Mod note: "Blast from the Past - Best of Eddie" - This one is originally from 11/11
**SPOILER ALERT** This post is going to discuss aspects of the movie Margin Call. If you haven't seen the movie and are concerned I might ruin it for you, skip this post.
We had a discussion about the movie Margin Call last week and, while some of you didn't think much of the movie, I really liked it. I think the movie gives you plenty of food for thought, and illustrates a situation very similar to what happened at MF Global over the past week.
One of the most interesting aspects of the movie to me was the impact of the bank's balance sheet problem on the rank and file traders. They came to work that day thinking everything was normal and found out at the meeting that it would be their last day. As if that weren't bad enough, they were instructed to destroy their own careers that day by burying their trusted counterparties in toxic assets. As compensation for destroying what was essentially their life's work to that point, each individual trader was offered a $1.4 million dollar one-off bonus if he achieved a 93% clearance rate (in other words, if he sold 93% or more of the toxic assets he was tasked with selling), and the entire trading department was offered an additional $1.3 million bonus apiece if the entire department achieved 93% clearance.
Here's how the options break down as I see it:
- Spend the day burying your book to make the bonus, knowing that at the end of the day you'll be out of work and probably never work on the Street again
- Spend the day looking for a new job, knowing that at the end of the day you'll be out of work and
- You might not find another job or,
- Even if you do find another job, the market going forward is going to be so shitty that you're going to take a massive hit to your income
- You walk out the door without ever picking up the phone
The bottom line is that you're out of work at the end of the day no matter what. So do you refuse to screw the people who trust you and cost yourself the bonus money? Or do you say screw it and sell all the crap on your books, knowing full well that you're hosing people who trust you (and are probably friends of yours on some level) and that doing so is probably going to cost them their jobs (let's face it: banks aren't very forgiving of traders who are taken in and scammed by other traders)?
Is $2.7 million today enough to convince you to screw everyone and walk away from it all? How about $1.4 million (assuming the floor didn't reach its goal, but you reached yours)? Remember: you're out of work at the end of the day no matter what you do.
I'm interested to hear what you guys think. Keep in mind it's not show friends, it's show business. Would $1.4 million in one day be enough to make you throw your career away? If not, how about $2.7 million?
As much as I hate this aspect of my personality, I have to say I'd take the money.
I might be wrong, but surely each individual trader has other options to find a job outside of their own individual clients. Maybe they could even lie and claim they didn't participate in the screw-you maneuver. On the other hand- what if they did? Maybe your next employer- even knowing that you did that, wouldn't care "business is business"?
Also in the movie, it seemed to me that they didn't achieve the overall 93% goal. Even in the beginning of the selling dialogue they seemed to have trouble getting to 93% and of course it went downhill from there.
One thing I love thought about realistic finance movies such as this and the documentary "Inside Job" is going to the theater and listening to other movie goer's opinions- people who don't know much about the financial services industry. I remember someone loudly gasping "Jesus" when Kevin Spacy announced the bonus plan to the rank and file traders. I wonder what their heads are being filled with. I imagine the job market for finance will become even more over-saturated with sellers.
They actually did achieve it. You might be confusing the clearance rate for the discounts they were being forced to provide to unload the crap. They started out the day around 95 cents on the dollar and finished up at 65 cents on the dollar, but they managed to get rid of it all.
I loved the horrified tone of Emerson's voice (played by Paul Bettany) when Rogers (played by Kevin Spacey) told him to fill the order with ML at 65 cents on the dollar.
There is something I don't understand, maybe you can help me out? In the beginning of the film they mention, that if the assets fall by just 25% the loss will wipe out the entire market cap of the company. But if they end up selling at 65 cents on the dollar haven't they taken just as big a loss??
Well if you think about it....getting 1.4 million dollars can put you in a great situation because you can literally start your own business, change careers, or if anything go from been a trader to working internally or worse case work overseas.......scores of option that money brings you
1.4 mm not really much to start a business with...
