The cry of "Ho varlet, thou hast offended mine honor" has become increasingly rare. Sword fights in the streets, jousting for a lady's hand, and not bathing for weeks have also gone out of style (at least officially), but we can still revel in the romance of the medieval world. Today we'll be looking at some of investing terms that hearken back to a time of kings, knights and princesses. Let's get medieval!

Crown Jewels
The crown jewels of the British monarchy have been around for over 800 years. In that time, they have been through fires, attempted thefts, pawn shops and general carelessness. However, to the British, the crown jewels carry serious sentimental and monetary value.

This is why the most valuable unit (section, subsidiary, etc.) of a corporation is referred to as the crown jewels. A firm's crown jewels are attractive for many reasons, including their profitability, asset value, future prospects, and so forth. Like the crown jewels of the British monarchy, a corporation's crown jewels are often the target of thieves - well, at least the target for a hostile takeover.

The Knights of the Hostile Takeover
Whether or not a knight's personality could really be summed up by the color of armor he wore (as fairytales would have us believe), I cannot say. The general rule for fairytales, however, is the darker the armor's hue the darker the knight's disposition. The investing world's knights aren't serving royalty or rescuing maidens but are mostly occupied with taking over other companies. Wall Street, like fairytales and Disney, assigns an acquiring company a color that is indicative of the nature of the takeover. So here goes:

Black Knight -The black knight, of course, isn\'t the type to court a maiden with flowers but instead prefers a fast horse and a sack. The black knight of a takeover is hostile and is likely to run up against any number of defenses funded by the target company\'s war chest.
White Knight - Always representing the "good guy", a white knight gallops in when a black knight is making a hostile takeover attempt. The white knight offers the target firm (the maiden) a way out with a friendly takeover.
Gray Knight - Since steel is almost naturally gray, you\'d guess that most knights were in this club. But, in the 21st century, the gray knight is an unsavory character that comes in unsolicited by the target firm and tries to worm into the deal through any cracks in the relationship between the first bidder and the target. The gray knights are essentially the scavengers of takeover attempts.
Yellow Knight - I doubt there were ever any knights in bright yellow, but yellow is a color often associated with cowardice, and that is how Wall Street uses it. A yellow knight is a firm that goes from attempting a hostile takeover to discussing a merger ("Can we talk about this guys?"). Reasons for chickening out vary, but it usually has to do with the target company\'s formidable defenses.

White Squire
Squires were the sidekicks of knights, for whom the squires would polish the armor, feed the horse and cook meals. Being a squire was a pre-requisite to eventually becoming a knight. In the world of takeovers a white squire therefore walks in the shadow of the white knight. Buying a minority interest in a firm targeted by a black knight, a white squire, not big enough to buy a majority interest, helps out the targeted firm quite a bit with the influx of capital but does not guarantee a successful defense.

Moats and Pits
Defending one's castle was a full-time occupation in medieval times. The two most popular defenses were the pit and the moat (basically a pit with water surrounding your castle). If you dot your land with covered and open pits as well as encircle your castle with a moat, you've made sure that any aggressor will pay a price before getting near your walls. The pits will force an advancing army on horseback to dismount and feel their way around covered pits (often spike-lined) thus losing mobility and speed. However, pits cannot stop them entirely because men can climb down one side and up the other safely (unlike horses). That's where the moat comes in. Have you ever tried swimming in full armor? Think stone, think sinking.

The pit in the world of trading isn't half as exciting (to me). Pits, like those at the CBOE, are places where individual options and futures contracts are traded. It's a chaotic ballet of thrashing limbs and raised voices, cacophony at its finest. On the flip side, the economic moat is right on par with its medieval counterpart. This term was coined by the oracle of Omaha, Warren G. Buffett. It refers to the competitive advantage that a company has over other firms in its industry; the wider the moat, the more attractive the company. The moat isn't actually water and mud. It can be anything, but good examples include brand name recognition, pricing power, barrier for entry into the industry, etc. Presumably, other companies cannot easily strip naked and swim in these moats.

In the Middle Ages, whenever you were feeling a little under the weather you would go to the local bone-saw (the physician ... you can guess where they got the name). It was common for these physicians to prescribe a regime of bloodletting, which involved either putting fat slimy leeches on your skin so they can suck your blood or actually cutting you to release some blood.

In the financial world, bloodletting is not meant to be a "therapy", but a period of time during which your portfolio takes massive losses. This frequently occurs during a bear market as the value of the stocks in your portfolio slowly bleeds away (probably from wounds inflicted while being mauled by the surly bears). As you've probably guessed, bloodletting helps your portfolio about as much as leeches help a broken leg - both forms of bloodletting are weakening processes. However, just because your portfolio is bleeding, doesn't mean its dead. With some TLC and patience, you can have it running around the market once it recovers. Just keep the leeches away from it.

That does it for our journey to ye olden times. Hopefully, thou hast enjoyed seeing how the past still plays a small role in the present.

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