Fat Cats and Starving Dogs; Happy Foxes and Sad Sacks
This weekend, I saw Margin Call on DVD. Jeremy Irons plays a CEO of a small Goldman Sachs like company.
A young analyst at the firm discovers that their highly-leveraged, massive mortgage bets are based on a VAR formula that’s flawed. It failed to consider volatility ranges beyond historical distributions. With the market swinging, his calculations show a 25% move in the underlying holdings will wipe the company out and then some.
Irons ends up giving a speech to Kevin Spacey towards the end of the film — no spoilers here — its just a fascinating digression, that goes something like this:
“Its just money; its made up. Pieces of paper with pictures on it so we don’t have to kill each other just to get something to eat. It’s not wrong. And it’s certainly no different today than its ever been. 1637, 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1987 — Jesus, didn’t that fuck up me up good — 92, 97, 2000 and whatever we want to call this [2008].
It’s all just the same thing over and over; we can’t help ourselves. And you and I can’t control it, or stop it, or even slow it. Or even ever-so-slightly alter it. We just react. And we make a lot money if we get it right. And we get left by the side of the side of the road if we get it wrong.
And there have always been and there always will be the same percentage of winners and losers. Happy foxes and sad sacks. Fat cats and starving dogs in this world. Yeah, there may be more of us today than there’s ever been. But the percentages-they stay exactly the same.”
Its a great film (IMDB) — if you have not seen it yet, move it to the top of your Netflix queue . . .
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January 22nd, 2012 at 8:46 am
“And we get left by the side of the side of the road if we get it wrong.”
____________
Um . . .
I believe you get fat bonuses and tax cuts if you get it wrong.
January 22nd, 2012 at 9:00 am
Gordon Gekko said it very well in the first Wall Street when he pointed out to Bud Fox that the painting he bought for 60K was now able to fetch 600K…..it was simply a matter of Perception.
You tell us what you want to buy, and we’ll show up with more. When we make the bad answers look more obvious; we’ll tell you that you got smarter in the multiple -choice educational space that leaves no child left behind…. in the rewind.
January 22nd, 2012 at 9:49 am
It seemed a lot more like Lehman Brothers than Goldman Sachs … with the unbelievable characters made amore idealistic …
January 22nd, 2012 at 9:54 am
The reason it was not Lehman was a) The CEO was not detached and lost; b) they were the early sellers of crap (ala Goldie) as opposed to late sellers (alal LEH); c) they appeared to survive . . .
January 22nd, 2012 at 10:09 am
“move it to the top of your Netflix queue . . .”
Done.
January 22nd, 2012 at 10:32 am
Would have loved to have moved it to the top of my queue, but I’m only streaming and it’s not available for streaming yet…., that happens fairly often these days. Wish an intermediate plan/strategy was available to stream recent releases (I’d swear the market is there), but until the content providers come to grips with the future, that won’t happen.
January 22nd, 2012 at 10:53 am
We watched it last night via Netflix as well. Seems to us it was a terrific movie.
The movie seems to end rather abruptly however as there is no mention of prosecutions, jail time, suicides etc etc.
On the other hand, maybe that’s how real and fictional stories of this type actually end.
January 22nd, 2012 at 10:53 am
+1 to the recommendation. It’s been available on Verizon FIOS On Demand for about a month now and I thought that it was really very well done. Acting on the part of all the principals was first rate.
January 22nd, 2012 at 10:55 am
The only thing the “content providers” have a grip on is their coke spoon.
Their Washington DC gamesmenship and refusal to try distribution models is likenec to a failing dictatorship.
When these Hollywood pukes, who want to impose North Korean-esque controls on us so they can ‘provide’ us more Britany Spears and Dancing with the Stars, end up homeless along La Cienga I will be overjoyed.
January 22nd, 2012 at 11:06 am
Just to point out how seriously flawed this whole “crony capitalism” is:
http://www.msnbc.msn.com/id/46070458/ns/business-us_business/#.TxrRfYF33Tp
Top Justice officials linked to mortgage banks
Pressure rises on Justice to open wide-ranging probe of mortgage servicers
“U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.
