Money never sleeps

Published on the Malta Today¸ issue 13 October 2010


Reviewing the film Wall Street -Money never sleeps is not easy. Those who saw this sequel to Wall Street filmed in 1987 must have been surprised to see Gordon Gekko (Michael Douglas) the ruthless corporate raider in 1987 is now a changed man. The first film witnessed the downfall of the dotcom boom and the irresponsible actions of investment bankers. Charged on insider trading Gekko served eight years in jail. We shall see later on in the article that insider trading hasn’t been stamped out yet it is only that regulators have become better at detecting it. A striking feature in the sequel is the advance made in technology since Gekko was released from jail.

The film nostalgically depicts Gekko leaving jail and collecting his mobile phone the size of brick compared with the stylish small (4g) smart phones in use today. Recent technology opened up massive opportunities for stock traders who as a result possess a huge amount of information at their fingertips .All this is vividly reflected in the sequel while the director Oliver Stone had a difficult task in filming the theme not to step on the toes of Bear Sterns or Lehman Bros which both featured as collapsed financial giants during the tumultuous two years since 2008. This is not to mention the $50 billion Ponzi scheme run by the ex Chairman of Nazdaq namely Bernard Madoff who run a successful hedge fund that suddenly went bust last year.

The film shows us how we were robbed blind by the Wall Street barons who would after raiding the store pleaded successfully with the US Treasury for a generous bailout to keep the entire system from collapsing. It goes without saying that the slogan ‘Greed is good’ epitomises the opprobrium consumers felt when they heard tales of investment bankers in Wall Street selling short and who dabbled in worthless paper such as credit default swaps ( cds ‘s  )culminating to the sub-prime bubble.

Yes it is true that greedy bankers were responsible for our current recession¸ a crisis which Gekko in the film warns us will happen. But the spotlight is young Shia LeBeouf an idealistic Wall Street kid who blindly fantasises that money and building a secure future can go hand in hand. As it turns out¸ he’s caught up in the first of the major investment banks to be sunk by the credit default swap plunge and we witness¸ through his eyes¸ the first raindrops of the storm that would wipe out global economies. It beckons the start of the credit crunch. After the election of Obama much had been done to save the US economy with taxpayers forking out massive bailout funds (TARP) intended to buy out toxic assets accumulated by banks and other financial institutions such as AIG. All this has culminated in a biggest and deepest recession since the end of the Second World War. Gekko says among other things that “the mother of all evil is speculation and borrowing to the hilt”. When addressing students¸ he tells them they’re the ‘Ninja generation’ – no income¸ no job and no assets. But let us now visit the norms that guide hedge fund marketers who promote billion dollar funds to willing investors. Just read the fine print in the offering memorandum and the finesse of the legal jargon that dominates it. To start with Fund managers extol the virtue of compounding. All tell us that successful investment strategies share a common characteristic – they employ the power of compounded growth aimed to deliver real long term returns. They then try to persuade us that the best way to achieve this is to diversify risk and we do this through true multi-asset class¸ multi-manager investing. Typically they pr