Economics 101: Talking The Talk

Wall street jargon serves a high purpose. People want desperately to believe that somebody understands the economy. But clarity is not always well served by the language of the dismal science. "Bear market" is a familiar term, but how many know that, by one widely used definition, it means a 20 percent drop from the peak? A guide to the lingo:

SOFT AND HARD LANDING: In a soft landing, economic growth slows gradually without falling too low. In a hard landing, the growth rate drops farther and faster.

TWO-QUARTER RECESSION: By spelling out the R-word and tightly defining its duration, the term implies that a recession can be limited, a comforting fiction. Since the technical definition of a recession is two consecutive quarters of negative economic growth, this term, when applied to the future, is a wish for the briefest possible you-know-what.

U-SHAPED SLUMP: In this, the economy goes down, stays down for a year or so, then rises. In the preferred V-shaped slump, it's down for months before climbing sharply. In the dreaded L-shaped slump, the economy goes down and stays down indefinitely.

VARIOUS BOTTOMS: When it appears that a market can't go any lower, and then it does, that's a false bottom. What investors long for is the true bottom, because markets can't start climbing again until they get there.

CATCHING A FALLING KNIFE: Painfully evokes the risk bargain hunters face when they buy stocks in a market that is still falling. A "dead-cat bounce" describes slight upward moves by stocks after steep declines. The logic: even a dead cat will bounce if you drop it from the top of a building.