I spend a lot of time in a parallel universe where, because there is no Elián Effect on stock prices, there is no Elián. One of the things that I enjoy about this universe is the jargon. I enjoy it, I guess, for the same reason I was made happy by figuring out the infield-fly rule as a baseball-watching kid: There’s something satisfying about arcana. Sometimes I forget that not everyone inhabits this universe. About a year ago, I was working on a story from which I was planning to remove the hoary cliché “catch a falling knife,” when I figured out that my editors were fascinated by it.
The “Frame Game” recently presented a very useful collection of market jargon and metaphors, which are, of course, absurd on close inspection. I like them anyway. (“Catch a falling knife” is one of the ones explained.) Many of these metaphors come from attempts to explain the movements of the broader market, and many–such as floors, support levels, and trend lines–are terms borrowed from technical analysis, which seems to have gotten popular because it sort of seems easy.
But there is jargon within jargon. Attempts to explain the broader market are really just fumbles and grasps to put phenomena into words after the fact. The only thing the words cover up is that, really, no one can explain a given market move on a given day. I’ve become partial to the jargon that is one level down from that, the obfuscation and euphemism of the companies and the analysts who cover them.
Press releases seem to have become such a critical part of the language of the markets that entrepreneurs have more or less adapted some of the most vacant PR phraseology. “Our goal is to increase shareholder value,” for instance, means “Our goal is to run up the stock.” And the familiar addendum “We want to build lasting value,” is a pleasant way of saying “We don’t want the stock to collapse before our options vest.” A company that brags of being “very high growth” is almost assuredly a company that is “extremely small.” And the assurance that “We have an experienced team” now rarely means more than “We’ve all had jobs.”
What analysts are generally trying to do is come up with very highfalutin ways of saying that they aren’t really sure what a stock is going to do. Thus the simple three-tier menu of recommendations–buy, sell, or hold–has been largely done away with. For starters, pretty much no one says sell–in 1999 about 1 percent of all analyst recommendations on stocks were sells. So, in a form of grade inflation, “sell” is now expressed as “hold,” though even hold recommendations are pretty rare, and so, for that matter, is the use of such a clear term.
It’s not uncommon to have five levels of opinion about a stock, expressed with words and phrases like “accumulate” and “market perform.” The meaning varies from firm to firm, but in some cases, at least, it is possible to downgrade a stock from buy to accumulate, leaving the onlooker to wonder–and I’m not the first onlooker to wonder–how one goes about accumulating a stock without actually buying. Suffice it to say that, depending on the analyst, a stock downgraded to “market perform” is often a de facto hold, which is a de facto sell. The salient thing is often the fact that a stock has been downgraded at all, though that tends to happen after it has fallen, not beforehand, as you might suppose. The trouble, as a financial journalist recently pointed out to me in an e-mail, is that analysts sometimes have what they call “reduced visibility” on a company, which is to say they have no idea what’s going to happen.
But the ultimate in jargon is when you can work this gobbledygook into your life, which has become distressingly easy in the current money culture. Just today I had lunch with an entrepreneurial type, and I joked that perhaps the best way for a certain massive societal problem to be solved would be for him to take care of it himself. He laughed and said, “Doesn’t scale.” What he meant by that–the term evolved out of building Web sites meant to “scale,” or handle millions of users–is “I couldn’t do that alone.” He could also have said, “Dude, not enough bandwidth.” That’s a popular one now, and it means the same thing.
Similarly, I used to work with a somewhat market-obsessed guy who had thoroughly soaked his day-to-day conversation with Wall Street terms. So if he’d had a good date the night before, he would tell us the evening, “Came in way above expectations.” Or, if he thought that asking for a day off would hurt his reputation with our bosses, he would borrow language an M&A lawyer might use if skeptical about a particular acquisition: “That would just not be accretive to earnings.”
As I said, I love this sort of thing. I don’t want the whole world to talk this way, but I’m actually glad someone does. It sure beats talking about Elián.
