileen Ambrose | Eileen Ambrose,Sun Staff

Like many fields, finance has its own language. Words and phrases become shorthand for complex concepts. New words are created each business cycle, while old jargon can take on new meanings.

Terms can be as dry as, well, convertible subordinated debentures. Others are colorful, borrowing from literature and pop culture.

A Wall Street broker recently e-mailed online financial dictionary with a question: "What's a Bo Derek?" He wasn't referring to the actress who played Dudley Moore's vision of the ideal woman in the 1979 movie 10. He meant a Wall Street term for the perfect stock. And an analyst talking about a "Jennifer Lopez" is talking about the rounding bottom in the price pattern of some stocks.

Many sports fans have no trouble discussing a Kobe Bryant triple double or Tiger Woods' triple bogey. But their eyes glaze over at the mention of total return (an investment's return based on appreciation, dividends or interest), market capitalization (total dollar value of a company's outstanding shares) or double-declining-balance depreciation method (zzzzzzzz).

Some say Wall Street long ago made the language of its work dense on purpose.

"Going back a ways, Wall Street was very much a club for the rich," said Jordan E. Goodman, co-author of Barron's Dictionary of Finance and Investment Terms. "The financial language was used as a barrier."

Club doors are more open these days, with more middle-income investors in stocks and bonds and information available on the Internet, but some suspect that jargon is now a sales tool to gain an investor's confidence. Who wouldn't buy bonds from someone who really understood duration? (a measure of a bond's price sensitivity to interest-rate changes).

Investment language is often shaped by the times.

The takeover mania of the 1980s gave rise to a lively vocabulary to describe corporate raiders and the defenses against them. Suitors came in hues of white knights (friendly acquirers) and black knights (hostile bidders). Would-be acquirers employed a Lady Macbeth Strategy (appearing to be nice, but secretly joining forces with the enemy) or made "godfather" offers (too good to refuse).

Takeover targets adopted poison pills (strategies to make themselves unattractive to buyers). They became suicide pills if they worked too well and killed the company.

In the 1980s, EBITDA (earnings before interest, taxes, depreciation and amortization) was created to try to measure a company's core business strength by discounting uncommon circumstances. It became especially popular during the technology boom in the late 1990s. However, it also became an accounting ploy to put a better face on earnings. For people in the financial community, the acronym has taken on a life of its own.

"EBITDA means the earnings before interest, taxes, depreciation, and um ... ammonia," Dilbert's pointy-haired boss sought to explain in a recent comic strip.

New terms were born during the corporate scandals and their fallout in recent years.

Under Lady Godiva Accounting Principles, for example, companies must make full disclosure. Leprechaun Leaders are mischievous, elusive executives who hide their millions, perhaps in offshore accounts. Also spelled Lepre "con" Leader, says Investopedia. And Enronitis describes a stock whose price has fallen because of suspected accounting irregularities.

"All it takes is one guy to say something off the cuff and three people to hear it and spread it around," says Cory Wagner, co-founder of Investopedia in Canada.

The online resource gets e-mail daily suggesting additions, which staff members research to see if they're dictionary-worthy.

Like cicadas, some terms fall out of use and re-emerge years later, says Richard Cripps, chief market strategist with Legg Mason Wood Walker Inc. in Baltimore. Oil terms that haven't been heard in 17 years are now all the buzz, he says.

Not only can events conjure up new terms, they can change the meaning of old ones.

Market timing once meant trying to predict which way the market is headed through economic data. New York Attorney General Eliot Spitzer gave the phrase a new -- and darker -- meaning last year, when he investigated mutual fund companies breaking their own rules by letting favored clients quickly trade in and out of funds, some even "late trading" illegally after market hours.

Wagner says as Spitzer announced the questionable activity at a televised news conference, Investopedia staffers typed in the updated definition.

However, developing a strong financial vocabulary doesn't guarantee you'll be a more successful investor, or even that you'll be understood.

Peter Ricchiuti, a finance professor at Tulane University in New Orleans, found that out when he mentioned on a radio program the "dead cat bounce," a temporary jump in a stock price after a steep decline. The term is based on the premise that even a dead cat will bounce if it's dropped far enough.

Animal lovers, he said, called in to complain.

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