Money talks, but it helps if you understand the language. To avoid getting lost in a sea of financial jargon, take note of our handy tips on using the appropriate slang terms and metaphors
I have stopped eating chicken. After one too many visits to hugely profitable but horrific chicken factories, I can no longer reconcile the pale dead thing on my plate with the things I have seen, so I have stopped.
What has surprised me since is the level of social opprobrium this has created. People really don’t like it if you stop eating chicken. I suspect this is because I have deviated from a strong social norm about what we as western people eat.
You either eat chicken or you’re a veggie. There is no third way of eating other types of meat but not chicken. This reaction is probably because we use food as a short cut to identify who is like us and who isn’t, and we don’t want any ambiguity.
We also use language in the same way, especially slang or metaphors, and the world of finance is particularly prone to this. If you speak the language of finance, we can quickly establish at social or business gatherings that you are one of us, wear a suit in the office and probably live in Surrey. If you don’t understand the lingo then you are one of them, probably wear jeans on a weekday and, I am sorry, but I really have to go and talk to somebody else right now.
So, in an attempt to widen social inclusion, I have prepared a quick guide to common or garden finance slang and metaphors. Language is of course a dynamic thing so this guide will get out of date quite quickly, but it should give you a way in to otherwise impenetrable conversations.
Let’s start with metaphors. Personal hygiene metaphors are very popular to describe bad investments and follow a sort of logical progression that mirrors the level of cleaning involved. To start with, if I ‘take a bath’ on an investment it’s a very bad thing and I will have lost a lot of money. I may even in dire circumstances use an adjective as well to take a ‘horrible bath’. In the same vein, most Irish banks’ debt books are ‘under water’ in that they have no chance of ever getting their recklessly invested money back.
If I take a ‘hair cut’ or a ‘trim’ it’s not so bad and I am relieved to have got out without having ‘taken a bath’. Banks take ‘a haircut’ on their debt if they let you off by only paying back a percentage of what you borrowed. This metaphor spawned the short-lived joke in the City last year of David Beckham going to his barber and asking for one of these Greek haircuts he had heard so much about.
If I ‘wash my face’ or the rarer form of ‘wash my feet’ I have made a little bit of money so am very pleased with events all things considered.
To describe debt, we use hierarchical forms that list who gets paid in what order. ‘Senior debt’ is the top of the hierarchy and gets paid before everybody else does. ‘Subordinate or junior debt’ is second in the queue after senior debt and will charge a higher rate of interest to reflect the lower ranking and higher risk.
Somebody then had the bright idea of introducing a type of debt between ‘senior’ and ‘subordinate’, and this became known as ‘mezzanine debt’ ie a layer of something that is not on the ground floor but not quite the first floor either - a bit like the mezzanine floor in a trendy docklands warehouse apartment.
This way of thinking about debt as metaphorical steps on a ladder gave rise to the concept of the ‘cash cascade’ or ‘waterfall’ ie the money sloshes down the steps and different funders get paid in hierarchical order. Where it gets confusing is if you are at the very bottom of the ‘cash waterfall’ and things have a taken a turn for the worse, so less cash is cascading down. Your lowly position means you are unlikely to ‘wash your face’ and you may in fact have to ‘take a bath’ or at best ‘have a haircut’.
Since the subprime mortgage debacle, we now also have a whole range of expressions that refer to parcels of debt that are less than perfect. ‘Liars loans’ are mortgages where the applicant only had to self certify earnings and personal debts and may, with hindsight, have not been completely honest about their circumstances. ‘Scratch and dent’ loans are ones with small defects such as missing paperwork, bad surveys or title disputes.
So if somebody offers to sell you a portfolio of US ‘liar’ and ‘scratch and dent’ loans you probably want to pass. This is one of the key lessons that European banks painfully learnt in the credit crisis.
Money itself is referred to by types of animals and this is derived from the Indian currency off the 19th century. Both a ‘Pony’ (£25) and a ‘Monkey’ (£500) were based on the animals that appeared then on Rupee notes.
You may think these terms are obsolete and obscure, but the opening line of the Only Fools and Horses theme tune features the line ‘stick a pony in my pocket, I'll fetch the suitcase from the van’. For the avoidance of doubt, they are not singing about a real horse.
In contrast a ‘cash cow’ is not a unit of currency but a solid investment that generates a lot of cash albeit in a boring plodding way.
For a while in the 1980s, a ‘Jeffrey’ referred to £2,000 as this was the amount Mr Archer allegedly paid to a lady friend at Victoria station. A pound coin was known as a ‘Maggie’ because it was brassy, two faced and thought it was a sovereign. I miss these phrases and am on a one-man crusade to reinstate them.
Finally, we have ‘bears’ who are very pessimistic about the markets and ‘bulls’ who are very optimistic. This is why the New York Stock Exchange has a huge bronze statue of a charging bull outside it. It was originally illegally installed as an act of ad hoc street art by the artist Artura Di Modica as a reaction to the 1987 Wall Street crash. This is a great pub quiz question.
By way of contrast, ‘a Goldilocks’ market or economy is one that is not volatile ie not too hot or too cold.
So, in conclusion, you can now legitimately use the phrase ‘please lend me a load of monkeys to invest in my new cash cow of a chicken farm. I promise you won’t take a bath and you may hopefully get to wash your face as I think we are in a bull or at worst a Goldilocks market’.
This may or may not make you popular depending on your social circle, but not as unpopular as giving up chicken.
Michael Ware is corporate finance partner at BDO
