ACCOUNTING & FAS 133
ASK DR. RISK!
IF ONLY ...
Devil's Derivatives DictionaryTM
Last revised: 07/27/00
- P -
- Definition: An investment vehicle that lets you
magically transform a large sum of mere idle cash for a
small, priceless, timeless nugget of a "boiler
room" operator's wisdom.
- Usage: Says the boiler room pro, "I have a
six-figure package or a seven-figure package. Which would
be better for you?"
- Proper Response: "They both sound very
interesting. Could you hold for a minute. I need to call
Office of Investor Education and Assistance. What's
your name, again? ... Hello? Hello?"
- The lending practice of piling credit fees and insurance
products onto a loan, until the drowning borrower can no
longer stay afloat. Cf. "flipping" and
"packing". To the great credit of Sen. Charles
Grassley (R. Iowa), chairman of the Senate Special
Committee on Aging, he does not plan legislation to
infantilize American borrowers by regulating this
process, but is only pointing out the abuses by "a
few bad apples" who are "con artists" and
"immoral and unethical". (Matt Murray,
"Ford's Loan Unit Draws Criticism at a
Hearing," WSJ, 3/17/98.)
- paint the tape
- To put cosmetic prices on the ticker tape to disguise a
deteriorating condition and sagging market value, much as
a woman might paint her face for the same reason.
- payment for order flow
- Chump change for those who don't understand that when
Wall Street invites you to a free lunch, you are likely
to be the main course. The wolf's kickback to the broker
who delivers lambs to the slaughter.
- A mechanism that allows a broker to offer to do your
trade for almost nothing.
- penny stock
- Wall Streets equivalent to the Roach Motel (q.v.)
you can get it, easily enough, but you cant
- Low-priced stocks originally, those trading for
under a dollar. Now, after inflation, a share price under
five dollars qualifies. Most of them trade over the
counter, but some are on the American Stock Exchange, or
even on the NYSE.
- peer competitor
- The politically correct term for what unenlightened
people called an enemy, back in the dark ages.
1. A new way for insiders to cash in on phantom profits. 2. Untraded
stock, reserved for managers, that tracks the performance of a
corporation's subsidiary. Its advocates allege that it gives the
managers the incentive to work harder and smarter.
Comment: While the managers may work harder and smarter, the
phantom stock allows them to focus those efforts on the subsidiary,
rather than work for the benefit of shareholders.
Source: Rebecca Smith, "Some See Dark Side in 'Phantom'
Stock," WSJ, 11/15/99.
1. A new way for piggish insiders to back up to the feeding trough.
2. A stock issue that comes shortly after an IPO and includes shares
that insiders received at the time of the IPO, thus allowing the
insiders to get around the "lockup" agreements that would have
frozen their holdings for at least six months.
Source: Suzanne McGee and Terzah Ewing, "'Piggyback' Deals:
Keys to Unlock Insiders' IPO Stakes," WSJ, 2/17/00.
nickname for Viktor Kozeny, a controversial Czech entrepreneur and
financial buccaneer from the landlocked country, who stands accused of
swindling a large group of prominent speculators of hundreds of millions
- Portfolio Insurance
- Definition: Hypothetical downside protection at
the certain expense of upside participation.
- Example: Its providers used mainly a Dynamic
Trading Strategy, namely sell into a falling market and
buy into a rising market.
- Comment: The effect is to create sitting ducks for
predatory traders during violent market swings, as we saw
in October 1987.
- potential accounting irregularities
- The accepted way of referring to suspected fraud in
reporting financial and managerial results, without
opening oneself up to a major lawsuit. For example, in
the wake of "potential accounting
irregularities," Cendant Corp. reported that it
would cut its 1997 operating income by 13% and 1998
earnings by an unstated amount. The market responded by
cutting the price of Cendant stock by 46.5%. (Leslie
Scism, Elizabeth MacDonald, and Emily Nelson,
"Cendant Is Hammered, And Its Vaunted Plans For
Growth Get Dicey," WSJ, 4/17/98.)