The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.
Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.
Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.”
it goes on, but i think you can see what’s going on behind the scenes from this; but wait, there’s more:
http://www.dailykos.com/story/2012/01/12/1054282/-RNC-Decides-to-Finish-Destroying-Democracy?detail=hide
RNC Decides to Finish Destroying Democracyby bmaplesFollow .
Share1397 permalink 106 Comments
“There are headlines that are so jaw-dropping in their implications that they stop you cold in your tracks. Then, when you try to tell others about them, talking about them doesn’t work. You just have to share them, and wait for the other person to stop cold in their tracks as well.
So, here you go:
Republican National Committee Files Brief Seeking To Allow Corporate Funding of Campaigns
Yep — you read that right. The RNC, those wonderful lovers of our form of government, have asked the Supreme Court to EXPAND the Citizens United decision to allow corporations to donate directly to campaigns. And to give as much as they want. With no limits.
If that hasn’t caused you to mutter amazed expletives to yourself, try these numbers:
The total cost of the 2008 Presidential campaign for EVERYONE — both candidates, PACs, 527s, you name it — was $5.3 billion.
Citigroup’s gross profit for 2011 was $60 billion.
In other words, ONE COMPANY could underwrite the entire campaign of any presidential candidate it chose — and not even breathe hard.
I try — I really try — to be charitable to Republicans most of the time. But this is one of the most dangerous ideas any so-called political party has ever come up with, and it deserves to be shouted down by people from every side of the aisle.”
so much for “elections”, “democracy” and the “quaint” Bill of Rights (not to mention the shredded Constitution).
January 22nd, 2012 at 11:19 am
Watch the movie and your sympathy for occupy Wall Street goes up. The more this goes mainstream, the worse for our political class and their enablers. Is there really any difference between the politcal parties besides rhetoric?
January 22nd, 2012 at 11:36 am
Great movie, happened to watch it last night as well. It *is* available for streaming, albeit not for free, through Amazon Video On Demand. A 24-hour rental is $3.99.
January 22nd, 2012 at 11:36 am
Mark Twain basically said the same thing: “History may not repeat, but it certainly rhymes.”
We live in a corrupt world: and until the human race is universally recalled and put through a badly needed re-design, this will always be the case. Live (and invest) accordingly.
January 22nd, 2012 at 11:43 am
“you find a way to spend the money in your pocket”. Great movie, even better commentary on the disk. Limited access to building at night necessitated shooting the film in limited number of takes.
January 22nd, 2012 at 11:53 am
I thought it was about Lehman-like company since I’ve watched it, but with Barry’s points, it makes sense that it is Goldman.
January 22nd, 2012 at 12:16 pm
Didn’t love.
In any normal firm, if you didn’t already know the parameters outside of which you are fucked, somebody fucked up really badly. Shit like that doesn’t just happen.
The financial system is an engineered system. You can engineer it robustly or for failure, with lots of leverage, moral hazard, lack of transparency.
If you sort of throw up your hands and say it is the way it is, normal people do their jobs as best they can and crazy stuff will happen, you’re playing into the hands of people who built it to fail because they thought it was to their benefit, and want to keep doing it.
It’s one thing to say there will always be crises and tornados. It’s another to say shit happens, so there’s no point in building strong houses and storm cellars so damage is minimized and people survive.
Basically offended by the lack of outrage, the cynical absence of taking a stand, the idea that this is just business as usual and there’s nothing you can do about it.
January 22nd, 2012 at 12:25 pm
That scene was the only good thing about that movie. As a movie I thought it lacked any real emotion or drama.
January 22nd, 2012 at 12:44 pm
History shows that Human Nature is a constant in the calculus and a DNA in the chemistry of life.
January 22nd, 2012 at 12:45 pm
Back in the 1950s, a Native American tribe in California came into a ton of money through an oil discovery. The money, which came as a lump sum, was divided equally among everyone. Within a few years, the overwhelming majority of the tribe was as poor as they were before and the few remaining were quite wealthy. It’s a bell curve world and no amount of redistribution will work in the long term ….at the same time we’re descending into a third world culture where it’s possible to die from lack of basic necessities. Anyone who can come with a long term fix, please line up here on the head of this pin.
