I'm frequently asked in the comments section of my videos
and by the university students that I teach how realistic are
some of the most popular Wall Street films.
I've worked as a trader for over 20 years, starting in the late
90s at some of the biggest investment banks and hedge
funds, and I spent about half of my career in the United States
and half in London. On top of that, most of my
friends either work for or still work for some of the top Wall
Street firms in areas like investment banking, trading and
securities analysis. So I know what it's like to work
in the industry. I also know how it's changed
over the years and I've heard a lot of stories.
A friend of mine who doesn't work in finance put together a
playlist for me of some of the most famous scenes from some of
the biggest Wall Street films so that I can react to them.
So first up we have The Wolf of Wall Street which is a really
fun film to watch, but I would argue that the title is a little
bit miss leading as it wasn't a real Wall Street firm.
It was a penny stock brokerage running a pump and dump scheme
and the firm it's based on, Stratton Oakmont, was located in
a strip mall in New Hyde Park, Long Island, which according to
Google Maps is a solid 2 hour commute from Wall Street during
rush hour. I guess The Wolf of a really bad
commute to Wall Street wasn't a punchy title so they called the
film The Wolf of Wall Street instead.
I don't want to seem pedantic, but there are no actual wolves
in the film either. In many ways, the title of the
film is as much of a fraud as the guy that it was based on.
There are lots of crazy scenes in the film as it's about a guy
who ran penny stock scams and pleaded guilty to fraud and
other related crimes, spent 22 months in prison and only paid
back $10 million of the $110 million he was supposed to
return to the victims of his crimes.
It seems that he's now a motivational speaker, so I never
worked at this type of a firm. For one thing, to commute to
Long Island wouldn't have appealed to me.
But it's probably a reasonably accurate description of what it
was like to work at a boiler room committing securities fraud
in the 1990s with the dwarf tossing and things like that.
I have heard stories of that type of thing at some of the
interdealer broker firms where there's a certain amount of
hazing of new hires, hamburger eating contests between interns
and things like that. And some of those stories can be
quite funny. But even at those firms, real
work does need to be done. About 10 years ago, a friend of
mine who was launching a hedge fund rented an office in one of
those short term office buildings in London, and he
noticed that one of the other offices on the same floor as him
seemed to be occupied by a boiler room scam.
He told me that there was a lot of noise and rowdy behavior from
down the hall, and he noticed that all of the employees had
printed out pictures of the watches that they hoped to one
day buy and tape them to their computer monitors as some sort
of motivation. He said that there were lots of
shiny suits, hair gel, and high fiving in the hallways.
I'm going to guess that it possibly feels a little bit
better scamming someone's grandparents out of their
retirement savings when you think of the nice watch that
you'll someday buy with the proceeds.
I don't exactly remember how the story ended, but I think that
there was a police raid before any watches were bought.
There are lots of scenes with fast cars in the film too, and
some of that does ring true, but usually the cars are taken
slightly better care of. If you look around the trading
floor, it's rare to see anyone much above the age of 40.
Traders and bankers are often young.
They spend more than 80 hours a week in the office, working
weekends and holidays. Often their base pay is not very
high, or at least that was the case before the financial
crisis. And you would earn the lion's
share of your total compensation as an annual bonus.
Young guys like fast cars. Buying would also signals that
you're doing well, so a lot of traders owned them.
A friend of mine knew a guy who had his Maserati towed during
the credit crunch and it was almost auctioned off by the
police as he had been too busy at work to collect it from the
car #. When the newspapers contacted
him, he pointed out that the fines were not actually that
expensive when compared to the cost of parking in central
London, which is a good point. Real life traders don't tend to
be anything like the guys in the Wolf of Wall Street.
Most of them went to top university studying things like
mathematics, physics, engineering and that sort of
thing. They're usually very hard
working with a lot of discipline.
Many of the traders that I know play musical instruments, run
marathons, or compete in sports at a high level because they're
really focused people and they're usually good at most of
the things that they apply their minds to.
This is partially because this is the type of person that the
good firms hire, but also because trading strategies in
this day and age are often quite technical and are not guesswork,
instinct, or illegal as they're often portrayed in films.
Traders are usually very smart and interesting.
They're often really funny too. They're usually very focused on
work and can be quite colorful. I think this is because when
someone has been successful for a while, they're often quite
confident and willing to express their personalities.
It's usually salespeople rather than traders who are the party
animals in finance, as their job involves winning and dining
clients, taking them to sports events, concerts and things like
that. But they still will have to be
at their desk the next morning, so they find a way of being fun
while also being able to make it into the office the next day.