- Price Keeping Operation (PKO)
- The tongue-in-cheek name for the Japanese
governments campaign circa the 1991 Gulf War of
buying domestic shares, in hopes of supporting their
prices and halting the erosion of the capital base of
Japanese banks. The name invites invidious comparison to
the contemporaneous, allied Peace Keeping Operation to
control Saddam Hussein.
- Propeller Head
- A Geek (q.v.). One of the Numerati (q.v.).
An obvious nickname for the sort of person who would
think that wearing a beany with a propeller on top is way
- Definition: The only market in which the customer
is always wrong.
- Pump and Dump
- A type of financial fraud in which
- "[S]tock promoters - often disbarred lawyers or
brokers who have lost their licenses - gain control of
most of the shares of a marginal or struggling
- They pay little for the shares.
- If the business is closely held, the promoters arrange
for an initial public offering.
- The promoters hire people - often, a public relations
firm and an analyst - to create favorable buzz about the
stock and to trade the shares at ever increasing prices.
- Brokers sell their shares to the suckers.
- Somehow the suckers can't sell out their shares as prices
- The promoters exit the scene and the stock price goes
where market forces take it - sometimes to zero.
(Source: Eaton, Leslie. "Investment Fraud Is Soaring
Along With the Stock Market," New York Times,
- A $25,000 chip at the MGM Grand in Las Vegas. (Alex
Berenson, "No Dice: A Gonzo Gambling Tour: The
Little (Rich) World of the Whales," TheStreet.com,
- Pyramid Scheme
- Definition: A modern monument to the triumph of
wishful thinking over common sense, found in a moral and
ethical desert, named after an ancient monument
celebrating a similar triumph, found in the Egyptian
desert. An unsustainable scheme that pays each early
joiner with the proceeds from multiple later joiners.
- Example: The past and present Social Security
system in the U.S.
- Comment on breaking news: So, the SEC has
charged International Heritage Inc. and three founders on
3/16/98 with luring 155,000 investors into a giant
pyramid scheme that raised $150 million. (Bloomberg News,
Washington, 3/17/98) We eagerly await the SEC's similar
action against the Democrat and Republican political
heirs of FDR, who have participated in luring more than
1000 times as many suckers into a gigantic pyramid scheme
that has raised much more than 1000 times as much money.
- Q -
- A mathematician who observes the price of a Derivative
Products in practice and tries to figure out what it is
- R -
- Red Chip Stocks
- Capitalism's ultimate weapon against the Red Chinese
- Red Herring
- A legal document that grants the issuer in an IPO the
right to pick the pockets of the unwary [redundant
Ed.] investor. A preliminary prospectus in an IPO,
designed to overwhelm and confuse investors, and required
by securities regulators.
- red meat
- The lurid stuff that the Democrat and Republican parties
and their candidates provide their base (q.v.) to
entice them out to vote during midterm elections.
Democrats hold up the scary image of that demon, Newt
Gingrich, or a Republican plan to take away Social
Security and Medicare benefits. Republicans advertise
Bill Clintons most egregious encounters with extra
marital sex, campaign finance violations, perjury,
obstruction of justice, subornation of perjury, trumped
up charges against White House Travel Office employees,
illegally gotten files on political enemies, Chinese
economic spies, etc.
- Red Thursday
- The day that Tomiichi Akiyama, chairman of Sumitomo,
announced that Yasuo Hamanaka, the company's former chief
copper trader, had lost a huge sum of money in the
vicinity $2 billion trading copper. Circa 6/11/96.
The date of a major crash in the Hong Kong stock market.
- Reinheitsgebot law
- Proof that Germany takes beer drinking a lot more
seriously than it takes investing, since the
Reinheitsgebot law is both older and stronger than German
A German law since 1516 that requires brewers to make
beer from malt, hops, yeast, and water. If you flavor it
with chocolate, cinnamon, tequila, or marijuana, it
isnt beer. (Greg Steinmetz, "As It Turns out,
The Bud in This Beer Is a Bit of Marijuana," WSJ,
This is in contrast to German securities law that does
not require issuers of securities to make financial
statements from generally accepted accounting principals
or accurate and current data.
- Definition: A sucker with a track record of
naivety, ignorance, or just plain stupidity, hence a scam
artist's preferred customer.
