So I just got off the airplane in Huntsville, Alabama. I’m on my (mostly) annual golf trip with my Dad and brother and the Men’s group from my church back in my hometown. Delta, and most other airlines, make flying pretty easy these days. I have my choice of a thousand different movies to watch, either on the screen on the seat in front of me, or on my phone/tablet/laptop. On this flight, I had a few good movies to choose from, but I decided to watch “The Big Short”, which I have seen before. It’s a movie starring Christian Bale, Steve Carrell, Ryan Gosling, Brad Pitt, and others, and it follows a few different groups of investors and hedge funds as they bet against the housing market leading up to the collapse of our financial markets in 2008. They do a fantastic job of explaining how the system was leveraged and propped up and just how easily it came crashing down. They showed it from the point of view of realtors, mortgage brokers, borrowers, banks, money managers, etc. They also mixed in some humor here and there which always helps lighten the mood on a somewhat somber topic.
Like I said, I have seen this movie before, as well as most other movies based around the stock market. I’ve seen Wall Street, its sequel Wall Street 2, Boiler Room, Arbitrage, Margin Call, (most of) Wolf of Wall Street, and some others that I can’t recall right now. Most of them sensationalize the way things work. The worst, in my opinion, was Wolf of Wall Street. We stopped watching it part way through. What made it interesting watching this one was that I had heard Jordan Belfort, the subject of the movie, speak publicly just prior to watching the movie. He was basically a complete crook who got caught, spent time in prison, and then wrote a book about his experience. As I listened to him speak, I got the feeling he only had one regret, and that was getting caught. Sometimes you can just tell about some people!
Back to “The Big Short. I loved it and would highly recommend everyone to watch it. If you pay attention, it will do a great job of giving you the reasons why the market collapsed. You see three groups of people make major ‘bets’ on the housing market collapse. Everyone thinks they are crazy, because at the time the housing market was super strong. But they stick to their guns, let their investment ideas materialize, and make some HUGE gains in the process. What I love is they stick to their guns and don’t listen to outside noise. They don’t allow all of those around them to alter their opinions. I try to do the same with my clients. We have a process and philosophy on how we manage money. Having that process helps take emotions out of investing. An investment idea that is right takes time to come to fruition. You don’t earn 1,000% overnight. You earn money by sticking with a process and adjusting as the markets and world economies change. If you are reading this and feel like you are always chasing yesterday’s good idea, maybe it’s time we have a chat. Maybe my ideas will work for you and maybe they won’t, but at least you can get another point of view.
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All investing involves risk including loss of principal. No strategy assures success or protects against loss.