One of the most famous scenes from The Wolf of Wall Street is
to sell me a pen scene. Sell me this pen.
It's it's a amazing pen to for professionals to Here's a little
trick. If you're being interviewed for
a job that's not at a stationary store and the interviewer is
asking you to sell them a pen, there's a really good chance
that if you get the job, you'll either end up in jail or
testifying against the person interviewing you.
While the wolf of a rough commute to Wall Street is a lot
of fun to watch, it doesn't tell you much about the financial
industry. Next up we have The Big Short.
OK, so The Big Short is a much more realistic depiction of the
financial industry, probably because it was written by
Michael Lewis, who studied at the LSE and then worked as a
bond salesman at Salomon Brothers in New York and London.
Salomon was one of the top five global investment banks at the
time, and after a few mergers, turned into the investment
banking division of Citigroup. Now you always have to make
things a bit more exciting for a film, but The Big Short didn't
have to stretch too much as it was about the global financial
crisis, which was a really crazy time to be working in the
industry. I think The Big Short does an
amazing job of explaining complicated financial products
like securitization to people who don't know much about
finance. Here's Margot.
Robbie in a bubble bath to explain.
Basically, Lewis Raineri's mortgage bonds were amazingly
profitable for the big banks. They made billions and billions
on their 2% fee they got for selling each of these bonds.
But then they started running out of mortgages to put in them.
After all, there are only so many homes and so many people
with good enough jobs to buy them, right?
So the banks started filling these bonds with riskier and
riskier mortgages. Thank you Banjo.
That way they can keep that profit machine shining right by
the way these risky mortgages are called.
Subprime. The film also shows how people
who do real research can have an edge in market.
We have to act now. How do you know the bonds are
worthless? Aren't they filled with
thousands of pages of mortgages? I read them.
I read yeah.
No one reads them. Only the lawyers who put them
together read them. The Big Short is very accurate
in its depiction of how people in the industry dress, or at
least before the appearance of the fleece vest.
When I worked in banking, there would have been no polyester and
no logos in the building. If you were given some corporate
branded merch back then, you'd say thank you and then you'd
quickly throw it in the garbage where it belongs.
I don't really know what's gone wrong in recent years.
I quite like this clip from the film where CDO tranches are
explained using Jenga. And I won't lie, I kind of want
my own Bond rating Jenga set. One of the good things about The
Big Short was that it didn't just look at financial markets
as numbers moving around on a screen, which many films do.
It instead showed how financial markets are a reflection of
what's actually happening in the real world, and that these price
changes affect real people. Stop it.
Stop. What?
Do you have any idea what you just did?
Oh come on, we just made the deal of our lifetimes.
We should celebrate. You just bet against the
American economy. Fuck yeah we did.
Fuck yeah. Which means?
Which means if we're right. If we're right, people lose
homes, people lose jobs, people lose retirement savings, people
lose pensions. You know what I hate about
fucking banking? It reduces people to numbers.
Here's a number. Every 1% unemployment goes up.
40,000 people died. Did you know that?
There can sometimes be something a bit cartoonish about the
depiction of traders in films where they're shown as not
caring about anything, and that's not really true.
But prices do move to match reality, and if something bad is
happening in the real world and you don't trade on it, it
doesn't prevent the bad thing from happening.
The price is still going to move to reflect the reality, and if
you don't trade it, it just means that someone else makes a
profit instead of you. So I was right.
I took a rash of shit for two years.
But I was right and everyone was wrong.
And yeah, I got a bonus check for it.
Sue me. You know, it's a lot of money.
I get it. I could feel you judging me.
That's palpable. But hey, I never said I was the
hero of this story. For me, the most realistic part
of the film was Credit Suisse being on the wrong side of the
trade, trying. To sell $200 million worth of
securities in a pub smells like sheep.
You could do this, I don't. Want to pressure you then?
But if you don't. Pull this off.
We lose everything. All right, let's see what Credit
Suisse's appetite is. We miss your Credit Suisse.
OK, so Next up we have the 1987 film Wall Street, which is a
classic of the genre. I think everyone in banking and
finance has seen this one. It came out about two months
after the 1987 crash and a few weeks before Ivan Boesky was
sentenced to prison for securities fraud.
So the film was very much of its time.
Wall Street is the story of a young stockbroker called Bud Fox
who's trying to get ahead on Wall Street in the 1980s and is
obsessed with a legendary corporate Raider called Gordon
Gekko. Bud gets a meeting with Gekko
and pitches him a bunch of stocks, leaving Gekko
unimpressed. Chart breakout on this one here.
