Dhruti Shah - Bear Markets and Beyond: A bestiary of business terms

BEAR MARKETS AND BEYOND

BEAR MARKETS AND BEYOND

A BESTIARY OF BUSINESS TERMS

BY DHRUTI SHAH AND DOMINIC BAILEY

Unicorns, narwhals, yaks, cows and civets what have all these creatures got to do with your hard-earned cash? Well, far more than you might think at first glance.

They are all beasts that appear in the global economic ecosystem. They pop up as warnings, messages and signals and provide us with useful analogies for describing and navigating what can sometimes be a confusing, closed-off world.

Animals have always exerted a strong hold on our imagination. You only have to look at prehistoric cave paintings to see how central they were to our existence and, in capturing these images and using them to pass on messages to the community, we can see how they were our first linguistic tools and shaped our relationship with each other.

Its therefore not surprising that, many millennia later, our contemporary Capitalist world is populated with metaphorical animals that stalk the landscape and alert us in the same way to what we can trust and what we should fear.

Indeed, according to John Maynard Keynes, perhaps the most influential economist of the last century, we are all in the sway of Animal Spirits. We may think that our behaviour, especially when dressed in a sharp-tailored business suit, is governed by facts and logic and the rationale of a well-reasoned argument. However, Keynes begs to differ and says, in his 1936 text on The General Theory of Employment, Interest and Money:

Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.

And so, as we find ourselves in the financial jungle, a place of intense competition, where the rules are simply; survival of the fittest, we hope this guide will be your friend. The jargon of the business world is a code but were on hand to crack it. You wouldnt want to enter a bear pit unprepared, so watch out for the big beasts baring their teeth and keep your wits about you as you follow us through the undergrowth...

The financial world is full of predators hoping to climb their way to the top of the food chain, so its unsurprising that reptiles make an early appearance in our guide.

In the world of markets, an Alligator Spread occurs when an investor will never be able to make a profit on the transactions they make. This is because the charges of the commissions involved are far higher than the profit made. The spread thus eats the investor, leading to the name Alligator Spread.

Take a quick wander over to the property market and you find that landlords need to take care that they dont invest in an Alligator Property. Thats when the costs of investing in and running a property far exceeds any profits derived from the rental. That house, which you thought would be your nest egg (see ), could actually end up eating all your money.

Did you know that ants can carry between ten and fifty times their own body weight? Pretty impressive. However, youve got to be very careful if you ever get described as an ant in China.

Chinese officials are using the term to describe people who take Chinese money and carry it across borders and overseas. The government is worried about this capital flight and has been cracking down on it.

Named after the direct hotline Gotham Citys Commissioner Gordon has to DC Comics superhero, Batman, the Bat Phone is only for the upper echelons of the trading universe. Its a tightly guarded private telephone number for high priority calls. Strictly for insiders.

Bears pop up a lot in business and nobody is quite clear on why they are such a feature of the financial landscape, though some claim it is because The London Stock Exchange was set up in the seventeenth century, a time when bear-baiting was a popular pastime.

Bear investors target vulnerable securities and try to make a profit from a decline in stock prices. Many believe it all goes back to the old bearskin traders and the idiom to sell the bears skin before one has caught the bear. This was when the middleman or bearskin jobber would sell a skin at one price and then buy it cheaper from the trapper, pocketing the profit.

This goes straight to the heart of the stock echanges. Whilst the value of stocks generally rise and fall, at times they simply fall and fall. And if you have a fall of twenty per cent or a long-term decline of more than two months, this is when you have a Bear Market. It is the opposite of a Bull Market (see ), some believe this pairing dates back to when bulls and bears were pitted against each other in staged fights. The bull would thrust its horns upwards, while the bear would swat down with its paws.

Killer Bees arent necessarily as scary as you might think. They refer to the firms or individuals who help a company that has been targeted with a hostile takeover bid. They include investment bankers, accountants, lawyers and tax specialists and their defence strategies are usually to make the company look less appealing or profitable and therefore less easy to acquire.

The term Queen Bee was coined in 1973 by psychologists from the University of Michigan. It describes a woman who, in a position of authority in a male-dominated environment, views and treats female subordinates in a more critical manner.

However, the original researchers have said that they now hate the term and that their findings were more about the sexist atmosphere in place at the time of their work. A lot of subsequent research has gone on to suggest that women do support each other in the workplace.

If youre particularly risk-averse, perhaps a career as a Bird Dog may suit. Thats the name given to someone who spends ages researching the market and hunting down properties they think are worth investing in. They then pass on the leads to the actual investors (so theyre purely a middle man).