Jared Dillian, a former Wall Street trader, rates 12 banking and trading scenes in movies and TV, such as "The Wolf of Wall Street," for realism.
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00:00I think I can pull twice that at 18 and a half from the California pensions.
00:03We've got close to a half a million shares in the bag.
00:06Huh?
00:07That's my favorite scene in Wall Street.
00:08It's 500,000 shares in the bag.
00:13We used to say that at Lehman all the time.
00:14Hi, I'm Jared Dillian.
00:16I worked on Wall Street for a number of years.
00:18I was a trader for Lehman Brothers from 2001 to 2008.
00:22Since then, I've been publishing a financial newsletter called the Daily Dirt Nap, and
00:26I am a commodity trading advisor.
00:28Today we'll be looking at Wall Street scenes in movies and TV, and judge how real they
00:32are.
00:33End of the month, 28.7 million in gross commissions, all from pink sheet stock, boys!
00:43There's a lot of people who watch The Wolf of Wall Street, and they think that's what
00:46Wall Street is, when it's really the wolf of strip malls in Long Island.
00:51Jordan Belfort had a firm called Stratton Oakmont, which was a penny stock brokerage.
00:55There was fraud, and there was illegal sales tactics, and he did go to jail.
01:00It is not Wall Street.
01:01It is not institutional finance.
01:05Well, the funny thing is that Christmas parties for the major Wall Street firms were common
01:15up until the financial crisis.
01:18When I was at Lehman, we had a Christmas party at the Hilton on 6th Avenue.
01:23There were multiple DJs, multiple dance floors, and then after the financial crisis, the Christmas
01:28parties went away, kind of for financial reasons, but also for optical reasons.
01:33It was considered to be a little untoward for a Wall Street bank to be having a big
01:39ostentatious Christmas party, but you didn't have women getting their head shaved.
01:44You didn't have a marching band.
01:45You didn't have strippers.
01:47That didn't happen.
01:48Well, I actually think for a penny stock brokerage in the 1980s, I think it gets a high rating
01:56for realism.
01:57I would say about a 7.5.
01:58It doesn't mean that I like it.
02:01I don't like it, but I think it's, for what it is, I think it's actually somewhat realistic.
02:10Michael, how are you, guy?
02:11I want to short the housing market.
02:14Really?
02:16You know, the idea of Michael Burry as this eccentric hedge fund manager, you know, making
02:20calls that he wants to short the housing market, I think that's very realistic.
02:24The term short is used in general terms to describe betting against anything.
02:30So if you want to bet that a stock is going down, what you do is you borrow the stock
02:35and then you sell it, and you wait for the price to go down, and then you buy it back
02:40and you return the stock that you bought.
02:43Basically, Louis Rainier's mortgage bonds were amazingly profitable for the big banks.
02:49So the banks started filling these bonds with riskier and riskier mortgages.
02:54Her description of it is pretty good.
02:56So what she's talking about here is the process of securitization, taking a pool of mortgages
03:01and putting them into bonds.
03:02And as she says in the clip, you know, this became so popular that pretty much every mortgage
03:07in the country had been securitized, so they were looking for other things to securitize,
03:12so less credit-worthy mortgages.
03:15This is your basic mortgage bond, triple Bs, zero.
03:20And then that happens.
03:22What is that?
03:23That's America's housing market.
03:25For a bunch of bankers and traders to be in a conference room talking about a trade, that's
03:31pretty common.
03:32The use of Jenga blocks, like I've never seen visual aids in one of these conversations,
03:38but for sure, yeah, that could happen.
03:40In these CDOs, collateralized debt obligations, you had a bunch of tranches of various credit
03:47qualities and you had triple A at the top.
03:48They said, look, we can package these in such a way that even though they're risky on an
03:53individual basis, they're less risky when you pull them together.
03:57That turned out not to be true.
03:58In fact, your chances of winning this hand are 87 percent.
04:02So my odds are good.
04:04I'm on a winning streak, but people who are watching and think that I won't lose will
04:08make a side bet.
04:11Really, up until that point, the U.S. housing market had never been correlated.
