MovieChat Forums > Margin Call (2011) Discussion > Problems- From a Finance Student

Problems- From a Finance Student

posted 13 years ago by t_may15
99 replies | jump to latest

So when I originally heard about this movie I was excited as I heard that IT WAS NOT POLITICAL. I was excited to see a movie on this subject that didn't have an agenda, that actually knew what it was talking about.

Now for the most part I enjoyed this movie. I thought it was superbly acted. The casting was great. The cinematography was wonderful.

The one big GLARING flaw. The one(there's a few other less obvious ones) thing that made me have to take this movie so much less seriously was this - They really wanted to show that the guys AT THE TOP were incompetent when it came to the actual business of trading. I don't want to watch through the movie and pick out the lines verbatim but there are at least 3, probably more, scenes where Will, Sam , and John either outright say that they don't understand or suggest it by saying something like " just speak plainly" or something to that effect. This is just so laughably ridiculous. The HEADS of a trading floor are going to understand the business, and probably better than anyone else..... It's no different than any other industry. Does the HEAD engineer understand engineering ? Does the head accountant understand accounting? Do the partners at a law firm know how to practice law?

In the finance business there is a designation called the CFA ( chartered financial analyst ). This is a brutally hard designation to achieve that require 4 years of graduate study. Failure rates exceed 40%. People in Will or Sam's position would most likely have this designation. And they certainly aren't going to have trouble understanding the models or reading the charts.......This one point to me gave away the writers slant and made them look like utter fools in this regard.

That is all.

[–] lostn 13 years ago

The writers would have been well aware of this. The reason the heads are "dumb" and ask for things to be explained in English, is a plot device used to give an excuse to the "experts" to explain in plain english to the audience, who will NOT understand the charts and stuff.

That's why they never show any numbers of charts when characters are reading them from the screen. The audience wouldn't understand and they didn't want to take focus away from the point at hand or confuse the audience.

[–] holyspicoli 12 years ago

This is not just a simple "screenwriting trick" to explain everything to the audience. Although the writer achieves that effect by having things explained relatively simply, it also gives valuable insight into the characters, particularly Jeremy Irons' CEO. He clearly already has a basic understanding going into that meeting that the major flaw and undoing of their business is at the company's doorstep; that "the music is stopping", the party is over, and the crash is coming. He knew it would happen eventually and as he states the market undergoes bubbles and busts throughout history. Notice he never looks at the plan, and is on top of every response from each team member and directs the conversation from the beginning. He knows the basic game already and wants a succint and simple explanation to get everyone in the room on the page now and to get this thing moving and take action - he's a results oriented, pragmatic CEO. He's also flexing his social CEO skills to get a feel for how his team is going to react to this and look for any moral objectors to what he knows he must do (sell everything) and who might be a problem (Sam). I think he's also sizing up Zachary Quinto's character to see how this kid handles himself in a pressure situtaion and how he organizes his thoughts and to determine if he'll attempt to keep him on in the company. That's why to me this film is great - yes it manages to "keep things simple" enough for a mass audience to understand, but it does this through character insight and not in a purely expository manner.

[–] poisoncupcake74 13 years ago

actually I think the only reason for saying they couldnt understand the charts or in the meeting where the guy (Jeremy Irons) said: "talk to me like I'm in Kindergarten"...or something like that was specifically for the audience who may not understand what was going on.
Really, I could be wrong, its just my opinion, but I think thats why. Because there are TONS of people watching and interested who didnt understand what was going on otherwise and needed it simplified.

[–] sfedor408 13 years ago

The reason the CEO asks for an explanation is a plot trick used when writing scripts – basically, it allows for the audience to understand what is going on without having a background on all the events leading up to that point. Even if someone has been living under a rock for the past five years and not paying attention to all the financial matters, these few lines of dialogue allow for them to get caught up in an effective way that isn't boring or condescending (to the audience).

[–] simian_ninja 13 years ago

I work in a Hedge Fund.

I've heard it from everybody from the CEO to Risk Management to back office Operations - speak plain and simple English otherwise everybody will think that you are a d*ckhead or just trying to look smarter than you actually are.

The only people I know that like to speak in terminologies have always pretty much been the people that want to pass the buck onto someone else and have them deal with it.

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[–] Yellowman88 13 years ago

Medical doctor isn't going to bust out medical lingo to their patients. KNOW your AUDIENCE. Communication 101.

Terminologies saves TIME. I'm a quant analyst at a trading firm. You better know what i'm talking about or else were going to lose money. If your co-workers don't know the lingo then they are mediocre at their job. Doctors/engineers/scientists etc... you must know it..

Why use 3 sentences to convey something when you could precisely express it into 1 sentence. Easy for your co-worker to remember 1 sentence then 3. It's all about efficiency.

[–] drexeltoker 13 years ago

Let's just call it down the middle? The 'explain it to me like a child' was two-fold. Yes, maybe part of it was to explain to a dithering audience. But the use of those actual words, Irons' expressions and follow-up (how he got to where he is) was purposeful to illustrate how (relatively) 'complex' the trenches might be and that even great manager/CEOs back then might not have fully understood the risks or what was going on (clearly the case)...

