"A contrarian's glossary"

A CONTRARIAN'S GLOSSARY

Quelle : Agora Publishing, Inc.

ALAN GREENSPAN - God

BEAR MARKET - A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry and the husband gets no sex.

BED & BREAKFAST STAGE - This is a new phase in the life cycle of humans... wedged in between the career phase and traditional retirement. It usually kicks in when children have left home, careers have run their courses and a man's balance sheet begins to look better than he does.

BILL GATES - Where God goes for a loan.

BONNER'S LAW - This one is eponymous. It describes the interaction of Moore, Metcalfe and the process of creative destruction. Moore and Metcalfe are used by technology investors to justify high prices. Why not pay a lot, they say, when the whole industry is evolving at an exponential rate? Bonner's Law predicts that the revved up speeds of creative evolution in the technology marketplace will produce revved up rates of destruction too. Moore + Metcalfe = Creative Destruction squared. Investors may want to gamble on Internet companies. But they should pay very low prices, not high ones. Low prices recognize the truth - that the company is most likely to fail.

BROKER - What my broker has made me.

BUFFETT VS. GATES - This is shorthand for the conflict between the older, Graham and Dodd investment approach... and the younger, Bill Gates/Jeff Bezos wealth creation formula. The eminent Graham and Dodd investor, Warren Buffett, for example, won't buy Internet stocks or even Microsoft... though he knows the company and plays bridge with Bill Gates. Technology investors, on the other hand, who tend to be younger, believe that Moore and Metcalfe trump Graham and Dodd. New technology is exploding so fast, they say, that the old standards no longer apply. The old guys just don't get it. Who will "get it" in the end remains to be seen.

BULL MARKET - A random market movement causing an investor to mistake himself for a financial genius.

THE "C" SPOT - A dangerous little corner of the brain where collective thinking occurs. It is useful in sporting events, cavalry charges and political campaigns... and essential for reading the editorial pages without laughing... but otherwise it is an impediment to the human race and should be surgically removed.

CALL OPTION - Something people used to do with a telephone in ancient times before e-mail.

America's Last Great CAPITALIST - New Era advocates maintain that the end of communism and the rise of the Internet have ushered in a golden age of capitalism. Not so. Instead, capitalism is dying. Marx defined capitalism as the system in which investors put up the money to build factories...and workers were then exploited by them. This is no longer the case. The new workers don't need capitalists to provide the machinery of wealth building. They own their own laptop computers. They've seized the factories. This is bad news for capitalists. Money no longer counts. It's human capital that is important. This is the capital that workers carry around in their capitas. Microsoft's main competitor, the Linux operating system, was built as freeware...an "open source" product that relied on voluntary efforts from programmers all over the world, cooperating without the benefit of payrolls or health insurance. No capitalists were involved. And no investors could profit from it. Linux is also made available free over the Internet to anyone who wants it. The pros say it is better than MS-DOS.

CASH FLOW - The movement your money makes as it disappears down the toilet.

CHATEAU - This French word might be translated as "money pit" or "place for people who don't like Internet stocks to lose their money." By way of introduction, I am the publisher of a group of investment services, called Agora Financial Publishing. We have offices in Paris, London and Baltimore. I had a choice. I shuttle back and forth between these offices. But I chose to live in France and bought a chateau not far from the late David Ogilvy's much larger pile. Chateaux are the only investments that have lasted - in a single family - for the very long run... a period of 1,000 years or more.

CISCO - Sidekick of Pancho.

CREATIVE DESTRUCTION - The economist Schumpeter came up with this expression. It describes the natural process of open markets - where old companies and old technologies are destroyed by new ones. Dirigisme tries to block the forces of creative destruction. By contrast, laissez-faire, another French term, lets the chips fall where they may. Bill Gates, America's Last Great Capitalist, built his company on the dirigiste model. Linux is an example of the laissez-faire approach. Gates created vast wealth. Linux, and/or the process of Creative Destruction, will destroy it.

DAY TRADER - Someone who is disloyal from 9-5.

DIRIGISME - This is also a French term. It is the modern French version of Plato's ideal form of government - where you get smart people together and they tell everyone else what to do.

DOLLAR - more valuable than gold... the dollar has nevertheless been going down in value since the Federal Reserve system was set up more than eight decades ago to protect it.

ERFAHRUNG - Things you know from personal experience. For example, if you slam your fingers in the door of a Deux Cheveaux (the French answer to the Volkswagen... without the power or the comfort), the next time you close the door, you move your hand out of the way. Why? "Erfahrung."

ESPERANTO MONEY - this is the term I apply to the euro. Esperanto was a made-up language designed to make it easier for people to communicate. It flopped. The euro will flop too. Gold - Gold is a heavy, yellow metal, rarely seen or spoken of. It is a barbaric relic that has been going down in dollar terms for the last 20 years. It is about the only thing you can leave on the seat of your car in Baltimore without worrying about the windows being smashed.

FINANCIAL PLANNER - A guy who actually remembers his wallet when he runs to the 7-11 for toilet paper and cigarettes.

FIN DE BUBBLE - This is the term I use to describe the spirit of our age. We live in a world which is waiting for something to happen. In the meantime, people are all very optimistic about the future - especially the financial future. Like people during the "fin de siecle" period of the Gay '90s and pre-WWI, they are impressed by technological progress and see few clouds on the horizon. WWI ended the "fin de siecle" sentiment. What Archduke waits to be assassinated so our fin de Bubble can be entered in the history books?

