Navigating Market Lingo In 2021

In February, Institutional Investor published a brilliant piece entitled Asset Manager B.S. Decoded.” As we approach the year-end of 2020, succeeding in 2021 may come down to navigating the “market lingo” successfully.

“A handy translation guide to the sales jargon and IR excuses that one family office chief is sick of hearing.” – Institutional Investor 

What They Say Versus Mean

  • Now is a good entry point = Sorry, we are in a drawdown.
  • We have a high Sharpe ratio = We don’t make much money.
  • We have never lost money = We have never made money.
  • We have a great backtest = We are going to lose money after we take your money.
  • We have a proprietary sourcing approach = We invest in whatever our hedge fund friends do
  • We are not in crowded positions = We missed all the best-performing stocks.
  • We are not correlated = We are underperforming while the market keeps going up.
  • We invest in unique uncorrelated assets = We have an illiquid portfolio that can’t be valued.
  • We are soft-closing the fund = We want to raise as much money as we can right now.
  • We are hard-closing the fund = We are definitely open for you.
  • We are not responsible for the bad track record at our prior firm = We lost money but are blaming all our ex-colleagues
  • We have a bottom-up approach = We have no idea what markets are going to do.
  • We have a top-down process = We think we know what markets will do but really, who does?
  • The markets had a temporary mark-to-market loss = Our fundamental analysis was wrong, and we don’t know why we lost money.
  • We don’t believe in stop-loss limits = We have no risk management.

There is a lot of truth to the list and many more examples from IPO’s to SPAC’s. To successfully navigate the markets in 2021, we need to understand what we are dealing with.

Wall Street Is A Business.

The “business” of any business is to make a profit. Wall Street makes profits by building products to sell you, whether it is the latest “fad investment,” an ETF, or bringing a company public. While Wall Street tells you they are “here to help you grow your money,” three decades of Wall Street shenanigans should tell you differently.

I know you probably don’t believe that, however, but take a look at a survey of Wall Street analysts. It is worth noting where “you” rank in terms of their concern and compensation.

navigating market lingo 2021, Technically Speaking: Navigating Market Lingo In 2021

Not surprisingly, you are at the bottom of the list.

While the translation is satirical, it is also more than truthful. Investors often only hear what they “want” to hear. However, actions are often quite different, along with the eventual outcomes.

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