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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S
SAFE, adj. A term used to promote any investment that is about to explode.
SELL, v. What Wall Street analysts say investors should never do, regardless of a stock’s price or market conditions. (Also see BUY.)
From a recent article by the widely followed financial journalist Phil D. Page:
Shares of Hoopla Corp. are down 10% so far this year as sales of the company’s leading product, an app that makes cellphones glow different colors as users’ moods change, have faltered. The company’s chief financial officer, Aston Martin, resigned in March amid questions about Hoopla’s accounting, which some short-sellers claim is aggressive. Some portfolio managers have expressed doubt about whether the stock, which had risen more than 35,000% until its recent stumble and is still valued at approximately 2,000 times the consensus forecast of what the company will earn next year, might be overpriced. Nevertheless, most analysts are optimistic. “We aren’t worried, and we certainly don’t think the stock is a sell,” said analyst I.C. Nutton of Alfred E. Neuman & Co., a brokerage in New York.
SHEEP, n. See PORTFOLIO MANAGER.
SHORT-TERM, adj. On Wall Street, 30 seconds or less — as opposed to LONG-TERM, which is 30 seconds or more.
STOCK, n. A fractional ownership in a business, regarded by most investors as the right to play a videogame.
The origins of the word are rooted in the Old Teutonic stukko, which meant a stick, trunk, or log. As early as 862, it appeared in Old English as stocca or stocce. One of its earliest meanings, by analogy to a tree trunk that generates many smaller branches, was as the source of a line of descent. That sense is still used, as in “She comes from good stock.” In another early nuance, stocke meant a stem in which a graft, or transplanted twig, is inserted.
Early on, stokke referred to the wooden chopping blocks on which butchers and fishmongers hacked up their merchandise. In 1282, a “stokkes market” was built in the heart of the City of London; it survived until Dickens’s day. An early city chronicle recorded that “This yere [1450] the stokkes was dividid bitweene fishmongers and bochers [butchers].” Since London’s securities market later sprang up in the same district, it is conceivable that the term stock market originated in this early haggling, open outcry, and bloody chopping of goods into little pieces for resale.
A stoke or stocke of money appeared in English by the 15th century to describe a sum set aside to fund future expenses. Soon, the image of a deeply rooted core or trunk led stock to mean the total wealth of an individual or nation. In 1729, for instance, Jonathan Swift’s A Modest Proposal satirically claimed that by raising Irish babies for food, “the Nation’s Stock will be thereby encreased Fifty Thousand Pounds per annum.”
Stock was first used to describe the funds available for a company’s operations in the early 17th century. “Many…put in different summes, which all together made up six hundred thousand pound, the first stock upon which this Company has built its prodigious Encrease,” a historian of the East India Co. wrote in 1669. Individual shares of that total were called stock as well, as were what today we call bonds.
It is a shame the ancient metaphor at the heart of the word stock has been forgotten. A tree trunk is a solid foundation, a fixed basis, for thousands of branches bearing green foliage. It grows steadily higher unless it is trimmed back, in which case it promptly sprouts new growth. The history of the word stock thus expresses exactly what most investors want from a stock itself — but seldom get, because they treat it like a weed to be yanked rather than like a tree to be nurtured.
STOCK MARKET, n. A chaotic hive of millions of people who overpay for hope and underpay for value.
The stock market serves not to allocate capital efficiently from those who have a surfeit of it to those who can put it to productive use in corporate enterprises; rather, it serves to humiliate those who think they know what the future holds. The stock market is a mechanism for putting a price tag on surprises. It transfers wealth from the arrogant to the humble, from those who trade the most to those who trade the least, from those who think they know the most to those who admit they know the least, and from those who pay commissions to those who collect them.
Those who “play” the stock market as if it were a game will lose. Those who respect it as a force of nature will prosper, but only so long as they are humble and patient.
SUPER BOWL INDICATOR, n. A purported predictor of stock-market returns, based on the belief that the performance of thousands of stocks over the course of the next 12 months will be determined entirely by the outcome of a single over-hyped football game in February. The main thing the Super Bowl Indicator indicates is that anyone who believes in it is a moron.
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