A Good Year makes bond trading look bad

Advisor versus Film: A Good Year (2006)

Expert: Brian Calder, senior bond trader at Franklin Bissett Investment Management.

Accuracy Rating: 4/10

The 2006 drama A Good Year, starring Russell Crowe, offers audiences stunning views of the French countryside and a charming romantic plot, but doesn’t deliver on financial content.

Crowe plays brash senior bond trader Max Skinner, who works for an investment bank in London’s famous Gherkin building. His methods, while they generate large returns, are morally questionable.

Through a flashback, viewers discover Skinner spent his childhood summers at his beloved uncle’s estate in Provence, France. There, he began acting unethically when he habitually cheated at chess. As he grew into a morally corrupt adult, Skinner and his uncle lost touch; but when his uncle dies, he gains possession of the estate. Skinner travels to Provence, where he falls in love with a local waitress named Fanny (played by Marion Cotillard) and begins a journey to become more selfless in honour of his uncle’s memory.

While the plot is heartwarming, Brian Calder, a senior bond trader with Franklin Bissett Investment Management in Calgary, analyzed the bond trading content for accuracy. Some aspects were realistic, but most were exaggerated.

Greed and competitiveness

Near the beginning of the film, a scene occurs where Skinner is commanding his firm’s bond trading floor. To rally his traders, he says, “Today is Greedy Bastard Day. The secret to riches is the same as the secret to comedy: timing.”

Calder says greed should never be a motivator. “We want to take advantage of inefficiencies we see in the market. But greed is difficult because what created your riches last year won’t necessarily do so this year.”

However, Skinner was right about timing, he says. “Timing is everything. The challenge is you don’t necessarily know in advance if you’re engaging in your actions at the best time. You’ll only know after the fact.”

The industry is portrayed as competitive throughout the film. As Skinner is dealing with his uncle’s estate in Provence, his second-in-command in London tries to usurp him. So, consistent with his morally questionable character, Skinner purposely gives his colleague bad advice on a trade to get him fired.

Calder says it’s unlikely that getting a colleague fired would be so easy in the real world, because trading strategies are often executed as a team. It’s more likely someone would be fired for not pulling his weight, he adds. But, competition is always present. “We want to outperform our peers. We want to keep our best ideas to ourselves. Everybody has to make sure they’re earning their keep.”

Trading schemes and a gentlemen’s agreement

After Skinner declares Greedy Bastard Day, he begins an unethical trading scheme. He tells all of his traders to purchase a particular bond, which would signal to the rest of the market to buy it, too. He then instructs everyone to wait for the price to climb; it increases substantially as other firms react to their move and buy the security. When the bond reaches a particular price, he tells all the traders to sell the bond entirely. They make a profit, while causing the price to plummet.

Once the price of the bond bottoms out, he gets his traders to repurchase the security, making £75.5 million on the strategy.

Calder says this method is unrealistic. A firm, acting alone, wouldn’t have such an impact on a bond’s price, he says. “There are so many [market] participants. Those types of things aren’t likely to happen in such a dramatic fashion.”

Regulators would also be an obstacle, because “[they] have taken steps to eliminate periods of influence by any one single firm by increasing transparency and liquidity.”

And, he says if a scheme like that were to occur in real life, it couldn’t be of similar scale. “It might not happen as dramatically, as instantaneously. They just flicked the switch and said sell and it was all done in two minutes from beginning to end. It’s not realistic to see the [price] moves that were seen.”

In the film, regulators look into the scheme and find it unscrupulous, so they suspend Skinner from trading for a week. Skinner’s competitor at another firm is also unimpressed by the scheme, and says there’s a gentleman’s agreement not to use underhanded methods in the bond market.

Calder says there aren’t gentleman’s agreements, but “there are general codes of conduct. There’s a bit of gamesmanship in how you’re facing off with the opposition, but reputation is paramount, and people have long memories.”

So, acting immorally places firms at risk. “Businesses have so much invested […] that they don’t want to knowingly be exposing themselves to reputation risk. We want to feel comfortable if any of our activities are written up in the business section.”

Overall, Calder rates the movie 4/10. “It’s not as sensational as they might make it in the movie. Bond people are a little more boring than that.”

Spoiler alert: What happens to Skinner?

After Skinner sells his uncle’s estate, he returns to London. The firm’s senior managers are unsure of Skinner’s loyalties, so they offer him two options: an exit package including a sum “with a lot of zeroes” or lifetime partnership at the firm.

Skinner realizes he doesn’t want to spend the rest of his life scheming. He takes the money and returns to Provence, where the audience discovers the sale of the house wasn’t completed. He confesses his love to Fanny, and ultimately becomes a man his uncle would have been proud of.