04:16You would have a bull market in New York.
04:18You would have a bear market in L.A.
04:20You would have a bull market in Minneapolis.
04:22And it was doing different things at different times.
04:24Well, the problem was, is that in 07, the stuff in the triple A tranche, which was never
04:29supposed to fail, suddenly became correlated and it failed all at once.
04:37This isn't how I pictured it.
04:40Obviously, Lehman Brothers had a big role in the financial crisis.
04:44I did not on an individual level.
04:46I was in equities.
04:48I was trading ETFs.
04:49I was totally removed from all the financial engineering and unicorn that was going on
04:57at the firm.
04:58Basically, Lehman Brothers management made a big bet on real estate and mortgages and
05:06not just on securities, but also on physical real estate.
05:11At the time of the bankruptcy, the firm owned about $40 billion worth of real estate.
05:17And that made it almost impossible to bail out because the assets were so illiquid at
05:24the time of the bankruptcy.
05:25I would give it an 8 in terms of realism.
05:27I know some of the people involved that are portrayed in this movie, and it's reasonably
05:32accurate.
05:33What?
05:34I've just spoken to Aubrey at Allerton.
05:36Why did you lie to me?
05:37You're middle office.
05:38You shouldn't be calling clients.
05:39You made a mistake.
05:40So what the f**k do you think you're doing?
05:43It seems that there was an error.
05:45Harper booked a trade incorrectly, sterling instead of dollars or the other way around.
05:51Middle office people generally don't yell at sales and trading people.
05:55I've never seen that before.
05:57They're usually more deferential.
06:00Ultimately, it's not the middle office person's problem that something's been booked.
06:04It's the person on the trading floor.
06:06Harper is an intern in this clip.
06:09As an intern, she would typically be sitting in a folding chair next to the desk watching
06:15somebody execute a trade.
06:17That's plus $2.50.
06:19Told you.
06:23If you do not execute at this level now, it'll come back.
06:27She says it'll come back, which is you never in trading, you never, never want to say it'll
06:35come back because it's not going to come back.
06:38I think the most realistic part of it was she has this risk and she decides to hold
06:44on to it through the payroll number and initially it goes her way and she fails to take profits
06:52and then it reverses when the customer is buying dollars.
06:56To me, from a trading standpoint, that was the most realistic part of it.
07:00I can sell you all $50 million at that price.
07:02All right, tell him I know his order book is f***ed and the market opens in 30 seconds.
07:05I will take $50 million at $44, not $45.
07:08He's running you over.
07:09It is very common for a large trade for multiple people to be looped in.
07:15I remember when I was at Lehman, there was a very big client that wanted to do a large
07:23ETF trade and, you know, I eventually executed the trade, but there was the head of derivatives.
07:30There was the head of somebody in fixed income.
07:32There was all these people around my desk.
07:34It was, it was just like that scene.
07:36Why don't we do 50 now and we'll leave a working order for 25 more after the open.
07:41It works.
07:43What she offered was you can put us at risk for some of it and we'll work the rest on
07:47an agency basis and that's what he agreed to, which is pretty common in the equities
07:52world.
07:53You know, you at least, you know, back 15 years ago when people were doing a lot of
07:58block trading, you would do a block trade of 500,000 shares and then you would have
08:03another 500,000 shares where you would work the balance like that's very common.
08:07I would give it a nine.
08:09Like I've never seen a movie or a TV show have a Bloomberg screen where you're seeing
08:14something move in real time.
08:16You see the P&L go up and down and the character's reaction.
08:20That was terrific.
08:21So I give it a nine.
08:30I don't think Seth Rogen should play hedge fund managers.
08:33It's too much Pineapple Express.
08:35I just, I don't know.
08:37It's not, it's not credible.
08:39But aside from that, I mean, I mean it gets, it gets all the basics right of what happened.
08:46GameStop was a company that was probably going to go out of business at some point
08:50in the future.
08:52This is a company that sold physical video games when everybody was downloading them
08:56from the internet.