- Comment: A sucker who has proven his vulnerability
is more likely to fall for a subsequent, properly
constructed scam than the average person in the
telephone directory. For example, a classic follow up
fraud is to approach someone who has been defrauded and
sell him services to "recover" previous
losses.The smartest investors and traders learn from
someone else's mistakes, which is good, because nobody
lives long enough to make all the mistakes himself. Many
people seem to learn only from their own mistakes.
Some poor, lost souls don't even learn the hard
way. They become "reloaders", two-time losers,
or even serial victims.
- Source: "Better
Business Bureau Tips for Businesses."
- Republican Party
- Formerly, the Episcopal Church, voting. Currently, the
Christian Coalition, fighting a cultural war. (William
McGurn, "Rum, Romanism And Republicans", The
Wall Street Journal, 1/29/99.)
- The overuse of buttons and banners from sponsors and
partners on a Web site. Refers to the logo-festooned
jumpsuits of auto racers. (Source: Gareth Bronwyn,
"Jargon Watch", Wired, 6/99.)
- rip ups
- The option market's counterpart of the torn up, worthless
betting receipts that litter the floors of the viewing
stands at race tracks. Option trade tickets that expire
worthless on the same day that their unfortunate buyers
purchase them. (Source: James Cramer, "Wrong!
Cramer Dodges Expiration Fridays," TheStreet.com
- roach motel
- An investment that you can get into, but cant get
- The prime example is a thinly traded penny stock whose
price promoters are manipulating. Its price keeps rising
on small volume. You get in at three and watch the price
go up to seventeen. You try to get out and find that the
only bid is two.
- An IPO can fit this description, too. You had to beg your
registered rep to let you in on the deal. Now, you tell
him you want to "flip" your shares (sell them
after holding them only briefly) and you meet resistance:
"Do you really want to sell, now? You'll be leaving
a lot of upside on the table." Turns out, if you
sell, his boss makes him pay a severe penalty for not
handling you properly. Of course, "the customer's
interest is primary", but the underwriters dumped
their stock as soon as possible.
A third example is Globix warrants. You can trade them in
any state, but cant exercise them in 33 states
including California, Illinois, and Michigan
where the company didnt register the stock.
If you sell them to someone who later finds he cant
legally buy them, because of nonregistration, the broker
must break the trade. Its not clear who would eat
the cost. (Suzanne Galante, "Silicon Valley: Globix
Warrants: A Net Company Makes Like a Roach Motel," TheStreet.com,
- "rocket" docket
- The only U.S. federal court that doesnt deny
justice if justice delayed is justice denied. One
place, at least, where the wheels of justice dont
have to grind slowly.
In the Eastern District of Virginia, a criminal complaint
leads, typically, to a decision within five months. A
multimillion-dollar civil suit may take up to nine
months. The district judges keep the assembly line moving
by sharing responsibility for cases. Each Friday, at
least one judge and one magistrate are available to hear
and rule on timely, pending motions. The 4th
Circuit Court can confirm a verdict in 30 days.
"Hell, they can electrocute you in 90 days!"
- Rocket Scientist
- Definition: A jocular term for a Derivatives
- Usage: You don't have to be a Rocket Scientist to
know you can't hedge volatility by trading the
- Definition: 1. A firm that tries to make a huge, silk purse out
of a large number of tiny sows ears.
2. A firm that creates “growth through a constant acquisition binge”
of small firms within a single industry.
Examples: U.S. Office Products Co. and Waste Management Inc., circa
Applications: Wayne Huizenga consolidated garbage companies into
Waste Management and video stores into Blockbuster. Others have
consolidated smaller firms in the funeral home, internet service provider,
and plumbing sectors.
Theories behind the “roll-up business”:
1. “[R]oll-ups … bring economies of scale, management discipline and
access to capital into industries dominated by inefficient,
undercapitalized mom-and-pop shops.”
2. The acquisitions provide a way to create spurious earnings growth.
3. They borrow and buy, borrow and buy. So when the stock market and bond
market are up, roll-ups prosper. When either the stock market or bond
market tanks, roll-ups suffer. When both markets tank, roll-ups die.
