Client Portals

The Devil’s Financial Dictionary5 min read

Apr 15, 2019 - John Osbon ( 7 mins to read)

Long time financial writer Jason Zweig published The Devil’s Financial Dictionary in 2015. The book is both factual and lighthearted. It’s easy to see our personal weaknesses in Zweig’s Dictionary. He says that the definitions are “mostly true.” He also uses a red dollar sign to flag things that may not be technically true, but still say something about the industry. I have been reading the Dictionary for several weeks and have picked out a few favorites for you to think about. See if you agree or disagree with his definitions. See also if you find the imaginary statements to be funny through your own experience of investing.


Known as “holdup artists” in the 1920s and “corporate raiders” in the 1980s, these agitators look to profit by shaking up an underperforming company. Now that pension funds and other sophisticated investors back their efforts with billions of dollars, these dealmakers go by the more dignified name of “activists.”

Balance Sheet

The part of a company’s financial statements in which it reports its assets (what it owns) and its liabilities (what it owes). Total assets and total liabilities must “balance” or match. If they don’t, the company’s management or its accountants may put a finger or two on the scale until they do.


A mania; a rise in asset prices that seems irresistible at the time and irrational in retrospect; a bull market blown full of hot air until it reaches the bursting point. Reliably identifying and steering clear of bubbles has never been easy and probably never will be – except in hindsight.


To hang on for the long term in an asset like stocks. At its best, buy and hold investing is stupefyingly boring. Critics are constantly declaring “buy and hold is dead” without offering persuasive evidence of an alternative that has worked better. If buy and hold is dead, what is alive?

Closet Indexing

The most inactive form of active investing in which a portfolio manager chooses to own almost exactly the same securities as an index fund.


Derived from the Latin for “forefinger,” a measure of the stock market that enables clients to point a finger at professional managers who can’t match its performance.

Prudent-Man Rule

The legal principle of good judgment under which money should be managed for other people, essentially unchanged since the early nineteenth century – although prudent men and women seem to be harder to find now than they were then.

Quiet Period

An interval of thirty days before a company’s public offering of securities, during which the company provides no useful information to investors, as opposed to all other times, when it provides almost no useful information.


Automatically buying some of whatever has gone down and selling some of whatever has gone up. Most investors fail to rebalance when they should, however. Buying high and selling low is much more exciting.

Religion Stock

Also known as a “one decision stock” or shares in a company believed to be so superior that the buyer can own it forever. Because very few companies stay superior indefinitely, the market is full of people who have lost their religion.

Stock Exchange

An organization in the business of selling information about stock prices to the highest bidder; also, a place where people trade fear and greed back and forth.

Stock Market

A chaotic hive of millions of people who overpay for hope and underpay for value, it serves to humiliate those who think they know what the future holds. Those who respect it as a force of nature will prosper, as long as they are humble and patient.


The sudden collision of expectations against reality.


The obsolete practice of spending less money than you earn.


The most fundamental fact about human life and economic activity. In the real world, uncertainty is ubiquitous.

The Robber Barons of The Gilded Age

Zweig’s Dictionary carries on a tradition started in 1906 when Ambrose Bierce published The Devil’s Dictionary, a book about the 19th Century Gilded Age of vast wealth creation and flawed characters. Bierce believed investors should be skeptical about everything, because that’s how investments functioned then. More than 100 years later, skepticism is still called for. And yet, now, significant wealth for the individual investor can be created over a long period of time.

$Psychologically Important$

Unimportant; trivial; nonsensical.
“We think the market will go down from here”, said technical analyst Conor Daley of Schaefer, Shearer, Skinner, Carver & Tanner, “but it will find support at the psychologically important barrier of 18,000.”

$Shareholder Value$

The pretext for any potentially damaging action that a company’s management takes. “We’ve reduced unnecessary staff in our stores, eliminated excess marketing expense, and borrowed $3 billion dollars to raise the dividend and buy back stock. Management and the board have bought a total of more than 200 shares of stock in the past year.”

$Structured Products$

Investment products designed to be profitable to the firms that sell them and incomprehensible to the clients that buy them. “This product couldn’t be simpler,” said Monty Bank, head of institutional sales at Hook, Lyon & Sinker, the global investment firm based in London.

Starting words are serious words

How serious is Jason Zweig? In my opinion he is always serious, even when he is joking. The dedication happens to be my favorite part of the book: For my father, who knew everything, including when not to be cynical. It’s a good reminder to take The Devil’s Dictionary at face value. The key to good investing according to Zweig is to know when not to be cynical.

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