Do you know your CDOs from your CFDs? Would you be able to spot a black swan if it jumped up and bounced a dead cat off the floor? Or do you sometimes want to stand up on the bus and proclaim that you’re not sure what the Hang Seng is, but you wouldn’t say no to one with a dollop of mustard and a mug of tea?
Don’t panic. As a non-business reporter who spent 15 years working for a business newspaper, I can help. My first tip is this: it’s rarely a good idea to start discussing your lunch intentions with a busload of strangers.
My second offering is below: a glossary of simple explanations for the twenty most arcane, oblique and -- in many cases, spirit-sappingly annoying -- terms you’re likely to encounter in the business pages.
Asset stripping: Taking over a company and disposing of its assets one-by-one, at a profit, without regard for the business’s future, possibly in the ruthless and swashbuckling manner of Gordon Gekko in the film Wall Street.
Bear market: A market in which share prices are falling consistently and significantly from their peak. The opposite is a bull market, in which prices are rising. The name is sometimes said to derive from the historic trade in bearskins, in which bearskin jobbers, or middlemen, would sell skins they had yet to receive. The jobbers would find a buyer for the skins at the higher price, hoping prices would have fallen by the time they had to pay for them -- an early example of short selling (see below.)
Black swan: An event that no-one could possibly have foreseen -- such as the existence of black swans in the days before the discovery of Australia. Or the fact that houses prices which had more than doubled in six years, might actually go back down one day.
CDOs: Collateralised debt obligations. These are structured financial products which pool together and repackage assets -- such as mortgages or loans -- and sell them on to investors. CDOs were first used in 1987, but remained a niche product until the early 2000s, when someone hit on the bright idea of bundling sub-prime mortgage loans together into one, attractive-sounding investment opportunity. And we all know how that worked out.
CFDs: A contract between two parties which stipulates that the seller will pay to the buyer the difference between the current value of an asset, and its value at contract time. If the value has fallen, then the buyer pays the seller. The term was popularised -- if that’s the right word -- in Ireland by the fallout from Sean Quinn Snr’s ill-fated stake-building in Anglo up to 2008.
CSR: Corporate social responsibility is the belief that a company must be responsible for the impact on society of its actions -- socially, environmentally, ethically . . . though not necessarily when it comes to depriving society of tax income.
Credit default swaps: A type of contract that offers a guarantee against the non-payment of a loan. Under the contract, the buyer makes insurance payments on a loan held by a third party; while the seller receives the payments for the term of the loan, and in return guarantees the third party’s credit worthiness. If the third party defaults, the buyer profits. In effect, this is a bit like you being able to take out an insurance policy on your neighbour’s house.
Dead cat bounce: A temporary recovery in share prices after a substantial fall, based on the notion that if you kick a cat off a large building, it will probably bounce at least once -- but that doesn’t make it any less dead.
Default: The failure to fulfill an obligation to repay a loan. A haircut is the term for the losses that would be suffered by investors in the event of a full or partial default.
Demised: If you’ve been demised, you’ve been downsized, surplussed, unassigned, dehired or given your P45. The latest gift to society from the banking world -- in this case, HSBC -- is this euphemism by which you may discover that you have been fired.
Ecosystem: A pretentious term for an industry’s network of manufacturers, designers, vendors and customers.
Elasticity: Nothing to do with how well your yoga pants cling to your bottom, this is businesspeak for the likelihood that price changes will influence consumer behaviour. If the price of milk goes up, you are unlikely to stop buying it, just as if the price goes down, you’re not liable to start stockpiling it. Therefore milk is price inelastic -- unlike, say, yoga pants, which most of us could probably live without in the event of a sudden run on trousers made from stretch cotton.
Kool-Aid: precisely, drinking it. Refers to the massacre in Guyana in 1978 where members of the Peoples, led by Jim Jones, committed suicide by drinking Kool Aid laced with cyanide. ‘Drinking the corporate kool-aid’ means to blindly accept something without critical examination, such as woolly statements about a company’s ‘core values’.
Learnings: Top of the list of crimes committed against the English language by the business world has been the brutal appropriation of this verb as a noun, often expressed in the plural eg: “What were your chief learnings from that project?” Ordinary humans might say “conclusions”.
Leverage: Similarly abused to ‘learnings’, but in reverse. Leverage is fine as a noun; as a verb, it is positively offensive. In its original form, it referred to the ratio of a company’s loan capital (debt) to the value of its ordinary shares. Now, it means to use something to maximum advantage, eg “We are leveraging our company’s goodwill”.
Low-hanging fruit: A phrase which emerged in the mid-1990s to refer to the easy pickings, or the most-easily achieved of a set of tasks, whilst at the same time casually referencing our hunter-gathering origins.
Moral hazard: A situation where someone is incentivised to take risks because they know the risk will be borne by others. The term has expanded here to mean ‘making those responsible for the financial crisis pay’.
Process re-engineering: Making things run more smoothly. May or may not involve jobs being demised (see above).
Quantitative easing: Non-economists like to call this ‘printing money’. (Note the not-so-subtle switch from the jocular, fratboy language of the financial markets to the arcane language of an economics textbook when they really don’t want you to know what they’re up to.) This is what happens when governments or central banks step in to ease the pressure on banks by, essentially, giving them extra dosh. There are slightly more subtle ways to do this, but US economist Milton Friedman said it would be theoretically possible for governments to drop large amounts of cash out of helicopters for the public to pick up and spend.
Short-selling: Selling the bear’s skin before the bear has been caught, or in modern parlance, selling currencies, commodities or securities that the seller doesn’t actually own, with the aim of making money when the share price falls. It’s investing in reverse, essentially. ‘Naked shorting’, its even grubbier little brother, is the practice of selling a stock short without first borrowing the shares, or ensuring they can be borrowed.
Sub-optimal: Businesspeak for ‘not exactly great’, eg “Many of these terms display sub-optimal use of English.”
