I really dislike it when people misapply the term "infamous."Infamous" means to be famous for doing something bad/evil/harmful. Michael Burry isn't infamous. Bernie Madoff is infamous. Sam Bankman-Fried is infamous. Michael Burry is just famous.
The Big Short is a unicorn, bordering on unique. It's brilliantly entertaining and tense, but also informative to a degree that many documentaries don't accomplish (especially anything from The "History" Channel). One of my all-time favorite movies!
@Daniel Hale me too ,i liked it when the parties insulted each other ,people worth millions are no different to us mere mortals :} these Masters of the Universe so called, my other fav is Margin call with the Fab Jeremy Irons :}
It makes sense out of a trade system designed not to make any logical sense, because it doesn't...The mortgage backed securities market is simply creating a communist housing economy, then selling it on the free market...For property that no one actually ownes (including the banks), that literally created the $ for the loans out of thin air...
Nice video, although there are some inaccuracies: 1. If I remember correctly, Burry (Scion fund) wasn’t charging management fee 2. Although CDS did exist before, there weren’t in the mortgage bond industry. Michael Burry actually had to ask to create this swap, which took some months. 3. The CDS that Brownfield bought were against triple A bonds on paper, but actually were full of subprime bonds which were shit. 4. In the movie, Jeremy Strong played the character of Vinny Daniel. 5. Michael Burry closed his fund because he felt disappointed by his investors, who took their money out and didn’t follow him, even after the magnificent returns.
Oh, thank you so much! Because I understood the entire financial inception except for one detail: How can the B buckets be "risky investments" if MBS had to pay out a fixed amount to their investors, and they had CDS as "insurance" in case they couldn't? That would eliminate the risk. Now that you clarified that Swaps weren't in the industry of MBS that makes much more sense.
It seems weird to me to basically allow someone to purchase insurance against an asset in which he doesn’t own. I recently rewatched “The Big Short” and I believe the movie brings that up. It was something like, “Well, if you could buy insurance against a neighbor’s house doesn’t that give you an incentive to burn it down?”
I watched the movie but never really understood CDS until this comment. The fact that you don't need to own the mortage to buy its CDS is the last piece I've been missing. Thank you. Edit: Watched the video😂
@@kristijanmadhukar516 Yeah, it's called a naked CDS, where neither the writer nor purchaser of the swap agreement actually owns the underlying bond. It's a highly unusual contract, but since investment banks were confident the housing market wouldn't fail, they were comfortable selling those swaps.
Well you need to read more. As the loan was backed by taxpayers ie the Insurance holder on the loans..And the rating companies told the public the loans "Was sound" The movie just exposed the fraud. The Government created.
In a world with perfect information, allowing shorts will temper prices for overpriced assets. The big problem was the derivative market wasn't well regulated so no one really knew what everyone had while selling these things. Believe it or not, shorting stabilizes prices when regulated properly.
Yes but it's not quite the same.It's like a stock option. It's not really insurance even though insurance language is used probably to cover up the fact that it's more like a casino bet. An option is just a contract(in everyday terms we call it a bet but the contract makes the terms legally enforceable)between two investors about what will happen to an asset in the future. In your example you wouldn't have any access to the home or a way to burn it down. However,you're still stuck paying those premiums every month for however long the bet is. If what you're betting on doesn't happen before the term ends then you're out of that money. You lose. If it does(house burns down) then you get to collect on it. The owner loses. You can get on any stock trading site right now and do the same without owning a single stock. Just as long as you have the money to pay the premiums. If you bet a stock will rise above a certain amount by a certain date and it does you win....if it doesn't then you lose the premium you paid and the owner of the stock you're betting on or against gets it. However,one investor really can't singlehandedly force a stock to rise or fall in order for him to win a bet. Without some insider trading info(which is illegal) there is no way to be 100% sure what a stock is gonna do and no way to force it to do what you want.
Talking abount Lewis, I also recommend reading his previous book, which is kind of a "prequel" to the Big Short. It is called Liar's Poker and it is related to Lewis's time as a bond trader at Solomon Brothers and the Toxic Culture of Wall Street in the 80s, It is an amazing read!
I live in Florida. I witnessed new young mortgage brokers swapping information on how to bypass underwriting protocols. I walked away. An acquaintance called me and wanted me to partner up because his banker would not give him anymore mortgages. I said no thanks. Home and lot prices were going up daily as people played the flip with nothing to support the price point. It was corrupt and insane. A young man said his girlfriend’s house value was up and she was going to sell. Told him she better hurry up but this wasn’t going to last. I’m talking about obscene prices for lots and homes where I would not live with nothing but intangible delusion to support the price. If you had a pulse, you could get a mortgage. Then it happened and there were vacant houses everywhere. One small nice pool home bought by a young couple in our neighborhood sat vacant for over seven years, roof caved in. It was eventually bought and restored. It’s in a nice neighborhood. Was grateful for my ability to seek the truth and be responsible.
What pissed me off wasn't that no one went to jail, its that as soon as our government gave them billions of taxpayer dollars the first thing they did was give themselves huge bonuses.
The thought process, right or wrong, is that if they don't give bonuses, the top execs (assumed brain trust) will leave and do other things and the bail out that was just handed out will be futile as no one will be around to lead them out of the mess. My opinion is that, sure, you can think that way, but you trust the same people who led them into the mess to lead them out? If you don't bail out, then trust in the US financial system craters and an even worse recession happens. There are no good answers.
As one of the characters in Aaron Sorkin’s The Newsroom says (and I’m paraphrasing), “you keep saying people should go to jail, but for the life of my I cannot figure out what laws they broke”.
