Month: February 2016

Great Financial Movies, Documentaries and Series Reviewed

Spolier Alert: Mild spoilers ahead

Leading up to the release of the Big Short, a movie based on the book. Many of these movies are based on books in fact and Hollywood has a fascination with these sorts of Movies. It is a sad reality that in the world of exchange rates massive leverage and bing banking decisions of Bankers and Brokers affect everyone around the world. Nonetheless the movies can be entertaining so I’ve watched and reviewed some from the perspective of knowing a little bit of what is going on.

Financial Movies

Margin Call (5/10) [Rotten Tomato: Audience Score 74%]

A very Hollywood style film with little to no reality. The film takes place over a single day. The day leading to the global financial meltdown. It feels trivial to show just this time when the repercussions, you would think, would be more entertaining to the viewer.

Also financially speaking not too much to go on. The risk analysts at the firm had gone through the numbers and apparently they had over leveraged a particular derivative that was really worthless. Which meant that the company if it did not sell right now would lose more than it’s entire market capitalisation. No charts or figures were ever given, we only see blurry computer screens in the background.

Just an annoying film that ends abruptly about some corporate clown owners of a huge firm that have people that are are selfish and think more about their own career progression than the company / global financial position.

The movie is about the utter ass clowns that started the fire sale of the 2008 financial crisis, and they are portrayed in a neutral light. Also it is show that they had no choice, it was sink or swim.

Sometimes I think some of the scenes in this film were just thrown together.

Rogue Trader (7/10) [Rotten Tomato: Audience Score 52%]

Not an enjoyable film for me, but I would say it is an essential for any potential or current trader. This is the reality of trading, it is the real thing. Perfect film for understanding the negative aspects of leverage and the derivatives market. Moral of the story, don’t use leverage.

The film is a biographical film and probably the most realistic of all the films in this list.

Although not set around a financial crisis, the story revolves around the rogue trader Nick Leeson who single handedly bankrupted a ban in the united kingdom with terrible trading practices.

If you ever wanted to know how terrible trading can be, this is the film to watch. It is not enjoyable, it is frustrating and the recklessness of the main character will piss you off. No wonder the rotten tomato audience didn’t like it…it is old as well. Anyway the verdict is an essential watch for any trader.

The Big Short (6/10)

[Rotten Tomato: Audience Score 88%]

It’s a bit hollywood, appealing to the normal people. They tried too hard to make something that is boring sound interesting. It is a good movie for the novice to enjoy.

Financial Documentaries

Inside Job (9/10) [Rotten Tomato: Audience Score 91%]

Warning: This movie might annoy you or piss you off

An awesome documentary exposing the disgusting rotten financial events, institutions and governments that led to the financial crisis in 2008. Narrated by Matt Damon and with interviews with good guys and bad guys, as well as great explanations of what really went on when those Capitalist bastard decided to deceive and burn the rest of the world.

The main cause of all of this was the Greed of disgusting humans.

Another shocking thing that comes out is the amount of academic community member were paid to praise the terrible decisions and deregulation of banks. Rating agencies: Moody’s, Standard and Poor’s and Fitch also gave these CDO and CDS instruments triple AAA ratings because they make money when they do. Ratings agencies opinions mean nothing.

The financial institutions even got the government (tax-payers money) to bail them out…

It is sad that no one is looking out for the public, only themselves.

Don’t ever use leverage, don’t ever use money you don’t have.

A financial engineer gets paid 4 to 100 times more than a real engineer. A real engineer builds bridges. A financial engineer builds dreams and those dreams turn out to be nightmares that they don’t have to endure.

Here is the PDF mentioned that exposes before the fact called Who’s Holding the Bag

Princes of the Yen (8/10)

A profound look at how the central bank and finance ministry work together or not. It highlights the ways in which an economy is highly controlled by government intervention and it exposes what is seemingly profound truths that relate to many economy. It is based on the Japanese post-war economy and what led it to prosper and fall.

Unfortunately not too much info about the negative interest rates and how it became like that and what is means. It is also taken primarily from a single person’s viewpoint but this guy clearly knows his stuff and is a professor of economics, Richard Werner.

View the Summary of points in the Princes of the Yen

97% owned ( 8/10 )

An in-depth look into what is really going on in the British economy with regards to money creation. It can be likened to the commercial bank and central bank actions throughout the world after the dropping of the gold dollar standard.

See the Summary of 97% Owned Financial Documentary

Enron the smartest guys in the room

Money for nothing, inside the Federal reserve

End of the Road, how money became worthless (9/10)

Another classic movie movie showing the debasing of world currencies through the removal of the Dollar-Gold standard by Nixon on 15th August 1971. Ending the Bretton-woods system.

The movie suggests the economy is just a massive Ponzi scheme held up only by people’s belief that the US can pay back this money, the truth is it cannot.

