My two favorite films of the 21st century—Wolf of Wall Street and The Big Short—will never appear on the Top 50 or even Top 100 list. Part of the reason for that is the subject matter. The average person has absolutely no idea how the financial and asset markets work or even why they exist.
While the characters in these films are in their mid to late 30s, the average 30-year-old today is embarrassingly ignorant about money and the markets. You also might think that it is not important, but note this: Over 1 billion people hold credits cards, with Canadians being No. 1 on the list as 80 percent of them has at least one card. The interest rate payable on those credit lines is determined in part by what happens daily in the financial markets.
Is it really necessary to mention that the price of literally everything runs off the price of the most widely and actively traded asset in the world—crude oil?
The scams of the Wolf of Wall Street were not about “financial literacy.” When a person is able to invest several hundred thousand dollars, he is not “illiterate.” Likewise, the global banks, pension funds, institutional investment companies, and individuals that were destroyed by the global debt failure and the Western housing market collapse were extremely literate.
There’s a line in The Big Short that explains it all: “Truth is like poetry and most people hate poetry.”
People who were cheated by Jordan Belfort—and thousands others like him—were not abnormally greedy, particularly incompetent, or overly trusting. What they refused to do was confront the truth.
Stock market investing is like a bank account in that’s supposed to be instantly liquid. The first time Belfort and his ‘Boys’ said “you cannot get your money,” the next call should have been to law enforcement. The only genuine reason for not allowing a withdrawal I heard of was several months ago when a local mutual fund could not honor withdrawal requests for a couple of days. This was because, while the banks and stock market were open, mobility restrictions did not allow their employees to come to work to process the withdrawals.
In the run up to the 2007 global financial crisis, literally everyone—government regulators, banks and financial institutions, the real-estate industry, and financial press— knew that there was a huge problem brewing.
Even individuals bragged to their friends about buying a new house by receiving a “NINJA Loan”—“No Income, No Job, No Assets.” And none of these people were asleep in the early 1990s when the government had to spend $30 billion (to date) to bail out the savings and loan industry for all the failed housing loans they made.
When it comes to facing the truth, stock market investors—primarily institutions—are deaf, dumb, and blind. Outside of the tech issues, there have been zero earnings per share growth in the past 12 years. Yet the Dow Jones Industrial Average is 225 percent higher since end 2008. If you take away global technology companies, the World ex-Technology Stock market Index has achieved zero earnings growth since the 2008 crisis.
The popular American science fiction television series The X-Files used this as the tag line: “The Truth is Out There.” But the American supernatural drama television series Charmed said it best: “The Truth Is Out There…and It Hurts.”
E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.