@@drivingmecrazyinla9457 As a layperson, I agree with your embedded comment there -- you have a layer of executives who have created and worked within a system that would have put us into another Great Depression if the government hadn't gone into emergency mode and thrown a huge amount of money into it, and we'll be dealing with the repercussions of those emergency measures for decades. But the crisis made us even more susceptible (because we were afraid) to trusting those "experts". The sudden dangerous situation meant we were afraid to swap horses midstream, even when the horses were causing the problem in the first place. Watching the Senate interview with the CEO of Kroger when he was getting his merger rubber stamped (the guy who gave himself $20 million while cutting post-COVID wages for workers, whose executive decisions included firing anyone not wearing his preferred messages on their aprons), this guy and "brain trust" don't go together. From a distance, it seems obvious they aren't the smartest guys in the room, they just know how to work the room -- leveraging privilege and credentials in a system of mutual graft. There's nothing about a free market system that would produce the kind of dysfunction you see in the executive layers of American business.
Watching the movie made me read the book. The book was like just a constant ramp up of, "Well, surely this is when the bottom falls out!" Then you find out that was only the beginning of the issue. Great book and I can't wait for Lewis' upcoming book about Sam Bankman Fried
Dude me too! Let's hope it's better than his book at high-frequency/high-speed/algorithmic trading, which lacked basic facts and common sense. What made the big short fantastic was that it was non-fiction, presented in a cohesive, entertaining fashion. It got me interested in finance haha
The campaign shenanigans from both the red party and blue party is exactly what is stirring up this market panic. I have a little over 250k i wanted to put in the markets but I don’t know what direction to head now.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850K
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? i'm in dire need of proper portfolio allocation
Viviana Marisa Coelho is her name. She is regarded as a genius in her area and works for Empower Financial Services. By looking her up online, you can quickly verify her level of experience. She is well knowledgeable about financial markets.
No one compares investment volume as a factor. A contributing factor was that investors began shifting from Real Estate into stock. Previously stock returns were flat but when stock returns began to increase investors shifted asset allocation away from Real Estate toward more liquid stocks. This left Real Estate investors with less and less buyers and caused values to decrease with decreased demand.
The main reason this all got started was because government loosened the requirements for people to get a house loan. I remember getting a HELOC loan (recommended by bank agent) a few years before the blowup without documented web design freelance income.
Government doesn't make loan underwriting calls. When the secindary mtge market was only the quasi- governmental FNMA, yes they set the bar. But as the secondary market became privatized, this ended the role of government as rule maker in the mtge origination market (not entirely tho, FHA and VA mtges are still significant chunks of home mortgages - but less than 10% total). Yeah, can't blame govt (except for no one going to jail).
@@henrybutchy3242 bull shit Government do goodism is to blame!! Too many poor people were denied loans…..horrors!!! So they stopped regulating and guess what poor people got loans…and we all lost because poor people failed to pay. Haha. OBAMA made his first million suing Bank America for red lining. Guess what? All his clients defaulted in 5 years. Democrats failed again as all progressives do
To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn’t good enough. I've been quite unsure about investing in this current market and at the same time I feel it's the best time to get started on the market, what are your thoughts?
Since the crash, I've been in the red. I’m playing the long term game, so I'm not too worried but Jim Cramer mentioned there are still a lot of great opportunities, though stocks has been down a lot. I also heard news of a guy that made $250k from about $110k since the crash and I would really look to know how to go about this.
Thats true, I've been getting assisted by a FA for almost a year now, I started out with less than $200K and I'm just $19,000 short of half a million in profit.
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Real estate speculation got away from us because we ignored Henry George for the last century. We need a Land Value Tax to prevent speculation and enrichment on limited resources like land and water rights. Property taxes are a corruption of the LVT, they include the useful building sitting on the unproductive land. Right now the property market is so expensive because investors are running businesses to pay off owning land investments.
The Market have been suffering over the past month, with all the three indexes recording losses in recent weeks. My $400,000 portfolio is down by approximately 20%, any recommendations to scale up my returns before retirement will be highly appreciated.
Find stocks with market-beating yields and shares that at least keep pace with the market for a long term. For a successful long-term strategy I recommend you seek the guidance a broker or financial advisor.
Very true , I diversified my $400K portfolio across multiple market with the aid of an investment advisor, I have been able to generate over $900k in net profit across high dividend yield stocks, ETF and bonds in few months.
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Wall Street stays out of jail because there is no difference between fraud and risk. Ryan's character in the film makes this point when he mentions his brother in law and the difference between stupid and illegal. Wall Street gets to be crooks because what they do can be easily blamed on stupid risk and when so many governments and the entire Treasury had their culpability there was no jail time coming. In fact the government and Wall Street made a profit off the collapse. It was the average person who suffered the most.
The rating agencies (S&P and Moodys) were giving CDOs artificially high ratings even though they were full of very very high risk mortgages. They did this knowingly. Those who were in on it at the banks and these agencies committed fraud, and should have gone to prison for it, but never did. Also, mortgage lenders were handing out loans to people who they *knew* were unable to pay. They would allow the borrowers to put any income, etc. they wanted on the loan applications and looked the other way. This is also fraud, and those responsible should have gone to prison, but again, none ever did. The game is rigged. Everyone in the game knows it. It is just how the world works, and what will ultimately lead to the collapse of the entire system. It *always* does eventually...
Credit rating could have put a stop to all of this collapse, but there is no liability on a credit rating. It’s an opinion. You can’t jail your grocer if he said the oranges taste great but you think it’s terrible. But folks treated the ratings as gospel
@@chowsquid The credit rating agencies did much more than just have a "bad opinion" - They knew the instruments were full of bad mortgages, yet rated them however the banks told them to anyway in exchange for their business aka for money. That is conspiracy to defraud no matter how you look at it.
So what you're saying is there's absolutely no reason for Wall Street or the government not to do it again. I mean, what was the worst of it? Occupy Wall Street? A bunch of people camped outside banging drums for a 3 months? I remember video footage of investors high up in the building looking and laughing.
