Sunday, May 9, 2010

Financial jargon wagon

It makes sense to be “on top of the curve” when it comes to keeping track of changes in the financial jargon-land.

Anand Kalyanaraman

In her first job at a financial research firm, Kavita was initially flummoxed when her boss asked her to ‘‘run him through the numbers'' of a company which had declared its results. She was left scratching her head once again when he asked her to do a ‘‘deep-dive'' into the numbers.

Her confusion was further compounded when she was told to prepare a ‘‘slice-and-dice'' analysis note. In time and with help from friendly seniors of course, she deciphered what her boss really meant when he used all those fancy expressions. In fact, she too began generously peppering her conversations with similar phrases. After all, jargon can be fun, contagious and quite addictive, once you have, well, done the ‘‘deep-dive''. It's tough to resist showing off a bit, isn't it?

The use of jargon has its genesis in a variety of reasons. From wanting to ‘‘say it as you see it'', sound cool, project perceived superiority, preserve domain exclusivity, mask ignorance, obfuscate the truth, intimidate the reader/listener, confuse when you can't convince, and so on…the list of motivations for employing jargon is indeed quite lengthy.

Jargon-usage is ubiquitous and every profession worth its salt has its pet jargon, phrases and sentence construction quirks. For instance, the lawyers have their legalese, engineers their technicalese, and doctors their medicalese. Marketers, in particular, revel in this game.

However, some of the most colourful, imaginative and entertaining jargon and code-words, undoubtedly emanate from the gangsta-world (for instance, peti for lakh, khokha for crore, ghoda for revolver, game bajana for a contract killing)…the list is long and forever evolving to help the mob always stay one step ahead of the friendly cop.

Now, can the financial world with its (ahem) formidable intellectual capital, deep pockets, wide sphere of influence, and an unending supply of wannabes (not necessarily in that order) be behind in this game? Hardly.

Sceptics who think that this is a world inhabited by boring suits and boots would do well to recall the haughty title used for global investment bankers — ‘‘masters of the universe'' — before the recession in 2008 and 2009 took the wind off their sails. To cut a long story short, and to put it mildly, the financial sector also thrives on jargon.

So, let's take a quick peek at some of the jargon doing the rounds in the financial markets and business media. Here goes:

“Keeping money on the table”: For a layman fed on the movies, this phrase would likely conjure images of seasoned gamblers having a chat in a casino. But for money-pinchers and bean counters, this translates into a public offer priced cheap and presenting a good chance to make some quick listing gains. Currently, this phrase tops the jargon chart in business media, given the slew of IPOs and FPOs flooding the market.

“Pop on listing”: This phrase does not suggest papa dear preaching (once again) on the benefits or otherwise of listing. Rather, it refers to gains which may be made on the listing day of the IPO stock. This would most likely happen when “money is kept on the table” for investors.

“Valuations look stretched”: No, the markets haven't caught the exercise bug. When the market price of a stock has run up sharply, such that it appears costlier than what its fundamentals suggest, or seems more expensive than comparable peers, its valuations are said to be stretched. Such stocks are best avoided.

“BRIC” and “PIIGS”: We aren't talking of building materials and animals of the stinky variety here. BRIC is an acronym for the group of high growth-potential emerging countries — Brazil, Russia, India and China. PIIGS, on the other hand, refers to the group of European nations (Portugal, Italy, Ireland, Greece, and Spain) which are perceived to be in economic trouble, mainly due their profligate ways and poor risk management mechanisms.

“New-normal”: This term which has been around for some time, gained prominence, post-recession. It refers to the new set of economic conditions which emerged out of the recessionary upheavals and which can be taken for granted for quite some time to come. For instance, increased regulation of the financial sector and high unemployment rates in the US are manifestations of the “new normal”. The decline of the British Empire, post-World War II, was also the ‘‘new normal” of that time.

“Anchoring inflationary expectations without hurting growth impulses”: We hear a lot of this vintage central banker stuff these days. It refers to the fine balancing act undertaken by monetary policymakers when they raise interest rates to rein in galloping prices, but at the same time keeping the rates within a reasonable threshold, so as keep the business community's animal instincts alive. Mild inflation is always seen as a good tonic for growth.

“Visibility”: No reference to eye-power here. Visibility in finance jargon refers to good probability of something occurring in the future. This term is often used in the context of corporate revenues and earnings, which may result from execution of strong order-books, among other factors.

“Upticks and downticks”: Hold your horses, auditors and aspiring auditors; these ticks are of a different variety. Simply put, upticks and downticks refer to growth and decline respectively. So, when a company is said to register an uptick in revenue, it means that its revenues have increased. Similar in the case of indices and stock movements.

“Headwinds and tailwinds”: These terms have been adapted from the world of aeronautics where a headwind (blowing against the travel direction of an object) slows down the speed of air travel and a tailwind (blowing in the travel direction of an object) enhances speed. In finance, headwinds are risks which may impair business prospects, while tailwinds are positive factors which may enhance prospects.

“Known-unknowns and unknown-unknowns”: Popularised by the former US Defence Secretary, Mr Donald Rumsfeld, these terms refer to uncertainties inherent in decision-making, some of which are clearly known while others may not be apparent.

“Run through the numbers”: A brief explanation of the salient points manifested by the numbers. For instance, sales and profit growth, important changes in business conditions, and future prospects. This is akin to the executive summary section of a report.

“Deep dive”: In easy speak, doing a deep dive means undertaking a through study of the facts and numbers in question. It goes beyond scratching the surface to getting a real, full-blown understanding of business dynamics.

“Slice-and-dice”: This refers to arranging and presenting data, information and analysis in a variety of ways to cater to requirements of various groups. Generally possible after the “deep-dive”.

So, by now, we have some inkling of what they mean when they say what they say (ok, only sometimes, since the above list is by no means exhaustive). However, a good dose of humility is in order here.

For the powers-that-be are well capable of coming up with phraseology which may make you want to head to the psychiatrist with a severe bout of low self-esteem.

Sample this: “Depending on how the net inflows are handled, there will be implications in terms of a combination of exchange rate appreciation, large systemic liquidity and fiscal costs of sterilisation.” Go figure.

All said and done, it makes sense to be (or at least try to be) ‘‘on top of the curve'' when it comes to keeping track of evolutions in financial jargon-land. For it may just help you ‘‘make the buck go much farther than the creator intended it to''.


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