Source: Paul M. Sherer, “Roll-Ups: Ironing out the Bumps,” NYT,
- rounding error
- The significance of Salomon Brothers in CitiGroup.
"Now its really just a pimple on the butt of
this huge elephant." (Alan Deutschman,
"Nightmare on Wall Street," New York,
- Russian flu
- Lackluster performance in the Russian financial markets
in late 1997, largely because foreigners (largely,
Asians, particularly Koreans, who were feeling the
effects of "Asian flu" withdrew some $7 billion
of investment during that period. (Laure Edwards,
"Russian Flu Symptoms," Financial Trader,
- S -
- A human wind tunnel, who blows sunshine up your skirt
while sucking money from your wallet.
- Sammy Davis, Jr., Theory of Leadership
- In the land of the blind, the one-eyed man is king
except in Washington, the land of the short-sighted,
where the man who acts as if he is blind or feeble-minded
- Santa Claus rally
- The stock market's legendary gift to investors after
Christmas Day, each year. According to Yale Hirsch (the
Hirsch Organization) the total increase for the last five
trading days of each year and the first two days of the
following January has averaged 1.72% of market value. (Jennifer
Westhoven, "Dow ends higher in broad rally, Santa
gains seen", New York, 12/22/97, Reuters.) Why
is the market so generous? (1) Investors sell some losers
at year end, in order to realize losses for tax purposes,
depressing prices. (2) The sellers become buyers, as they
reinvest their proceeds in shares of different companies,
pushing up those prices.
- "n: a mass of
investors comprised of individuals each of whom makes investment decisions
based on the observed actions of the other members of the herd :
sheep-like as a : one unable to make rational investment decisions
personal observations that lead to actions that contradict the actions of
the herd b : uncritical of information inputs from those who seek
to profit from them, such as financial services companies c : in
for a big surprise"
Source: Eric Janszen, www.iTulip.com.
- Shinto gambling
- Gambling at one of the riverboat casinos that have sprung
up throughout the Midwest, according to University of
Nevada-Las Vegas professor William Thompson. The term is
a play on the fact that most Shinto temples are near
water nearby because of Japanese religion emphazes nature
and cleanliness."You wash your hands in the water,
and then you go gamble," Thompson says
Berenson, "No Dice: A Gonzo Gambling Tour: Swimming
Upstream with the Riverboats," TheStreet.com,
- Legislators crafted Shinto gambling to satisfy
simultaneously midwestern laws of demand for both sin and
sainthood. Without a doubt the casinos meet much of the
demand for sin, whether you measure it in gross amount
wagered, the casino's take, or the all-too-human
suffering of the losers' dependents. The claim to
sainthood is more tenuous, but, clearly, midwestern
legislators in the 1990s could teach a thing or two about
hypocrisy to the colonial New England Puritan clerics of
Nathaniel Hawthorne's The Scarlet Letter.
- The casinos must both float and cap each customer's loss
per cruise. "Floating" is a term of art that
means that each casino is a vast, nearly immobile barge,
floating beside a river bank. Each "cruise"
lasts an hour, and you can end one cruise and start
another by walking off one barge and onto its neighbor.
Hence, losing $500 per cruise can mean losing $500 per
hour. At current prices that's a few months of diapers
- 1. "A peripheral used to produce digitized images of
documents and photographs, which can be stored as files
and edited on a computer. ("Jargon Watch," Fortune
Technology Buyer's Guide, Winter 1998, p. 14.)
2. A human ferret that management employs to roam the
trading floors to produce mental audio and visual images
of conversations and trade tickets, before they can be
stored as files and edited on a computer.
- Definition: An innovative financial product that did for General
American Life Insurance Co. in 1999 what lending long-term and borrowing
short did for S&L’s in the 1980s.
Example: American General borrowed from money market funds and
other lenders, with loans callable anytime with only a 7-day delay, and
bought assets with maturities much greater than seven days. In 1999,
interest rates rose. On 7/30/1999, Moody’s downgraded General American
from A2 to A3. Almost immediately, money market funds started withdrawing
funds with seven days notice. Soon, General American faced the equivalent
of a “run on the bank.” After various attempts to deal with the
“run”, General American asked the State of Missouri insurance
commission to put it under supervision. Ultimately, MetLife acquired
Source: Deborah Lohse, “How General American Got Fancy in
Investing, Lost Its Independence,” WSJ, 9/3/1999.
