Once again, it's time for Halloween. Pumpkins are turning up on doorsteps and small children are dressing like ghosts and superheroes. Let's get into the spirit of the season and look at some of the more macabre and bloodcurdling terms circulating in the world of investment.

Key Takeaways

  • The investing world is full of spooky terms.
  • Zombie companies are dying companies that still operate as if nothing's wrong.
  • Corporate cannibals eat up market share by releasing product lines that are in direct competition with their own established products.
  • Jekyll and Hyde companies or chief executive officers have dual personalities characterized by sudden shifts in value as previously concealed information is released.

The Witching Hour

In his book "The BFG," Roald Dahl described the witching hour as "a special moment in the middle of the night when every child and every grown-up was in a deep deep sleep, and all the dark things came out from hiding and had the world all to themselves."

In European folklore, the witching hour was believed to be a time of magic when witches and magical beings took to the mortal world and abducted children foolish enough to wander out past their bedtimes. A general rule of thumb: If the subway isn't running, it's probably the witching hour.

In investing, there are two witching hours—double and triple—and they are also times of true trickery. A witching hour occurs when two (double) or three (triple) classes of options or futures expire on the same day. The triple witching hour (which can also be considered a quadruple witching hour) is the rarest, happening only four times a year: on the third Friday of March, June, September, and December. The triple witching day has earned the appropriate title of "Freaky Friday."

The witching hour is already spooky because it occurs just regularly enough to be suspicious (like a full moon). But what makes it downright hair-raising is that it's a time of volatility. During witching hours, traders are scrambling to offset their options and futures positions. But, because the effects of the witching hours are only temporary, they are not a big scare for the long-term investor.


In the supernatural world, a zombie is a reanimated corpse with a vicious craving for brains. Some of the main aspects of your common zombie are they move slowly, and if they bite you, you'll become a zombie too.

Zombies in the investing world are companies that are insolvent or on the brink of insolvency but are still operating as if nothing's wrong. Although zombies are in or close to Chapter 11—which allows a business to continue to operate while restructuring its debt—a zombie company is perceived as not having a chance. Therefore, much like the supernatural zombie, the corporate zombie doesn't know that it's already dead. As an investor, you should avoid zombie companies like you would avoid the living dead.

Corporate Cannibalism

You probably know that cannibals are people who consume the flesh of other people. This grisly practice is called anthropophagy, and it's not exactly palatable, but in the corporate world, a different kind of cannibalism is all the rage.

Corporate cannibals try to consume a greater market share by releasing product lines that are in direct competition with their own established products. For example, say you designed some tax-preparation software called "Not Slow Tax," but then, to gain a greater share of the market, you designed another program called "Even Less Slow Tax." This new product would compete against any software within its market regardless of who created it. Since your new product would compete against your older product, you'd be pulling a "Hannibal Lector" and engaging in corporate cannibalism.

Jekyll and Hyde

"The Strange Case of Dr. Jekyll and Mr. Hyde" (1886), the horror novel by Robert Louis Stevenson, tells the story of an eccentric but well-intentioned scientist (Dr. Jekyll) who begins experimenting upon himself. Jekyll ends up creating a separate evil personality and physically transforms into his evil alter ego, Mr. Hyde. Hyde eventually overcomes the doctor and commits a horrible crime for which Jekyll must take responsibility.

In investing, this term describes people or entities with a dual personality. You can have Jekyll and Hyde companies, finances, or even chief executive officers (CEOs). Jekyll and Hyde investments, for example, are characterized by sudden shifts (good or bad) in value as previously concealed information is released. A Jekyll and Hyde CEO is both the good cop and bad cop rolled into one expensive suit—which isn't always a bad thing.

Voodoo Accounting

Voodoo is a religion practiced chiefly in Caribbean countries and some African countries but is focused mainly in Haiti. In many Western countries, the term "voodoo" may connote black magic and unexplained phenomena. Hence, we have the term voodoo accounting. This occurs when a company uses some highly suspicious accounting methods to disguise what's really going on with the business.

These methods can be as simple as shifty math (when numbers don't add up) or as complex as cooking the books through cookie jar accounting or the big bath. Voodoo accounting can also raise zombies of its own. Corporate zombies are exactly the type of desperate and mindless companies that could use some voodoo accounting to cover up their major financial woes.

Phantom Stock and Ghosting

Ghosts are dead people that come in all shapes, sizes, and forms. Usually, ghosts will appear as invisible or translucent. Some are friendly, while many are tricksters, playing pranks on unsuspecting humans. They also appear to help Demi Moore make pottery.

Phantoms, on the other hand, are illusions, representations of things that are not real. Phantom ships and ports materializing in the fogs of the high sea have misled sailors. Phantoms have also caused pain in missing limbs and appeared in the occasional pop opera.

The investing sort of phantoms and ghosts are a good match. Ghosting is an illegal practice whereby two or more market makers collaborate to manipulate stock prices. Although market makers are bound by law to remain in competition, this collusion can be nearly invisible—like a ghost—making it tough for investors to spot. Knowing how to spot these shoddy business practices is key, so don't be afraid of ghosts!

Phantom stock is not such a negative thing; it's simply stock that doesn't exist. With this imaginary stock, companies offer employees (usually senior management) the benefits of owning stock without taking any from the outstanding shares. The phantom stock follows the price movements of the real company stock, paying out any profits that are made. This is a clever way for companies to motivate management without giving up equity.

Tombstones and Graveyard Markets

Graveyards and tombstones are essential to the atmosphere preferred by the creatures of the night. Something about the dead is irresistible to the undead (vampires) and the living dead (zombies).

Ironically, the tombstone we find in the financial world is created at the beginning of a stock's life. It is a written advertisement issued by investment bankers before the public offering of a security. The tombstone gives basic details about the new stock, listing in order of importance the underwriting groups involved in the deal. It's called a tombstone because it is printed in heavy black ink surrounded by a black border and it contains the "bare bones" information about the issue. Basically, a tombstone serves as a teaser for prospective investors and directs them to the red herring prospectus.

A graveyard market, on the other hand, pops up right where you'd expect it to—at the end of a prolonged bear market when investors have just finished weathering a financial storm. They aren't exactly moving and shaking like they used to. At the same time, any new investors are tentatively eyeing a market that just beat up the big players. Thus, there is no action either from those already on the inside or from potential new investors on the outside. The parallel between this type of market and a graveyard is obvious. The dead (longtime investors) can't get out and the living (new investors) aren't rushing to get in.

Viatical Settlement

We saved the scariest term for last. In a viatical settlement, a person with a terminal disease sells their life insurance policy at a discount from its face value in exchange for ready cash. Presumably, the terminally ill individual either needs the money for medication or has decided to enjoy the remainder of his or her life. The buyer of the policy cashes in the full amount of the policy when the original owner dies.

Simply put, a viatical settlement is like betting that a person will die in the near future. Because of the time value of money, the longer the person lives, the lower the rate of return on the investment. So an investor interested in a profit is essentially hoping that the original policyholder heads to the Great Beyond as soon as possible. Grim stuff!