Decrypt the movie "The Wolf of Wall Street" and avoid financial scams

This "The Wolf of Wall Street", which involves pornography, gambling and drugs, is directed by the famous director Martin Scorsese and is based on a real American financial fraud company-Stratton Oakmont. Jordan Belfort, the founder of the company, is played in the movie

The decryption is divided into three parts:

1. False reality: an atypical Wall Street

2. Routine design: how a real scam works

3. Core secret: how to sell hope to customers

1. False reality: an atypical Wall Street

First of all, it needs to be explained that the crazy Stratton Oakmont company in the movie neither works in a skyscraper on Wall Street, nor is it a typical Wall Street company. In fact, they are just a group of people who set up their base camp. Financial scammer in Long Island, New York. The company's founder, Jordan Belfort, was born in a middle-class family in Queens, New York City, and has shown extraordinary marketing talent since he was a child. When he was 10 years old, he sold snow shoveling services to his neighbors after a snowstorm to make money; when he was 16 years old, he used his summer vacation to sell cold drinks and ice cream on the beach near New York, earning enough for college tuition

At the age of 23, he Despite his parents' objections, he gave up medical school and found a job selling seafood and meat products. With his excellent sales skills, Belfort quickly ranked first in the company. But the profits brought by this kind of low-end sales are limited. He is thinking about finding a place where he can use his sales skills to maximize profits, such as Wall Street.

This is also reflected in the movie. In the movie, when DiCaprio was unemployed, he discussed with his first wife that he wanted to work as a tally clerk in a supermarket. Go to the general manager.

In 1987, Belfort joined the old securities company L.F. Rothschild. As a result, he encountered the famous "Black Monday" of the 1987 stock market crash shortly after. The company went bankrupt and Belfort had a bad start.

That is to say, in the movie, Li Zizi had just obtained his agent's license and was ready to make a big move, but the company went bankrupt. But at this company, he met his first mentor in the financial field: Mark Hanna (McConaughey's character). The mentor taught him two things. First, the three elements of success on Wall Street are masturbation, cocaine and prostitutes; second, the secret of making money is to keep clients investing so that brokers can earn large commissions of real money.

After reading this, will you find that this routine is exactly the same as the so-called stock recommendation routines in China that make you keep trading?

Therefore, you will find that the various trading software we use send us various so-called hot spots and good news every day. Why? It just wants to constantly stimulate us to trade! Because as long as we trade, no matter whether we make money or lose money or even lose our family or our family, these brokers themselves make a lot of money!

Obviously, Belfort actively practiced these two golden rules in his subsequent career. In 1989, he rented the garage of a used car dealership and founded Stratton Oakmont. His partner was Danny Porush. In the movie, Porush went by the pseudonym Donnie Azoff, played by Fatty. Played by fat Jonah Hill.

Belfort also attracted a group of friends, such as Kenneth Greene and Victor Wang, who were amateur marijuana dealers, and attracted more people through them. Most of Stratton's first 100 employees were drug clients of the two powerful men, and the history of this fraud company's troubles began.

How did Belfort transform such a team full of drug dealers, idiots, and trash, and turn it into a fraud team with amazing ability to collect money?

2. Routine design: How does a real scam work?

First of all, Belfort put forward two basic theories:

Theory 1: The American inside Although the 1% rich people appear to be rational and prudent on the surface, most of them are hopeless gamblers in private. They cannot resist the temptation of gambling.

Theory 2: Deception can be copied

With the theoretical framework established, Belfort found a field that is naturally suitable for deception: the Pink Sheet market (Pink Sheet)

The Pink Sheets market in the United States is similar to the New Third Board and is also a gathering place for many companies that cannot enter the regular market.

The Pink Sheets market has a long history in the United States and is a type of OTC (over-the-counter trading). Stocks listed on this market do not need to provide financial reports or disclose information regularly.

Most of the companies listed on the Pink Sheets have the following characteristics: stock prices are less than 5 US dollars (most of them are only a few cents), skyrocketing and plummeting, serious information asymmetry, and easily manipulated by brokers.

In the movie, it is translated as penny stocks.

This is the "pink sheet" printed by the National Quotation Bureau.

In this lawless field, the Belforts who are good at sales are like a duck in water. At its peak, Stratton Oakmont recruited 1,000 employees, frantically calling potential customers, promoting stocks, and earning generous commissions (up to 50% of the stock price). It's also mentioned in this movie.

However, this kind of business of promoting other people's stocks cannot satisfy Belfort's appetite. They then invented a "pump-and-dump" technique, commonly known as bankrolling in China, but this kind of bankrolling has stronger control: it not only controls the chips, but also controls the major shareholders. Controlled the rhythm of retail trading.