08:58Having said that, if you are a long short hedge fund manager, when you short a stock,
09:06you don't necessarily want it to go out of business.
09:09You're not betting that it's going to zero.
09:11So what they care about is that their longs go up more than their shorts.
09:17How much money is being made?
09:19True investors never heard of Reddit a few years ago.
09:23But for that to drive a short...
09:25Yeah, they were absolutely surprised.
09:27So GameStop was around $15 and all of a sudden it trades up to $500.
09:31You do not expect that at all.
09:33Keith Gill was an individual investor.
09:35Interestingly enough, he has a CFA.
09:37He had some financial job, but he was sort of the ringleader of this movement to squeeze
09:42the shorts in GameStop.
09:46So it was him and millions of Reddit users that bought with whatever tiny amount of money
09:52they had.
09:53And not just buying the stock, but they were also buying call options.
09:56It was mayhem.
09:58You can lose money to infinity.
10:00How much did we lose today?
10:04A billion.
10:05You can lose, theoretically, an infinite amount of money.
10:09I think Melvin was a $10 billion hedge fund and I think they lost $6.8 billion on GameStop.
10:16Well, I mean, it's not common.
10:18I mean, this was a once-in-a-hundred-year event.
10:22Crazy stuff happens in the stock market.
10:24Even a stock like Nvidia, which everybody knows about, Nvidia is up 400-500% more since 2022.
10:33I think there's been a number of consequences to this.
10:36But I think on an institutional level, I think if you're a long-short hedge fund, you have
10:42to take a really close look at your shorts and evaluate them as if they are candidates
10:49for a squeeze for something like this.
10:52People will never look at long-short investing the same way again.
10:56I'll give it a six for realism.
10:58They had some charts where the stock was going up very quickly.
11:03It doesn't really work like that.
11:04It's a lot slower.
11:14Open outcry trading floors were the best thing in the world.
11:17I absolutely loved it.
11:18I worked on an open outcry trading floor.
11:21This is the NYBOT.
11:22This is the New York Board of Trade, where they trade most of the soft commodities.
11:26And the first time I set foot on a trading floor was the NYBOT in 1999.
11:31And from the moment I set foot on that floor, I knew I wanted to be a trader.
11:35It was incredible.
11:38Is the trading floor as chaotic as it's depicted in the movies?
11:43I wasn't on a trading floor in the 80s.
11:46I started in the late 90s.
11:48But even in the 2000s, trading floors were pretty chaotic.
11:52There were paper tickets.
11:54There was yelling out of orders.
11:56Open outcry trading floors are gone.
11:59They're all gone.
12:00It's all been changed to electronic trading.
12:04And if you made this movie today, it would be a bunch of guys around the country clicking their mouse on their computer.
12:20That's not really what open outcry trading looks like, but it's good enough.
12:26Trading Places is one of the classic Wall Street movies.
12:29When Dan Aykroyd says, time to sell, and everybody converges on him and they start buying from him,
12:34it doesn't really happen that way.
12:36It's a little bit more disorganized and chaotic.
12:38It helps to be physically large and intimidating.
12:41I mean, there's a lot of aggression involved.
12:43Ladies and gentlemen, the orange crop estimates for the next year.
12:48The cold winter has apparently not affected the orange harvest.
12:52Yeah.
12:54I mean, in the financial world, you have economic data.
12:57In the agricultural world, you have crop reports.
13:01And the one for most agricultural commodities is called WASDE.
13:06It's called World Agricultural Supply and Demand Estimates.
13:09And yes, when that comes out, it's not open outcry.
13:14Everybody's at their computers, but they're sitting waiting to trade when the WASDE numbers come out.
13:19You know perfectly well we don't have $394 million in cash.
13:23I'm sorry, boys.
13:25Seize all assets of Duke and Duke commodities brokers, as well as all personal holdings of Randolph and Mortimer, Duke.
13:31With Randolph and Mortimer getting all their assets seized at the end, well, that's not going to happen.
13:36But that is how the futures margining system works.
13:39A future is an agreement to buy or sell something at some specified date in the future.
