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DEVIL'S DD "AlwaysBe Closing". This is the financial salesman's first and great commandment. The rest are and around the world.
like unto it: "Talk to People. Get all their money. Get all their friends' money." (Andrew Greta,
www.RiskManagement
"Hoosier Dispatch: The Trouble with 'Localitis' ", TheStreet.com, 7/10/97.) Digest.com
Summaries
Academe of the best articles
"An ancient school where morality and philosophy were taught." (Ambrose Bierce, The Devil's from the best
publications
Dictionary, New York, Dover, 1958.) in the risk
management trade
Academy press.
"(from academe). A modern school where football is taught." (Ambrose Bierce, The Devil's
Dictionary, New York, Dover, 1958.) www.Derivatives
Digest.com
Summaries
Accredited Investor of the best articles
In the eyes of the SEC, an outlaw not deserving of the usual standards of financial disclosure, from the best
publications
because of his past frugality or past and anticipated near-term productivity. The SEC can rely on a in the derivatives
variety of bounty hunters – including bucket shop operators, promoters of limited partnerships and trade press.
penny stocks, hedge fund managers, and commodity pool operators – to cut this vile character
down to size. www.AskDrRisk
.com
Answers to your
SEC Rule 505, which offers one way of issuing securities without registering them, defines questions about
accredited investor to include Investment,
1. a natural person with a net worth of at least $1 million; Risk Management,
Derivatives, and
2. a natural person with income exceeding $200,000 in each of the two most recent years or joint Financial Engineering
income with a spouse exceeding $300,000 for those years and a reasonable expectation of the
same income level in the current year.

According to SEC regulations, an accredited investor is fair game for the sellers of a variety of
securities, including interests in hedge funds. This is analogous to the statutory rape laws that
define a person over the age of consent (12 years old, in Delaware) as fair game for any smoothie
with a good pickup line or a new pickup truck. To quote the SEC, "It is up to you to decide what
information you give to accredited investors, so long as it does not violate the antifraud prohibitions."

AC-DC Option
One way for a customer to earn a "shocking" payoff.

active manager
An investment manager who professes to focus his energy on extracting abnormally large returns
from the market, but actually focuses it on extracting abnormally large investments from his clients.
He is difficult to distinguish from his pathological brother, the hyperactive manager. In most cases,
given that competitive markets tend to be efficient and that transactions don't come cheap, much
less free, the faster he runs, the farther behind his benchmark he falls.
 Usage: The four greatest lies known to man are

1. The check's in the mail.

2. Honey, I've got to work late.
3. I'm from the government, and I'm here to help you.
4. I'm an active manager, and I can beat the market.

affinity fraud
"It's a category where people try to take advantage of ethnic or religious similarity or other kinds of
things in common to say, 'You can trust me; I go to the same church.' " (Marc Beauchamp,
spokesman for the North American Securities Administrators Association, according to Randall
Smith, "Loss-Plagued Baptist Foundation of Arizona Undergoes Investigation by Regulators in
State," Wall Street Journal, 9/1/99.)

Act-of-Devil Bond
An Act-of-God Bond, in hindsight. After the hurricane strikes, the buyers will complain that "the devil
made me do it."

adverse selection
The insurance industry’s derogatory name for the unfortunate fact that their most eager customers
are those who can benefit the most from their products. Thus, if an insurer offers a contract, such as
insurance, to many customers, the least profitable customers will accept the offer.

Affluenza
A sickness of the spirit caused by affluence and ambition, aggravated by the devils on Madison
Avenue. Best cured by poverty and/or complacency. Not a problem in the Kalahari Desert, the
Amazon River basin, or on Skid Row, one presumes. According to the PBS show, "Affluenza",
9/15/97, it is "an unhappy condition of overload, debt, anxiety and waste resulting from the dogged
pursuit of more." (Source: Walter Goodman, "Seeing Money as the Ruler, More Despotic Than Kind"
[Review of ], New York Times, 9/13/97.)

Air Bag Economy

The Japanese economy, where the government intervenes to protect businesses and banks from
crashes in prices of goods, services, stocks, and real estate. As a result, " ‘Everybody has jobs,
everybody has health care, and nobody’s out on the street,’ Professor Morse said." Also, nobody
has the proper incentive to take strong action and fix what’s broken. The result – economic
stagnation from 1990 to 1999 – and still counting. (Nicholas D. Krisfof, "The Japanese and Inertia,"
NYT, 6/19/98.)

alphabet soup
Where mutual funds these days find the names for their shares, e.g., A, B, C, D, I, R, T, X, Y, and Z.
The shares differ mainly in the way the managers confuse their customers about sales and
management charges.

ambidextrous
"Able to pick with equal skill a right-hand pocket or a left." (Ambrose Bierce, The Devil's Dictionary,
New York, Dover, 1958.)

angel
An investor with deep pockets. An "accredited" investor (q.v.). ( Angel Capital Electronic
NetworkSM.) An investor who is willing to finance part of a Broadway show just for bragging rights
and a ticket to the cast party. An investor who is willing to make an uneconomical investment in a
celebrity's restaurant to validate some name dropping.

angel capital
Seed money from semi-pro, high-tech nouveau riche investors with money to burn, rather than "VC
money" (q.v.) from pros or "3F money" (q.v.) from amateurs. (Rich Karlgaard, "Dollars From
Heaven," WSJ, 3/16/98.)

apology
A cheapskate’s way of making amends for a horrendous faux pas.
"The Japanese are so much more efficient about this: chop off the little finger and present it to the
offended party, neatly wrapped in a pocket handkerchief. If you’ve really screwed up, use a longer
blade and disembowel yourself." (Christopher Buckley, "Hoof In Mouth," Forbes FYI, Summer
1998.)