I'd go for the money. Truthfully, it takes skill to achieve such a high clearance rate, which means that these bond traders are among the best on the Street. I mean, you'll definitely be hated by some counter parties for screwing their asses, but in such turbulent times, it's every man for himself. Once the smoke clears, they'll probably find jobs on the Street one way or another based on their track record (similar case to Drexel Burnham Lambert's employees). And the best part? You get to enjoy living in the Hamptons during the crisis, and you could probably make another killing using your new found wealth in the stock / bond markets. You could easily double your wealth if you invested at the right moment during the Great Recession of '08.
I could find a way to make $1.4Million work, money talks bullshit walks?
I'had take the money, no doubt about it.
What do you estimate was the eventual average value of the contracts they sold after all the dust settled?
Take the money either way. Granted, I might not be able to work in the sell side business anymore, but it does give a compelling argument that you are loyal to your employer. I've spoken to institutional traders and they all say the same thing (and its echoed in the movie which i've seen 3 times lol), as a trader, you do not come in the office thinking you'll be on the green everyday, you come in looking to be ahead of everyone else, whether you finish in the red or in the green. By doing this maneuver, aren't you telling future employers that you had the skill to finish wayyy ahead of everyone else? Isn't this something desirable?
I'm taking the money... that is too pretty a chunk to pass up when you compare it to $0.00
yes. ill go spearfish in bali for the rest of my life
^yes.
Yeah that is a pretty excellent choice of alternative occupations. Insert parable of the banker and the Mexican fisherman.
I think one of the strongest commentaries in the movie was in the last scene - Spoiler Alert!! - where Kevin Spacey's character is burying his dog at his ex-wife's house and he asks her how their son was doing. It was subtly suggested earlier in the movie that his son is a trader at another firm. Anyways, his wife says something to the effect that their son's firm had a lost a lot of money that day because they were duped into buying all the toxic assets. I guess the message was that his greed got the best of him to the extent that he screwed-over his own son.
Yup, homeboy fucked over his own kid. That's hardcore.
The real irony in all that was that he fucked over his own kid for the money (which you know was way more than $2.7 million) and at the end of the movie he couldn't quit his job because he still needed the money.
I don't know if all the business relationships I have developed are worth more or less then 2.7 million....especially at a senior sales trader level
In times of turbulence, take the money and run. You aren't necessarily destroying your career. You may not have an industry to go back to, and even if you do, there are lots of unemployed people out there who are competing for the same job.
I have met enough ex traders who now drive trucks to know that trading is a fickle job- in that role you should always take the payout. Even if I had no cash in the bank otherwise, after taxes I could pay off my mortgage and have about 10 years of runway. Even if in the extreme case you can't get a job anywhere near wall street, you have plenty of time to reinvent yourself.
^^^^ yep that was the strongest commentary of the movie
Movie was just awesome. Seen it three times already
The guys in the movie weren't technically traders, right? I was convinced they were all sales-traders
I'd aim for 99% clearance and never step foot on the street again.
I realize I'd probably react differently if I was actually in that position, but I don't think I could bring myself to do it. I'd probably say sayonara.
Hopefully before it comes to that point, I will have built up enough savings and continued networking enough so that finding a new job wouldn't be as hard. If you destroy your reputation, it's extremely hard to get it back, but I feel like the clients would remember that I took the high road and back you up down the line.
Here's hoping...
yeah i'd take it
$2.7MM is not fuck-you money in the US but in thailand you'll be living royally
+1
I doff my cap to you, sir.
^^2.7MM IS fuck you money in Texas. I'd take the money everyday and twice on Sunday.
i gotta move to TX
Take the money. It's the safest bet. Maybe you find a job, maybe you don't...but it's probably better to be searching with a few million in the bank account than not.
Regards
Yup. Or you can always use the money to start your own thing.
And what if you only sell 92%? No payday and no relationships.
I'm walking out the door.
Wake up. If you only sell 92% you call your mom and bury her 401k. Guaranteed your whole family makes out better in the end.
Without a second of hesitation.
Can the law take that money after the fact?
If no: then fuck you, pay me.
If yes: then I'd spend the day getting another job.
If I were a movie character: I'd now know who to rob and then murder the following day.
Depends how many they sold at 65 cents on the dollar
after that you could work for goldman.
I would take that money and run. go write a book about how it all went down and pull in another mil.
there is no certainty you'll get an new job or not afterwards and the firm will taint your name not you having to participate or not.