13:48Like everything is marked to market at the end of the day, and you have a credit or a debit at the end of the day.
13:53And if you can't meet the margin call, then the exchange will liquidate your positions.
13:59Here, he's talking about going after their personal assets and stuff like that.
14:04I don't know about that, but the clearing firm will probably take legal action to satisfy the margin call.
14:13Even though it's not super realistic, I've got to give trading places some love.
14:17It's one of the classics, and it's open outcry.
14:20So I'll give it an eight.
14:22There's going to be considerable turmoil in the markets for the foreseeable future.
14:26The firm has decided to liquidate its majority position of fixed income, MBS, today.
14:34The one thing about markets is that if you're going to panic, you want to panic first, right?
14:41Like, it's not that you should not panic. You just have to panic before everybody else does.
14:46This is what the beginning of a fire sale looks like.
14:49Jesus, where does this land?
14:51Ninety-six on the dollar.
14:52Ninety-one.
14:53All three, and we're done at 94.
14:54Ninety-three and a half.
14:56Done.
14:58So what you saw in that clip, Paul Bettany, who is terrific, he starts selling bonds at, like, 94.
15:05And then the price goes down, and the price goes down as the firm sells bonds over the course of the day.
15:11And, like, that is panicking first before everyone else does.
15:17I would say that's the most realistic trading floor I've seen so far in a movie.
15:22I think Paul Bettany sounds like a real salesperson.
15:29Kevin Spacey is kind of chewing the scenery and doing his Kevin Spacey thing, and I don't think he was really convincing as a M.D.
15:39I would give it a seven.
15:43We're getting hit by a tsunami.
15:45No, actual tsunami in Brazil.
15:47Weather can actually have a big impact.
15:50I mean, in agriculture, if you're trading agriculture futures, there's people who just trade the weather.
15:56And in the stock market, I mean, probably the biggest example of this was Hurricane Katrina 20 years ago.
16:01The interesting thing was the stock market actually went up.
16:04So, you know, weather causes catastrophic loss.
16:08A few of the moves I'm already making, shorting Brazil's largest debt holder, buying long-dated VIX calls,
16:13also buying solar, wind, and every alternative energy play not dependent on government subsidy.
16:18That's actually reasonably realistic.
16:21With any catalyst, there's sort of a first-order play, and then there's second- and third-order plays.
16:28Buying long-dated VIX calls.
16:30So this is very complicated to explain.
16:33There are options on the VIX, which is crazy, because they're kind of like options on an index of options.
16:39It's a derivative. It's unicorn ****. It's crazy stuff.
16:43I think that's actually a terrible idea for this trade, but I think it sounds good on TV.
16:50No one worried about the people, you know, in Brazil?
16:55Sometimes in your trading career, there will be a circumstance where something bad happens,
17:05and you can profit from it, and by profiting from it, you will make somebody else's life worse somewhere else in the world.
17:11The depiction of Wall Street of being ruthless or cold-hearted is cartoonish at times.
17:19What I found with people on Wall Street is that they are typically very generous of their time, very forgiving.
17:27And, you know, I mean, there are exceptions, but billions in general, I think, is guilty of that, you know, throughout all their seasons.
17:37I lost a CEO yesterday. Something's blocking my efficiency.
17:41Focus on process. It's where your genius shows up. The rest will flow.
17:45I saw season one of Billions many years ago, and, you know, Wendy's character, I was like,
17:51OK, this is TV. Like, they don't have performance coaches at hedge funds.
17:54Apparently they do. Like, apparently this is the thing.
17:56I did not know that this was a thing until, like, three months ago,
18:00when one of my newsletter subscribers actually reached out to me, and he said he was a performance coach.
18:06People don't understand how psychologically difficult it is to work on Wall Street.
18:11I mean, a lot of jobs are hard, right? Being an ER doc is super hard.
18:17Being in the military is super hard. And I think that's very visible.
18:20And I think when they look at people on Wall Street, like either in TV shows or elsewhere,
18:26and what it looks like is a bunch of guys throwing money at each other and partying and stuff like that,
18:31which is, you know, in the industry clip, experiencing that stress when the market goes down and moves against her.
