Thursday, January 30, 2014

DOCUMENTARIES IN ECONOMICS & FINANCE FOR COURSES TAUGHT BY DR. MABID ALI AL-JARHI

I.         The Trillion Dollar Bet (2000) - a documentary about the demise of Long-term capital management

 (2000; documentary; 48 minutes; option pricing)
This documentary tells the story of the Black-Scholes-Merton options pricing formula, physics envy in finance, and the collapse of hedge fund Long-Term Capital Management (LTCM). It includes interviews with Robert Merton and Myron Scholes, who won the Nobel Prize in Economics in 1997. (The Nobel Prize could not be given to Fischer Black, who died in 1995.) The effect of the formula on financial markets was far reaching. In the words of the narrator of the documentary, “Capitalism was on the march. The combination of mathematics and money, it seemed, was unstoppable.” The hedge fund LTCM was founded by a bond trader at Salomon, and Merton and Scholes signed on as partners. When LTCM fell, it had losses so large that it became a systemic threat and had to be bailed out, bringing financial losses and lingering embarrassment to its owners. Its fall raised a difficult question: If even Nobel laureates cannot understand the risks in financial markets, who can? The closing line of the documentary: “There is a tempting and fatal fascination with mathematics. Albert Einstein warned against it. . . . Don’t believe in something because it is a beautiful formula.”

II.         Floored: Into The Pit - Epic Trader Movie! (2009; documentary; 78 minutes; floor trading)

Hear it from the Chicago traders themselves — who tell it like it is, with lots of swearing and cigars. This documentary is also a chapter in financial history; it’s about a profession that technology has made largely obsolete — floor trading. It shows how the brutally competitive and in-person floor trading at the Chicago Mercantile Exchange worked. There are a number of surprising quirks to the culture. Floor traders had their cliques, based on which part of the city they lived in or their ethnicity or even their religion. Many traders earned a living by trading on their own account. As one of them says, “I am the hedge fund manager of my own family’s worth.” Others are more frank about what they do. As one puts it, “Whether people like to admit it or not, this is a form of gambling.” The film explains the switch from open-outcry floor trading to electronic trading and its effect on the lives of the floor traders in Chicago. Today’s impersonal and anonymous electronic trading in most financial markets is the opposite of the royal-rumble-style pit trading, and some of those who had great success in the pit struggle with electronic trading. While the film is about floor trading in Chicago, some of its lessons can be safely generalized to markets around the world that underwent the same change.

III.         Rogue Trader (1999)

In a sentence: Faster paced British version of "Wall Street."
Plot: Based on the real-life story of Barings Bank trader Nick Leeson, Ewan McGregor does a surprisingly awesome job of emulating the British wunderkind down to his addiction to fruit candies. While a relatively unsuccessful movie at the box office, Rogue Trader is entertaining.

IV.         Boiler Room (2000; drama; 120 minutes; securities fraud)

This film depicts finance at its absolute worst: A group of lying, cheating, and stealing young stockbrokers sell worthless stocks to people they can fool using high-pressure sales calls. “You will make your first million in three years” is the promise made by J.T. Marlin to its batch of young recruits. If Wall Street explains insider trading, this one explains the pump and dump. Money is everything for these guys, and they make their money by closing sales. As one of them puts it: “And there is no such thing as a no-sale call. A sale is made on every call you make. Either you sell the client some stock, or he sells you on a reason he cannot. Either way, a sale is made. The only question is, Who’s going to close? You or him?!” The film is also the story of a son who finds it hard to live up to his father’s standards. He joins the dodgy brokers and discovers his inner salesman. Interestingly, these stockbrokers act as if they are not practicing fraud but, rather, are performing the art of sales at the highest level.