The one big issue left out of the movie and this video is the effective repeal of the Glass-Steagall act by the Graham-Leach-Bliley act in 1999. If the investment banks weren’t essentially protected by the government, they would’ve actually payed attention to the mortgages they were buying for the CDOs. In addition, where the hell is the reform of the ratings industry? The idea that you can shop for a better bond rating is absurd.
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The most significant lesson I gained from the stock market in 2023 is that uncertainty prevails, emphasizing the importance of humility. Adhering to a long-term strategy with a competitive edge is key.
Certainty eludes everyone; thus, it's vital to establish your own methodology, handle risk, and adhere to your strategy unwaveringly. This commitment should endure challenges and successes, all while maintaining a commitment to ongoing learning and improvement.
@@DeannaPeters-lz8we Who is the professional who is advising you, if you could perhaps tell us? As a novice investing in stocks without the correct direction of a professional, I have lost a lot of money.
You keep thinking that. As the markets are rigged these days. As they use taxpayers money to bail them out. Why most people that had these CDS never got paid. The Government used your money to bail out the losers.
Real Estate provides cashflow, tax benefits, equity building, competitive risk-adjusted returns, and inflation protection on its own. Whether you invest in physical properties or REITs, real estate may help you diversify your portfolio and reduce volatility. Dividends are what got me into investing in REITs, great way to secure the accumulate wealth, I hold AMT, CCI & PSA. $290k in profits made in 2022.
Consistently investing in high quality dividend paying REITs & companies over the long term is a relatively easy strategy to create generational wealth. My "boring" REITs portfolio paid me over $4,000 in dividends last month.
It's time to make high value games! Discounted dividend stocks. Ever grateful to my CFP "Eileen Ruth Sparks", I now have a six-figure REIT portfolio, which includes, but is not limited to; AMT, SPG & PSA.... I now have 606 shares of AMT which pays dividends of $3800 per year.
Thanks for this tip. Her website popped up on the first page immediately I searched her, I read through her resume and it seems pretty tight. So, I dropped a message & hopefully she replies soon.
As much as I love this movie I personally feel where they really missed the mark was failing to highlight in any way the governments involvement in the financial crises. The government aided and abetted the behavior of the banks. Bad government policies allowed the problem to grow to its ultimate scope.
After this happened there were only four AAA rated banks left in the world, the largest Australian banks. The heavy regulations they operated under prevented them from doing any thing stupid. Strange how American banks didn't ask for more regulation after they lost so much.
Brownfield actually had that same strategy for their whole time they ran the fund. They would buy options and other financial instruments for events that were really unlikely to happen. But, because the instruments were so underpriced, even if the market just moved 1% they were able to make a lot of low risk money.
To my understanding this just proves how much we need an edged as an investors because playing the market like everyone else just isn’t good enough. I’ve been quite ensured about investing in this current market and at the same time I feel it’s the best time to get started on the market, what are your thoughts?!
That’s true , I’ve been getting assisted by ‘Margaret Johnson Arndt’ for almost a year now , I started out less than $200k and I’m just $19,000 short of half a million in profits.
I am being advised by Margaret Johnson Arndt, an experienced financial professional. If you're interested, you can easily find more information about her as she has accumulated years of expertise in the financial market.
@@dinocrest1946 People often use that argument to defend a movie that is still vastly inferior. Spiderman 3 (the Sam Rami one) and Spiderman: Into the Spiderverse are also two very diffirent kinds of films. But the latter still crushes the former.
As an lnvesting enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?.
Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks
I agree with you. I started out with investing on my own, but I lost a lot of money. I was able to pull out about $200k after the 2020 crash. I invested the money using an analyst, and in seven months, I raked in almost $673,000
@@SethDonald-mf4vm I agree with you. I started out with investing on my own, but I lost a lot of money. I was able to pull out about $200k after the 2020 crash. I invested the money using an analyst, and in seven months, I raked in almost $673,000
@@DylanMoore-cb7if Actually its a Lady. Yes my go to person is a "Monica Shawn Marti". So easy and compassionate Lady. You should take a look at her work
This video was horrible at describing the different tranches of mbs. The lower ratings of each "bucket" as they 're called here was strictly because of the credit rating of the borrowers and the actual product. There were loans given out back prior to the great recession known as "liar loans". There were actually loans available where the borrower could state their income on the mortgage application and no income verification would be done. You could make $74,000 a year and claim you made $200,000 a year and no one would verify this. There were also variable rate loans and other time bomb loans. There were many bad loan products that were doomed to fail back in the days prior to the great recession. These loans would be insured by companies like AIG and others. This insurance would vault these bbb rated loans to AAA status. Then groups of these loans would be sold off to investment banks and the like. Problem was that these banks thought they were buying AAA rated securities when in fact they were buying garbage products dressed up to look like AAA rated ones. Couple that with property appraisers on the take and making inflated appraisals and you have a recipe for disaster. There are still calls to this day to bring back liar loans (and similar bad mortgage products). The dolt at the start who talked about no one going to jail. Well, there weren't just a few people responsible for this. You couldn't build enough jails to hold the number of people that were responsible. The crimes were committed from the top of these banks all the way down to loan officers and appraisers.
Often, mortgage brokers were filling out loan applications for borrowers (who had, up to that point, told the truth about their income) - and the broker would quietly plug in whatever income level was needed to qualify for the loan! Borrowers wouldn’t even see the application with the false info until they were seated at the closing table signing a stack of legal documents. For most borrowers, at that point, it felt rather late in the process to pull out of the deal-if they even noticed the discrepancy.
Thanks for the video! Honestly, I'm still not entirely sure where the movie went wrong. I understand that CDS are basically insurance with premiums, but the other differences seem pretty subtle.