Arbitrage
 In the marketplace, the act of picking someone's pocket, entirely legally and with his enthusiastic
complicity. The financial market's daily performance of The Sting.

Art
Something that is – like pornography, a kind of art – impossible to define, difficult to agree on, but
easy to recognize when you see it. Works of expression that derive value from their ability to
stimulate the senses. Examples range from James Joyce's Ulysses to Piero Manzoni's "Merda
d'artista no. 35" (1961), a "signed, numbered – and well-sealed – tin" of his excrement. A
connoiseur paid $28,800 for this tin on July 2, 1998 in an auction at Sotheby's London. One
wonders if the bidder mistook it, perhaps, for a can of Shinola. ("The commodification of crap,"
Forbes, 7/2798, p. 244.)

Asian flu
An epidemic of economic sickness that swept the Asian Tigers (q.v.) in the last half of 1997.

Asian Tigers
Strong Asian national economies, including Hong Kong, Malaysia, Singapore, South Korea, and
Taiwan.

Asian Paper Tigers

The Singapore Dollar, Malaysian Ringgit, Thai Baht, Indonesian Rupiah, Phillippine Peso, and
Taiwan Dollar, circa July 1997, when each suddenly and separately lost value, relative to the dollar.
The term alludes to, combines, and twists earlier terms: Asian Tigers (q.v.), Paper, and Paper Tiger.
Paper refers to paper money. Mao Zedong's Paper Tiger was an impotent U.S. government.
(Source: Data on devaluation and depreciation from Darren McDermott, "Asian Currencies Feeling
the Heat Again," WSJ (8/13/97).)

Auctioneer
"The man who proclaims with a hammer that he has picked a pocket with his tongue." (Ambrose
Bierce, The Devil's Dictionary, New York, Dover, 1958.)

Australia
"A country lying in the South Sea, whose industrial and commercial development has been
unspeakably retarded by an unfortunate dispute among geographers as to whether it is a continent
or an island." (Ambrose Bierce, The Devil's Dictionary, New York, Dover, 1958.)

Axe
(1) A superstar stock analyst that institutional customers want to hear. Hence his brokerage house
markets him the way a Hollywood producer "peddles Harrison Ford and, at one time, Demi Moore."

"... That analyst can stop a stock dead in its tracks and get it to jump up or roll over and play dead.
You may call that person a charlatan, a mountebank, a hypocritical jester.

(Source: James J. Cramer, "Wrong! Cramer on Why He Likes the Axe," TheStreet.com, 8/27/97.)

(2) An instrument, security, or derivative product that a trader strongly wants to buy or sell. The
salesperson who brings the trader a customer willing to take the other side of that trade is a hero.

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-B-
Baht’s Entertainment!
The reason that a 205-page, government report on the collapse of the Thai economy in 1997 is
flying off the shelves. It’s also available on CD-ROM and videotape. Among other tales from
southwestern Asia, it tells how the Bank of Thailand squandered $10 billion in one disastrous day,
"defending the baht."
(Pichayaporn Utumporn, "Government Report on Thai Debacle Could Be Titled ‘Baht’s
Entertainment’," WSJ, 6/24/98.)

Bahtulism
A sickness that began in July '97 as weakness of the Thai baht, then spread across southeast Asia
to the Singapore dollar, Malaysian ringgit, Indonesian rupiah, Phillippine peso, and Taiwan dollar.
(Source: Paul Krugman, quoted in Andrew Morse, "The Best Links: Curious About Asian
Currencies? Here's a Hunting Guide ," TheStreet, 8/1/97.)
bailout
What the federal government didn't do for Long-Term Capital – instead, it "persuaded" LTC's lenders
to bail it out.

A bailout is an effort to remove the water from a sinking vessel. Sometimes it works – Chrysler
Corp.– and sometimes it doesn't – the U.S. thrift industry and the Titanic.

[the] base
People who will vote for one candidate or party, no matter what. For the Democrat party, African
Americans and Feminazis. For the Republicans, the religious right. During a midterm election, the
name of the political game is turning out the base to vote, which requires "red meat" (q.v.).

basher
A bad news bear who posts derogatory messages about a stock, to drive its price down. "That stock
was flying, until a couple of bashers started taking shorts at it." (Terri Cullen, "Translation Required,"
WSJ, 9/8/98.) The opposite of a hypster (q.v.).

bastinado
"The act of walking on wood without exertion." (Ambrose Bierce, The Devil's Dictionary, New York,
Dover, 1958.)

beard
An person who serves to disguise an illicit relationship by pretending to have a relationship with
each of the parties in the real relationship, thus giving them a reason to be in close proximity.
Example 1: The president wants to take his bimbo somewhere public. He might order his
subordinate to join them and play the role of the bimbo’s lover.
Example 2: The president wants his bimbo to do her thing at the office. He might claim that the
bimbo is his secretary’s friend and visitor.
(Michael Craig, "He Talked Too Much," The American Spectator, June 1998.)

Beardstown bozos
Elderly women who achieved their place in the investors' hall of fame by means of blue hair and
mirrors. Their experience suggests that elderly women are no safer managing money than they are
driving cars.

Members of the Beardstown (Ill.) Business and Professional Women's Investment Club wrote a
book about investing that proclaimed on its cover that they had earned 23.4% per annum from 1983
to 1993 – versus 12.1% for the Dow Jones Industrial Average. The public has bought 800,000
copies to glean their wisdom, and their video won an award. In 1998 Price, Waterhouse found that
their annual rate of return was only 9.1%. Now, it seems that, far from outthinking the competition in
the stock market, they couldn't do simple arithmetic. They are "terribly sorry for the error and any
confusion it may have caused." Nearly a month later, Coliseum Books in Manhattan still displayed
their book prominently. (Calmetta Y. Coleman, "Beardstown Ladies 'Fess Up to Big Goof," WSJ,
3/18/98.)