There are a myriad of other ways to do the whole 'explain to the dumb audience' trick so I think it is fair to say that was at least part of it...

Also I replied to someone earlier but it got buried so in case they miss it:

Your statements are not entirely accurate. The movie was based on complicated Math Equations. Traders would not and do not know those equations. They trade in milliseconds and rely on FRACTIONS of a penny to make money. The people who make these equations are called "Quants". I've seen their resumes. I saw a guy with an M.I.T. PhD, who had worked with Nuclear Reactors and had all kinds of statistical requirements a "Quant" could meet and the firm *STILL* said he was not good enough. These guys come from a different planet, the code monkeys and I guarantee you the Paulson's, et.al of the world do not have a clue what a Quant equation looks like, much less that a "day in the life" of a Quant is.

1. The movie was not based on complicated math equations. The 'risk management engine/system' is based on complicated math equations. I am pretty sure the point of the movie was to describe a day in a (semi-mock/semi-real) financial firm that came to the brink prior to the full-fledged '08 crisis and how individuals at that firm in various levels dealt with it...

2. Traders DO NOT typically trade in milliseconds and rely on fractions of a penny -- certainly not at banks, although bid-ask has shrunk (especially for cash equity business). Yes, what you describe as high-frequency trading (which I personally loathe) does do that and trade on micro seconds and fractions of pennies per share, to the point that they try to be physically 'closer' to certain exchanges so they save 'time' on electronic transmission, etc.
The Asset Backed Security (ABS), Mortgage Backed Security (MBS), CDO/CLO, etc (collectively lets just call it the structured credit market)--it DOES not trade that way. Cash or synthetic. For starters even in 2007 it was not 'extremely liquid' (say like selling 100 shares of IBM or buying 100 futures lots of NYMEX WTI) so the 'dealer community' (Citi, Goldman, Deutsche, MS, etc) making markets requires a much larger premium, things trade over the counter (OTC) and usually on a bespoke basis, with a lot more credit analysis because there are so many unique issues on vintages, credit triggers, collateralization, etc....in short, it is in no way like you describe.

3. Yes -- a good trader will understand the main equations and drivers of profit and loss (pnl)--DV01, correlation and gamma, recovery ratios, etc. for his products. Structured credit traders are usually more 'math-y' and can have PhD or Masters Financial Engineering etc (though not required all the time) and most of the big shops in US the desks are actually full of Indians, Jews and Asians (or foreigners in general if you will).
Also, quants and structurers will sit right on or near the traders on the desk at most shops.

4. The fact that you refer to it as a 'Quant equation' or 'day in the life' of the Quant was kind of funny, too. The 'day' is rather boring staring at Excel, MatLab, SQL, etc. al day and testing models, fine-tuning the risk engine, PnL, etc.
John Paulson is a dick but a brand now. He is their to manage his fund and think big strategically and to raise funds or maintain (after his disastrous 2011) his client relations. He doesn't need to understand every detail of how to write or program his models or do valuations/stress test every security. He (should) understand the results of stress tests, inputs and sensitivities and the general risks...

[–] 13 years ago

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[–] haloboyscp 13 years ago

I believe it was very simple.
As they're the guys at the top they dont bother about reading the stuff anymore.
They just ask others to tell them what's going on.
I dont think Tuld was serious at all when he said he didnt know anything about the business... He probably read what was going on the firm while he was on his way to the firm and simply wanted to test the employees as just in the following scenes he was the one who decided what to do. He must have understood clearly what was going on.
However I agree with you when it is up to Sam, as long as apparently he couldnt really read what the charts were telling...
But again, may be they just didnt bother to think about what was going on or just couldn't adapt to the new technologies =P.

[–] jdrusk 13 years ago

And yet in the real world of 2008, these super-qualified chartered financial analysts were found to have constructed paper obligations that were worthless.

[–] McEwansExported 13 years ago

Listen, you really have no idea how this works. Your thread title suggests you are a finance student - good news is as a student you have chance to learn, bad news is you are a finance student which makes it probable you think you have things worked out and technically you possibly do but a text book is not the real world.

In simple terms, top executives have so much information coming from so many different sources with so many flavours of accuracy and motivations for why people are telling them what they are telling them and so many considerations around how investors will perceive the company's results and actions that they DEMAND people to speak in plain English and not to share their homework but just get to the nitty gritty. They are paid to make decisions, not sit and listen to junior staff's eureka moments.

It is not the technical stuff they are asking about, yes they know that, it’s the interpretation and opinion they are asking to hear to triangulate against other inputs they have had as well as their own intuition.

This film was scary accurate in its portrayal of how the top guys react. Been there and got the t-shirt!

Come back in 20 years and let's see how you think about your post.

A company is like a tree of monkeys - when at the top and you look down, all you see are smiling faces, and those looking up, all they see are arse holes.

[–] Bozohead 13 years ago

You're young. You still think people in position of authority ALWAYS are competent. Quite often they're not.

If you're beloved Wall Street managers, aka Masters of the Universe, were so brilliant and on top of their game why was there the GFC?

Sam and Will were more than capable of understanding the charts. I think at first they were a bit unwilling to wade through the charts and just wanted Peter to quickly explain it to them.

I will concede that the film makers had a little fun Jeremy Irons' character.