- The name that pessimists have reserved in advance for
economic stagnation in Communist China in the 21st
century. If China adopts import substitution policies,
expanded public ownership, and price controls, we will be
fortunate to have a name for the Chinese case of the
disease that has afflicted Brazil and Mexico since the
1980s. If China embraces free markets and privatization,
and realizes the promise of economic growth, this will be
a disease without a country. (Rowan Callick,
"Uncertain future for ambitious China," Australian
Financial Review, 9/19/97.)
- Sleep Tax
- The reasons that eternal vigilence is the price of more
than liberty. New York City police coined the expression
during "Operation Awake", because much of the
theft on subways occurred as pickpockets "made
'withdrawals' from sleeping passengers." Similarly,
scam artists can impose a sleep tax on investors who
aren't alert to pitfalls in franchise and other business
offerings. (Source: Bob Rosner, "Scam
Detection," ABCNEWS.com, 10/21/97.)
- State and Local Government Series
(q.v.) of Treasury securities. More appropriately
termed DOGS (q.v.).
- Short for "the snake in the tunnel" the
exchange rate scheme that allowed exchange rates to
fluctuate within bounds. A graph of the exchange rate
versus time would show the snake (the fluctuations) and
the tunnel (the bounds). During the 1970s the U.K.
participated this scheme and got the worst of fixed and
flexible exchange rates. Ultimately, it lost billions of
dollars before pulling the plug on this Frankenstein
monster. (David DeRosa, "1998 -- The Year of the
EMU", TheStreet.com, 12/31/97.)
- The nickname for a certain player on Wall Street. "I
live by three rules: (1) Never eat at a restaurant named
'Mom's'. (2) Never play poker with a man named 'Doc'. (3)
Never take a job for a boss they call, 'Snake'."
- Small Order Execution System (q.v.). NASDAQ's
mechanism by which traders taking NoDozTM
can pick the pockets of market makers using SominexTM. Cf. SOES Bandits.
- " 'SOES turns smart people into rich people,' says
Friedfertig. 'I've seen people who used to steal car
batteries for a living come in here and make $7,000 a
week.' " (Mark Friedfertig, quoted in Cory Johnson,
"Easy Money: SOES Bandits Rain on Nasdaq
- SOES Bandits
- NoDozTM-guzzling OTC
stock traders who try to pick the pockets of NASDAQ
market makers, the same way program traders pick the
pockets of SominexTM-ingesting
investors who have placed limit orders with exchange
specialists. Big Wall Street trading operations - often
including both market makers and program traders
gnash their teeth and wail bitterly about the goniffs who
get away with the first crime, while explaining piously
that the second virtuous act is how they make markets
- Racketeers apparently, yakuza (q.v.)
who threaten to disrupt the shareholders' meeting
or otherwise embarrass corporate management, unless
management makes massive payoffs. Mr. Ryuichi Koike has
managed to shake down the Japanese big four securities
firms and Dai-Ichi Kangyo Bank for millions of dollars. Satoshi
Yamamoto claims to be a "shareholder
activist", but some claim he is another
in Japan Inc.", Australian Financial Review,
7/15/97.) In the past, Japanese corporations used the sokaiya
as "muscle" to keep investors from loudly
demanding higher dividends at the shareholder meetings.
- Definition: Punishments.
Origin: Military. "Soldiers who suspect
generals are punished more discreetly than sergeants coin
a descriptive phrase: 'Different spanks for different
ranks' ." (Ronald G. Shafer, "Minor
Memos", WSJ, 1997.)
Derivatives Application: A back-office clerk who
"borrows" $2 in change from the coffee money or
gets daily free coffee from the trading floor finds
himself without a job. An option trader who creates $20
million in bogus P&L finds himself reassigned to
trader supervision. A manager who creates a Derivatives
business that records $200 million in bogus P&L
retires to the life of a country squire.