Belorussian roublette
The dangerous game of holding the currency of Belarus during 1997 and the first quarter of 1998.
On 3/17/98, after a sharp decline in the value of the rouble, Belarus’s strong man, Alexander
Lukashenka, ordered firms and shops to use the prices from 3/1 and currency traders to use the
exchange rates from 3/1. At those prices, citizens dumped roubles where they could – they bought
out the stores immediately and tried in vain to buy hard currencies. On 3/23 "he ordered Belarussian
banks to limit settlements with non-resident sellers." In Minsk, the central bank’s official rate was
33,460 roubles per dollar, and currency kiosks posted a rate of 42,000, but the free market rate in
Moscow was nearly 70,000. ("Roublette," The Economist, 3/28/98.)

best execution
An abstract concept that, like unselfish love or unicorn, is easy to define, but seldom seen.
"Unlike pornography, which while difficult to define is known when seen, best execution is easily
defined but often unrecognizable …" J. Macy and M. O’Hara, "The Law and Economics of Best
Execution," NYSE Working Paper 97-05, 1997.

Bigamy
"A mistake in taste for which the wisdom of the future will adjudge a punishment called trigamy."
(Ambrose Bierce, The Devil's Dictionary, New York, Dover, 1958.)

big, swinging dick

A huge money maker on Wall Street, possibly because he has just screwed a customer – in size. An
expression made famous by Michael Lewis in Liar’s Poker, his book about the months he spent at
 Salomon Brothers. Not a nickname for a large orangutan, named Richard.

bimbo-topia
"Where the Boys Are" in 1998, judging from "MTV's Spring Break," ("Tony & Tacky," WSJ, 3/27/98.).
Little Rock, Washington, The White House, The Oval Office, ... wherever President Clinton is at any
given moment, judging from reports in the New York Times, Washington Post, and Wall Street
Journal.

black chips
The bags that catch the booty when the new African National Congress government Mau Mau's
South Africa's white capitalists. The ANC has accomplished in black-majority South Africa what
Jesse Jackson could only dream in the white-majority USA.

Shares, traded in the Johannesburg market, of South African corporations in which black
businessmen have at least a ten percent interest, perhaps control. Black ownership gives the
corporations an advantage in competing for governmental and related contracts, and may help
white capitalists divert the ANC from seizing their property. Consequently, in 1997 black chip stocks
outpaced the South African all share index by 16%. The name suggests that black chips are the
African counterpart of Chinese red chips (q.v.). (Neil Behrmann, "Black-Chip Stocks Take Center
Stage In South Africa," WSJ, 2/20/98.)

blank check company

An empty vessel, into which
1. naive investors can pour their unwanted cash, the easier for stock promoters to steal it
2. sophisticated companies can pour their assets to get around excessively onerous SEC
registration requirements.
A public, shell company with few or no assets, income, products, services, activities, business plan,
management team, employees, or anything else that an ongoing business ordinarily has -- except
for registration with the SEC. A private company can use a blank check company to go public via a
"reverse merger" without doing an expensive IPO. (Schellhardt, Timothy D. "As 'Blank-Check' Firms
Regain Allure, Businessman Lines Up Numerous Suitors." WSJ, 10/29/99.)
blue sky law
A license to steal, issued by a state legislature. It takes its name from speculative business
propositions that a judge in the early 1900s said had about as much substance as "blue sky".
boiler room
Sherwood Forest for modern day Robin Hoods. A room, densely packed with matched desks,
phones, and telefleecers, dedicated to the proposition of separating fools from large sums of their
money.
[the] bouncing Czech"
A nickname for two infamous swindlers, who colorful antics have beggared thousands of persons
and put a small country on the map of financial fraud.
1. Victor Kozeny, also known as the Pirate of Prague (q.v.).
2. Robert Maxwell, the late financier, who was posthumously accused of looting the corporations
and pension funds under his control or influence. Robert Maxwell, a Czech immigrant to the U.K.,
who built a business empire with thousands of employees, whose pension fund he looted of some
400 million pounds Sterling.

brain

"An apparatus with which we think that we think. ... In our civilization, and under our republican form
of government, brain is so highly honored that it is rewarded by exemption from the cares of office."
(Ambrose Bierce, The Devil's Dictionary, New York, Dover, 1958.)
Buba
A nickname and abbreviation for "Bundesbank", the German central bank.
Bubba
An excessively complimentary nickname for the 42nd President of the United States.
bubble
An wildly overvalued financial market, most clearly recognized via hindsight. The classic example
given is Amsterdam's market for tulips in the 1600s, when the price of one rare tulip was "2 lasts of
wheat; 4 lasts of rye; 4 fat oxen; 8 fat swine; 12 fat sheep; 2 hogsheads of wine; 4 tuns of beer; 2
tuns of butter; 1,000 lbs. of cheese; a complete bed; a suite of clothes; and a silver drinking cup." A
more current example that some "experts", with no money in the market, one presumes, put forward
is the U.S. stock market, cira July 1998.

bucket shop
A field of dreams for investors and field of nightmares for regulators and exchanges. The Bucket
Shop creates trades in the underlying assets – ordinarily, shares – out of thin air. Regulators claim
to hate the Bucket Shop because it can fold and leave investors with nothing, and otherwise cheat
them. However, so can regulated dealers. Exchanges hate Bucket Shops, because they can
produce the same returns as investments, but at lower cost than exchanges. Investors clearly love a
 Bucket Shop ex ante, if they trade with it. They may hate it, ex post, if they win, but it doesn't pay off
and flies by night.

