I have been reading about some of the most interesting Halloween themed terminologies that one can find on Wall Street today:
- The Witching Hours: It was believed to be a time when witches took to the skies to do naughty things… but in finance there are two witching hours. Double and Triple, when a double or or a triple class of futures or expire on the same day. It is also known by the title Freaky Friday
- Zombie: Zombies were thought to be corpses that came back to life with magica voodoo powers. In investing: Zombies are companies that are insolvent or on the brink of filing for chapter11 (Bankrupcy), but are operating as if nothing was wrong. Much like a supernatural Zombie, the corporate zombie does not know that it is dead, because it filing for chapter11 and tries to continue to operate while restructuring its debt.
- Corporate Cannibalism: We all know what cannibals are non? Corporate Cannibals try to increase their market share by releasing products which would also serve as competition for their current products. If your new product competes against your old product, you are a corporate cannibal.
- Jekyll and Hyde: A tale of a kind scientist (Dr Jekyll) who begins experimenting on himself. Jekyll ends up physically transforming all the worst part of his personality into his alter ego, Mr. Hyde. Mr. Hyde eventually takes over everything and commits a horrible crime that Dr. Jekyll has no choice but to take the blame for. Investing: the term describes entities with dual personalities. You can have Jekyll and Hyde companies, finances, or even CEOs. Jekyll and Hyde investments can go from suddenly being good to being bad in value, as the previously concealed information become known. A Jekyll and Hyde CEO is a both a good man and a bad man rolled into one (manic depressive of sorts)
- Voodoo Accounting: Voodoo is known as black magic and unexplained phenomen. Voodoo Accouting (something which good old Bernie Maddoff should be aware of) occurs when a company uses some accounting methods that cannot be explained to disguise what is really going on in the company. We like to say that “the numbers are being cooked”. These numbers can simply be “spooky math” (when the numbers absolutely do not add up). Voodoo Accounting is also very capable of raising zombies of its own.
- Phantom Stock and Ghosting: Ghosts are wondering souls of the dead me entiende? Phantoms are illusions. The investing COUSINS ghosts and phantoms are a good match. Ghosting is an illegal practice where two or more market makers collaborate (and form a sort of a cartel) to manipulate the stock prices. Even though the market makers are bound by the law to remain in competition, their sleeping together can be near invisible. Phantom stock is not completely bad. It is just stock that does not exist. Companies usually offer employees the “benefit “of owning this kind of stock to their senior management, without taking any from outstanding shares. The Phantom Stock even goes so far as to follow the price movements of the real company stock, paying out any profits that are made. This is a really clever way that companies motivate their umployees without really giving out any equity… South Africa? Broad Based Black Economic Empowerment?
- Tomb Stones and Graveyard Markets: There is something about the dead that the undead (vampires) and the living dead (zombies) find irresistible, and so Graveyards and Tombstones are essential to the crepuscular atmosphere. The tombstone that we find in the financial world is created at the beginning of a stocks life (which is a little odd… or ironic). The Tombstone is a written advertisement issued by the investment bankers before a security goes public. It is called a tombstone because it is printed in heavy black in without a big black border around it, and it contains the no frills information about the issue. A Graveyard Market pops up at the end of a prolonged bearish market, when the investors have just finished weathering a financial storm. SO basically at this point, there is no action from the investors already on the inside (who have just gotten a fat hiding) or from any potential investors (who have witnessed the big players getting a fat hiding). Basically the dead (zombies- the big players) cannot get out and the living (new investors) are not rushing to get in.
- Viatical Settlement: In this case a person with terminal illness sells their own life insurance policy at a discount of its face value exchange for ready cash. This presumably because the person needs the money for medicine, or wants to have a blowout before they call it quits for life. This is the sinister part: The buyer of the policy cashes it in (full value) when the original owner dies. So it is like betting (and hoping) that a person will die in the near future, so the longer that they live, the less money you are likely to make. Now who betted on Magic Johnson. Just kidding… That wasn’t funny? Sorry.