"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."
-Buffett
would selling off all your toxic assets realistically destroy you on wall street for life?
There are a lot of pros to taking it. Drum up some publicity for it and everyone is going to want to interview you. Not to mention the fact that you can write a book on your story and make royalties. Then use the publicity after the book/interviews to start a company that could take advantage of it.
Not saying I'd definitely do it, though...
for one day of work? give me a million.
Me personally, being me. I would take the money, sell the shit out those bonds and walk away with more money than i had before. Then, me being the trader that i am, would gladly move into trading my own account for the rest of my life, if something else doesnt open up of course. But hey, that's just me.
I loved the movie by the way, every minute of it.
I'd take the money if that figure was already after taxes. $1.4 million before taxes is not worth it.
i'd take 2.7 but not 1.4
^assuming that's after tax
Or you tip off a competitor in exchange for a job. Gotta do it as soon as you find out what's going down though. Fuck your failed employer.
I would tip off a competitor and once I had the job nailed down, clear 93% of the sales so I get the $2.7 mil and a job. Even if I only got the $1.4 mil it would be easily worth it because I'd have another job ready to go once I left that day. Also, I'd try to sell off most of the assets to just a few of my contacts, so I could keep most of my network intact.
Just watched Margin Call. The speech made at 1:36:00 is classic.
Even if you did take the high road, unless you're a trader that's fairly high up, what are the chances they'll recognize that you did? I'd imagine other banks/trading firms would lump you in with the rest from the infamous team that screwed everyone else over...
In that case, I'd take likely the money. Go back to school for a law degree or something. Or use the money to start my own thing.
You would be a complete idiot to not take the money.
First off in this industry it takes a lot more than that to totally be unemployable again, some moron starting some new shop somewhere will hire you since you have experience and past results. Next, there is no guarantee if you don't take the cash and walk that you will be employable, how many prop MBS traders you think from 2008 are still around? How many sales MBS guys? So you know the end is basically here at that point. You always take the $$$ and run in any situation.
Losing less = winning when you compare against your peers who are racking up huge losses.
Just saw this movie last night--I suppose in a panic situation like that, I'd be strongly tempted to take the money and run. Imagine just going into work and hearing, "Come in early, we've got some extra work for you--oh, and by the way..."
I really liked that movie a lot. That movie was beautiful and well acted. Everyone takes the money, that was the point. The "normal people" take the money. The traders take the money, the disgruntled laid off risk mgmt guy takes the money. That's how it works, people take the money.And there's money to be made coming out of the shit storm. People will take that money too. Its the problem and solution - these little pieces of fiat paper we pass around....
I loved the juxtaposition with the chocolate lab - Kevin Spacey loses his dog, the most loyal creature on the planet. The dog operates and is motivated by pure love and companionship. And all the humans are motivated by small printed pieces of paper. And as someone who loves my 11 year old hound dog very much - the last scene made me tear up a little bit. He goes to bury her where he believes she belongs, where he doesn't even belong anymore since he lost his love and companionship presumably in the pursuit of the pieces of paper. It was just a really beautiful movie.
After all the good points on here i guess its essentially a consensus that you should take the money and go from there.....
Loved the movie and would absolutely take the money. You would need one hell of a discount rate not to!
The money, without question.
Most of us would take that money, no question.
Now if it that figure were to be $500k instead of $2.7 mil, then we might have slightly different results. Interesting thread, nonetheless.
It is a tough industry, I would take the 2.7 million, keep that money for my retirement and then become a college professor at a local college making some decent money. After tenure I would have my benefits and also a side retirement on top of my 2.7 mill. I would do it and walk away from the industry for a while, who knows after 3 years everybody forgets and things go back to the way they were so maybe there is hope to come back in a few years.
Take the money, they were the first firm to dump the assets but you can be damn sure that they weren't the last. Also as a few others have pointed out the sale/traders of MBS still don't have jobs today. And again, this is probably not a career ending action anyways. Wall Street is the INsecurity business, take the money and run because you know damn well that the guy on the other end of the phone would have done the same thing.
