Financial Definitions for dummies
Having been introduced to the financial sector less than a year ago when I joined MRM I was amazed at the vast array of jargon being thrown my way. I’d studied languages at uni but this was a whole different ball game of terms and phrases. After a confusing couple of days I was directed towards the Bible (that’s Investopedia – @Investopedia to those not in the know) and suddenly it all became clear.
Here are my top ‘Financial Definitions’ for those weird and wacky phrases explained in layman’s terms. Admittedly they are probably second nature to most of you by now but take a step back and try to view expressions like ‘Dead Cat Bounce’ from a newbie’s point of view (FYI – my name is Cat…)
Bloodletting – Thankfully, this has nothing to do with the original meaning – a medieval medical practice involving bleeding out a patient. Instead it refers to a period of severe investing losses.
Bullish stance – When a bull attacks, he gouges upwards with his horns – he goes from low down to high up (and in doing so makes a killing!) So, in the same way, a bullish investor is one who thinks that a particular sector, or indeed the whole market is about to rise – go from low to high.
Bearish stance – This is the opposite of bullish. When a bear attacks he attacks from high up (standing on his hind legs) and then drops down (on all fours). So, a bearish investor is one who thinks that a particular sector, or the whole market is about to fall – go from high to low.
CIVETS – This is an acronym for “Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa”. Investors may think of this as a second-generation of emerging economies, as these countries generally have fast-rising and young populations, relatively well-established financial infrastructure, internal stability and a pathway towards significant economic growth and potential co-leadership in their economic spheres. Not to be confused with the animal the civet – a small, lithe-bodied, mostly arboreal mammal native to the tropics of Africa and Asia
Dead Cat Bounce – A personal favourite meaning a temporary recovery in the market from a prolonged decline, after which the market continues to fall. Comes from the phrase – even a dead cat will bounce if dropped from high enough(!)
Long – No, this doesn’t refer to something that is time-consuming and dull, it’s all about buying a security (eg stock, currency etc) with the expectation that it will rise in value and therefore make you money.
Quantitative Easing – The best definition for QE can be seen here. Nothing else could do it justice.
Trading platform – Think of iTunes: you can pick and choose various songs from a large selection. Similarly on a trading platform you can pick and choose various funds from a large selection. Simples!
Let me know if there are any phrases out there that tickle you (or indeed plunge you into a financial meltdown) by commenting below or indeed by tweeting me @Cat_MRM.