This weekend we watched the documentary The Queen of Versailles, now available on Rogers on Demand. Garish and over-the-top in many ways, I found the film a useful reminder of the downside of leverage and the self-destructive financial habits that are common to varying degrees in human behavior.
The Queen of Versailles is a character-driven documentary about a billionaire family and their financial challenges in the wake of the economic crisis. With epic proportions of Shakespearean tragedy, the film follows two unique characters, whose rags-to-riches success stories reveal the innate virtues and flaws of the American Dream. The film begins with the family triumphantly constructing the largest privately-owned house in America, a 90,000 sq. ft. palace. Over the next two years, their sprawling empire, fueled by the real estate bubble and cheap money, falters due to the economic crisis. Major changes in lifestyle and character ensue within the cross-cultural household of family members and domestic staff.
In a related story, CNBC reports on how the “wealthy” are using pawn shops as a revolving line of business and personal credit. Financial duress and desperate choices are not just for those with low incomes. Here is a direct link.
The irony is that most people see a sudden downturn in their fortunes as the fault of one particular external event that comes out of nowhere and throws them into duress. The truth is that leverage, poor to non-existent risk management and lack of financial discipline are the main culprits that routinely leave people (and over-optimistic markets) vulnerable to financial shocks.