Great post from Henry Blodget over on The Business Insider on the phrases you’ll hear on financial television that really don’t mean anything, and just make the speaker sound smart. Here’s a very common one – someone claiming stocks are down due to “profit taking”:
When to use it: Any time you are asked to explain why the market (or a stock) is down after a strong run.
Why it’s smart-sounding: It sounds like you know what professional traders are doing, which makes you sound smart and plugged-in. It sounds like common sense: Traders have made a lot of money–now they’re “taking profits.” It doesn’t commit you to a specific recommendation or prediction. If the stock or market goes down again tomorrow, you can still have been right about the “profit taking.” If the stock or market goes up tomorrow, you can explain that that traders are now “bargain hunting” (see next smart-sounding meaningless phrase).
Why it’s meaningless: Traders buy and sell stocks for dozens of reasons. And for every seller, at any time, there is a buyer on the other side of the trade. Whether or not the seller is “taking a profit”–and you have no way of knowing–the buyer is at the same time placing a new bet on the stock. So collectively describing market activity as “profit taking” is ridiculous. Any trade, at any time, in any market, can be described as “taking a profit” or “cutting a loss” or “bargain hunting” or “filling out a position,” and so on. You have no way of knowing what’s actually going on, and there’s always someone on the other side of every trade. But no one will ever prove you wrong!
The whole slideshow has had over 270,000 page views – it’s worth yours too.
Source: “16 Meaningless Market Phrases That Will Make You Sound Smart On CNBC” Henry Blodget, The Business Insider, 6/16/11, https://www.businessinsider.com/meaningless-phrases-that-sound-smart-on-cnbc-2011-6
