The Devil's Financial Dictionary

This glossary of financial terms is inspired by Ambrose Bierce’s masterpiece The Devil’s Dictionary, which the great American satirist published sporadically between 1881 and 1906. (View free versions of Bierce’s text here or here.) Like Bierce’s brilliantly cynical definitions, the explanations presented here should not — quite — be taken as literally true. Some of these entries are adapted from articles published previously in Financial History, Money, and The Wall Street Journal.


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P

 

PANIC, n. and v. Contagious fear that sweeps across a crowd, a market, or a planet, frightening multitudes of people into selling and leaving the rest wondering whether they should.

In the 19th century panics came, like swarms of cicadas, roughly every 17 years: 1819, 1837, 1857, 1873, 1893, 1907. They became less frequent in the 20th century, then struck twice at the onset of the new millennium: in 2000 and in 2008-2009.

Panic first appeared in English in 1603 but seems not have have been applied to financial markets until the 1750s. It appears to have been used first in the U.S. to describe the stock-market dive of 1819. After turmoil at the Bank of the United States rocked the financial markets late in 1833, the 23rd U.S. Congress, which convened that December, was popularly nicknamed “the Panic Session.”

The word originates in the name of the god Pan, who haunted the pastures and wild places of ancient Greece. In the form of a grinning but ugly man with the horns, ears, and hairy legs of a goat, Pan was the god of herds and flocks, serenading them with his pipes. (The Pied Piper of Hamelin, said to have led swarms of rats — and children — to their deaths in a medieval German city and made famous in Grimm’s Fairy Tales and a poem by Robert Browning, is the direct descendant of Pan.)

Marble statue of Pan, Roman, 1st century A.D., Collection of the Metropolitan Museum of Art, www.metmuseum.org

Marble statue of Pan, Roman, 1st century A.D., Collection of the Metropolitan Museum of Art, www.metmuseum.org

Fittingly, Pan was the son of Hermes, the god of shepherds, messengers and heralds, travel, diplomacy and persuasion, trade, and thievery. That suggests that the relationship between panic and commerce is as old as commerce itself.

Among Pan’s pastimes was terrifying nymphs by chasing them through the woods. In ancient Greek art, he is often shown accompanying Dionysos, the god of wine, in a drunken Bacchanalia. Vases and sculptures sometimes depict Pan lugging a leather wineskin, or bursa, from which the modern word BOURSE is derived — another reminder of the eternal connection between panic and trade.

Pan’s sweet music made him the favorite god of the gold-obsessed King Midas. Restless and untameable, Pan lived out of sight in mountain caves and often slept at midday, arising at odd hours to race through the pastures and forests, much the way modern panics lie in wait and come to seem the most remote when markets are at their sunniest heights.

Pan also had a mischievous habit of spooking travelers by rushing at them from the forest, and city dwellers attributed night-time squeaks and creaks to the wayward god blowing on his pipes. He was thus the first overlord of “things that go bump in the night” — the ancestor of hobgoblins and poltergeists and the other spirits that personify the fears lurking in the recesses of the human mind.

To the Greeks, a sudden fright was called panikos, “of Pan.” Today’s herd of panicking investors, scattering in a selling frenzy set off by the unexpected, would be all too familiar to the ancient god.

Pan was also the god of fertility — and a market panic, by stomping prices down until bargains emerge, sets the stage for future growth. As the shrill, high notes of panic fade away, a calmer and quieter market tends to emerge. Even amid the incessant booms and busts of the 19th century, wise investors understood that, as this image shows:

"Panic, as Health Officer, Sweeping the Garbage Out of Wall Street," cover of The Daily Graphic, Sept. 29, 1873.

“Panic, as Health Officer, Sweeping the Garbage Out of Wall Street,” cover of The Daily Graphic, Sept. 29, 1873.

Of course, once prices have risen so far and for so long that a decline has come to seem impossible, Pan rubs the sleep from his eyes again and bursts out from his cave, his pipes blaring a tune of terror. It was ever thus, and thus it ever shall be.

 

PAREIDOLIA, n. The compulsive human tendency to see patterns or meaningful trends in random events and images. Brilliantly described by Carl Sagan in “The Man in the Moon and the Face on Mars,” a chapter in his book The Demon-Haunted World, pareidolia is probably an evolutionary adaptation that kept our early ancestors safe by enabling them to recognize — and trust — the familiar. It still haunts human perception today, as when people detect the face of the Virgin Mary on a grilled-cheese sandwich, see a network of canals on the surface of Mars, or believe that the past performance of an investment predicts its future results.

People Will Pay a Lot for Patterns Scorch marks on a grilled-cheese sandwich, believed by some to be an image of the Virgin Mary. The sandwich sold at auction in 2004 for $28,000.

People Will Pay a Lot for Patterns
Scorch marks on a grilled-cheese sandwich, believed by some to be an image of the Virgin Mary. The sandwich sold at auction in 2004 for $28,000.

 

PLUS, conj.  Minus.

When added to the name of a mutual fund or portfolio strategy, this word almost always signifies the subtraction of something from investors’ results. An “income plus” fund, for instance, typically yields income plus losses.  An “index plus” fund generally produces the results of an index portfolio plus greater risk.  The use of the word “plus” does, however, accurately indicate the addition of higher fees by the company marketing the investment.

 


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