The Secret Language of Wall Street Revealed

Say these five words out loud very quickly: Bifurcation, Backwardation, ZIRP, NIRP, Contango.

Did you do it?

If so, did you sound like a cheerleader singing some foreign language?

These are actual words used by many Wall Street traders, gurus and promoters.

They may sound funny or confusing, but they serve several purposes. (1) They reveal or describe certain market conditions. (2) They act as “signals” for commercial purposes. (3) They are intended to confuse and/or impress you.

And they are only a small part of the many words, acronyms and sayings that make up the “Secret Language” of Wall Street.

The funny thing is, most people (myself included) aren’t impressed by words that don’t make sense.

However, if you have a basic understanding of them, you will be better prepared as an investor and more likely to stay ahead of the crowd. Think of it as learning how to “connect the dots” of a financial puzzle.

Contrast that with trying to run a business in a foreign language (German, French, Japanese, Greek, etc.). If you don’t understand the language, you will most likely lose money… A LOT of money.

So, like learning any language, you need a good teacher or translator who makes it simple and easy to understand.

This is where we come in.

In this article we will introduce a few words so you can see how easy it is to learn the language and at the same time understand how Wall Street makes things so confusing.

Let’s start with ZIRP. It is an acronym meaning “Zero Interest Rate Policy”.

It was initiated after the 2008 crash to “supposedly” stimulate the economy. The truth is that ZIRP has caused critical damage to the pension plans of most nations. (They need high interest rates to fund their plans for their retirees.) ZIRP has also crippled most senior citizens who depend on the interest on their investments to live.

Although rates are slowly rising, it will take a long time to undo the damage caused by ZIRP.

But let’s move on to NIRP. This is another acronym meaning “Negative Interest Policy”. Yes, you read that right. NEGATIVE interest rate policy.

This is more collateral damage from the 2008 crash and is mostly in effect in European countries.

Here’s the crazy part. When a country’s government bonds have negative interest rates (currently -0.05% to -0.36% or higher), investors must PAY THEM to hold their money.

It’s a losing proposition for the investor and it’s hard to imagine anyone buying bonds with negative interest rates, but millions have been sold.

We’ve only scratched the surface here, but hopefully you can see how these acronyms can be very confusing and misleading.