Glossary K

The financial world is full of jargon - i.e. strange words no-one understands. Here we try to explain some of the many technical terms.

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K

Kleptocracy

A government of thieves, for the purpose of theft.

A related term is lootocracy, the effect is basically identical, except that there is more of an added emphasis in 'helping ones friends' while in office rather than directly trousering this years welfare budget to your Cayman Islands bank account, the point being that once out of office, they will 'help you out' in return, for example with lucrative and cushy jobs.

Kondratieff Cycle

When one looks at historical price charts of the major indices, one can pick out periods of bull and bear market behaviour - these last for years at a time; the Kondratieff Cycle is a hypothesis (- i.e. a guess!) that there is very long-term order in the markets - a cycle which repeats with a period of about 55 years.

A similar idea is the Elliott Wave - prices follow a repeated hierarchical pattern (- basically 5 up moves then 3 downwards), which could be described as an 'inverted fractal' (- i.e. it grows rather than subdivides). All one then needs to do to make money is to work out which wave is currently being executed and since the system is deterministic - a 'clockwork universe' - then we will also know the next wave in the sequence to be executed, and hence whether to buy or sell stock. If the theory is right and you have 'counted the waves' properly, you can make unlimited amounts of money by buying at every bottom and selling at every top; the Elliott Wave gurus should thus be the world's richest men. When Elliott Wave is wrong, it is because the practitioner has made an error in his 'wave counting' - so the theory is always right, in any case.

In Hindu cosmology, the history of human civilisation is divided into cyclic periods of creation, growth, decay and destruction - these occur within fixed periods of time. So all you need to know is the current date in the Hindu calendar for an accurate macro-economic forecast. Its easy!

Now while it is perfectly OK to entertain controversial ideas, at e.g. your drunken dinner party, the bottom line is that we have to check whether there is anything in them or not; do they work? Thus we can make contact with science. Remember that no matter how much we like an idea, if it is wrong, we have to bin it. None of the above 'interesting hypotheses' has enough in it to make me feel comfortable about making an actual trading decision; they are fascinating stories which bear our repeating - like Santa Claus, the Tooth Fairy and Brer Rabbit. Enjoy them, buy don't take them into the real world, unless you want to end up in the Funny Farm, shirtless.

As a final remark, there is nothing scientifically wrong with the concept of long-term order; it does occur in nature - a good example would be the 11 year sunspot cycle; out of the chaotic thrashings of gravitational, nuclear, thermal and magnetic forces reacting on an enormous scale, arises this cyclical behaviour.

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