V.         The Corporation (2003; documentary; 145 minutes; legal person)

The most destructive sociopath of modern times, according to this hard-hitting documentary, is the corporation itself. The opening line says it well: “One hundred and fifty years ago, the business corporation was a relatively insignificant institution. Today, it is all pervasive.” The Corporation is not strictly a finance film, but it deals with the concept of limited liability and externalities. Featuring a number of interviews with prominent thinkers, the documentary digs deep into the ideas underlying corporations, contrasting the natural person (human) with the legal person (the corporation) and exploring why some large, profit-hungry companies seem to have little regard for society and the environment. When I interviewed Bob Monks, a corporate governance pioneer, about his top learning resources on corporate governance, he named this film as “an all-time favorite.” Monks is interviewed in the film. His best line? “A corporation is an externalizing machine in the same way that a shark is a killing machine.” If you are interested in environmental, social, and governance (ESG) issues in finance, this film is one to watch.

VI.         The Ascent of Money (2008; documentary; 120 minutes; financial history)

In this documentary, based on a book with the same title, Niall Ferguson, author and academic, traces the evolution of money, bond markets, insurance, and the subprime mortgage debacle. A key lesson from this documentary is the same as that from history in general: This time is not so different; it has happened before — and more than once. We need only read history to find out. Ferguson’s thesis is that the history of money can help explain all human history. “There was one huge possibility created by the emergence of money as a system of mutual trust — a possibility that would revolutionize world history. It was the idea that you could rely on people to borrow money from you and pay it back at some future date.” That’s why, explains Ferguson, the root of credit is credo, Latin for “I believe.” This fast-paced documentary was filmed in a variety of locations, including the United States, the United Kingdom, Japan, Italy, Russia, and Chile. The two-hour version of this documentary comprises six episodes, starting with the origin of credit and ending with globalization. This is how Ferguson puts it: “Because we take it for granted we tend to underestimate the extent to which our entire civilization is based on the borrowing and lending of money. No, it does not literally make the world go round. But it does make vast quantities of people, goods, and services go round the world from Babylon to Bolivia.”

VII.         Capitalism: A Love Story (2009; documentary; 127 minutes; capitalism)

This may well be the most provocative film on the list. Made by Michael Moore, who is described in the trailer as “the most feared film director in America,” it hits Wall Street hard, gives voice to some of the views held by ordinary Americans, and goes after the ideology of free market capitalism. It does so in the context of the social cost of the financial crisis in the United States. An early line by Moore provides a good indication of the content: “This is capitalism, a system of taking and giving, mostly taking.” The documentary shows how those being evicted from their homes or laid off from their jobs feel, something that statistics cannot adequately convey. Here is a line from an American being evicted from his home: “There’s gotta be some kind of rebellion between the people that have nothing and the people that’s got it all.” The film openly questions the political power of financial institutions. (It has some shocking scenes, such as one in which the chairman of Merrill Lynch tells US President Ronald Reagan, who is making a speech, to “speed it up.”)
Moore documents
·      The failures of capitalism in the United States,
·      How the regulatory system seems to privatize profits and socialize losses, and
·      How large financial institutions write the rules.

VIII.         Why Are We All in Debt? (2009; documentary; 26 minutes; alternative monetary system)

Four parts:
This documentary is the shortest film on my list. As the title suggests, it addresses a fundamental question that puzzles many: How come we are all in debt? The principal writer and presenter in this documentary is the Islamic finance author and former bond-derivatives dealer Tarek El Diwany. He points out that according to conventional wisdom; both the disease and the cure of the financial crisis are the same: “On the one hand, we are told that our financial crisis is the result of too much debt. But then we are told that the solution is that the banks lend more. How can that be?” Made in England, it is probably the only Islamic finance–themed documentary of its kind. Taking a historical perspective, the film explains the origin of paper money, modern-day interest, and fractional reserve banking and its impact on the world around us. The documentary describes paper money as part of the problem: “Paper money is a promise to pay that is never kept. You can’t go to a bank and get your ten pounds’ worth of gold.” The film does not just explain a problem, it also offers a solution — an alternative financial system in which the money supply is controlled by neither the banking establishment nor the government.

