Sunday, October 23, 2011

"Margin Call" (Film Review And Commentary)

Margin Call is set in 2008 right on the brink of the financial collapse, the effects of which we still suffer from today and will for years to come. It details a firm's obliviousness to its perilous financial state until a whiz kid trader (a literal rocket scientist from MIT) finishes formulating an equation started by a recently fired employee. What he finds is the firm is upside down in its holdings to the point its possible liabilities exceed its worth. Ouch!

For an understanding of this we'll use the commodities market model which is where the term "margin call" comes from. In a margin situation you are able leverage your money many folds over in a high risk/high reward gamble by not having to pay full price for what you purchase. For an example, one can purchase an oil contract worth $100,000 for only $5,000, which gives you a 20 to 1 leverage rate. So just imagine if you could rig a situation - however temporary - where the prices went only up. The profits would be staggering!

If oil is, say, $100 a barrel at purchase time and then goes up to $105, that's a five thousand dollar profit, doubling your initial investment! Obviously, if you had paid full price for the contract you would have made only a measly 5% profit. What wants that? The downside is if oil drops from 100 to 90, you just lost $10,000, wiping out your initial 5,000 plus putting you another 5,000 in the hole. When that happens that's when you get a "margin call" to cover your losses. Scary, huh?

Well, it's scary if you're playing with your own money. Investment firms play with the public's money so why give a shit? If you think that's outrageous don't forget both Bush and Obama (and any future President) couldn't bend over quick enough to bail out the banks - on their terms. You're kidding yourself if you think anyone is out there standing up for you.

Anyway, that's the premise of leveraging and is the simple version of how these firms were able to sink themselves so easily and massively as mortgages sank in value on very highly leveraged commodities that had made huge profits on the way up. So it's a premise of the film that the Firm (as its referred to in nameless fashion throughout) has no idea it's holding more losses than it can sustain. That's debatable point number one: Did the investment banks know they were actually trading worthless mortgages before the bubble burst?

Regardless, the Firm does find out and its answer to this problem reveals its true character: sell the worthless commodities before everyone else finds out they're worthless. Since the mortgages were repackaged and re-layered to the point no one knew their exact value, they were sort of a black box to be pawned off to let the unlucky buyer get the ugly surprise later on. Even if pawning off their losses onto other companies then sinks them, the Firm is OK with that. Survival at all costs, baby.

I read one positive review and one negative review. The negative review called the film "lifeless" and I agree. It takes place over 24 hours as the Firm goes into crisis mode once its doom becomes evident and the characters work throughout the night and into the next morning. Very claustrophobic. Both reviews called it a story of human weakness. The negative one claims the film was trying to illicit sympathy for the players while the other claimed it was a film with no good guys in it. I agree with the latter interpretation.

I rooted for everyone's demise. But I also realize 95% of the people placed in their situation would have acted just the same. Oh sure, some had reservations about their dastardly deeds of outright swindling but in the end no one could answer the question: what other way is there? Over and over the phrase "no choice" is repeated as it's applied to various individual situations leading to a totality of "no choices" as if on a runaway train.

At various times we hear the rationalizations of the traders as they speak of their unwarranted rewards but I don't know how much of the attitude reflected is accurate. I mean, I'm sure there's some sort of rationalization going on - there has to be - but if they displayed the same thought processes as real life traders I don't know. One thing did ring true on "fucking the public", about how people like to play all innocent and look the other way just as long as they get what they want. The trader explained that's how his greed profits from their greed. Hear, hear.

We pretend otherwise but money is the name of the game, the bottom line of our entire structured system. We pretend it's not our fault, that Nature will not allow any other way, "no choice". I hear fools complain of how corporations are dedicated to profits over people. But have we not agreed as a society that's the way it has to be? We have to make the dollar our god just as the ancients made stone statues and wooden idols. Yes, we're just as dumb as we've ever been.

In the search for an answer, one must first eliminate everything that is not an answer. How twisted is a mind that says there's "benefits" to polluting our environment. Yet, we say it every day: "It costs too much to do right." But as long as we are more concerned with artificial monetary costs than we are human costs, as long we continue to pretend to not face the answer, our situation will continue to decline and we'll all act innocent and surprised by our demise - by the very things we've mandated!

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