Jeremy Strong portrayed Vincent Daniel, who did not go to prison LOL. Him and Porter Collins run there own fund and are great guys! They spoke with my finance class about their time at Frontpoint and it was great!
Patrick Boyle sent me here to berate you for subjecting us to horrible music, and I ended up learning something from this extremely inciteful, and very well-made video. Now, I don't know where to register my rage!!!!
7:50 see, this is what I don't understand. Why can this not be done with a simple portfolio loan? That is, under a portfolio loan, why can't the bank just use the funds from mortgage payments for whatever it wants, like creating new mortgages?
I remember going into an elevator and telling my friend that the bubble is gonna burst. The person who overheard our conversation laughed and said a bubble was just a myth. I told him to be patient and just wait. He just shook his head. This was in 1998.
Wrong on timing. There’s a saying in short positions. “The market can be wrong longer than you can stay solvent” If the bubble dragged on longer, m.burry could have been insolvent and have to dissolve his fund with big losses.
I have a question on the policy regarding the returns in the tranched structure of the MBS. Now, good mortgages were pooled together with bad ones, but there was a cascade-esque structure to it. The investors who bought AAA, AA+ rated ones were paid first (safer investment, but lower payoff), while the ones who bought the C and B- were paid last, and were more likely to lose their investment in the event of homeowners defaulting on their payment. My question is this - were the MBS designed in a way that investors who purchased AAA bonds were paid first by default, regardless of which tranche the inflow of payment was coming from? (Intuitively, since the bonds are paid for by homeowners paying their mortgages, the AAA & AA+ bonds would likely get paid first anyway - because those mortgages are of homeowners that supposedly have good incomes, good credit scores, etc.) However, let's hypothetically assume (just for the sake of argument), that in a certain MBS, the homeowners associated with the AAA & AA+ tranches were the ones who actually ended up defaulting on their loans, while the homeowners associated with the C & B- mortgages actually ended up paying their mortgages properly. In this case, would the ones who purchased AAA & AA+ tranches still get paid first, or would the ones who purchased the B- & C tranches get paid, given that the cash flow has actually come from their corresponding mortgages?
One thing I don't get: at 6:47 he says that Mortgage backed securities HAVE to pay out a fixed amount of money to their investors, that's why they have "insurance". In case they can't. But the later analogy at 11:16 with buckets says that the B bucket doesn't always gets filled and that's why they are "riskier investments". But how can there even be risk with MBS if they have insurance (CDS) to pay in case the bucket doesn't get filled?
The bucket situation is the reason why the insurance is taken out. So the bucket situation happens before and to protect themselves the buyers take out the insurance against the possibility that the buckets won't get filled.😁
It might be that , their lower B rated MBS products insurance covers their face value but because they are riskier ones , their premium could be higher in which case , the insurance company loses much less than they are supposed to do . They always have an ultimatum
As a p&c underwriter, it blows my mind that you can buy insurance on something you don’t own. In p&c insurance you have to have “insurable interest” in a something to insure it, usually meaning you own it.
And that was the most common way for CDS's to be sold: to bond holders and lenders to insure the loans they were issuing. But these banks were so certain that the housing market would not collapse that they were comfortable selling "naked" CDS's to these investors.
It’s banks selling insurance on something they have no idea how to insure. Imagine a P&C selling insurance assuming things don’t catch fire or ain’t no such thing as hurricanes 🎶….or pandemics.
9:45 incorrect. The movie did mention this, with the pseudonym of the one Morgan Stanley trader who made the 5th largest bond loss in history, by attempting to short MBS's two years before Burry.
It's ridiculously obvious we are in another bubble (several, actually -- Real estate, but then higher ed is likely to burst soon, also), but just like last time everyone I say that to in my community thinks I'm nuts. It's shocking how people are able to not see what they don't want to see.
Let's pretend you wanted to be a homebuyer in 2004: You would get to the local bank and take out a mortgage and buy a home. You were obligated to pay a monthly amount until you paid off the whole loan. The local bank would sell your loan (you would still pay to them, but they would wire the money to the loan buyer) and a big bank would buy it. They clumped thousands of bought loans into packages and sold them to investment companies (to use the money to buy more loans like yours). The hedgefunds and investment companies bought them so they would get a return on the amount given (e.g. gave 10 mil and expected 15 mil back). Having 1000 different loans in the same pack, meant that if some of the mortgages (like yours) would default, the interest from the others + the value of the sold house would cover the losses and still turned a profit. The guys in the video figured out that more and more packs contained more and more bad loans (the local bans would lend huge amounts of money to people with bad credit history and they would buy overpriced houses, thus they couldn't make their payments and big banks bought them just to sell them fast to the next sucker). When they figured it, they took insurance saying: if the packs won't turn a profit, pay us a sum of money that covers our losses and turns a profit for us. For the isurance to work, they paid tens of millions to the insurance companies and waited for the price of the houses to fall abruptly. In 2007-2008 the prices of houses fell greatly and many people were unable or unwilling to make payment and defaulted on the loan en-masse (for 1000 in a pack, 600 or 800 defaulted) and as the packs wouldn't return money, the hedge funds, investment companies and banks started to not get paid for what they gave for the packs and some went bankrupt. The ones taht took insurance against the packs, had to be paid in full by the insurance companies and they were paid when the Congress voted to send money to the insurance companies to pay their policies and the insured parties got away from the crisis scot-free. tl;dr - small banks gave bad mortgages, those got bought by big banks, big banks clump thousands of loans into packs and sell the packs to investors. Mortgages default en-masse and cause the investors to lose everything (except for those insured). Hope this helps, I tried to simplify this as much as I could
Great video. Great content. Thank you. One recommendation is to slow the cadence down a bit. Felt like a race. It would be more enjoyable and easier to glean some of the facts with a little bit slower pace.