A Derivatives Dealer.

burn rate
The amount of capital that a startup company consumes each month.
(Michael Wolff, Burn Rate - How I Survived the Gold Rush Years on the Internet, New
York, Simon & Schuster, 1998.)

business ethics
The philosophical issues that crop up when someone who lives to make a profit faces the
opportunity of taking candy from a baby. "So when a client walks in with a $1 million inheritance, you
earn $320 to stick it in a T-Bill, $2,500 in your average mutual fund, or $50,000 in a variable annuity.
You make the call." (Andrew Geta, "Hoosier Dispatch: For Brokers, It Pays to Be Honest,"
TheStreet.Com, 12/4/97.)

bulletproofing

A business arrangement that makes it difficult or impossible for a creditor to put a severely wounded
debtor out of his misery. For example, "Long-Term Capital did have a strategy of 'bulletproofing'
itself from a liquidity squeeze." It consisted of convincing lenders to pay $3.65 billion for 90% of a
bankrupt partnership, rather than liquidate it immediately and reap an even larger loss. (Steven
Lipin, "Unwinding the Bets Stressed Long-Term Capital," The Wall Street Journal, 9/28/98.)

Business School

A nursery for human predators who prefer green paper to red meat. "A professor of ethics at
Stanford Business School described the task of holding the attention of his ambitious, driven
students as trying to give an intellectual life to baby wolverines." (Peter Robinson, Snapshots From
Hell: The Making of an MBA, Warner Books, 1994.)

Back to Top

-C-
cache
"A portion of RAM set aside as a temporary storage area, or buffer, to speed up communications
between the microprocessor and the hard drive or other components." ("Jargon Watch," Fortune
Technology Buyer's Guide, Winter 1998, p. 10.)

A portion of the balance sheet set aside as a temporary storage area, or buffer, to slow up the
communication between the trading area and the controllers, financial accountants, top managment,
and/or the shareholders. In commercial banks, it has in the past consisted of an investment portfolio
that the bank need not mark to market and can carry on the books at cost. In investment banks, it
has recently consisted of a reserve account and non liquid investments that the trader can mark at
will.

Catastrophe Derivatives
How modern finance would have dealt with the Biblical seven plagues of Egypt. If Pharaoh had had
these, the Israelites would would still be tilling Egyptian fields and Europeans would still be
worshipping rocks and trees – instead of hard currency.

New shears for new sheep. ("Between 1988 and 1992 the losses on Lloyd's policies ran to about
$13 billion, of which more than two thirds fell on the names recruited in the '80s. U.S. names have
alleged in lawsuits that they were recruited to be taken – 'If God hadn't meant them to be sheared,'
a deputy chairman of Lloyd's once wrote of names who did not take proper responsibility for their
affairs, 'he wouldn't have made them sheep' – to reinsure about $3 billion of losses Loyd's insider
knew were coming. Lloyd's vehemently denies that allegation ..." Martin Mayer, "Return from the
dead," Institutional Investor, June 1997, pp. 37-40.)

chaebol
Literally, "fortune clusters". In Korea, a huge conglomerate or industrial group – such as Samsung,
 Hyundai, and Daewoo – that many accuse of trading with itself as much as possible, with other
chaebols to a lesser degree, and with U.S. and other foreign companies as little as possible. The
mutual admiration society consisting of the chaebols and the ruling party has dominated Korean
politics and economics for some 50 years. The disastrous culmination of this unholy alliance was
the bankruptcy of Korea and its complete formal surrender to the IMF circa 12/5/97. Only time will
tell whether the surrender is genuine or just the start of a long guerrilla war, but preliminary results
suggest the latter.

Update (8/19/99): Daewoo is breaking up, a good sign for Korea's economic health, allowing the
sort of "creative destruction" that capitalism fosters, and which has made America's economy the
world's envy during Bill Clinton's presidency.

certificates of guaranteed confiscation

Russian Acting Prime Minister Viktor Chernomyrdin’s persuasive argument for the notion that 80-
year-old defaulted debt from the Russian Empire is worth more than newly issued GKOs (Treasury
bills) of Boris Yeltsin’s Russian government.

The government appears ready to force holders of its debt to swap for new debt that matures in
three to five years and carries a coupon of 30 percent. They might choose to swap up to 20 percent
of their old debt for new, dollar-denominated debt with maturity in eight years and a coupon of five
percent.

With the Russian central bank unwilling to support the ruble, and the government unable to collect
taxes and preserve the rule of law, people who bet in 1997 on a strong Russian recovery appear to
have lost that bet.

(David DeRosa, "Russia’s Certificates of Guaranteed Confiscation," Bloomberg, 8/26/98.)

Chapter 22s
Two-time corporate losers. What bankruptcy lawyers call “firms that file under Chapter 11,
reorganize and file again.” Three-time losers are “Chapter 33s”. (Daniel R. Fischel and Randal C.
Picket, “A Firm That Failed Well,” Wall Street Journal, 10/12/98.)

cheat sheet
Definition: The investment banking equivalent of the crib sheet that a dishonest pupil uses during a
closed-book exam. Sales literature that goes illegally beyond what appears in the prospectus.
Comment: In the world of education, during an exam, the pupil brings his own crib sheet and hides it
from the teacher. In the investment banking world, during the period of analysis before the offering
(exam), the banker (teacher) supplies the sheet to the prospective investor (pupil) and hides it from
the SEC (principal).
The SEC requires the prospectus to be the complete, balanced, and exclusive piece of sales
literature that the broker offers the potential investor. Errors of omission or commission carry serious
penalties. The rationale is to put the investment game on a level playing field, because the
prospectus goes to the individual investor, as well as insitutional investor.
SEC rules allow investment bankers to use any information – no matter how shaky – for internal
evaluation of an issue. The rules allow the bankers to present potential customers with a wide range
of information orally and visually, but not to leave it in writing. For example, during a "road show",
brokers may hand out information that is not in the prospectus, but must collect the information
before the prospects leave the room. Some institutional investors prefer to take this information
away, and do take it, complete with the words "Internal Use Only".
Source: Susan Pulliam, " 'Cheat Sheets' On IPOs Raise Fairness Issue," WSJ, 12/31/97.