Whitewood Young Industries explosive earnings, a 30%
discount from book break cash flow, couple of 5% holders, the
dog very strong management. It's the dog, pal.
Then Bud gives him inside information about the airline
company where his father works. Gecko buys the stock, makes
money and becomes one of Bud's clients.
But then he gets drawn into Gecko's world of inside trading
and stock manipulation. Insider trading is, of course,
illegal, and regulators are always on the lookout for it.
Back in 2009, there was a big scandal centered around Raj Raj
Antaram and his fund Galleon Group, which implicated traders
at other big Wall Street firms too.
According to the writers, Gecko wasn't based on any single
person, but was instead inspired by a number of people like Carl
Icahn, Ivan Boesky and Michael Ovitz.
The famous Gecko quote Greed, for lack of a better word, is
good, echoed a speech Ivan Boesky had given at Berkeley a
few years earlier where he had said I think greed is healthy.
You can be greedy and still feel good about yourself.
The film dips into the world of corporate rating, where
companies are bought and assets are stripped and sold, which
often leads to job losses. This was a big deal in the
1980s, and the film shows the human cost of the financial
decisions made by corporate Raiders like Gordon Gekko.
In the 1960s, there had been a trend in corporate America where
the CEOs of large growth companies were buying up smaller
companies, often in totally different industries, building
what were known as diversified conglomerates.
The trick was for a high PE company to buy up companies with
low growth but solid earnings and a much lower price earnings
ratio. Earnings per share would then go
up, and for a short while investors didn't appear to
notice that growth was slower and that on top of that,
management wasn't very good at managing a collection of
unrelated businesses. There are examples like CBS, the
broadcasting company, buying up Fender musical instruments and
mismanaging it. By the 1980s, corporate Raiders
started taking control of these inefficient conglomerates and
breaking them up so that the individual businesses could be
run properly. This was good for economic
efficiency but bad for workers at these firms and the job
losses and disruption made a lot of people angry at the time.
A fun Side Story is that the look on Wall Street at the time
would have been much more conservative than the way that
Gordon Gekko dressed in the film with his contrast color shirts,
suspenders, Cartier watch and peak lapel suits.
Apparently Alan Flosser who owned a custom and made to
Measure Suit store in New York came up with the look for the
Gordon Gekko character which Michael Douglas loved and after
the film came out, Wall Street guys started dressing like
Gordon Gecko. So the film inspired the Wall
Street look of the late 80s rather than Wall Street
inspiring to look at the film. The way that people dress at
work has changed quite a bit over time and one of my first
jobs in the late 90's the bank I worked for announced a casual
Friday's policy and so that Friday I wore a Sport coat to
work without a tie. I was a bit unlucky that day as
the CEO walked by my desk that morning to go into my boss's
office and I did notice him giving me a funny look as he
passed my desk. A few minutes later, while the
CEO was still in the office, an e-mail was sent to the whole
floor. There was a loud Ding from every
computer because back then everyone had their notifications
turned on and would read their emails immediately because
e-mail was somewhat new and we didn't get that many of them.
The e-mail said that all men should be wearing ties in the
office no matter what day of the week it is.
A friend of mine raced over to my desk and threw me a tie so
that I could put it on before the CEO came out at the office.
I've never been seen without a tie ever since.
In fact, I think it's wise to keep a spare one on hand just in
case of emergency. I can't really tell you how
accurate the film was, as I was a child when it came out in 1987
and I never worked in leveraged buyouts.
It's worth noting that Oliver Stone expected audiences to
think of Gordon Gekko as the villain in the film.
He was supposed to represent the excesses and ethical failings of
the financial world. Stone apparently couldn't
understand how after the film came out, people would tell him
that they loved the film and that Gekko had inspired them to
pursue careers in finance. OK, so Next up we have American
Psycho, which came out in 2000 and was about an investment
banker named Patrick Bateman who leads a double life as a serial
killer. But that's by no means the worst
of it. In one of the most sadistic
scenes in movie history, Bateman hires 2 prostitutes, brings them
back to his apartment and forces them to listen to Phil Collins
music. Do you like Phil Collins before
paying them to leave? I doubt that I'm the only person
who had to block his ears during that scene.
So does the film accurately depict the life of a New York
investment banker? Not really, no.
One of the most famous scenes in the film, which was supposed to
highlight the superficiality of Bateman and his colleagues, was
the scene where they compare their almost identical business
cards, getting jealous about the different paper quality and
typefaces. There were quite a few problems
that made this scene entirely unrealistic.