Political Application: Peter Collins ran a
newsletter about ballroom dancing on government time,
when he worked for the Defense Intelligence Agency. The
Justice Department won a conviction for his crime of
using the government copier to copy his newsletter and
calendars. Bill Clinton auctioned off the Lincoln
Bedroom, seats on Air Force One, ambassadorships, a plot
in Arlington Cemetery, gambling rights on Indian
reservations, and anything else not tied down. The
Justice Department finds no evidence of any criminal
activity. (Mark Levin, "Dancing Around the
Law," WSJ, 1/8/98.)
- To spin a golden yarn out of a factual hay maker. To
break down a dangerous concentration of toxic facts into
a harmless and diffuse cloud of confusing issues,
questions, and counter charges. A term that Time
magazine coined in 1988. (Robert L. Dilenschneider,
" Spin Doctors Practice Public Relations
Quackery," Wall Street Journal, 6/1/98.)
- "In my book Hardball, I explained the
art of spin as a traditional two-step: first, you
admit you have a problem, thereby establishing
credibility, then use the enhanced credibility to define
the problem in a way that keeps the political damage to a
minimum. In Fridays press conference, Mr. Clinton
managed to disguise an obvious untruth that he was
eager to testify by prefacing it with an obvious
truth that he wanted to scandal behind him."
(Christopher Matthews, "Doesnt He Ever Get
Dizzy?" Wall Street Journal, 8/5/98.
- spin doctors
- "[P]urveyors of deception, manipulation and
Spin doctors try to alter the
facts through a deliberate and reckless disregard for the
truth. Spin is to public relations what pornography is to
do whatever it
takes to get their message outconfuse the issue,
change the subject, attack the presidents critics.
Forget taste, appropriateness and common sense and
pay no heed to long-term consequences." Example:
"Drag $100 through a trailer park, and theres
no telling what you will find." (Robert L.
Dilenschneider, " Spin Doctors Practice
Public Relations Quackery," WSJ, 6/1/98.)
- The statutory gang rape of shareholders by investment
bankers and corporate decision makers. A heretofore
unprosecuted form of corporate bribery, akin to the
political concept of "legal graft".
- The investment bankers identify the corporate decision
makers and gain approval to bring out an issue of shares.
In return for each decision makers approval, the
bankers put newly offered shares of the corporation in an
account for him. Then, when the shares go public, he can
sell them for a quick, riskless profit.
- The investment banking practice of allocating shares of
"hot" initial public offerings to certain
brokerage accounts, then promptly selling the shares for
a profit. Venture capitalists and corporate executives
who are in a position to throw more business to the
bankers are the most frequent beneficiaries of this
- While this practice makes eminent business sense to the
bankers and players who want to influence key decision
makers, the NASD and SEC look at it with a jaundiced eye.
The NASD warned the bankers that it might hold them
liable for spinning. (Michael Siconolfi, "NASD Warns
On 'Spinning' IPO Shares," Wall Street Journal,
11/24/97) If a retail customer were to unload shares he
bought in an IPO, in the standard way that a decision
maker does, then his broker would never let him get close
to another IPO.
- A person who is good with numbers, but lacks the
personality to be an accountant.
- What gets an honest NYSE specialist out of bed every
morning. One sixteenth of a dollar or a percent six and a quarter cents on the
dollar. A common profit margin on a trade in a liquid
stock, such as IBM. (Source: Desmond Macrae,
"How Specialists Make a Living," Financial
- stock promoter
- The professional blowhard who puts the hot
air into a stock bubble.
- The fine art of lending a borrowing homeowner more than
he can repay, unless he sells the home that prompted the
loan in the first place. Cf.
"flipping" and "packing". To the
great credit of Sen. Charles Grassley (R. Iowa), chairman
of the Senate Special Committee on Aging, he does not
plan legislation to infantilize American borrowers by
regulating this process, but is only pointing out the
abuses by "a few bad apples" who are "con
artists" and "immoral and unethical".
(Matt Murray, "Ford's Loan Unit Draws Criticism at a
Hearing," WSJ, 3/17/98.)