Chinese Wall
Definition: An ambiguous fixture in the compliance structure of American finance, analogous to the
River in American history. In theory, an investment bank's Chinese Wall impedes the flow of
valuable financial information from its mergers and acquisitions department to its brokers and
traders.
Comment: In practice, if you can believe the press allegations about Marisa Baridis ("Ratings &
Briefs", Financial Trader, Dec. 1997, p. 9.) , the Chinese Wall can serve as an information
superhighway. In just the same way, in the early to middle 1800s, the mighty Mississippi River
interrupted wagon traffic moving west, but made possible inexpensive riverboat travel from New
Orleans to St. Louis .

chop
Definition: "[T]he immense profit margins" – bid-ask spreads – on Chop Stocks (q.v.).
(Source: Gary Weiss, "Investors Beware: Chop Stocks Are on the Rise," Business Week [online],
12/15/97.)

chop houses
Definition: "[D]ealers in penny stocks such as Blinder, Robinson & Co."
 (Source: Gary Weiss, "The Mob on Wall Street: Why You Can't See It," Business Week [online],
3/24/97.)

chop stocks
Definition: "Street lingo for easily manipulated micro-cap stocks."
Source: Gary Weiss, "The Mob on Wall Street: Why You Can't See It," Business Week [online],
3/24/97.

churnin' and burnin'

Trading a customer's brokerage account excessively, just to create commissions, with the result that
much of the customer's portfolio value goes up in smoke.

churning
In financial sales, the fine art of taking candy from a baby, done typically in three steps:
1. Open a brokerage account (stock, bond, or futures) to receive money from a naive youth,
overworked and inattentive professional, or helpless geriatric
2. Gain that customer's confidence and receive or assume control over the account.
3. Betray that confidence for one's own financial gain by draining the account via commissions for
frequent, unnnecessary transactions.

An insurance salesman can play a variation on this theme, persuading an insurance policyholder "to
switch policies in a transaction that would do little or nothing more than generate commissions for
the insurance agent." (Leslie Scism, "Despite Strikes Made Against Churning, Caution Is Key in
Purchasing Insurance," Wall Street Journal, 1/21/98.)

circuit breaker
A device by which the batter has arranged for the umpire to postpone the game for rain every time
he has to face a strong pitcher.

A colossally destructive stock exchange rule that stops the community of investors, controlling
trillions of dollars of equity investments, from behaving like rational human beings, whenever
rationality calls for bidding the prices of shares down sufficiently. The rule protects about forty small
businessmen, who have agreed to play Russian roulette, in return for having monopoly power in the
market for one or more corporation's shares. The small businessmen are NYSE "specialists" –
market makers. Their suicidal bargain requires them to keep their assigned share prices moving in
tiny increments, no matter what kind of hell is breaking loose in the markets around them. On
occasion – not rare occasion – a market crash has bankrupted conscientious specialists.
(Holman W. Jenkins, Jr., "Why Circuit Breakers? Hint: Not for the Little Guy," WSJ, 2/4/98.)

A miracle cure for a feverish stock market that has just fallen out of bed – break the thermometer! Its
advocates are now working on an amazing cure for airplane crashes that consists of shutting off the
altimeter if an aircraft falls suddenly more than 350 feet. After that we reform campaign financing by
ending the collection of data on contributions whenever we find widespread abuse. Could we
perhaps straighten a winding road by locking the steering wheel when a car goes into a skid? O
Happy day! The millenium is here! ("Trading on the [NYSE] halts for half an hour if the [DJIA] falls
350 points from the previous day's close, and an hour if it falls 550 points. ... These circuit breakers,
which are coordinated with futures exchanges, have never been triggered." Deborah Lohse,
"Nasdaq Revamps Its Order System," WSJ, 8/25/97.)

Just in from the WSJ, the NYSE has proposed the following circuit breakers: When the Dow-Jones
Industrials fall 10% / 20% / 30% the NYSE would halt trading for one hour / two hours / the rest of
the day. (Aaron Luchetti and Greg Ip, "Big Board May Loosen Its 'Collar'," WSJ, 3/23/98.)

Just in, from the "If all your friends jumped off a bridge, would you jump off a bridge?" Department:
The Wall Street Journal reported – appropriately, on Friday the 13th of March, 1998 – that the
Chicago Mercantile Exchange and Board of Trade have decided to have their Circuit Breakers take
effect on the following April Fool's Day (4/1/98). The New York Stock Exchange's Circuit Breaker
halted trading in October 1997, after the market fell more than the 500 point limit (554.26 points,
less than 8% of its beginning level). The new Circuit Breakers at the Merc will halt trading in its S&P
500 index futures contract when the S&P 500 index falls 10% and 20%. The new Circuit Breakers at
the CBOT will halt trading in its Dow-Jones Industrial Average contract when trading halts on the
NYSE. (Clifton Linton, "Circuit Breakers Spark Debate In Futures Arena," WSJ, 3/13/98.)

clairvoyant
"n. A person, commonly a woman, who has the power of seeing that which is invisible to her patron
– namely, that he is a blockhead." (Ambrose Bierce, The Devil's Dictionary, New York, Dover, 1958.)