18:40That type of stress is really the main reason I got out of the business.
18:47Muffy, this is for you. One million straight in crypto.
18:53The crypto on the flash drive, I guess you could pay somebody in crypto.
18:58I mean, it's super shady. Like, never mind, you know, never mind, like, the regulatory aspects of that,
19:05but the tax aspects of that, like, are terrible, what happened with Silk Road.
19:11I mean, the interesting thing is, is that Ross Ulbricht, he was running a, basically a Walmart for illegal drugs on the dark web,
19:21and all the payments were transacted in crypto.
19:23I think what people have learned about crypto over the years is that it's not untraceable.
19:28I think people thought that to begin with, and it's not, which makes this even, you know, more implausible.
19:34You've got to give the writers and the producers credit for getting the scenery right and the costumes right.
19:45That was the one thing I noticed about Billions.
19:47When I watched the first season, the costumes and the scenery were so good, I almost had to lay down.
19:52I think that the plot and some of the trades are kind of unrealistic over time, so I'll give it a six.
20:02We just wanted to make contact, given where we are.
20:06We are concerned.
20:08But I guess the issue is, we owe you $3.2 billion.
20:12$3.25.
20:13It's very possible to negotiate with lenders.
20:16I mean, a negotiation is necessary, and I think, here's the problem.
20:20In this scene, the CEO is really not in a position to negotiate.
20:24I think some of the language here, some of it was good, some of it was bad.
20:29The investor says, we are concerned, which I think is a good thing to say.
20:34What he could say is, we don't have $3.25 billion.
20:37You're getting a fraction of that, or we work together, so that would be a more effective negotiation.
20:45So he just totally screws it up here.
20:47What your position will be if we have a sustained breach of the stock price and we fall out of compliance with our debt covenant?
20:54And our position is to seek recruitment.
20:56Oh, come on, man.
20:57F*** off.
20:58I think that it's not realistic at all, because if you're going to have a conversation between a CEO and investor about potentially breaching debt covenants,
21:09you would have lawyers in the room.
21:12They would be telling him what to say, and just this guy, hey, what's up, just calling him up.
21:20And then telling him to f*** off, that's not realistic at all.
21:27I give it a three.
21:28This is a big phone call.
21:30It's not just going to be two dudes talking on the phone.
21:34Come on, pal.
21:35Tell me something I don't know.
21:37Blue Star Airlines.
21:38They just got a favorable ruling in a lawsuit that even the plaintiffs don't know about.
21:43God help you if you're ever trafficking in insider information.
21:47You know, Bud Fox was kind of stuck.
21:51What you don't see is that he gives a bunch of ideas to Gordon Gekko, and he dismisses all the ideas.
21:57And the one where he does have insider information, which is on his dad's airline, is what he gives them.
22:02Yeah, not good.
22:03I'm not an expert on the insider trading laws.
22:06Basically, what they call it nowadays is MNPI, which is material non-public information.
22:13After the crackdown on insider trading in the 2010s, hedge funds put a lot of policies and procedures in place to make sure that they do not receive MNPI.
22:23There was a period of time, I mean, everybody remembers Galleon and Raj Rajaratnam and all the insider trading convictions from pre-Barara in, like, 2010.
22:35That crackdown was effective.
22:39And I would say that the hedge fund world is hypersensitive, even paranoid, about coming into contact with any non-public information today.
22:51I think I can pull twice that at 18 and a half from the California pensions.
22:55We've got close to a half a million shares in the bag.
22:58That's my favorite scene in Wall Street.
23:00It's 500,000 shares in the bag.
23:06That's absolutely my favorite.
23:08I used to say that at Lehman all the time.
23:10I used to say 500,000 shares in the bag.
23:12Well, it's kind of like Trading Places.
23:14It's not the most realistic clip in the world, but it's a classic.
23:17I would give it an eight and a half, but I'll round up to a nine.
23:21Two and a half times your cash at a day trading firm.
23:24I've been upping the dose for over a week.
23:29It seemed to cut my learning curve.
