Martin Scorsese’s 2013 extravaganza, The Wolf of Wall Street, is the adaptation of Jordan Belfort’s autobiography that tells the story of his time earning $50 million a year.
Belfort was sentenced to four years in jail following his manipulation of the stock market. Whereas Scorsese’s adaptation of Belfort’s ventures in the 1990s focuses primarily on the Belfort’s drug fueled lifestyle – his drug addiction, the sinking of his yacht in a Mediterranean storm, his frequenting of presidential hotel suites with prostitutes and flying his helicopter with just one eye open because he was suffering from drug induced double vision – the film can be accused of skirting over the details of Belfort’s crimes. One stand out point in the movie is when Belfort, brilliantly portrayed by Oscar nominee Leonardo DiCaprio, addresses the audience and gets into the academic details of his swindling only to stop halfway through to simply say that what he doing was by no means legal.
Those who haven’t read Belfort’s recollection of his Wall Street ventures may be wondering why Belfort has been ordered to repay $110 million to investors he ripped off. Belfort ran Stratton Oakmont and employed young salespeople eager for a quick earner. These salespeople rang investors and random citizens found in the telephone directory and persuaded them to buy shares in companies that Stratton Oakmont financed and floated on the stock exchange. The process is called Initial Public Offerings and saw private companies transform into public ones, and the greater the number of people who invested, the higher the share price rose. Whilst Belfort’s army of salespeople employed an aggressive ‘buy or die’ method, Belfort and his cronies also bought shares in these businesses and allowed prices to soar before selling. This allowed Belfort to make a fortune before the share price plummeted, leaving the other shareholders with worthless stocks.
So what is the effect of films like The Wolf of Wall Street on the stock market? Business Insider and Bond Vigilantes suggest that the release of films that focus on the stock market and Wall Street is usually followed by slight downturn. Of course, this is a very general statement to make and doesn’t take into account other effects on the market or any potential occurrences when a film based on Wall Street has seen an upturn in the market. However, what The Wolf of Wall Street has revealed is the need for existing shareholders to ensure that their investment management is being handled with calculated consideration. When shares, bonds and property are on the line, shareholders should ensure that their investment management is focussed on their needs, fully accountable, reliable and impartial. In short, an investment manager should be everything that Belfort’s army of young salespeople weren’t; shareholders should have the final say on where their money goes and shouldn’t feel pressured into any investments.
The stock market is an inherently risky business and whilst swindlers like Belfort and Stratton Oakmont are few in number, it’s better for shareholders that they research who they choose manage their investments rather than committing on the spot.