The Justinian

Read any semi-sophisticated financial mag or publication and you’ll see the same terms used over and over. The same five to ten catch phrases are used daily to explain a wide variety of market movements. The classics? “Reserve diversification” explains the forex market’s gyrations, “inflation fears” are to blame for falls in stocks and rises in bond yields, and “profit taking” covers every other conceivable situation. Another oldie is “strong demand.” The latest addition is “risk appetite” which appears for the moment at least to be good enough for the Bloombergs, Reuterses, and FTs of the world even if the others aren’t.

Copywriters seem to have a playbook of terms they go to in order to fluff up or fill out their daily attempts to explain markets to the unsuspecting public.

Trouble is, it’s not only copywriters and media people buying into it.  Bank analysts, brokers, and dealers also choose to pepper their speech with the same hackneyed phrases. A few select choices:

“But we may see profit-taking in banks today after their recent strong run. People may also sell mining stocks to lock-in profit,” Suryo Dipo, the dealing head of Valbury Asia Securities, was quoted by XFN-Asia as saying.

“The nonfarm payrolls reaffirmed risk appetite because it reduced fears of recession,” said Siobhan Morden, Latin America strategist with ABN AMRO in New York.

In this example, lethargy somehow gets involved as the futures market is accused of laziness:

“Rubber futures lacked the energy to move higher,” a Japanese dealer said.

Fact is, few have the experience and aptitude necessary to elucidate markets that fluctuate on the basis of hundreds of thousands of separate decisions daily. So the terms have stuck as a way to explain the obvious. Less demand equals a drop in price. Inflation fear means higher interest rates (and lower bonds) and risk appetite apparently means thousands of dealers and traders are suddenly bored with their current level of exposure and hungry for more.

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