One of the great things about vacation – in addition to all the time I get to spend with my wife and five-year-old son – is that I actually get to peruse the books and watch the movies that I spent the other 51 weeks of the year setting aside.
Don't misunderstand: I don't spend the week away from the office holed up and away from my family. Quite the opposite.
This year, in fact, the three of us rented a house down at the Delaware shore for a week in mid-August, and spent our days swimming, shopping, walking, and playing miniature golf and Skee-Ball. We ate Dough Roller pizza and even had some Dumser's Dairyland ice cream.
My folks said my little boy later described it as "the best vacation ever."
Even so, I did manage to find some "me" time that week.
Late in the week, after my tired-but-happy son conked out in my arms (smiling to the very last), and I'd tucked him in, I found time to watch two films about the U.S. financial crisis that I suspected would be worth talking about here.
Turns out I was right….
The movies in question are "Too Big to Fail" (2011) and "Inside Job" (2010). They both address the same topic – how the 2009 financial crisis nearly brought down the global financial system (a tacit warning that this could easily happen again). But they attack the topic in totally different ways.
The HBO-produced "Too Big to Fail" (TBTF) is based on the superbly executed best-seller of the same name written by journalist Andrew Ross Sorkin. The film adaptation is actually a scripted "docudrama" – with Hollywood actors standing in for the real people they portray (William Hurt does a great Hank Paulson).
The Sony Pictures-filmed "Inside Job" is a straight documentary, narrated by "Bourne Identity" trilogy star Matt Damon. It features interviews with such financial stalwarts as billionaire George Soros, former Fed Chairman Paul A. Volcker and super-economist Nouriel Roubini.
Both efforts were critically acclaimed: "Inside Job" was a hit at film festivals around the globe, while "TBTF" was nominated for 11 Emmy Awards.
What You Need to Know About Wall Street
Both films underscore some valuable lessons for investors – the same ones, in fact, that we consistently convey here. Key among them:
- Wall Street is out for itself, and will vivisect anyone who stands between it and a big profit. That goes without saying, I know. But the thing that doesn't get said is that America's individual-investing middle class is the single-easiest (and single-largest) target for most of Wall Street's profit-making schemes.
- Experts would have you believe that if something sounds too good to be true, it probably is. Talk about an understatement. I'm here to tell you right now that if it sounds too good to be true – and Wall Street is connected with it – it definitely is. When Wall Street brings investment "opportunities" to individual investors, nine times out of 10 it's doing so to let its best customers "cash out" of a profit play they've already made their money on. In other words, you're taking the back end of an already-overvalued trade.
- If you don't take control of your own financial destiny, someone else will. And that "someone else" (usually Wall Street) won't have your best interests at heart.
- Investment bubbles, speculative manias, financial crises and market meltdowns are a fact of life (look at how many we've had since just the early 1980s, and you'll see what I mean). And while we can't avoid them, we can avoid getting totally clobbered by them by remaining vigilant and managing our risk.
- Contrarian Investing isn't merely a mindset or a stock-market philosophy – it's a key to survival. Many investors erroneously believe that that a contrarian philosophy means you're always thinking opposite the crowd. But that's not true. It's only when you're buying and selling that you're "out of synch" with the masses. You want to spot good deals and buy in before "the crowd" discovers what you found. But once you're invested, you want everyone else to see what you saw – for it's their liquidity that will drive your investment up in value. The same is true of selling – you want to bail before the masses do, since a mass exodus will cause the market price of an asset to plummet.
- The Contrarian approach has another benefit: You become an independent thinker. That means you won't get suckered in by the "too-good-to-be-true" investment markets that come along every couple of years – only to end up giving millions of middle-class investors the kind of financial "haircuts" that they never recover from.
- And, finally (at least for now), the reason it's so important to understand and embrace these lessons is very simple: You can bet this isn't the last financial crisis that you'll have to navigate.
We've talked about these concepts many times before. And, I promise you, we'll be talking about them again. If you watch these two movies (and read Andrew Ross Sorkin's book, as well), and I think you'd find it tough to disagree.
Both "TBTF" and "Inside Job" were very well done – informative, entertaining and insightful. If you watch either one, you'll end up feeling enraged.
But you'll also end up a more-vigilant, better-informed and more-effective investor going forward. As always, that's the goal here at Money Morning and in Private Briefing.
In fact, the "profit-while-you-learn philosophy" that Private Briefing is built on has attracted over 14,000 investors over the last 12 months. I can't even begin to tell you how personally gratifying that is.
Five days a week, we show readers step by step exactly how to think… invest… and win like a pro. It's hard work, but it's been a really great job.
Believe me, a lot of times it's what you don't know about the markets that can sting the most. If you'd like to join the thousands of investors we've already helped, click here.
Starting with your very first "lesson," you'll be on your way to creating the kind of wealth Wall Street would never help you amass.
And once you have it – with what you'll learn from us – you'll never fall for the kind of tricks that Wall Street employs to try and take it away.
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About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.