January 22nd, 2012 at 1:23 pm
I be a miffed __ sadsack .. its available in my area Redbox
http://www.ritholtz.com/blog/2011/12/clouded-title-the-gross-illegality-of-mers/#comment-602427
I’m wondering:
a. you have apps that block me from showing up on your page
b. you see me but let your eyes skip me
c. I’m in TBPv9.6 and I see what I see but its not what you see
anyway – come back to my world view – I liked it too – and had my own fav quotes
January 22nd, 2012 at 1:26 pm
Question for the well connected: Do you guy’s know who the players ,at Bear or Lehman, that were against the firms “double down” decision to profit from a counter-cyclical strategy and stretch the internal risk limits? What happened to those guy’s? Were there any?
January 22nd, 2012 at 1:35 pm
Great movie. The whole time I was wondering how many middle guys like Spacey’s character, wanted to do what was right, until they were shown the error of their ways and bit the bullet.
January 22nd, 2012 at 1:50 pm
When the head regulator believes that Wall Street fraud will magically clear, and the market will decide what works and what doesn’t [ Greenspan ], instead of the public, you’re screwed.
The first “mistake” was that the VAR formula only contained 2 years of “history”.
A statistician can only make that “mistake” if Ordered to.
January 22nd, 2012 at 2:27 pm
Barry, how funny, I downloaded on Amazon Friday night. I thought it was ok.
Didn’t quite inspire the emotions a movie like Glengary Glen Ross, Wall Street (forever my inspiration) or Boiler Room produces…
The acting was a bit lazy. Recommend The Company Men if you haven’t seen it.
January 22nd, 2012 at 3:02 pm
“Bear, Lehman…What happened to those guy’s? Were there any?”
They were rendered to the back office if not dismissed with prejudice as is the daily vetting policy of any old school Corporation or Institution.
January 23rd, 2012 at 9:52 am
Saw this awhile ago. Limited run in an artsy theatre.
The answer to “how can people act this way” is to be found in sociology. Saw firsthand a business slide from “we’re one with the community we serve” to “take advantage of those suckers.” Took 6 or 7 years. It does not happen overnight. I was not popular when pointing out the trend. I was “out of touch.” Now retired and to hell with them.
Some are cowered by the organization’s progression (Kevin Spacey’s character) and others go with the flow, either for financial gain or just because they lack the strength of character to stand in the way. This last group would be those who may seem less forceful – they are conflicted but dealing with it.
January 23rd, 2012 at 2:04 pm
Good movie and recommendation. Rented it on BluRay from the local independent video store (yes, they still exist) late last week. Better selection that Netflix and much cheaper than pay-per view (i.e. $2.49 pre-paid).
Overall, thought the writing and acting were quite good, especially Irons, Spacey and Stanley Tucci. Demi Moore brought no internal life or emotion to her role. Horrible casting decision.
While fictional, it lends credence to the suggestion that most of Wall Street has morphed into professionalized “bucket shops.” When the sole purpose of these firms becomes to make a profit at all costs, how can we rationally expect any other outcome?
Does someone believe Adam Smith’s “invisible hand” going to tap on the shoulders of executives from these financial firms and caution them about the evils of greed, pride, gluttony and envy? No way. Not even Disney or Spielberg would touch that plot line.
Nope, the only way to stop it is aggressive re-regulation and concomitant prosecutions of scofflaws. It’s a no-brainer. Maybe therein lies our problem? Have we the people collectively given in to ‘hopium’ and checked our brains at the door?!
January 23rd, 2012 at 11:01 pm
I too watched Margin Call last weekend. I thought it was an excellent movie that was a good parable for what has been going on.
One minor but significant theme was that the “good guys” were engineers who were seduced by the easy money of Wall Street. Stanley Tucci gives an interesting business case for infrastructure investment with his story about the bridge he built. And Paul Bettany then gives a sarcastic rebuttal to Tucci’s benefit cost analysis.