I didn't fully get what "Boiler Room" was about.?

Question

I am still young and don't really understand the market. Can you guys explain to me what happened in that movie?

Answer 1

The film was about high-pressured sales tactics used by stockbrokers who "cold called" customers (i.e., called them out of the blue) and tried to get them to invest in low quality or fraudulent investments. It's a relatively recent rendition of an old story--how greed corrupts, and how crime doesn't pay.

No doubt your parents taught you not to lie or steal, so you probably understand that part of the film. The part of the film that you, as you enter your adult years, should keep in mind is how the fictional crooks were able to exploit their victims. The greed (really, financial desperation) of the victims led them to be too willing to believe the sales pitches of the brokers. The more subtle lesson for someone like you to learn is to avoid making risky investments in the hope of fast money. You'd only make yourself vulnerable to crooks. Keep your desire for money under control. Greed kills financial planning. See the webpages listed below for more information.

Answer 2

You find stocks with very low volume and you buy the stock. At some point the stock will rise to the point that somebody that owns the stock will sell you that stock. Once you have the stock, you get other people to buy that stock. Now there are more buyers and sellers and the stock goes up. If the stock moves from 1 cent to 2 cents you have a 100% profit. Once the stock goes up, you sell the shares you own and move on to the next stock and leave those other stock owners holding near worthless stock.

The reason why they choose low volume stock is it's easier to manipulate. The high the volume, the more callers they have to get to drive up the price. Stock manipulation like that is illegal since much of it is based on fraud (healthy company, rising stock prices, the next big thing, you will make a fortune).

So a run through: The boss picks the stock. The crew in the boiler room make the calls to get people to buy the stock. The boss sells the stock the boss and crew own and move on to the next stock. The boiler part comes from two meanings. One is they were using "high pressure" tactics and two since it's illegal, they would have to set up shop in an unmarked area with the ability to have a lot of phones which could be the boiler room of a legit business.

Answer 3

I love that film.

I am a Portfolio Manager with over a decade of experience in the Stock Markets and you can ask me anything about that film and I will answer all your questions.

Just drop me a line with your questions.