23:31I wish there was a pill that would give me 1,000 IQ and I could quintuple my money in four days.
23:37I wish that existed.
23:38I'd probably take it.
23:40When I was at Lehman in the 2000s, it was a big drinking culture.
23:45I would go to the bar every day after work, and we'd go out a couple nights a week with clients and stuff.
23:51I don't want to say that it's really cleaned up its act.
23:53That's not really the right word, but nowadays people go home.
23:56They go home and watch TV.
23:59It's really boring.
24:08I think that as a trader, if you sit in front of a screen for eight hours a day and just watch the market,
24:16I think you do be able to pick up on patterns.
24:19There are day trading firms, and I think they look kind of like that.
24:24The idea of somebody just having a magic pill to make profits, I don't know.
24:34I would give it a five.
24:36Well, I'm here to make digital information travel faster between the Kansas Electronic Exchange and the New York Stock Exchange.
24:43One millisecond faster!
24:46Pretty bad.
24:47So what they're trying to do is take a fiber optic cable and take it from Kansas to New York
24:52and make a faster connection than they have in existence.
24:56And in the clip, he talks about getting it one millisecond faster.
24:59First of all, the whole high-frequency trading thing of setting up fiber optic lines and stuff like that,
25:06all the technology behind that has gotten so sophisticated,
25:09we're now talking about microseconds and nanoseconds, not even milliseconds.
25:13It's gotten incredibly fast, and I think we've made all the advances we're going to make on that front.
25:19I don't think it's going to get any faster.
25:21My name is Santana Lopez, FBI.
25:23Under arrest for committing stock market fraud by using proprietary code.
25:28Well, Alexander Skarsgård is being arrested because he misappropriated some source code from his previous employer
25:35and he's being arrested for, they say stock market fraud, I guess it would be securities fraud.
25:41A theft of intellectual property in the form of computer code is actually kind of a big deal right now.
25:47There's a big lawsuit about that between two trading firms.
25:51And that IP is super, super valuable.
25:56I mean, depending on what algorithm it is, it could be something that makes $250 million.
26:10Leaving a bug in somebody's software to make it slower, I guess that's possible.
26:15If that happened, I don't think people would be slamming keyboards on the desk.
26:20That's not realistic to me.
26:21I'm going to give this a four.
26:24This is not very realistic.
26:34I think actually my favorite part of that is when he hangs up on Philip Seymour Hoffman.
26:38You know, because that's a traitor right there.
26:41Like, you know, I don't have time to talk. Click. See you later.
26:44I hung up on my wife like that.
26:46At Lehman. Bye. See you later.
26:54You've got a theory. Look at this.
26:55Oh, good. You've got a theory.
26:57Look, Frank, f*** you and your theory.
27:00The language is all wrong.
27:01Like, this is Spike Lee.
27:03This is how he thinks traitors talk.
27:05And it's absolutely not the case.
27:08Today, it's much more polite.
27:10No one's going to be dropping F-bombs.
27:12It's just going to be a very calm, polite conversation.
27:15Look, this movie came out in 2002.
27:19So, in the 90s, maybe people would talk to each other like this.
27:24This is my favorite.
27:26This is my favorite out of all of them.
27:28Because it's actually a common discussion to have for a manager to come to a traitor and say, look, like, you need to cut risk.
27:36But 25th Hour is a great movie.
27:38It's a very underrated movie in general.
27:40I'm going to give it a nine, you know, because of the language and stuff.
27:42My favorite Wall Street movie is Wall Street.
27:45And one of the reasons I like that movie is because Oliver Stone basically threw a temper tantrum and said, I'm going to make this movie to make everybody hate Wall Street.
27:56And it totally backfired.
27:58And everybody thought it was the coolest thing ever.
28:00And everybody wanted to work on Wall Street.
28:02But Wall Street, you know, I actually teach at the university level.
28:07And there was one semester we had like an extra class.
28:10So, I showed the movie to my class.
28:12And I'm like, yeah, this is kind of what Wall Street was like in 1987.
28:16Like this is, you know, this is real.