IX.         Inside Job (2010; documentary; 105 minutes; financial crisis and regulation)

One of the most insightful documentaries on the 2008 financial crisis, this film, narrated by Matt Damon, makes the case that the crisis could have been avoided if regulation had been adequate. An early line sets the tone: “This crisis was not an accident. It was caused by an out-of-control industry.” It is similar in spirit to Capitalism: A Love Story but strikes a more serious tone and goes about analyzing the crisis, largely through a series of interviews with well-placed individuals — politicians, journalists, and academics. As described by director Charles Ferguson, the documentary is about “the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption.” Made in the United States, Iceland, England, France, Singapore, and China, the film has its share of powerful scenes and hard-hitting interviews with academics and policymakers alike. In a hearing where representatives of Wall Street are being grilled by US legislators, one legislator passionately says, “You come to us today, telling us, ‘We are sorry, and we won’t do it again. Trust us.’ Well, I have some people in my constituency, and they actually robbed some of your banks. And they say the same thing.”

X.         Too Big to Fail (2011; drama; 99 minutes; systemic risk)

Based on the book with the same title, this film is about the 2008 financial crisis, the bankruptcy of Lehman Brothers, and the subsequent bank bailouts. Its title is a phrase that has entered into the popular lexicon because of the financial crisis. Like Wall Street: Money Never Sleeps, this docudrama covers the subject of moral hazard. The US Treasury Secretary is shown saying, “We are not bailing out Lehman. Wall Street has a gambling problem. If government keeps covering their losses, they never learn anything.” Like many films on my list, this one is highly critical of Wall Street. Still, the film is unusual because it provides a reconstruction of the closed-door meetings of important real-life figures — such as the US Treasury Secretary, the chairman of the Federal Reserve, and heads of investment banks — as they negotiate the Troubled Asset Relief Program (TARP). You have to follow the dialogue closely to know what is going on, which probably makes it more suitable for hard-core finance fans. At the end of the film, viewers are told that the remaining Wall Street institutions are, once again, too big to fail.

XI.         The High Human Cost of Following the Money in the Madoff Fraud Case


On Dec. 11, 2008, Bernard L. Madoff confessed to F.B.I. agents that he was running an immense Ponzi scheme, involving tens of billions of dollars from investors all around the world. That might have been a day of triumph for Harry Markopolos, the whistle-blower who for years had tried to get the Securities and Exchange Commission, as well as several business publications, to investigate Mr. Madoff’s activities. Instead, the arrest provided only momentary relief. As set out in the documentary “Chasing Madoff,” Mr. Markopolos panicked, thinking it would be only a matter of time before embarrassed S.E.C. agents would break into his home in Whitman, Mass., seeking to erase his records of their incompetence. Of course, as with everything else in this case, the S.E.C. did nothing.

XII.         Peer into the Future of Hedge Fund Evaluation: Send in the Clones

Published on Sep 3, 2013
In the future, we will not pay much for exotic betas. We will pay for superior human intellect instead. We will know the difference because we will abandon simpleminded performance benchmarks, like peer groups and indexes, and replace them with smart science. Disruptive innovation will elevate our comprehension and contentment.

XIII.         Debtocracy (2011)

For the first time in Greece a documentary produced by the audience. Debtocracy seeks the causes of the debt crisis and proposes solutions, hidden by the government and the dominant media.
Debtocracy is a 2011 documentary film by Katerina Kitidi and Aris Hatzistefanou. The documentary mainly focuses on two points: the causes of the Greek debt crisis in 2010 and possible future solutions that could be given to the problem that are not currently being considered by the government of the country.
Aris Hatzistefanou, 34, is accustomed to uncomfortable reporting. A journalist since his teens, his long-running show infowar on Sky Radio was canceled just as his thought-provoking documentary, Debtocracy, was released.
From the authors: The idea came about during a Sky Radio show on how the Ecuadorian president was responding to the country’s massive debt. He started a simple financial audit of sovereign debt, and concluded that other countries were using Ecuador as a slave, like Argentina and many other countries before. The administration forced a haircut of 70% on its creditors.
Katerina Kitidi – editor in chief of TV XS – and I decided to produce the documentary. We faced a serious funding problem but, for obvious reasons, we did not want to ask any political parties, companies or – even worse – banks, so we resorted to crowd funding.
It worked very well; we collected 8,000 euros in just 10 days, an unprecedented figure for a country like Greece, facing a serious economic crisis.
At the beginning, this project was supposed to be a mere YouTube video. But because so many professionals offered their help (musicians, video editors), and so many people donated their money, it became a real documentary. The surplus was invested in promoting the movie.

