Talking the Wall Street talk

  • Business
  • Wednesday, 17 Mar 2004

MIAMI: White knights who rush to the rescue, dead cats, bears, elephants and the right temperature of Goldilocks’ soup. 

It’s not a fairy tale or a thriller, just the everyday language of Wall Street brokers and analysts. 

“When Wall Street experts talk on TV, most of the people don’t know what they are talking about,” said Wall Street Words author David L. Scott. 

Despite technological advances that allow the New York Stock Exchange (NYSE) and Nasdaq to process a total of more than three billion shares a day, market players still use expressions dating back to the beginning of stock trading in the United States. 

Wall Street started functioning as a financial centre in the 1700s, when buyers and sellers would close transactions outdoors. The American Stock Exchange operated on a Manhattan sidewalk until 1921, when it finally took its business to a building in the city. 

“Some terms are old, but others change or disappear throughout time,” said Scott, an accounting and finance professor at Valdosta State University in Georgia. “In some cases, they are in fashion for one or two decades and then fade away because the situation they refer to changes.” 

Wall Street jargon may be the everyday language of the financial community, but the average person can easily misinterpret it. 

A workout, for example, is generally considered a positive experience. Not so for executives who are summoned by workout bankers, a much-feared breed whose mission is to collect on problem corporate loans. 

Many people are familiar with terms like “bull” – someone who’s optimistic about where the market is going – and “bear” – a person who takes a pessimistic view. 

But there are more animals in Wall Street parlance. Elephants are institutional investors like mutual funds or pension funds. A killer bee is an investment banker who helps a company repel a hostile takeover, and a dead cat bounce is a short and moderate rise in a stock after a very steep fall. 

Some terms sound like something out of a horror film. Take, for example, “zombies,” which are insolvent companies on the verge of shutting down or being acquired.  

Then there are “tombstones,” or newspaper ads where a bank announces an offering and the list of participants. 

Wall Street also has “poison pills”, or tactics to avoid a hostile takeover. One such deadly capsule is the issuance of preferred stock that gives the shareholders the right to sell their shares at a premium in case of an acquisition. 

Need a haircut? In the financial world, that’s the differential between the value of a loan and its collateral. 

Fairy-tale characters are also part of the Wall Street vocabulary. The term “Goldilocks economy” was used to describe the state of the US economy during the mid-1990s – “not too hot, not too cold, but just right.” 

And when it comes to knights, they’re available in more than one colour. A “black knight” is a company that makes a hostile bid for another. But a “white knight” is a potential buyer that a target company approaches to try to repel the takeover. 

Some terms even have spiritual overtones. A “fallen angel,” for example, is a once-popular security that has fallen out of favour. 

If that’s not puzzling enough, look at the terms used by those who work on technical analysis of the market. You will find yourself immersed in “exponential moving averages”, “support and resistance levels”, and “relative strength.” 

But that’s another story. – Reuters 

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