Money Monster

Have you seen the 2016 film Money Monster? It stars George Clooney and Julia Roberts. I just watched it, and several lessons immediately jumped out at me. I’ll summarize the film and then go over four lessons we can get from this Hollywood thriller.

Money Monster Summary (Spoilers)

(Click here to view the trailer and skip right to the lessons.)

George Clooney plays Lee Gates, a brash and arrogant host of the daily stock-picking TV show “Money Monster.” The show is a fictional version of CNBC’s “Mad Money,” with Clooney playing a much-better-looking version of Jim Cramer. Host Lee Gates talks endlessly about stocks and picks the ones he thinks viewers should get in and out of with lots of outrageous TV antics. He works with his producer Patty, played by Julia Roberts, to shock and delight audiences.

The film takes a turn when a disgruntled and desperate investor named Kyle bursts onto the stage during a live show and takes Lee and the crew hostage at gunpoint. He forces Lee to wear an explosive vest and keeps the others at bay with the pistol.

After gaining control of the studio and locking it down, he starts yelling and ranting about how the system is rigged and stealing money from regular folks. It is revealed that he wagered $60,000 on a stock pick that Lee declared on the air as rock solid and “safer than a savings account.”

The pick was a fund managed by Ibis, a fund company whose fund had averaged 18% returns through its high-frequency-trading algorithm. A “glitch” in the algorithm had caused the fund to lose $800 billion overnight. Kyle, the gunman, had put all his savings into that fund and lost it, along with everyone else.

The film chronicles their unraveling of some corruption behind the scenes at Ibis, and their quest to get everyone out of the hostage scene safely.

The movie had some adult themes, but aside from that was interesting. In particular, there are several lessons we can learn from the film.

Lessons from the Money Monster

Let’s look at three lessons from the film and a final one that sums it up.

Following TV Personalities is Foolish

The antics on the fictional show “Money Monster” are ridiculous, but so are those on “Mad Money,” which is entirely real!

CNBC’s Mad Money claims that Jim Cramer “aims to make the audience better investors.” But that’s not its goal.

Like all members of the Financial Pornography Network, Mad Money exists to sell one thing: ads. They exist to hold your attention to sell TV ads. Their website exists and publishes content to get you to read that content and click on their banner ads. They exist to make money, not to make you a better investor.

They genuinely don’t care about your money. The media does not care about your returns. They care only to the extent that if the show isn’t plausible, it isn’t watchable. But if they make recommendations that turn out wrong and cost you money, they don’t care. They have another segment to produce and more ad space to sell.

In Money Monster, Lee doesn’t even remember the recommendation that cost Kyle $60,000. He had already moved on. But that was all the money Kyle possessed. He lost all he had except the child he had on the way. This desperation caused him to result to violence.

Kyle insists throughout the movie that he isn’t stupid, and while everyone else may accept the story of a “glitch,” he doesn’t. Because he’s not stupid.

He may not be stupid, but he is foolish. And so is anyone else who follows the advice of TV personalities. The fictional Money Monster and the real Mad Money are entertainment programs. Do not follow them.

Multiple studies have shown that those who follow Jim Cramer’s advice end up far worse off than if they had simply invested in the S&P 500. And they have a lot more headaches besides! Jim’s track record is so bad there are funds that do the opposite of whatever Jim says, and they are performing better!

Following TV personalities is foolish.

Chasing Returns is Foolish

During a live session of Money Monster, before the hostage situation, there is a clip of Lee talking about Ibis and its momentous ascent, followed by its devastating crash.

Is Lee using it as a cautionary tale? No. He explains why he was right all along in recommending it. If people had promptly followed his advice and entered early, they wouldn’t be experiencing the pain of those who entered late just before it crashed. And he claims that the fund will come back.

But this is another problem. People follow popular advice and chase after “investments” with amazing returns, only to prop them up more. One of the four horsemen is called “Chasing Returns.” Behavioral mistakes like this one cause so many to do so poorly in investing.

Don’t invest in fads; you will never get caught when they fall.

Trying to Beat a Rigged System is Foolish

In his rants, one of the main messages the gunman wants to convey is how the system is rigged. Wall Street has all the power. They can trade billions of dollars in a microsecond. They have insider information. How can the average person get a fair shake when the system is rigged against them?

And you know what? He’s right—at least to some extent.

Wall Street is rigged. How are you, an individual investor with a Robbin Hood or eTrade account, supposed to beat million-dollar algorithms trading billions of dollars in a microsecond? How are you, with your Motley Fool scoops and your Yahoo Finance Alerts going to outfox the wizards on Wall Street with their Harvard Degrees and six computer screens revealing down to the second information?

You can’t. And you won’t. So stop trying to beat Wall Street at their own game. Don’t play the trading game, and you can’t lose. Don’t play the speculation game, and you’ll win.

Trying to beat a rigged system is foolish.

Avoid the Money Monster: Invest

If you want to avoid the Money Monster—losing your money to a speculative bet or missing a trade and losing it all—don’t play his game. Chasing returns and market timing are traps.

Invest. Become co-owners of the best businesses in the world and let them go to work for you. Don’t trade. Do not speculate. Don’t follow gurus or TV personalities. Episode 42, Investing, Trading, And Speculating, Oh My, covered the differences. Listen to that one again if you need to.

I thought Money Monster was interesting and somewhat thrilling. Unfortunately, movies like these lead so many into thinking that investing is like gambling or something only the rich and well-connected can succeed at.

In truth, anyone can be successful at true investing. Using the Seven Principles of Investor Success, you can win.