It's October and my local supermarket has been kind enough to remind me that Christmas is only two months away. No doubt you will all be looking for a movie to watch over the holiday period but are not keen on seeing The Great Escape or The Sound of Music again. If so then what better way to invigorate yourself than to watch a finance related movie or documentary. There are plenty to choose from.
Anyone involved in trading has probably watched Wall Street. For many, sports trading is as far as they will get into the world of trading. That is not a bad thing considering the daily reports of financial rigging. Then again, if you think that you alone can beat large financial institutions single-handed then sports trading is probably too small a stage for your talents. Wall Street is not that inspirational considering that the film's plot is based around fraud. The sequel, Wall Street 2: Money Never Sleeps, was not easy to watch as Gordon Gecko was a reformed character. Not that he couldn't reform but did we want him to?
Although Wall Street is dated and of its time, it is still very watchable. A film that is more relavent to today's financial environment is Margin Call. This film (graced by Kevin Spacey and Jeremy Irons) is in the procedural genre in that we see a trading firm get into difficulty when its overall position is in danger of a margin call* greater than the value of the firm itself. We then see the characters discuss the consequences of inactivity and the repercussions of taking action and unwinding the position. I won't spoil the film any further but I highly recommend it as a partial view into the world of finance.
The Big Short is a film based around the book
of the same name by Michael Lewis. The book is a about the financial crisis in 2008 and how some people could see that the housing loan boom was about to go bust because many house buyers could never hope to repay their mortgages. There was much fraudulent activity as many mortgages were given to the unemployed or low-wage workers to buy properties that many of us can only dream of buying. The debt on many of these loans were of junk status but were sliced and diced with other loans of better standing to create AAA rated Collateralised Debt Obligations (CDOs) that could be sold to the unwary.
Those that could see the coming collapse shorted CDO insurance derivatives (a bet that believes CDOs will default) and made handsome profits during the 2008 collapse. The film dramatises the actions of those who foresaw the collapse with a cast of well-known actors with some asides from other well-known actors explaining the terminology. A very watchable film indeed. Nothing is said about the sentences handed out to the fraudulent mortgage lenders, the fraudulent banks that created the CDOs, the fraudulent ratings companies that triple A rated the CDOs nor the fraudulent insurance companies willing to insure the CDOs. The reason being that nobody has been charged or sentenced and probably never will be. Try committing acts of fraud on a bookmaker and see how us little men get away with it.
Another film about the 2008 collapse is a documentary called Inside Job. It's fascinating to watch those in positions of power show that either they are not as bright as they think they are or have such an over-inflated ego that they imagine they are incapable of wrong-doing. Many of the higher-ups dare not show their faces but they are named and shamed all the same.
The Wolf of Wall Street
is another painfully true film, this one based on the activities of Jordan Belfort, who eventually went to prison for his market manipulation activities. A meek trader to start with, Belfort soon discovered that the financial markets are often a place of subterfuge and all that really matters is making a profit at any cost. A good film if you like excess but Belfort is hardly someone to admire. It is odd that many traders have twitter accounts calling themselves "The Wolf of Betfair". The alliterative 'Bull of Betfair' would be more appropriate, there is a lot of it about.
A recent film, starring George Clooney (so your lady friend won't mind sitting with you to watch it) is Money Monster, a film about a ficticious financial news TV channel that has its top star (Clooney) held at gunpoint during one of his stock advisory shows. It's a good film to watch. It isn't procedural or factual but you do end up wishing that many in finance received a similar comeuppance.
Finally, in my list of finance related films is Rogue Trader, another true account of a wayward trader. In the film Ewan McGregor plays Nick Leeson in the ultimate factual account of why Martingale/Doubling Down gets you nowhere in life. Nick's derivative trading activities remain unnoticed until the firm he works for, the once venerable Barings Bank, gets a margin call* that collpases the bank entirely.
* A margin call is when you are in a leveraged position (often using derivatives) that goes against you and you receive a call for more margin (cash) to cover losses on the position. In stock trading the most you can lose is the entire value of your stock. In derivative trading you can lose a lot more than the underlying value of the derivative, typically a set amount for each index point move, up or down. Derivatives permit you to open a large position with a small initial outlay (leveraging) but profits and losses are much greater relative to the outlay over buying the underlying commodity.
