Given we are now more than three years removed from the height of the start of the financial crisis in 2008, a few films have come to the big screen recently trying to capture some facet of the chaos and turmoil that took place that autumn.
Went to watch "Margin Call" tonight after hearing about the film from a few friends and colleagues. It's features a star-studded cast of Kevin Spacey, Demi Moore, Paul Bettany, Jeremy Irons, Zachary Quinto, Stanley Tucci, Simon Baker, and Penn Badgley. The film focuses on the rapid deterioration of the MBS market in 2008 as a result of the sub-prime crisis, and throws in loose hints of Lehman Brothers.
The film, given its relatively fast pace and simplified storyline, is reasonably captivating. Yet as somewhat of an industry insider (after all, I began my Global Markets new hire training during the fall of 2007 and was very much a part of the capital markets sitting on the trading floor in London during 2008), I couldn't help but feel a bit unsatisfied with this version of the story.
I suppose it is understandable that for the general public to remain captivated (or even interested) in this theme, the film had to be relatively easy to understand, and some stereotypes were unavoidable (and honestly, some of the stereotypes were not bad at all), those did draw laughter from the knowing members of the theatre audience and a few chuckles and snorts from me as well.
Despite my earlier reluctance, I have picked up a few of the books on the financial crisis recently, and have read Michael Lewis' The Big Short, Hank Paulson's On the Brink, and am currently reading Andrew Ross Sorkin's Too Big to Fail. Like many people, Michael Lewis' book is the most entertaining, with Andrew Ross Sorkin's containing the most factual tidbits which I do quite enjoy as well.
I read the other day that HBO has made Too Big to Fail into a TV movie, I intend to find it and watch it some time, after I've finished with the book. Apparently, the movie-adaptation of The Big Short is also in the works, with Brad Pitt rumored to play the lead (who would be the lead?). This ought to be interesting.
Coincidentally, someone asked me about applying to Cornell's Financial Engineering program tonight on Weibo. Of course, having graduated as an undergrad in OR&E (FE is a masters degree granted by the School or ORIE), I know very little about the M.Eng application process, but it did get me thinking about the kind of enthusiasm many students, especially Chinese students (not to sound stereotypical on purpose) show in pursuing an FE degree and aiming for a job in a financial services firm.
While it is admirable and one could only encourage the pursuit of higher education and one's dreams, but I have begun to wonder just how many real opportunities this industry will have to offer students who are experts in developing exotic financial products, especially in tomorrow's world. Yes, I suppose we will always need traders and structurers who can devise custom-tailored solutions to meet clients' needs, but the trend across the industry is definitely for less structures rather than more, with the increasing amount of regulatory scrutiny and oversight placed on complex financial products, firms no longer have the same desire to sell, and clients certainly do not have same desire to buy complex derivative products.
The financial services industry is going through, or should I say have been going through changes since 2008, perhaps there is some truth in what the character in Margin Call said about the industry having a short memory and repeating itself in cycles, but perhaps as we go through this current cycle, the industry will be transformed, at least for the medium term, into something quite different from what it had been in the days when pure product capabilities beat everything else.
Now the question to industry practitioners as well as those who hope to enter this industry is whether each one of us has something valuable to offer our clients, do we really understand what the client needs? It's no longer about trying to convince a client to buy something that ultimately is immensely profitable for the bank (which may or may not be profitable for the client in the long term), it is now about whether we understand the client, whether we are willing to commit time, resources, energy to build a client relationship based on something much more long term, and whether we can convince clients to see that in us.
This is definitely not an easy task, whether we succeed will likely affect how long and how well we survive.