Just saw “The Wolf of Wall Street.” For those squeamish about a lot of gratuitous sex and drug use, you might want to take this one off your ‘must see’ holiday movie list. Oh yes, the language is primo. Of course, I hid my eyes (closed my ears) during the juicy parts (which was most of the movie). Martin Scorsese’s cinematic account of stock-fraud artist, Jordan Belfort, was a three-hour epic; but with all the sex and drug use the time passed quickly.
“The Wolf…” is a good news/bad news story.
As it pertains to Belfort’s firm, Stratton Oakmont, its willful illegal conduct will reinforce the image of Wall Street as a rigged game, a den of iniquity where the sheep (unsophisticated public investors) go to be fleeced and possibly slaughtered. It will keep people, who should have some of their assets in stocks, frozen at the controls and out of the market. This is bad news because there is a boat load of empirical evidence to the contrary (i.e. stocks for the longer-term have offered very attractive returns).
The good news is that firms like Stratton_Oakmont and Madoff Securities are exceptions. Exceptions, where investor greed, unreasonable expectations, the willingness to suspend reason and the desire to ‘get rich quick’, come together for disastrous financial consequences. Certainly, most in the investment business are in it to make money. But, most realize that success on a long-term basis comes from having a good name and successful clients. ‘Pump and dump’ operations a la Stratton Oakmont soon collapse from the weight of their many sins.
The movie, on another positive note, is a strong reminder to all that there are always unscrupulous operators out there waiting to take advantage of greed and naivety, such as might be brewing now in this time of sharply rising markets. We are not at the speculative fever pitch of the “The Wolf’s…” market in the mid to late 1990’s, but the urge to ‘get in the game’ or ‘catch up’ can still be felt.
Importantly, I believe to avoid these traps (regardless of how well-intentioned your advisor) you need to bring reasonable return expectations and a longer-term perspective to your investment program. Unfortunately, for most of Stratton Oakmont’s clients, real investing was the last thing that they had on their minds.
What do you think?
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2 thoughts on “Session 79–“The Wolf of Wall Street””
I still think that dividends are important and that large cap stocks, with a track record and good management are relatively safe and that the PE is a good indicator of how far a stock may fall (be overpriced).
All the best,
Willard, I’m on the same page re. Dividends,but I think you may want to think about PEs in the context of risk free returns (I.e. the 10 year UST, now at 2.97%). A stock like GE with a 3.2% yield and 20 PE may not be something you want to unload even if that ten year goes to a four percent yield. Thanks for following.
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