Quick question: When everyone says 'i'd take the money' isn't that assuming you'd clear 93%? What happens if you attempt it, but don't clear the 93%. Then you're out of a bonus, AND you've screwed people over. Or am I missing something?
You forget the mentality in this situation is "Get Rich, or Die Tryin". People will always believe that 93% is for the taking. It's good enough.
I think most people take the money. I'll start with two observations: (1) People take a sure thing, especially in a time of crisis/uncertainty. (2) People, especially traders, are self-confident to think of the 93% target as totally within their control.
As to me, personally? Sitting at my desk, I am not thinking about how I'm fucking my counterparties. My firm fucked me and by proxy my counterparties, a long time ago when they made the decision to get into this product. And this situation is true of my counterparties and their firms as well: from my seat, I'm just lucky that my firm "woke up" first.
In a time of crisis, more than ever, you have to think of yourself; nobody else will. That's the structural reality, outside of my control. As a floor trader, I have the luxury of not having been involved with the managerial decisions to make a firm-wide "all in" (as they put it) bet on this product. I have the luxury of being able to be a "victim" of my management, which allows me to view this "decision" as out of my hands.
Ultimately, everyone signed up for this when they entered the business. Those are the ground rules, that's the playing field.
Which is of course the point of the movie. How a firm made an otherwise irresponsible bet on the basis of "everyone else will do it, so it's out of my control." How a firm made a decision to fuck the Street, on the basis of "It sure is a hell of a lot easier to just be first" (see my signature for context). And how the incentives of all actors, from c-suite to trading floor, supported this reality. The movie is trying to make the point that, in the financial system at that time, nobody was responsible for their actions.
Dont take the money.
I think we all know, deep down, the difference between right and wrong here. Between following a good impulse and a bad one. I wouldnt do this because if I had a kid of mine with me, or my mom, and they know what was going on, I wouldnt want to do something that I knew was shameful.
Such a good movie.
I'd take it easy.
Opportunity cost of not doing it is to damn high, and the probability of lateraling to another job on WS will be close to 0 since any basic chum reading your application will see you last came from 'Bank XYZ' that got plastered for burying their counterparties in said toxic assets.
Whether you do it or not, you'll be associated to it happening since you were employed there at the time. Doesn't even matter if you were the Janitor because through Occupy Wallstreet's eyes you were the overpaid Janitor who "probably" knew something, and stayed quiet.
If you take the money, you can lateral to a non-finance job in an environment where they still think a banker is the teller at their local Chase. OR you can try your hand at building your own business, reinvesting, etc. etc.
I enjoyed Margin Call, abrupt ending to it though. Head it was based on a much more watered down situation at GS with two RSM analysts years back?
If there were some guys who you worked with at a lemonade stand, and everyone was selling this new type of lemonade mix, and it was delicious and everyone was getting in on it, but then you found out that it was actually a toxic lemonade mix that was going to eventually kill everyone who drank it, and the other guys at the lemonade stand knew it was toxic, and wanted to keep selling it anyways, would you keep selling the lemonade?
What if they said theyd give you 2.7 million dollars if you went along with them? What if you knew that theyd be caught by the police, and put in prison for knowingly selling fatal, toxic lemonade that killed people, and that theyd say you knew the lemonade was toxic even if you didnt before they had brought it up with the cash offer, and there was a 0% chance youd be able to get out of prison? Also presume that you could use the money for your family, and that its tax free.
Bonus: Would there be any change in your behavior if you found out that one of your loved ones was thinking of trying out your lemonade stand?
Double bonus god mode: Satan appears before you and offers you an amount of money or worldly pleasures in exchange for your soul. You cant use the money to help other people, and you dont know what the amount of money is until you decide to accept, if you do - just that it is equal to an amount of money that is triple what youd be able to make during your entire career, because he can see in to the future, whether your career be in selling lemonade or if you decide to switch to finance or whatever.
Ask the "normal people"
$2.7M? Would take it and go on vacation. With the work experience it's not like you're not marketable to get something else, and potentially better.
Great Movie. I think I would take the money. Out of any profession, I think traders will understand your plight. Its like two good golfers, they may be friends, but if they are suddenly in a playoff on sunday you gotta get yours
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