CMOs
"The exploding cigars of the financial world." (Howard L. Simons, "Posting Up,"
http://www.futuresmag.com/library/oct95/tradetech.html.)
coin-operated employee
"An employee brought in for a particular project or set time period." ("Jargon Watch," Wired, April
1998.)

collar
The means by which the New York Stock Exchange (NYSE) strangles trading on its exchange and
blinds its customers, while trying to suffocate its competition at the Chicago Mercantile Exchange. In
effect, an additional uptick rule (q.v.) (downtick rule) that prevents a trader from selling (buying) a
stock in a down (up) market – unless the last trade was above (below) the immediately preceding
trade. The expressed (but untrue) wish is to prevent arbitrageurs from aggravating swings in the
market prices. The unexpressed (but true) wish is to prevent arbitrageurs from picking the pockets
of the specialists who do their jobs – or embarrassing those who don't. (Aaron Luchetti and Greg Ip,
"Big Board May Loosen Its 'Collar'," WSJ, 3/23/98.)

commerce
"n. A kind of transaction in which A plunders from B the goods of C, and for compensation B picks
the pocket of D of money belonging to E." (Ambrose Bierce, The Devil's Dictionary, New York,
Dover, 1958.)

common cents
Something totally lacking in the American stock market, but available in virtually every other market
in the world. While the U.S. was the first country to decimalize its currency (circa 1776) and Yemen
was the last (1974), U.S. stock markets still operate as though "pieces of eight" were the coin of the
realm. Clearly the leadership in this market is crazy – like a fox! When the minimum price differential
is an eighth of a dollar, so is the minimum bid-ask spread, which stymies vicious price cutters. (Jack
Weatherford, "Let Common Cents Prevail on Wall Street," WSJ, 3/26/98.)

connoisseur
"n. A specialist who knows everything about something and nothing about anything else.

An old wine-bibber having been smashed in a railway collision, some wine was poured upon his lips
to revive him. 'Pauillac, 1873,' he murmured and died." (Ambrose Bierce, The Devil's Dictionary,
New York, Dover, 1958.)

convoy system
1. The incredibly stupid and short-sighted Japanese approach to insuring the solvency of their
financial system by having the stronger banks bail out their weaker brethren. (Jathon Sapsford,
"Hedge-Fund Bailout Allows Japanese to Lecture U.S.", The Wall Street Journal, 9/28/98.)
2. The incredibly brilliant approach of the Federal Reserve Board to insuring the solvency of their
financial system by "persuading" commercial banks and investment banks bail out a failing hedge
fund.

For those without business sense, the potential problem with the convoy system is that it may end
up weakening even the strong to the point where everybody is in danger of sinking – as in the
Japanese financial markets at the end of the 20th century..

cookie jar accounting

The term for a pattern of taking excessive reserves against possible losses – e.g., loan losses –
during times when earnings are large, then reducing those reserves during hard times, using the
reserves as a "cushion", thus "smoothing earnings" to deceive "investors, funds providers,
regulators, or other affected parties." The SEC, Federal Reserve, FDIC, Office of the Comptroller of
the Currency, and Office of Thrift Supervision signed a statement (circa 11/24/98) opposing this sort
of manipulation. (Richard Waters, "Warning on use of loan loss reserves," Financial Times,
11/25/98.)

corporate opportunity
1. A doctrine of human greed that says a corporate executive must take personal advantage of any
financial opportunity that presents itself to the executive by virtue of his office.
2. A doctrine of corporate law that says that "Corporate executives can't take personal advantage of
financial opportunities that come to them by virtue of their position at the company. Instead, the
executives are required to offer the opportunities to their company." (Michael Siconolfi, "SEC
Broadens 'Spinning' Probe To Corporations," WSJ, 12/24/97.)

Costly Collar
A significantly more accurate – but much less marketable – term for what Derivatives salesmen
commonly term the "Costless Collar".

courtesy call
The telemarketer's euphemism for wasting your time by rudely interrupting your otherwise
productive day. You can fight "courtesy calls" and maybe even "make money at home, just
answering the phone" by using the Junkbusters Anti-Telemarketing Script. It really works! Listen to
 them squirm, silently, politely.

coward
"One who in perilous emergency thinks with his legs." (Ambrose Bierce, The Devil's Dictionary, New
York, Dover, 1958.)

crossed market
A market where the dealer community loses a nickel on every trade, but makes it up on volume.

In a crossed market the bid exceeds the ask, which is a difficult position to maintain. In both theory
and practice, dealers don't maintain it. Nor is a prolongued crossed market required to make money.
Instead, a dealer crosses the market for an instant to set a spurious underlying price and a
confederate takes the profits in an ill-designed derivatives market. (Leslie Eaton, "Nasdaq Fines
Morgan Stanley $1 Million, NYT, 4/14/98. "NASD Fines Morgan Stanley $1 Million For Allegedly
Manipulating Stock Prices," WSJ, 4/14/98.)

currency speculation
"Currency speculation is the financial equivalent of AIDS." (Roughly translated from Jacques
Chirac.)

cybersucker
Definition: A high tech lamb who, finding boiler rooms archaic, prefers to find his slaughterhouse on
the World Wide Web.
Comment: "THERE'S A CYBERSUCKER BORN EVERY MINUTE . . . As you read this, there are
probably several scam web servers opening for business. The offers and pitches are incredibly
varied, though they narrow into the same end game: separating the online sucker from his or her
money. 'Sucker' seems a harsh term, but what else do you call someone who throws away money
on too-good-to-be-true offers from total strangers?"
Source: Lance Rose, "STATE REGULATORS: PROBLEM OR ANSWER?" LEGALLY ONLINE.

cynic
"n. A blackguard whose faulty vision sees things as they are, not as they ought to be. Hence the
custom among the Scythians of plucking out a cynic's eyes to improve his vision." (Ambrose Bierce,
The Devil's Dictionary, New York, Dover, 1958.)