Do you still remember the guy wearing the hat in the middle?

In the movie, the company controlled by Stratton is Steve Madden Ltd. (hereinafter referred to as Madden Shoes), which specializes in women's shoes. Founder Steve Madden is a well-known designer and childhood friend of partner Danny Porush. Danny convinced his good friends to let Stratton package his company for listing. In the process, Belfort made tens of millions of dollars by manipulating the stock price.

The movie does not elaborate on the details of the bankruptcy, but according to the SEC’s investigation report, this operation can be divided into 6 steps:

1. The company that created the IPO: Stratton Oakmont Core Competitiveness is about selling customers “stock in a company with unlimited potential.” Madden Shoes, which is engaged in designing and manufacturing women's shoes, meets this condition: you can brag about him as the next Armani, Jimmy Choo or Chanel, but there is no way to prove it for the time being.

2. Control chips: The key to planning is to control enough equity in advance. U.S. securities laws only allow underwriters like Stratton to hold 5% of Madden Shoe's shares. In order to circumvent this regulation, Stratton first issued an issue to an intermediary at a price of $4 per share, and then secretly sold it at a price of $4.25 per share. After selling it back, they eventually controlled 85% of the shares. It's also mentioned in this movie.

3. Find a good taker: The takers are naturally the leeks that Stratton has cultivated in advance - retail investors. Stratton's sales staff will allow retail investors to make a little money on one or two IPO projects and win the trust of retail investors. Once trust is established, Stratton's sales staff will tell these customers: I have a project here that can make a lot of money, you must participate!

In this case, the salesperson will tell the customer: The issue price of Madden Shoes is US$4, but it will definitely rise to US$20 after listing, and I can help you get the "new" quota. . Many customers were so happy after hearing this that they immediately called us with US$100,000 to wait for the issuance of new shares. Through this method, Belfort can roughly estimate how much purchasing power the leeks have.

4. Change bait: Shortly before the IPO, the sales staff will call and tell customers: Madden Shoes’ IPO is too hot, and the new quota of $4 per share is very small, but once the stock Start listing and trading, and I can help you buy at the "market price" as soon as possible. At this time, many people will settle for the next best thing, thinking that if they can't buy new stocks, they can just buy and sell new stocks as soon as possible.

Many customers thought that the "market price" would only be a little higher than 4 US dollars, and the money had already been sent anyway, so they agreed, and only a few people refused.

But once you accept it, you fall into a trap.

5. Market manipulation: After the IPO, Belfort began to increase the stock price. The target price was calculated through backward calculation: If Belfort wanted to sell 1 million shares in his hand, and Stratton The purchasing power of the customer is about US$22 million (estimated through step 3), so it is necessary to raise the stock price from US$4 per share to US$22 per share, and then sell it to them, earning US$22 million (the cost may only be a few cents) money).

In the Pink Sheets market, the way to increase stock prices is much simpler than on large exchanges. The simplest method is to "pair up": buy and sell between Stratton's own accounts, but this method is too blatant. With control of the majority of Madden Shoe's chips, Belfort can slowly push the stock higher through small market orders, all the way to his $22 price target.

6. Close the door and beat the dog: When the stock price rose to 22 US dollars, Stratton fully executed the buy order entrusted by the customer, that is, invested all 22 million US dollars and bought 1 million shares. At this time, the money for these leeks was all taken over at a high of 22 yuan.

The "Rathole Accounts" controlled by Belfort were almost the only sellers, and all the leeks were taken over by the Rathole. The $22 million earned went entirely into Belfort's pocket, and this was the film's celebratory moment.

Don’t think that this process is very long. In fact, just like what is said in the movie, it may only take 2 or 3 hours.

In such a short time, Liek has time to realize that he has been deceived. Already?

So, the scammer company did "fulfill" what it said it had given to Leek - buying it "at the first opportunity". As for Liao Cai, he happily thought he had bought blue-chip stocks.

If those customers who bought the stock for $22 wanted to sell it in the market, they would find that they could not sell it at all, and no one wanted it even if it fell below the issue price of $4. In this way, wealth is transferred through seemingly open market transactions.

A simple summary is: in a legal trading place, by secretly manipulating the prices of trading items, the wealth in the pockets of ordinary investors is transferred to the wallets of the scam designers, and the victims feel "My investment level is not good enough so I lose money." I will come again next time. Look at the leeks around you, are they like this?

I thought it was due to luck, but it was actually designed

A-shares perform this kind of plot almost every day. From this perspective, the old saying is still true: the world The deceitful friends are one family, and their routines do not differentiate between you and me.