- style drift
- The investment manager's equivalent of a basketball
betting junky's switch to football bets after losing ten
basketball bets in a row. Desperation plays by hedge
funds and mutual funds. For example, switching, after ten
years of experience, from fixed income
"arbitrage" to equity "arbitrage".
- submerging markets
- Former emerging markets (q.v.), as they head
back into the primeval slime, whence they came.
- In Japan, a popular financial planning tool, and a
pleasant alternative to facing creditors (cf. dogeza),
in-laws, or yakuza. Japanese life insurance
companies pay the full benefit for suicide, as long as
the policy has been in effect for more than a year
in contrast to the typical three years in the U.S. The
suicide rate in Japan for the life insured is double the
rate for the uninsured. Japanese lenders often require
guarantors for loans, and in-laws are frequently
guarantors. Yakuza sometimes buy up the debt of
companies in distress, then use the position of creditor
to extort cash or anything they can turn into cash.
(Edward W. Desmond, "When Suicide Makes Sense,"
Fortune, 5/25/98, p. 32.)
- SWAG Pricing
- Definition: Approximate pricing based on a
questionable methodology. An acronym for Scientific Wild
Usage: We don't have time to turn this over to a
Rocket Scientist (q.v.). What's your SWAG price?
- T -
- talking points
- 1. A list of points to make in an affadavit, interview,
conversation, or public presentation.
- 2. A blueprint for perjury.
- For example, imagine that you have said that you saw a
young married woman or widow, looking disheveled, leave
the President's Oval Office, and that you heard her say
that the President had made a pass at her. A young friend
might hand you an unsigned memo with talking points, such
- 1. "[Y]ou now do not believe that what she claimed
happened really happened."
- 2. "You now find it completely plausible that she
herself smeared her lipstick, untucked her blouse,
- (" 'Talking Points' for Tripp Affidavit," New
York Times 1/26/98.)
- If those points summarize your thinking, you may be
grateful for assistance in dealing with an scary
encounter with potentially hostile attorneys. If they
don't bear any resemblence to opinions you have ever
expressed, then you may conclude that this looks like a
blueprint for perjury.
- Tauber, Laszlo
- Not now and never will he be a patron saint of
derivatives dealers. A wealthy surgeon and real estate
tycoon who immigrated to the U.S. from Hungary after
World War II, he made tens of millions of dollars in
Washington, DC, real estate, and lost tens of millions in
FX derivatives deals with Salomon Brothers and others. He
then sued to nullify the contracts on the grounds that
they were illegal futures contracts. ("Your Honor, I
killed my parents, but have mercy on me, for I am but a
poor orphan.") Fortunately for the rule of law and
the survival of the OTC derivatives industry, he lost.
- Proof that "size matters" in finance. Since the
18th century, the minimum tick size in U.S.
stock markets had been 1/8 of a dollar. Then, in 1997 the
American Stock Exchange reduced tick size to 1/16.
- term insurance
- The magic words that can make a pesky life insurance
salesman disappear. An insurance contract that ends in a
specified number of years, and which includes only a
small sales commission.
- The Japanese term for the common Japanese securities
firm's practice of covering the trading losses of
"favorite" customers. One presumes that the
pros have skinned these customers so thoroughly and
frequently that tossing them a few chips after a bad roll
of the dice is not a serious hardship. Nevertheless, the
revelation that Yamaichi had hidden some $1.6 billion of tobashi
payments off its balance sheet may have enraged Japanese
regulators and sealed Yamaichi's fate (RIP, 11/14/97).
- Top Cat
- "An Asian Tiger who lost his claws and several
billion U.S. dollars of Malaysias treasure to
George Soros and other currency traders in a tussle over
the British pound in 1992, then more in 1993. At the
time, Nor Mohamed Yackop ("Top Cat") was a top
official at Bank Negara Malaysias central
- The unprofessional, total absence of the normal and
prudential practice of hiding all inconvenient details
from one's intended victim.
here to email Dr. Risk or the William Margrabe Group
CONSULTING AT THE WILLIAM MARGRABE GROUP, INC.:
Our other web sites:
Free option pricing calculators from here and around the world.
of the best articles
from the best publications
in the risk management trade press.
of the best articles from the best publications
in the derivatives trade press.
Answers to your questions about Investment,