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-D-
Dagenham smile
"The unsavoury (and typically hirsute) buttock cleavage exhibited by a certain calibre of building site
worker, such as might come from Dagenham, a fairly grim outskirt of London. This grim [and
vertical] smile is especially prominent when bending over. Caused by enormous beer gut at front
preventing T-shirt at rear ever tucking into jeans." (Andy Webb)
D&D
Due diligence. (Terri Cullen, "Translation Required," WSJ, 9/8/98.) The process by which
underwriters, investors, and stock analysts give the Devil his due.
8/28/00 Darrell Zimmerman Rule
Definition: A rule of the Chicago futures exchanges that allows the clearing firms to keep the profits
on any positions that exceed what their margin supports. Named after the man who created havoc
in the CBOT bond pit in 1994 by buying huge amounts of option bond options on margin that
consisted of a worthless $50,000 check.
Comment: If it had been in effect when Hillary Clinton made her $100,000, Refco would have been
entitled to keep all her profits. Of course, that would have defeated Refco's purpose in letting her
trade.
Source: Ted C. Fishman, "...Almost," Worth, 1/94,
2000http://www.worth.com/articles/Z9401F04.html.
Day-After Option
A much-needed Derivative Product that gives the customer the right to cancel a trade after 24
sobering hours.
day trader
The financial market's equivalent of the little old lady who spends every day at the casino, sticking
quarters into a slot machine. One who believes you can lose a nickel on every trade and make it up
on volume.
dead cat bounce
A small, unsustainable increase in a speculative price after a precipitous drop. For example, the
 Korean won fell precipitously from about 900 won per dollar in October to about 1700 in early
December, had a dead cat bounce to around 1400, fell to about 2000, bounced to about 1400, and
fell again to about 1700 at the end of the year.
"At a recent $281.40, gold is at a 17-year low. ... The Bre-X fiasco, along with other scandals,
demoralized investors and combined with tax-loss selling of unprecedented savagery to devastate
gold stocks.
"But even dead cats bounce ..."
(John Brimelow, "Dead-cat bounce?", Forbes, 1/12/98.)
If a warped individual drops a dead cat off a tall building, after it hits the pavement, it will bounce a
little. However, don't expect much of a bounce.

dead hand
A board-room villain that refuses to die – the "dead hand" is to the drama of corporate governance
what seemingly immortal Freddie Kruger is to "Friday the 13th".
In the documents governing a corporation, a continuing director clause that "authorizes the
incumbent board of directors of a target company and only the incumbent board of directors – to
remove a target company’s ‘poison pill’." (Thomas E. L. Dewey, "Loosening the Grip of the ‘Dead
Hand’," Wall Street Journal, 8/24/98.

dead Tiger bounce

A dead cat bounce (q.v.) for stocks of the Asian Tigers.

death spirals
Convertible, preferred shares, with a conversion ratio that increases as the share price decreases.
Also known as "toxic convertibles." (Aaron Lucchetti and Leslie Scism, "Unusual Convertible
Preferred Raises Needed Cash-- and Risks," The Wall Street Journal, 9/28/98.)

defibrillator
A contingent option now available near the trading floor of the New York Stock Exchange. It pays off
if a trader has a heart attack and the electric shock restores normal rhythm. It has gone in the
money about five times a year. Also available off the exchange at Grand Central Terminal. ("New
York Exchange Faces Reality of Heart Attacks," New York Times (courtesy of Bloomberg News),
1/2/98.)

delay, deny, denigrate, and distract

The four pillars that support the Clinton administration’s strategy for dealing with Special
Prospecutor Kenneth Starr and other small-minded critics – in the press and the Republican party –
who miss the big picture, while nipping at their ankles for little things like selling U.S. trade secrets to
the Red Chinese for illegal campaign contributions, perjury, subornation of perjury, and obstruction
of justice:

Deny that any crime occurred.

Delay the investigation of the crime.
Denigrate the investigator and his investigation.
Distract attention when the investigation turns up solid evidence.

democratization of capital
Racist socialism in Jesse Jackson's dreams.

dentist
"A prestidigitator who, putting metal into your mouth, pulls coins out of your pocket. (Ambrose
Bierce, The Devil's Dictionary, New York, Dover, 1958.)

digerati
What the literati call anybody who knows how to use a [digital] computer. (Webster's College
Dictionary, New York, Random House, 1997.) Cf. numerati.

Dismal Science
[Positive] Economics (q.v.). So-called because of its stubborn attempts to describe the world as it is,
rather than Pollyanna thinks it should be. "Its dismalness is largely a delusion, due to the fact that its
chief ornaments, at least in our own day, are university professors. The professor must be an
obscurantist or he is nothing; he has a special and unmatchable talent for dullness; his central aim
is not to expose the truth clearly, but to exhibit his profundity, his esotericity – in brief, to stagger
sophomores and other professors." (H.L. Mencken, "The Dismal Science," in Prejudices; A
Selection, p. 149. Baltimore: Johns Hopkins, 1996.)

distinguished, portly, elderly gentleman

A fat old fart who has retired with at least ten million dollars.
Diving Board Effect
Definition: The tendency of certain falling (rising) forward price or yield curves to go (up) down more
for the nearby delivery and less for the more distant delivery. AKA Horizontal Tornado.
Source: Culp, Christoper, and Miller, Merton. "Auditing the Auditors." Risk 8 (April 1995), pp. 36 ff.) .