GAMBLING - what you do with your excess money when you are too lazy to invest the way Buffett does.

GRAHAM AND DODD - These are the guys who wrote the book on investing. Warren Buffett - their most brilliant student.

HEAD AND SHOULDERS PATTERN - Not to be confused with the dandruff shampoo, a head and shoulders pattern on a chart vaguely resembles the head and shoulders of a man. A very strangely shaped man. It is thought to be a precursor of a decline. But if the market doesn't go down... the technicians take another look and tell you that it didn't look like a head and shoulders after all. It was really a horse's rear end.

HEART OF DARKNESS - where Internet investors go... the horrors.

HOMO ANALOGIENS - People who have trouble setting their alarm clocks and believe the new economy is mosty hype.

HOMO DIGITALIENS - Ed Yardeni, Al Gore, Bill Gates, Jeff Bezos and a few others. They walk among us.

THE INFORMATION AGE - the handle given to today's post-industrial, post-modern economy. The successor to the Age of Ignorance, the Age of Information is characterized by such an abundance of useless facts and senseless data that, now, everyone knows everything... and almost no one knows anything.

INSTITUTIONAL INVESTOR - Past year investor who's now locked up in a nuthouse.

INTERNET INVESTING - This oxymoronic term describes what people who don't speak French do with their unwanted money. For example, they buy Microsoft, or our "River of No Return" stock, Amazon. The convention among Internet stock buyers is that the company is worth a p/e equal to it's rate of growth. Thus, MSFT, growing at 25% per year, should sell for 25 times earnings. It sells for twice that much now...50 times earnings. That's a lot of money for a mature company that is bound to be the victim of creative destruction. AMZN is growing at 70% per year. But the trouble is, it has no earnings. So you can't apply the formula. Most likely, AMZN will never make money. Most likely, it will disappear...just as the 400 radio publicly-traded radio companies of the `20s disappeared...and the 497 auto companies.

INVESTING - This the activity that many people say they do but few understand. It involves studying the likely stream of income from an investment, anticipating its growth or decline and adjusting for risk. Most of today's "investors" wouldn't know a balance sheet if it bit them on the derriere - which, I predict, it will.

LEICHT DENKEN - (Schwer uberlegen's distant cousin)... the kind of superficial reasoning one does when he only has gross generalities or someone else's money to work with. The source of much misguided action in government, politics, finance and romance.

MARKET CORRECTION - The day after you buy stocks.

METCALFE'S LAW - Metcalfe noticed that a system like the Internet becomes more valuable the more people use it. Like the telephone, the first phone is virtually useless. The millionth, by contrast, is exceptionally useful. Thus, the value of the system itself increases exponentially as its use becomes more widespread. Another curiosity, Metcalfe's Law helps explain why the dollar has been such a hit all over the world. Investment Biker, Jim Rogers, driving around the world with his girlfriend, Paige Parker, reports that he can use dollars almost everywhere - and in many places where even the government won't accept its own currency. Dollars have become a worldwide medium of exchange - made more valuable simply because they are so ubiquitous.

MOMENTUM INVESTING - Find a trend and stick with it until you go broke.

MOORE'S LAW - a key to understanding new tech investing. Moore said that computer power would double every 18 months. Interestingly, statisticians use this device to ramp up the GDP figures...arguing that a computer purchase today is worth more than the actual dollars exchanged. They never applied this logic to autos or any other sector, but some $300 billion of these fictitious "chained dollars" have been added to the nation's GDP.

P/E RATIO - The percentage of investors wetting their pants as the market keeps crashing.

PROFIT - Religious guy who talks to God.

SAND, SMALL TOWNS AND OLD TOWNS - Where people go to have their mid-life crises.

SCHWER UBERLEGEN - Either the kind of reasoning one does based on first-hand experience or the winner of the Gold medal in the luge in Nagano '98. We don't speak German so we're not sure.

SENSATION MONGERS: People think the news media just report the facts. Yet, a zillion things happen every day...and the news media doesn't mention any of them. Instead, the media confines itself to amplifying the madness of crowds and reporting all the news that fits its group-think agenda.

SIGNIFICANT BASE FORMATION - This is what you get when you sit around and eat too many donuts while reading the financial news.

SPECULATING - This is what you call gambling when your wife asks what you doing.

STOCK ANALYST - Idiot who just downgraded your stock.

STOCK SPLIT - When your ex-wife and her lawyer split all your assets equally between themselves.

TRIFFIN PARADOX - The trouble with making a currency the world's leading brand is that do to so, you have to print a lot of them... and export them vigorously. Each dollar is an IOU from the government. The more outstanding... the weaker the issuer's balance sheet, and the less each one is worth. Eventually, Triffin and Metcalfe will have to come to terms.

UNIFIED THEORY OF GREED (UTG) - The insight that we're all greedy SOBs, but the real SOB is the guy whose greed - whether for power, money or love - is not held in check by his wife, the market or the law.

VALUE INVESTING - The art of buying low and selling lower.

WINDOWS 2000 - What you jump out of when you're the sucker that bought Yahoo @ 240 per share.

WISSEN - Things you think you know - but usually have no direct experience of and couldn't pick out of a police lineup if your life depended on it...Most 'isms' fall into this category - capitalism, communism, antidisestablishmentarianism... the kind of thing that is reported in the paper and discussed with pompous gravity on the editorial pages.

YAHOO - What you yell after selling it to some poor sucker for $240 per share.