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Wolf Of Wall Street lays bare the pitfalls awaiting those who succumb to greed and envy
Goh Eng Yeow
12 January 2014
I am glad I went to the preview of the movie The Wolf Of Wall Street, and got to talk about it two days later at the launch of my first book, Small Change: Investment Made Simple.
The film, starring Leonardo DiCaprio as the villain Jordan Belfort and directed by Martin Scorsese, tells the story of a former broker on Wall Street who stole hundreds of millions of dollars from investors in the 1990s through his “pump and dump” stock scams to fund a drug-fuelled life of debauchery.
But first some inconvenient facts about the real-life Belfort: He went to jail for only 22 months despite committing so much wrong. Those who were defrauded by him later said he failed to honour his promise to make restitution.
After getting out of jail, he hit the lecture circuit and became a successful motivational speaker who wrote two best-sellers. That would offend the sensibilities of those of us who strongly believe that crime does not pay.
So why am I recommending that you see the movie? To me, The Wolf Of Wall Street is an eye-opener for anyone - bar stock manipulators - who think they can make a fortune out of trading penny shares.
But unless I tell you upfront, you will sit through the three hours of the film - be prepared for plenty of swearing, sex and drug use - and miss the warning message flagged in it as you laugh at the anti-hero’s antics.
Stratton Oakmont, Belfort’s company, took excess to excess, specialising in peddling penny stocks issued by financially suspect firms to unsophisticated investors.
Or as DiCaprio’s character says in describing the job of one of the firm’s brokers, peddling penny stocks is like “selling garbage to garbage men”.
It reminded me of a conversation I had with a businessman many years ago on why people perpetually get caught in penny stock scams. At that time, I had my eyes on a counter whose price had tripled in a month for no particular reason.
He said: “Mr Goh, there are people who want to get rich fast. Sell them a beautiful enough dream and they will get sucked in.”
He then disclosed that one retiree sank $200,000 into the particular stock I was cagey about.
Months after the meeting, that stock collapsed in price and I always wondered about the retiree and his $200,000. Did he get out in time?
It is no wonder that some Wall Street brokers are reported to be unhappy about the Wolf film, feeling perhaps that it exposes the darker arts practised in the stock market.
When I watched the film, I had misgivings initially about the wisdom of screening such a vivid portrayal of a penny stock scam. Will the film become a template for a whole new generation of con artists bent on defrauding unwary investors of their hard-earned cash?
After all, there were bankers and stock brokers who claimed that it was another hit movie from 27 years ago that lured them into the finance business in the first place.
The firm was, of course, Wall Street starring Michael Douglas as the swashbuckling financier Gordon Gekko who famously proclaimed that greed, for lack of a better word, is good.
On reflection, however, I have to admit The Wolf Of Wall Street has powerful educational value because it shows how a slick conman can cause us to lose our senses with some get-rich-quick scheme by capitalising on our greed and envy.
Belfort’s contributions to the annals of securities fraud had been a toxic mix of “IPO and dump”.
Exploiting the irrational exuberance for IPOs (initial public offerings), Belfort helped companies with dubious business plans go public and sell shares to outside investors. But he and his associates continued to illegally hold most of the shares in these companies through nominees.
Belfort and his associates would then drive up the price of the shares and dump them once the value went sky-high, making a big gain in the process.
One point: Does the film not evoke memories of some of our own S-chip accounting scandals that erupted four years ago?
As one writer observes, the devil always has the best tunes and The Wolf Of Wall Street carries a more powerful and memorable message than the homilies offered by the Pope in his crusade against the idolatry of money.
But as long we keep up our guard against deadly sins such as greed and envy, scam artists like Belfort will not have the last laugh. That, I feel, is the real value in watching the film.