A Credit Default Swap is basically insurance if the basket of mortgage Defaulted. Had AAA rated mortgages ever Defaulted NO. So they created this Swap and he paid a high premium to keep it, not a very low premium like regular insurance.
One question. Why should I buy growth share which don't pay money. If someone buy that share then only I get money. What if no one buy it. In that case what will happened
That is how the market works... you pay for the opinion of others. If the big players doesn't think stock ABC will go up, than it wont because they don't buy it. That is the risk.... luckily we can short🤷🏻♂️
"Play." "Betting." I understand it is high risk, but at the end of the day just trying to distill a) why this makes markets more efficient, and b) what parts of this system were corrupt.
When something bad happens, the question should not be, “well, who goes to jail over this, who shall be the scapegoat?” The system had weaknesses. That’s it.
It's absolutely disgusting how Credit Default Swaps would be allowed... we hear about millionaries and the occasioanal billionaire individuals, but a company being able to save TRILLIONS in an "insurance" sounds like a corrupt scheme on an entirely different level
I enjoyed watching this movie though it took time to get it,but it was very good😎and the best part was they got the point that all those housing loans and bonds that were given it was not based on actual money or assets,that base of the horrendous financial catastrophe was a bubble
In 2005 I was interested in business. Then I started to get interested in God and took a long break from those dreams. I didn't even feel the crisis but I look back and I'm on finance as it relates to business now and I still don't regret not starting sooner.
The details in the movie that "were not quite right" or "not explained in enough detail" is for a couple of reasons. Firstly, its a movie, and entertainment product which in this case is also a learning product to further the general publics understanding of a complicated subject. And you have to get it across to them in about two hours, without losing their attention by throwing too much technical jargon at them. For example the scene where Dr. Burry first attempts to get the bank to make him a contract the woman repeats back to him "so you want to bet against the housing market?" In reality that would have never been said but its there to make sure people understand basically why hes there and what hes trying to do. Its super hard to make learning entertaining at the same time. But they did just that.
I made some real estate transactions in 2020 and am now anticipating a market downturn so I can acquire properties at a low cost. I've been giving thought to investing in stocks as an alternate option; do you think this is a wise move at this time? I hear people commenting that the current market is chaotic and volatile, yet I still come across reports of traders earning over $225,000 per week. How can this be achieved?
it depends on your exit and entry strategy, most folks are used to a bull market and can't handle a crash, but if you know how to navigate and where to look, you'll make a killing.
Dc. True, the US-Stock Mrkt had been on it’s longest bull-run in history, so the mass hysteria and panic is relatable, considering we’re not accustomed to such troubled mrkts, but as you mentioned there are avenues lurking around if you know where to look, I’ve netted over $850k in the past 10months and it wasn't some rocket-science strat. I applied , I just knew I needed a firm and reliable technque to navigate better in these times, so I hired a portfoilo advlsor.
@@henrech I want direction so I can rescue my port-folio because of the huge plunges and think of better methodologies. How might one arrive at this counselor?
The adviser I use is actually quite known, you might have heard of her KIMBERLY JEAN HEAVNER, she's been featured on several platforms including CNBC and Bloomberg, you can search her name.
@@henrech Thank you for this Pointer. Your handler, who appeared to be highly competent and versatile, was easy to find. I scheduled a session with her.
i was having so much trouble with a lot of what the movie said. i couldn't wrap my head around the CDO's The movie didn't explain them well. You give a better explanation as to what they were and how they worked. The whole part of the movie with Selena Gomez in it is a bad analogy. At least that's how I see it.
I really appreciate your efforts! A bit off-topic, but I wanted to ask: My OKX wallet holds some USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). Could you explain how to move them to Binance?
My own "Big Short" was welching out on 6 figures of my unsecured debt in a Chapter 7 bankruptcy during that time, while I kept my fat 401K (OK, it was trimmed down by then, LOL), cheap house that I bought literally an hour before officially filing, and a grand piano (that is exempt in my state, LOL).
The most hilarious/horrible part of this is that the greatest possible returns on this trade were available mere months prior to the crash of the CDOs. Swaps on the AAs were still available for almost nothing in the summer.
Just found your channel. I went to Wharton, worked in investment banking during this period, and was trying to explain this movie to my teenage son. This video and all others are awesome, keep on telling the real story. Kudos.
This is why banking regulations are important and necessary. All you have to do is compare the U.S. banking system to the European system where this kind of thing can't happen.
Came here because of Patrick Boyle, he said you owe him a beer or tea, or something...whatever you guys drink while looking into financial statements from the hedge funds or those complicated words...😄
Thing is how often do people offer put options at such high margins? If seller thinks highly the stock will soar then no need to offer put option. Just buy stock now at higher price. You think it will keep going so why need to risk it. In other words if someone makes a lot of money from put option then they have to spend a lot. An amount that probably is not even worth risking. At some point enough is enough. All this only happens because of fiat money system. Is not regulated enough. Money is cheap so bankers just throw it around. They can always make more or get bailed out.
The other thing that is interesting about this is that Paulson was actually selecting individual MBS with Goldman - maybe that’s the allusion they were making in the Burry scene with GS
Every time i read or watch something on the financial crisis i briefly trick myself into thinking i learned something only to realize ive just gotten more confused its been a decade and a half
Maybe I missed it but a critical piece of this puzzle appears to be Harry Markowitz's Modern Portfolio Theory (for which he jointly won a Nobel Prize) . The theory states that the act of diversification in a portfolio will reduce the risk of that portfolio to below that of its average asset. And so, when Bear Stearns bundled a bunch of subprime mortgages from across the US (or even internationally), there was a theoretical basis for the bond rating agencies to rate this syndication of subpri me mortgages as AAA. The diversification justified the increased ratings. And all of this was consistent with the signature works of Nobel Prize winning economists.