XIV.         Le Capital French - (2012)

In French:
English and other subtitles:
Le Capital (English: "Capital") is a 2012 French film directed by Costa-Gavras.
The film describes an executive who becomes the CEO of a large bank, only to upset the bank's board of directors when he begins to take unilateral control in the bank, laying off many of the employees and making a corrupt deal with the head of an American hedge fund.

XV.         The Debt time bomb that is Britain

An apocalyptic documentary regarding the sorry state of the British Economy and its colossal debt mountain. Warning: Unpleasant content.
If Money Week are to be believed, Britain's love affair with borrowing has put us on a collision course with complete economic, social and political collapse. Osborne cannot save us now.

XVI.         Wall Street: Money Never Sleeps (2011; drama; 133 minutes; moral hazard)


Gordon Gekko is back, but this time in a feel-good film. After serving jail time for what happened in the prequel, Wall Street, the former insider is now an outsider. But he has not come back without some quotable quotes: “Someone reminded me I once said greed is good. Now it seems it is legal. Because everybody is drinking the same Kool-Aid.” Unlike Wall Street, this is a relatively complicated story, and the film devotes a good deal of time to the emotional drama of Gekko’s strained relationship with his daughter, her up-and-down relationship with her partner (played by Shia LaBeouf), and his relationship with his mother, whom he must repeatedly bail out from financial troubles. The film takes place within the context of the financial crisis, in which a young financier, Gekko’s daughter’s partner, a specialist in alternative energy, is trying to live a different kind of life on Wall Street — making money while doing good and avoiding the moral hazard of bailouts. Rather than blatantly violate the law as Gekko did in Wall Street, the young financier in this film prefers to work around it. Luck and design pit him against the same billionaire who is the enemy of Gekko. What is driving these people? Is it money, is it love, or is it simply madness? Gekko says, “It’s not about the money. It’s about the game, the game between people.”

XVII.         Front-line, the Warning (2009)

Long before the economic meltdown, one woman tried to warn about the threat to the financial system.
Brooksley E. Born (born August 27, 1940) is an American attorney and former public official who, from August 26, 1996, to June 1, 1999, was chairperson of the Commodity Futures Trading Commission (CFTC), the federal agency which oversees the futures and commodity options markets. During her tenure on the CFTC, Born lobbied Congress and the President to give the CFTC oversight of off-exchange markets for derivatives in addition to its role with respect to exchange-traded derivatives, but her warnings were opposed by other regulators. Born resigned as chairperson on June 1, 1999, shortly after Congress passed legislation prohibiting her agency from regulating derivatives.
An October 2009 Frontline documentary titled The Warning described Born's thwarted efforts to regulate and bring transparency to the derivatives market, and the continuing opposition thereto. The program concluded with an excerpted interview with Born sounding another warning: "I think we will have continuing danger from these markets and that we will have repeats of the financial crisis -- may differ in details but there will be significant financial downturns and disasters attributed to this regulatory gap, over and over, until we learn from experience."
In 2009 Born, along with Sheila Bair of the FDIC, was awarded the John F. Kennedy Profiles in Courage Award in recognition of the "political courage she demonstrated in sounding early warnings about conditions that contributed to the current global financial crisis". According to Caroline Kennedy, "...Brooksley Born recognized that the financial security of all Americans was being put at risk by the greed, negligence and opposition of powerful and well-connected interests... The catastrophic financial events of recent months have proved them [Born and Sheila Bair] right." One member of the President's working group had a change of heart about Brooksley Born. SEC Chairman Arthur Levitt stated "I've come to know her as one of the most capable, dedicated, intelligent and committed public servants that I have ever come to know", adding that "I could have done much better. I could have made a difference" in response to her warnings.

In 2010, a documentary film Inside Job further alleged that the crafting of derivatives regulation was flawed from the Clinton administration on. Along with fellow whistle blower, former IMF Chief Economist Raghuram Rajan, who was also aggressively rebuked by the economic establishment, Brooksley Born was cited as one of the marginalized voices arguing that financial derivatives increase economic risk.
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