Thursday, March 14, 2013

Two recommendations: "Margin Call" and "Free Capital"

In this post, I'll take a break from stocks and instead recommend a movie and a book.

The movie recommendation is "Margin Call", a relatively understated suspense drama about the unravelling of a major fictional New York investment bank in 2008. As one can guess, the drama is caused by Mortgage Backed Securities (MBSs), the crap that brought down Lehmans Brothers and Merril Lynch.

I liked the movie because it is very believable and it did not over-dramatize the tense, career breaking, life shattering moments of the movie. I'll support my points a little without spoiling the ending too much.

The movie plays out in a 36 hour period and starts as a do-good manager is shown the door during a massive layoff. Before he leaves, he hands a subordinate some files he has been working on. Those files purport to show that the company's exposure to the MBSs are about implode. Over the course of the evening, morning and next trading day, the drama plays out as executive after executive and finally the CEO is alerted to the info and they attempt to contain the fallout.

I enjoyed the drama, because firstly I didn't see the over-dramatization and the overacting that is so prevalent in Hollywood. Secondly, I liked how the movie shows that all people are complex and torn by greed and principle. I couldn't find a clear villain in the movie although certainly some are more responsible than others for the mess. And everyone in the end was able to be bought for the right amount of cash. And thirdly, I found that the movie portrayed bankers more as clueless buffoons than the stereotypical knivving fat cats. This is also my view from several books about the 2008 crisis.

My second recommendation is the book "Free Capital" by Guy Thomas. I read about it in oddball stocks. The book is the first that describes people with nonfinancial backgrounds who become full time investors. The book mentions a dozen millionaires, all between 40 and 60 who now manage their own money. A few of the subjects have financial backgrounds but most just stumbled on investment by accident. For example, one could be dissatisfied with his job, or another may do it out of necessity because he could not find another way to generate income. This book contains many insights and lessons from others that may help me in my investments. It is definitely one of the top books I've read on finance.

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