17 weird finance buzzwords, explained

You're better off investing in a big ugly or a Jennifer Lopez than taking a tip from a dip about an ankle biter, right?

To the uninitiated, conversations about finance can be painfully dry and impenetrable: net income this, profit margin that. Your eyelids could be forgiven for feeling awfully droopy.

But like any industry, the finance world is also filled with lively slang words and phrases, coined over the years to describe practices and trends unique to that world. Here are a few of our favorites.

1. Ankle biter: This phrase — used outside the world of finance to describe small children who are so little that they, metaphorically at least, barely reach an adult's ankles — can also be used to describe a small cap investment. Small cap just means a company with a relatively low value, or market capitalization — usually somewhere between $300 million and $2 billion.

2. Big uglies: Big, older companies, usually in "dirty" industrial sectors like mining or steel. Though they can be solid investments with good, steady returns, many investors ignore them for "cleaner," trendier stocks.

3. Chasing nickels around dollar bills: The practice of big companies trimming small, trivial costs (like candy in the lobby) instead of big, serious costs (like the entire research department).

4. Cockroach theory: The theory that when a company reports bad news to the public, there's usually a lot more bad news behind the scenes that may come out later. It can also refer to industry-wide suspicions — if one subprime lender is going bankrupt (like New Century Financial was in 2007), other subprime lenders might have similar problems behind the scenes.

5. Cookie jar accounting: An accounting practice in which a company stores up funds during good times to dip into during bad times. Because it effectively misleads investors — making them think goals are being met even when the company is losing footing — this practice is forbidden by the SEC.

6. Dead cat bounce: A small rally after a sharp decline on Wall Street. It could refer to a stock with a plummeting share price or a market trend. An old investment saying goes: "Even a dead cat will bounce if it is dropped from high enough."

7. Garbatrage: When price and trading volume in a particular sector surge due to a high-profile takeover in that industry. Speculators often predict that more takeovers are right around the corner, even if they actually aren't. Also known as "rumortrage."

8. Jennifer Lopez: An informal term that describes what happens when a security reaches a low, then gradually starts to go up again. On a graph, it looks like a curve at the bottom, which is why investors named it after the admirably round-bottomed singer. 

9. Puke point: Puking, in this case, is slang for selling an asset as the value is plummeting. The "puke point" is the point at which the investor can no longer stomach the losses, and decides to sell the asset, regardless of its steeply falling price.

10. Razorblade model: When businesses sell dependent goods for different prices. The first part is sold cheaply, but the second part is much pricier. It's not unlike razors with replaceable blades. Often the razor is pretty cheap, but customers have to keep replacing the blade cartridges, and that cost adds up.

11. Rust Bowl: A bummer phrase used to describe northeast and midwestern areas where the auto and steel industries used to thrive, and now either languish, or quasi-thrive thanks to federal help. As Investopedia puts it: "The term 'Rust Bowl' essentially epitomizes catastrophic economic change."

12. Sandwich generation: It sounds like a fun term, but the sandwich generation actually refers to the age group sandwiched between their aging parents and young kids. These adults are typically tasked with financially supporting both their older and younger dependents while trying to save for their own retirements. The sandwich gen may eat actual sandwiches, but probably only as a way to save money (or to stress-binge).

13. Shark watcher: A firm that specializes in keeping a lookout for takeovers. Usually this means monitoring trading, keeping track of who's accumulating shares, and reporting noteworthy activity back to clients.

14. Sleeping beauty: A profitable company — usually a start-up — with impressive assets but bad management. These companies are great candidates for takeovers.

15. Suicide pill: Any takeover prevention tactic that can end in the death of a company. Taking on extensive debt is one kind of suicide pill. So is offering shares at a discounted price to devalue the company. A company takes a suicide pill when it would prefer to go bankrupt than undergo a hostile takeover.

16. Sushi bond: A bond issued by a Japanese issuer in a non-yen currency. As Investopedia notes, "sushi bonds are especially popular with Japanese institutional investors, since these bonds do not count toward regulatory limits on foreign securities holdings."

17. Tip from a dip: Financial advice from someone who claims to have inside information that could impact stock price. Tips from dips are illegal (obviously).

SourcesFinance Wikia, Financial DictionaryInvestopedia


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