Here is a basic glossary to help decode some of the terminology used by the popular press this week in the aftermath of some price movements in global financial markets.
Liquidity - The ability to exit out of your position without the price moving so much you can’t exit out of the rest of your position.
Lack of liquidity - Losing money because everyone else is doing what you would like to.
Volatility - Something that most people have forgotten the meaning and value of.
Growth concerns - A backward fitting correlation between the momentum of GDP and price action.
Correction - A move counter to your belief.
Turn - A move finally going in the direction of your belief.
Stop losses - A reason employed by sell-side advisors to explain any sharp market movements.
Euro-crisis - A term used to explain otherwise unexplainable moves in European assets.
Positional adjustment - Hedge fund losses.
BIS reports on market instability - A story for the press to misrepresent as a reason to sell stocks when in fact it is related to potential bond market selling on a long term time basis which is all the more irrelevant as the bond market is still short.
Deflation concerns - A misinterpretation of commodity price falls as bad news when in fact they are good news for most western nations.
The need for more regulation - The belief in the non-existence of unforeseen consequences when the consequences are asked to be foreseen by individuals who have little comprehension of the whole picture.
Technical support - A hope for those long.
Break of support - A hope for those short.
Moving average - A number derived from history that some hope many will hope predict the future.
Largest move since (insert date) - An observation that fills column lines but has no predictive powers.
CDS price rallies - A natural move in the sister market to bonds that has no bearing on the actual chance of default.
Italy yields skyrocketing - A media description of small moves in Italian bonds to levels that three years ago would have been considered as Nirvana.
10% - A nice round number that can be used to insight fear or imply value.
Leverage - A disaster waiting to happen
Balance Sheet - Where most leverage is hidden.
Greek concerns - Stop losses in over-leveraged carry trades.
Overbought/oversold - It’s surely got to go down/up now
Expected Fed policy response - Hoping that the train isn’t more than 10 minutes late.
Expected ECB policy response - Realising that the train isn’t going to stop at your station.
Expected German policy response - Realising that the train never left Berlin.