And that is one of the challenges of applying MPT: you need to estimate how much correlation exists between assets in order for it to correctly estimate the risk. But, when things go horribly wrong, assets tend to be much more highly correlated than during normal times.
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I really dislike it when people misapply the term "infamous."Infamous" means to be famous for doing something bad/evil/harmful. Michael Burry isn't infamous. Bernie Madoff is infamous. Sam Bankman-Fried is infamous. Michael Burry is just famous.
Infamous means more than famous . To be IN famous
@JBG1968 Sorry but it doesn't.
@@JBG1968this guy's probably the biggest thing coming out of Mexico!
@@JBG1968 Infamous is defined as being known for bad quality or a bad deed.
Terms are also used figuratively or ironically….short sellers of all types are often erroneously viewed as being bad.
The Big Short is a unicorn, bordering on unique. It's brilliantly entertaining and tense, but also informative to a degree that many documentaries don't accomplish (especially anything from The "History" Channel). One of my all-time favorite movies!
@Daniel Hale me too ,i liked it when the parties insulted each other ,people worth millions are no different to us mere mortals :} these Masters of the Universe so called, my other fav is Margin call with the Fab Jeremy Irons :}
Inside Job documentary on the subject 👌
It makes sense out of a trade system designed not to make any logical sense, because it doesn't...The mortgage backed securities market is simply creating a communist housing economy, then selling it on the free market...For property that no one actually ownes (including the banks), that literally created the $ for the loans out of thin air...
It's crazy how despite some inaccuracies this movie still ends up being quite loyal to what actually happened
I've read articles of investors who mentioned Janet Lindsey and her consistency in making lots of money from crypto..
Everyone here is a bot. Do not follow any advice or comments here.
How or why is that crazy? lol
@@justaweeb1884indeed. It'd be a serious mistake.
I’ve read articles from Janet Herp and she says buying options in bio tech companies awaiting FDA approval is the safest way to grow your money.
Nice video, although there are some inaccuracies:
1. If I remember correctly, Burry (Scion fund) wasn’t charging management fee
2. Although CDS did exist before, there weren’t in the mortgage bond industry. Michael Burry actually had to ask to create this swap, which took some months.
3. The CDS that Brownfield bought were against triple A bonds on paper, but actually were full of subprime bonds which were shit.
4. In the movie, Jeremy Strong played the character of Vinny Daniel.
5. Michael Burry closed his fund because he felt disappointed by his investors, who took their money out and didn’t follow him, even after the magnificent returns.
It explicitly states in the book Dr. Burry rejected the 2:20 payment structure and only took fees on profits generated
Oh, thank you so much! Because I understood the entire financial inception except for one detail:
How can the B buckets be "risky investments" if MBS had to pay out a fixed amount to their investors, and they had CDS as "insurance" in case they couldn't? That would eliminate the risk.
Now that you clarified that Swaps weren't in the industry of MBS that makes much more sense.
Thanks! So they did exist in the CDO market but not in the MBS market? What products was AIG's CDS market in relation to?
@@Hamboarding no cdo market was made later and did not have cds but burry asked for it to be made
That’s a lot of serious misses by the content creator. Enough to say that it was at least just as misleading as the movie that he’s criticizing.
It seems weird to me to basically allow someone to purchase insurance against an asset in which he doesn’t own. I recently rewatched “The Big Short” and I believe the movie brings that up. It was something like, “Well, if you could buy insurance against a neighbor’s house doesn’t that give you an incentive to burn it down?”
I watched the movie but never really understood CDS until this comment. The fact that you don't need to own the mortage to buy its CDS is the last piece I've been missing. Thank you.
Edit: Watched the video😂
@@kristijanmadhukar516 Yeah, it's called a naked CDS, where neither the writer nor purchaser of the swap agreement actually owns the underlying bond. It's a highly unusual contract, but since investment banks were confident the housing market wouldn't fail, they were comfortable selling those swaps.
Well you need to read more. As the loan was backed by taxpayers ie the Insurance holder on the loans..And the rating companies told the public the loans "Was sound"
The movie just exposed the fraud. The Government created.
In a world with perfect information, allowing shorts will temper prices for overpriced assets. The big problem was the derivative market wasn't well regulated so no one really knew what everyone had while selling these things. Believe it or not, shorting stabilizes prices when regulated properly.
Yes but it's not quite the same.It's like a stock option. It's not really insurance even though insurance language is used probably to cover up the fact that it's more like a casino bet. An option is just a contract(in everyday terms we call it a bet but the contract makes the terms legally enforceable)between two investors about what will happen to an asset in the future. In your example you wouldn't have any access to the home or a way to burn it down. However,you're still stuck paying those premiums every month for however long the bet is. If what you're betting on doesn't happen before the term ends then you're out of that money. You lose. If it does(house burns down) then you get to collect on it. The owner loses. You can get on any stock trading site right now and do the same without owning a single stock. Just as long as you have the money to pay the premiums. If you bet a stock will rise above a certain amount by a certain date and it does you win....if it doesn't then you lose the premium you paid and the owner of the stock you're betting on or against gets it. However,one investor really can't singlehandedly force a stock to rise or fall in order for him to win a bet. Without some insider trading info(which is illegal) there is no way to be 100% sure what a stock is gonna do and no way to force it to do what you want.
Talking abount Lewis, I also recommend reading his previous book, which is kind of a "prequel" to the Big Short. It is called Liar's Poker and it is related to Lewis's time as a bond trader at Solomon Brothers and the Toxic Culture of Wall Street in the 80s, It is an amazing read!
It's actually called "Liar's Poker" and yes, it is a great book.
@@bti2270 Yes! corrected, thnks!
His other book When Genius Failed-about Long Term Capital Management- is an amazing read as well.