Firstly, investment banks provide employees with business
cards. People don't get their own cards
printed up at Staples, but if we skip over that, the scene still
doesn't work. Junior investment bankers spent
their first year or two putting together client presentations,
and their bosses go through the presentations insisting that
they're absolutely perfect. There'll be no grammar errors,
no commas out of place. Everything has to be perfect
before a client sees it. Bateman's card, the first one
shown, is not correctly centered, which no self
respecting investment banker would miss.
There should be a space after the ampersand in Pearce and
Pearce and the word acquisitions is misspelled.
I'm sure you agree with me that this is wholly unacceptable.
David Van Patten's card is a bit better, but once again, not
correctly centered. And the word acquisitions is
once again misspelled on that one.
It's misspelled on all of the cards.
I don't really know what to tell you, but it's clear to me that
Pearson Pierce is not a top tier firm.
I work on Wall Street and Pearson Pierce.
Have you heard of it? No.
No, not really. All of these clowns should be
fired, in my opinion. The nail gun scene, you might be
surprised to know, is actually reasonably accurate.
In the film, Bateman is a serial killer, but he clearly knows
nothing about construction. His nail gun doesn't appear to
be hooked up to an air hose, so it won't work.
And even if it was, he would lose the element of surprise
when the air compressor kicked in, alerting his secretary of
what's about to happen. I know you're thinking that he
should have bought a battery three powered nail gun, but they
weren't actually available back then.
Bateman, if he's going to be taken seriously, should get a 10
gallon compressor installed in his living room, charge it up
before his guests arrive, and he should probably disable their
safety on the nail gun too. Now, the reason I say that the
scene is somewhat accurate is that we once had a Patrick
Bateman like IT guy at one of the firms that I worked at who
ordered a nail gun online and it was delivered to his desk when
he had stepped away for lunch one day.
One of my colleagues at the time signed for it, and when the guy
arrived back at the desk, he was asked what it was for.
We'd all seen the film. He told us that he had bought it
so that he could assemble some IKEA furniture at home.
And there are two things pretty much everyone knows about IKEA
furniture. You don't assemble it with a
nail gun, and bankers don't shop at IKEA.
Back then, I used to ride a motorcycle to work, and I
decided that it was prudent to wear my helmet at the desk for
the rest of the day until the nail gun left the building.
God knows what that nail gun was eventually used for.
OK, so the last film on the list is Rogue Trader, which came out
in 1998 and was based on Nick Leeson's autobiography.
Leeson worked his way up from a back office role at Bering's
bank in the 1990s and was eventually sent to Singapore to
head up Bering's trading operation on the Symex exchange.
The film follows Leeson's rise and the antics he and his
friends got up to when they start making a lot of money.
Whenever Leeson made a trading error, he hid his positions in a
secret errors account, often doubling down on losses and
exiting the positions when they got back to break even.
He got away with this for quite a while, but over time the
positions hidden in the errors account grew and grew.
So what are you going to do? Well, I just have to keep buying
futures like the going out of style to support the market.
When the Kobe earthquake caused a huge stock market sell off in
1995, Leesons error accounts suffered losses of over £800
million or $1.3 billion. Nick did what any sensible rogue
trader would do in his position. He left a post it note on his
desk saying sorry and he fled the country.
He later said that he didn't understand the severity of his
losses until he read in the newspaper the next day that
Bearings had gone bankrupt. He was arrested at the airport
in Germany, got extradited back to Singapore and was sentenced
to 6 1/2 years in jail. When he was released from
prison, he managed a football team for a while and today he is
a motivational speaker. Is this movie realistic?
It is. It might be a bit too realistic
as this type of mistake has happened a number of times since
the film came out and the losses have only gotten bigger over
time. A year after the collapse of
bearings, there was a $2.6 billion loss at Sumitomo Queco.
Altobole lost $2.3 billion at UBS in 2011, and the biggest
loss of all was Jerome Kerrviel, who lost $6.3 billion in 2007.
Kerrviel actually became the world's poorest man in 2008 when
a French court ruled that he had to pay back the full $6.3
billion that he had lost. I guess Sam Bankman freed outdid
Jerome Curvial by losing $11 billion in crypto in 2022, but
FTX wasn't a bank and there's no movie yet.
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Have a great day and talk to you again soon.
Bye. Bald.
The bald from the eyebrows down. Wow.
Nothing. Not a stitch.
It's like lasers. Wow, New world.
See, I've heard that too.