In my first blog post I mentioned that I would be reviewing movies for some fun and a change of pace. As we move ever deeper into the COVID-19 pandemic and markets tumble, now’s a good a time as any to take a look at the movie, The Big Short.
The Big Short, is a 2015 Oscar-winning movie that follows multiple characters whose stories all have one thing in common, they see major problem in the U.S. housing market. The film chronicles the…. and the events leading up to the global financial crisis.
It’s a movie heavily steeped in financial industry jargon and strategy. To help with this, the director and screenplay incorporate a short vignette with exposition delivered directly to the audience via celebrity monologue. The helps the laymen make sense of who’s done what and how.
The plot’s starting parting point begins with, Michael Burry, a seemingly austistic-potrayed hedge fund manager who has discovered the U.S. housing market is extremely unstable. This market is based on ‘subprime loans’ of high risk (although the bonds they are packaged in are highly rated – meaning low risk). He predicts the market to collapse around 2007 and looks to profit from the drop. He develops a short-selling strategy (a bet against the prevailing market sentiment) that catches the attention of Jared Vennett.
Vennett, is a stockbroker looking to get out of his position, that the housing market will do well, and seeks others to take up on his new found strategy.
Another hedge fund manager, Mark Baum, hears Vennett out and decides he will short the housing market as well. This is done through and arrangement called a credit default swap. As Mark learns more and more about the mortgages that have been bundled to together to form the bonds the banks are selling as investments, he finds out that they’ve been packaged and resold
The film also includes a final set of characters that figure of the impending collapse, Charlie Geller and Jamie Shipley. These two young investors look for guidance from retired investment banker, Ben Rickert, after finding a white paper written by Vennett.
Ultimately, the housing market falls thus triggering the global financial crisis. Multiple investment banks declared bankruptcy, millions of people became homeless, lost their jobs, and trillions of dollars were wiped away.
I highly recommend this movie as it’s very informative on a subject matter that you may have heard about but better never really knew about.
My Two Cents 