He's just all around a great author
Sorta like wolf of wall street
I live in Florida. I witnessed new young mortgage brokers swapping information on how to bypass underwriting protocols. I walked away. An acquaintance called me and wanted me to partner up because his banker would not give him anymore mortgages. I said no thanks. Home and lot prices were going up daily as people played the flip with nothing to support the price point. It was corrupt and insane. A young man said his girlfriend’s house value was up and she was going to sell. Told him she better hurry up but this wasn’t going to last. I’m talking about obscene prices for lots and homes where I would not live with nothing but intangible delusion to support the price. If you had a pulse, you could get a mortgage. Then it happened and there were vacant houses everywhere. One small nice pool home bought by a young couple in our neighborhood sat vacant for over seven years, roof caved in. It was eventually bought and restored. It’s in a nice neighborhood. Was grateful for my ability to seek the truth and be responsible.
What pissed me off wasn't that no one went to jail, its that as soon as our government gave them billions of taxpayer dollars the first thing they did was give themselves huge bonuses.
Then these same businesses turned around and shit on individuals who did the same thing during covid with a stimulus check. Smh.
The government made a profit on the money they gave out
The thought process, right or wrong, is that if they don't give bonuses, the top execs (assumed brain trust) will leave and do other things and the bail out that was just handed out will be futile as no one will be around to lead them out of the mess. My opinion is that, sure, you can think that way, but you trust the same people who led them into the mess to lead them out? If you don't bail out, then trust in the US financial system craters and an even worse recession happens. There are no good answers.
As one of the characters in Aaron Sorkin’s The Newsroom says (and I’m paraphrasing), “you keep saying people should go to jail, but for the life of my I cannot figure out what laws they broke”.
@@drivingmecrazyinla9457 As a layperson, I agree with your embedded comment there -- you have a layer of executives who have created and worked within a system that would have put us into another Great Depression if the government hadn't gone into emergency mode and thrown a huge amount of money into it, and we'll be dealing with the repercussions of those emergency measures for decades. But the crisis made us even more susceptible (because we were afraid) to trusting those "experts". The sudden dangerous situation meant we were afraid to swap horses midstream, even when the horses were causing the problem in the first place.
Watching the Senate interview with the CEO of Kroger when he was getting his merger rubber stamped (the guy who gave himself $20 million while cutting post-COVID wages for workers, whose executive decisions included firing anyone not wearing his preferred messages on their aprons), this guy and "brain trust" don't go together. From a distance, it seems obvious they aren't the smartest guys in the room, they just know how to work the room -- leveraging privilege and credentials in a system of mutual graft. There's nothing about a free market system that would produce the kind of dysfunction you see in the executive layers of American business.
Watching the movie made me read the book. The book was like just a constant ramp up of, "Well, surely this is when the bottom falls out!"
Then you find out that was only the beginning of the issue. Great book and I can't wait for Lewis' upcoming book about Sam Bankman Fried
Dude me too! Let's hope it's better than his book at high-frequency/high-speed/algorithmic trading, which lacked basic facts and common sense. What made the big short fantastic was that it was non-fiction, presented in a cohesive, entertaining fashion. It got me interested in finance haha
The campaign shenanigans from both the red party and blue party is exactly what is stirring up this market panic. I have a little over 250k i wanted to put in the markets but I don’t know what direction to head now.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850K
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? i'm in dire need of proper portfolio allocation
Viviana Marisa Coelho is her name. She is regarded as a genius in her area and works for Empower Financial Services. By looking her up online, you can quickly verify her level of experience. She is well knowledgeable about financial markets.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
Broad market index funds. You're welcome.
No one compares investment volume as a factor. A contributing factor was that investors began shifting from Real Estate into stock. Previously stock returns were flat but when stock returns began to increase investors shifted asset allocation away from Real Estate toward more liquid stocks. This left Real Estate investors with less and less buyers and caused values to decrease with decreased demand.
'It was a gully'.
The main reason this all got started was because government loosened the requirements for people to get a house loan. I remember getting a HELOC loan (recommended by bank agent) a few years before the blowup without documented web design freelance income.
Government doesn't make loan underwriting calls. When the secindary mtge market was only the quasi- governmental FNMA, yes they set the bar. But as the secondary market became privatized, this ended the role of government as rule maker in the mtge origination market (not entirely tho, FHA and VA mtges are still significant chunks of home mortgages - but less than 10% total).
Yeah, can't blame govt (except for no one going to jail).
@@henrybutchy3242 bull shit Government do goodism is to blame!! Too many poor people were denied loans…..horrors!!! So they stopped regulating and guess what poor people got loans…and we all lost because poor people failed to pay. Haha. OBAMA made his first million suing Bank America for red lining. Guess what? All his clients defaulted in 5 years. Democrats failed again as all progressives do
All in the name of equity and equality….
When has that ever turned out well?
To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn’t good enough. I've been quite unsure about investing in this current market and at the same time I feel it's the best time to get started on the market, what are your thoughts?
Since the crash, I've been in the red. I’m playing the long term game, so I'm not too worried but Jim Cramer mentioned there are still a lot of great opportunities, though stocks has been down a lot. I also heard news of a guy that made $250k from about $110k since the crash and I would really look to know how to go about this.
There are actually a lot of ways to make high yields in a crisis, but such trades are best done under the supervision of Financial advisor.
Thats true, I've been getting assisted by a FA for almost a year now, I started out with less than $200K and I'm just $19,000 short of half a million in profit.
Impressive can you share more info?
My advisor is ‘’Catherine Morrison Evans’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
This and Margin Call feel more grounded compare to Wolf of Wall Street
Margin call had almost no detail of what went wrong. Huge difference from Big short.
@@tubewacha true. I really wanna see what is in Eric Dale’s USB drive visually
Remember rules work differently for rich
@@eavyeavy2864 what does this have to do with rules for the rich?