Doctor Death
Albert Wojlinower, a perennial market bear. For 23 years as First Boston's chief economist, he
preached gloom, doom, and even "plagues".
dogeza
A traditional Japanese institution that sometimes makes suicide a better way than reorganization to
handle default on corporate debt. "[A] meeting with creditors in which the ruined company owner sits
on the floor, bows deeply, and begs forgiveness while his creditors scream abuse." (Edward W.
Desmond, "When Suicide Makes Sense," Fortune, 5/25/98, p. 28.)
DOGS
Drastically Overpriced Government Securities. A "pet" name for SLUGS (q.v.).
"dogs of the Dow"
Ten stocks that have recently lived up to their name. The ten stocks in the Dow-Jones Industrial
Average having the highest dividend yield. They ordinarily get that high yield by having a recent and
severe decline in share price. In 18 out of 23 years from 1971 to 1993 they outperformed the DJIA
over the ensuing year, which gave them a reputation as future winners. Alas, in three out of four of
the years from 1993 to 1997 the DJIA beat the dogs, which put the "dogs of the Dow" theory in the
same category as the hemline theory in the minds of some. (Greg Ip, "Bull Market in Stocks Is
Trampling Some Investment Rules of the Past," WSJ, 4/6/98.)
downshifter
A euphemism for a victim of career burnout.
8/28/00 drop the H-bomb!
An immensely successful technique for scoring with the opposite sex in singles bars . "For us, it
was a guaranteed entrée. 'Like a neutron bomb which wipes out humans but leaves buildings
standing, the H-bomb leaves brunettes standing but puts blondes on their backsides ... It worked
very simply. We'd wade into a crowd with a beer in each hand, start talking to a girl, and casually
mention we'd gone to business graduate school. If the girl asked, "Which one?" we paused, looked
at her with slight curiosity and then said quietly, 'Harvard.' Someone scored with the H-bomb every
night."
Source: Joseph Jett (with Sabra Chartrand), Black and White on Wall Street," New York, William
Morrow, 1999.
dumb money
The opposite of "smart money". Money "invested" – i.e., flushed down the toilet – by large
corporations in research and development, according to Michael Jensen's 1993 article in the
Journal of Finance. (Rich Karlgaard, "Dollars From Heaven," WSJ, 3/16/98.)
D.W.B.
Driving While Black. A popular term among the criminal class – including drug runners, their
attorneys, their legislators, and any clueless bleeding hearts in the neighborhood. Similar to

D.W.I. – Driving While Intoxicated

D.W.U. – Driving Under the Influence.

According to some African-Americans, police unfairly target blacks, particularly younger, black, male
drivers, for investigation. A New Jersey state judge ruled that police were selectively enforcing laws
by focusing on blacks, because the probability that the police will pull over a black driver is 4.85
times as large as the probability that they will pull over a white driver. (John Kifner and David M.
Herszenhorn, "Facial ‘Profiling’ at Crux of Inquiry Into Shooting by Troopers," NYT, 5/8/98.)

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-E-
Easy-Come, Easy-Go Option
Definition: A variety of Knock Out Option. Specifically, (1) if it goes in the money, it knocks out, and
(2) if it goes back out of the money, it knocks back in, again.
Source: A trader who shall remain anonymous.
economics
Definition: The dismal science (according to Thomas Carlyle), so called because it focuses on
understanding how humans make choices.
economist
Definition: A professional cynic (q.v.), schooled in the dismal science.
Examples:
 1. Economist, Normative. An theoretical economist schooled more in mathematical analysis and
less in statistical analysis.
2. Economist, Positive. An empirical economist, schooled more in statistical analysis and less in
mathematical analysis.
3. Economist, Policy. An applied economist, more schooled in the architecture of castles in the air,
less in mathematical and statistical analysis.
4. Economist, Business. An applied economist who tries to predict the future, ideally by speaking
with someone who is about to announce it.
education
Definition: The only market where the buyer customarily pays in advance, but adamantly refuses to
take delivery.
emerging market
A backward economy, temporarily growing faster than its indigenous thieves can deplete it, as
brokers and dealers, those imaginative authors of modern financial fairy tales, describe it to their
starry-eyed victims. A future submerging market (q.v.).
EMU
1. A large, flightless Australian BIRD (Dromiceius novaehollandiae) related to the CASSOWARY
and OSTRICH. A swift runner, it is 5 to 6 ft (150 to 180 cm) tall. Its brownish plumage is coarse and
hairlike. Iin the early 1990s, American farmers paid up to $70,000 to get a breeder, because the
meat is low in cholesterol. In 1997, with about 2,000,000 emus in the U.S. and a pair of emus worth
less than $400, one Texas physician and farmer clubbed 22 of his recalcitrant emus to death.
2. European Monetary Union. A large European organization, related politically to the OECD and
NATO, but in some ways more closely related to the mythical CHIMERA and DRAGON. Its body
exists, but shows no signs of performing as advertised. Everyone agrees it's a slow runner. Some
people think it's a nonstarter. So far, no one has clubbed it to death.
Episcopal Church
"The Republican Party, at prayer." (William McGurn, "Rum, Romanism And Republicans", The Wall
Street Journal, 1/29/99.) A church that weeds out the intellectually unfit through Sunday morning
exercises that involve juggling prayer book, program with inserts, hymnal, and supplementary sheet
music, while alternately standing, sitting, kneeling, as well as listening, reading, speaking, singing,
and – during the sermon – snoozing.
European Central Bank
The institution that the European Monetary Union has put in charge of manipulating the value of its
currency, the euro. (Dagmar Aalund, "What's the Euro?", The Wall Street Journal, 9/28/98.)
European Monetary Union
The European attempt to compete in the currency market with the dollar and obtain interest-free
financing of hundreds of billions of dollars of European debts.
Eurotrash
Attractive, well-dressed, well-spoken – at least, while sober – degenerate druggies who hang out at
clubs in major American cities. "That New York City club has become a compactor for Eurotrash."
executive
Definition: "An officer of the Government, whose duty it is to enforce the wishes of the legislative
power until such time as the judicial department shall be pleased to pronounce them invalid and of
no effect." (Ambrose Bierce, The Devil's Dictionary, New York, Dover, 1958.)
experience
Definition: "The wisdom that enables us to recognize as an undesirable old acquaintance the folly
that we have already embraced." (Ambrose Bierce, The Devil's Dictionary, New York, Dover, 1958.)

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