Proven 100% failure rate, FIAT currencies always fail

All currencies have tethered their currencies to the US dollar ie. fresh air.

A very simple explanation, to a very difficult topic.

One thing that this movie disregards is the group that creates the majority of money…commercial banks, not central banks.

They were saying buy gold when the movie was released 2012, when it was $1700 a fine ounce.

Take home: Become more economically aware, empower yourself, don’t let the people running the Ponzi scheme guide your decisions.

The China Hustle (8/10)

One from netflix, showing how US companies made dual/foreign listings of Chinese stocks on US exchanges that had false financials.

The real companies were not as great as they were made out to be across the pond.

A nice documentary about how shareholders can be the idiots left holding the bag,

Financial Series

Dirty Money (8/10)

A netflix original series exposing people and organisations that broke the law and cheated in order to make more money.

Billions

Follow Bobby Axelrod an insider trader billionaire with a hedge fund called Axe Capital and the District attorney trying to take him down.

A semi-realistic look into the world of high finance.

Making the best of a Tax Free Savings Account

So the deadline for this years R30000 maximum contribution is the end of February 2016, and if you are like me you have been waiting (procrastinating) for some time about this.  In this article I will be highlighting my thinking of making the best of a Tax Free Savings Account in South Africa for the various income groups.

A Summary of Tax Free Savings Account Options

We can categorise the investment options into 6 categories as follows:

Stock Broker Account

Costs vary from None (Easy Equities) to 0.5% annually

A normal stock broking account where you manage your account. Remember you can only invest in exchange traded products (Index trackers and ETF’s). You also can’t buy and sell, so if you expect resources to do well for 2 years by all means buy Satrix RESi10 but when you feel they have topped out and sell, you can’t go and invest that sum elsewhere you will have to wait and invest in R30k increments again. Apparently this restriction will end in the coming year.

No guarantees on returns

Unit Trust

Costs vary from 0.2% (Old Mutual Life40 fund) to 2.61% annually

A trust formed to manage a portfolio of stock exchange securities, in which small investors can buy units. Basically you deposit and a fund manager manages the money, nothing to worry about and less risk usually. For that convenience you pay a premium in terms of fees, so watch out.

No guarantees on returns

Cash deposit/ Fixed Deposit

Costs are usually free

A standard savings account offered by banks. You deposit money, they use the money for loans you gain interest in return.

Returns vary based on the amount from 2-3% to 8.61%. Investec offers the best deal but you are forced to deposit the full R30000 once off as the minimum each year and bound to a 12 month term.

Returns are guaranteed

ETF

Costs are 0.11% to 1% Annually (Absa S&P GIVI)

Similar to a stock broker account but held by the ETF manager themselves.

No guarantees on returns

Bond

Annual costs are zero the only available bond is Fed Group according to savetaxfree.

Interest rate: 7.5%

A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.

Returns are guaranteed

A word on Risk for your Tax Free Saving Account

Time to look at yourself. How annoyed would you be if you deposited R30000 on 01 March 2015 and the total investment is worth R25000 now? If you would be very annoyed then I would say stick to a guaranteed return from fixed deposit or bond accounts.

As with anything if you increase the risk, then losses can be higher and rewards can also be higher. That is why I feel if you are a seasoned investor and can afford to lose the R30000 a year…I would suggest that your tax free savings account be made up of your riskiest investment choice. If you are not paying tax on this account and it is not your only source of saving/invetment then it is only natural to take advantage of the fact that it is tax free. Another important thing to note is your drawdown, the maximum you will lose is limited per year. It is limited to R30000 so if you can afford to lose that each year and still maintain your current lifestyle I would say make your TFSA (Tax free savings account) your riskiest investment.

Making the Best of a TFSA: The Higher Income Sector

Let us look at the past year to date the best performer from the ETF’s has been the DBXJP followed by DBXUS and DBXWorld. All above 27% returns for the year to date. Now past performance is no indicator of future performance but Satrix IndIi25 which is usually the apple of the ETF investors eye, year to date has returned 7.32% and it was the 7th best ETF. You might as well have put it into a fixed deposit. Only 10 out of the 34 ETF’s you can invest in (my data may be wrong) have been profitable year to date with only 8 greater than CPI.

So this year (March 2015 to date) if you weren’t smart enough to put your money in a foreign tracker ETF it would have been smarter to put it in a fixed deposit (cash) earning interest.

But I digress, hindsight is always 20/20 and I am not taking dividends nor unit trust performance’s into account.

The Higher Income Pick:

You’ve got to take the risk. Also if you haven’t started your tax free savings account and have R60000 lying about you could pick up a proverbial “double whammy”. If you deposit R30000 during February and another R30000 on 1 March 2016.