>> Tuesday, December 01, 2009
At the risk of invoking the wrath of dsqaured, I will admit that when I compile my list of "movies I watch with some frequency although they're not very good [and because a DVD allows you to skip the especially overwrought scenes with the overacting father]" Boiler Room would be on it. I think there was a missed opportunity, however, in the extent to which "respectable" brokerage firms were held up as an alternative to the transparent scam he got involved with. The structure of the movie would have been much better served if Seth had gotten his dad's dream job for him at J.P. Morgan and learned a similar lesson. Really, high-churn mutual finds are also analogous to but less honest than Seth's backroom card game: essentially, you're giving up a significant house edge for "expertise" that is no better than throwing darts at the Wall Street Journal (or, to use another term, "gambling.") And it's not as if high-pressure sales tactics and cold calling are unknown to the "respectable" brokerage industry either.
...and, yes, mpowell is right that hedge funds are, if anything, even worse.