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
An arrangement in which one entity appoints another to act on its behalf. In finance, an advisor or money manager acts as the investor’s agent. Other examples: doctor-patient and lawyer-client. On occasion, a person may act as both agent and principal.1
Conflict of interest common in hedge funds and other alternative investments where managers must weigh loyalty to their shareholders against beachfront estates in Amagansett. In September 2014 the largest public pension fund in the country, Calpers, announced it would no longer invest in hedge funds, citing their complexity and fees. The hedge fund industry said Calpers didn’t know what it was talking about and had just picked some bad funds (Business Insider, 9/16/14) to which Calpers said whatever, we are so done.
BLACK SWAN THEORY
Feigned nonchalance following a cataclysm. Frequently expressed after market crashes by stretching back in one’s chair and saying, “I knew that was going to happen.”
1. A catchphrase for the growing movement in socially responsible investing, also called impact investing, sustainable investing, ESG (environment, social, governance.) 2. Conscious capitalism is also the name of several TED Talks, an Eileen Fisher clothing line, and a flavor of Ben and Jerry’s ice cream identical to Cookie Dough, only the dough is made with spelt.
1. Deeply held belief, i.e., in ecological fragility tested by cognitively dissonant behavior i.e., simultaneously holding stock in Chevron.2 2. Can’t happen without prosecution. see: too big to fail theory
1. A comprehensive audit of a potential asset. 2. Name of failed Law & Order spinoff. 3. slang, going through roommate’s drawers.
Human feeling, as taught by consultants. One firm’s website reads, “In the last ten years, the most sensational strategy for building emotional capital has been to focus on developing emotional intelligence. Emotional intelligence is an indispensable set of social and emotional competencies for leveraging knowledge and emotions to drive positive change and business success.”3
FUND OF FUNDS
A master fund of other funds. Also known as “multi-management.” A layer cake of fees. You have to pay fees to the main guy plus all the other guys.
A low cost, passively managed fund, which frequently outperforms actively managed mutual funds. John C. Bogle, founder of Vanguard, is considered the father of this type of investing and his groupies are called “bogleheads.” Think rainbow family, but for low-cost diversified investing.
Euphemism for heir or heiress or inheritor. These rich people often have a hard time dealing with their money, since they didn’t make it and in some cases it was around long before them. As a first-gen, lower-rich “legacy” investor in a large family, I simply did what I was told. I feared that if I meddled with money I might be disowned or whisked off for deprogramming. It took me many, many years to realize this was all in my head. If you’re unsure, try some hypothetical probing. Maybe go, “I have this friend…”
Phrase used to describe the counter-productive reactivity of ignorant investors to market ups and downs, e.g. “Market timing is so drama.” Works like black swan theory to make the nervous investor feel like an ass. And yet still nervous.
Exists. One day may exploit human pair-bonding biochemistry by raising oxytocin levels, thereby eliminating panic during financial crises, thereby eliminating necessary market corrections, thereby speeding us towards the greatest crash of all time and the end of everything we know and cherish, thereby a good reason to take out a thousand dollars in dollar bills right now, as kindling will be hard to find in urban areas.
Like an alias, but for corporations. Philip Morris to Altria. Blackwater to Xe Services and then Academia. Deathstar to Poppy Seed Muffin Partners.
Investopedia summarizes this arcane investment product as, “A debt obligation that also contains an embedded derivative component with characteristics that adjust the security’s risk/return profile. The return performance of a structured note will track that of the underlying debt obligation and the derivative embedded within it.” Right.
1.The acronym for Margaret Thatcher’s catchphrase “There is no alternative.” This was her cutting answer to critics of free markets, free trade, deregulation, privatization and globalization. Some suggested it should be her epitaph. 2. Llama under Napoleon’s care while grandma’s at the dunes breaking her coccyx.4
Like a financial advisor, but with a minimum. Offers a variety of services. Currently hotter field of study than investment banking at many MBA programs. Conferences for managers help them brainstorm ways to attract clients in a competitive market. Topics include the impact of robo advisors, how to woo millennials, same sex marriage and tax law, and panels like “Defcon1: What To Do When Your Client Looks out the Window and Says Softly, ‘I Don’t Understand Anything Anymore,’” or “Emotional Capital and Lagging Returns: The Efficacy of Crying Like a Baby.”
1 Such as Dr. Leonid Rogozov, who performed an emergency appendectomy on himself in Antarctica and Ted Bundy acting as his own lawyer, arguing to a jury that he was “too handsome” to have done it.
2 Possible resolutions: ceasing to care, reading books on socially responsible investing, and/or mindfulness-based shame meditation.
3 Rochemartin.com, “Global Leaders in Building Emotional Intelligence.”
4 It is an obvious allusion to Thatcherite neoliberalism when Uncle Rico tells Napoleon to “go feed Tina” while he and Kip conspire to sell 24-piece sets.