Many of Wall Street’s brilliant minds speak an acronym-filled jargon that is difficult to decipher. We here at Wall Street Fighter are trying to break down some of these douchey barriers.
Let’s take a look at some terms often heard on the street:
1. All the Boats Rise
The full explanation of this phrase is “When the tide comes in, all the boats rise.” It refers to when the stock market is quickly rising, and there is a tendency for most stocks to increase in value due to over-optimism. The opposite is, when the tide goes out, all the boats sink, which is due to over-pessimism. Also of note, what happens to the boats when a Tsunami of sub-prime mortgages rolls in.
2. Castles in the Sky
This is a term used to describe when stock prices are extremely overvalued, and not justifiable by future increases in earnings. 1987 and 1999 are examples, just before large market drops. Ironically, we will also look back at the golden days of increasing home prices in 2006 as Castles in the Sky.
3. Merger Monday
Mergers, or companies buying other companies, often consummate a deal over a weekend, and then publicly announce it on a Monday. I would hate to walk into a merger announcement and hear someone exclaim ‘Sounds like someone’s got a case of the merger mondays!’ ala Office Space. Someone should punch that guy in the face.
4. Random Walk
A 1970s author created a portfolio of stocks by throwing darts randomly at a newspaper stock price table. The dart portfolio outperformed the collective results of a sideways market. This just adds to the seemingly random nature of the stock market and calls into question the enormous fees some people charge for ‘expert advice’.
5. Rubber Band Effect
After a large sell-off in the market, there is a tendency for the market to bounce back right away. It is caused by computerized trading programs. It’s also known as a V rally due to how it appears on a chart. I also believe that ‘Rubber Band Effect’ would have been a great name for a New Wave Rock band in the 80s.
6. Sell in May and Go Away
The market is often seasonal, rising in late winter at times. The market can run out of steam in May, with stock prices falling, causing summer doldrums. Trading volume usually decreases significantly over the summer with traders going on vacation. We’re right around that time now, folks! And this has got to be some of the worst financial advice I have ever heard. Taking the summer off? Who do you think you are, teachers?
CelebrateBoston: Wall Street Lingo and Slang Terms