By Jason Rigoli, Principal at The White Oak Group
Are you headed to a movie this weekend? If so, you might want to check out the current No. 1 film in America, Wall Street: Money Never Sleeps.
I’m sure you all remember Michael Douglas’ infamous villain character, Gordon Gekko, from the first movie. In this sequel (which, believe it or not is Oliver Stone’s first sequel), Gordon Gekko has recently been released from prison and tries to warn Wall Street about the looming economic disaster. (Too bad this movie wasn’t released a few years ago prior to the start of the current recession. Maybe we could have learned something from Gekko.)
Anyway, Gekko makes an interesting point in the movie based on his famous “Greed is good” slogan from the 1987 movie. In the sequel he said, “Someone reminded me I once said, ‘Greed is good.’ Now it seems it’s legal. Because everyone is drinking the same Kool Aid.”
In an article in Daily Finance, reporter Bruce Watson tries his hand at comparing the business environment in the 1980s to the one today. He writes,
“Back then, the great wheeler and dealers were corporate raiders like Gekko, who took over companies and either dismantled or reorganized them for considerable profit. Today, the biggest paychecks go to hedge funders like James (referring to Bretton James who is a shady hedge fund manager in the movie, played by Josh Brolin) – or John Paulson – who never get any closer to a company than its stock or its derivatives.”
With billions of dollars under management, savvy hedge fund managers can swing markets in their favor, often at the expense of the retail investors, home owners, and retirees, without even leaving their computer screen. There are a multitude of examples of individuals manipulating foreign currencies (such as George Soros), driving large swings in commodities (oil over $140 a barrel), shorting the housing sector (such as John Paulson), and shorting a century old investment bank into oblivion (Lehman Brothers).
This brings me to a few very important questions: Are the actions of hedge funds and people like this a net positive for our markets? Our economy? Our country? Drop us a comment and let us know your thoughts.
Also, let me know if you liked this movie … the reviews have not been too nice.