Too Big To Fail is also a gem
Real estate speculation got away from us because we ignored Henry George for the last century.
We need a Land Value Tax to prevent speculation and enrichment on limited resources like land and water rights.
Property taxes are a corruption of the LVT, they include the useful building sitting on the unproductive land.
Right now the property market is so expensive because investors are running businesses to pay off owning land investments.
While i agree. The world is run by landlords. Youd need serious political upheaval to get it implemented
The Market have been suffering over the past month, with all the three indexes recording losses in recent weeks. My $400,000 portfolio is down by approximately 20%, any recommendations to scale up my returns before retirement will be highly appreciated.
Find stocks with market-beating yields and shares that at least keep pace with the market for a long term. For a successful long-term strategy I recommend you seek the guidance a broker or financial advisor.
Very true , I diversified my $400K portfolio across multiple market with the aid of an investment advisor, I have been able to generate over $900k in net profit across high dividend yield stocks, ETF and bonds in few months.
@@Charlescarbajal971 .wow ,that’s stirring! Do you mind connecting me to your advisor please. I desperately need one to diversified my portfolio.
You can do your research and be on the lookout for one with intelligent strategies who'll help your portfolio maintain an unwavering and a progressive growth. Diana Luise Hines is my FA. She has the Flexibility & Expertise to Meet Your Needs. Verify her yourself
@@Charlescarbajal971 Thank you for this tip. it was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.
Wall Street stays out of jail because there is no difference between fraud and risk. Ryan's character in the film makes this point when he mentions his brother in law and the difference between stupid and illegal. Wall Street gets to be crooks because what they do can be easily blamed on stupid risk and when so many governments and the entire Treasury had their culpability there was no jail time coming. In fact the government and Wall Street made a profit off the collapse. It was the average person who suffered the most.
The rating agencies (S&P and Moodys) were giving CDOs artificially high ratings even though they were full of very very high risk mortgages. They did this knowingly. Those who were in on it at the banks and these agencies committed fraud, and should have gone to prison for it, but never did.
Also, mortgage lenders were handing out loans to people who they *knew* were unable to pay. They would allow the borrowers to put any income, etc. they wanted on the loan applications and looked the other way. This is also fraud, and those responsible should have gone to prison, but again, none ever did.
The game is rigged. Everyone in the game knows it. It is just how the world works, and what will ultimately lead to the collapse of the entire system. It *always* does eventually...
Exactly. the govt gutted the risk assessment in the market in order to spur growth by essentially backing the mortgages with the tax dollar ie bailout
Credit rating could have put a stop to all of this collapse, but there is no liability on a credit rating. It’s an opinion.
You can’t jail your grocer if he said the oranges taste great but you think it’s terrible.
But folks treated the ratings as gospel
@@chowsquid The credit rating agencies did much more than just have a "bad opinion" - They knew the instruments were full of bad mortgages, yet rated them however the banks told them to anyway in exchange for their business aka for money. That is conspiracy to defraud no matter how you look at it.
So what you're saying is there's absolutely no reason for Wall Street or the government not to do it again. I mean, what was the worst of it? Occupy Wall Street? A bunch of people camped outside banging drums for a 3 months? I remember video footage of investors high up in the building looking and laughing.
That was hugely informative...thank you!
The one big issue left out of the movie and this video is the effective repeal of the Glass-Steagall act by the Graham-Leach-Bliley act in 1999. If the investment banks weren’t essentially protected by the government, they would’ve actually payed attention to the mortgages they were buying for the CDOs. In addition, where the hell is the reform of the ratings industry? The idea that you can shop for a better bond rating is absurd.
I recently made more purchases. Saving money for a market downturn is likewise a bad idea. There are numerous ways to look at recessions and depressions, we cannot always expect to make large returns, and taking chances is better than doing nothing. The bottom line is that you will achieve remarkable results by diversifying your portfolio and making wise decisions. My portfolio's raw earnings rose by $608k in just 5 months.
@Dylan Shultz Due to the variety of my employment, I don't have a certain fund that I invest in. I don't act at all like that. I imitate the behaviors of seasoned financial counsellor HEATHER ANN CHRISTENSEN, who holds a US Securities and Exchange Commission license (SEC). Since then, in contrast to the IRA's slow growth, my returns have increased quickly. What I possess only appears in her trades, not in a small number of specialized firms.
@colleen Odegaard You can find her online, then get in touch with her. She is well renowned for her work as a consequence of a recent Bloomberg piece. She has a homepage devoted to consultations, so you'll need to ask her about her rates.
Letting bots have empowering conversations is tight
The most significant lesson I gained from the stock market in 2023 is that uncertainty prevails, emphasizing the importance of humility. Adhering to a long-term strategy with a competitive edge is key.
Certainty eludes everyone; thus, it's vital to establish your own methodology, handle risk, and adhere to your strategy unwaveringly. This commitment should endure challenges and successes, all while maintaining a commitment to ongoing learning and improvement.
@@DeannaPeters-lz8we
Who is the professional who is advising you, if you could perhaps tell us? As a novice investing in stocks without the correct direction of a professional, I have lost a lot of money.
Thanks for sharing, needed this myself. I just looked her page up online and I would say she really does have an impressive background on investing.
You keep thinking that. As the markets are rigged these days. As they use taxpayers money to bail them out. Why most people that had these CDS never got paid. The Government used your money to bail out the losers.
Real Estate provides cashflow, tax benefits, equity building, competitive risk-adjusted returns, and inflation protection on its own. Whether you invest in physical properties or REITs, real estate may help you diversify your portfolio and reduce volatility. Dividends are what got me into investing in REITs, great way to secure the accumulate wealth, I hold AMT, CCI & PSA. $290k in profits made in 2022.
Consistently investing in high quality dividend paying REITs & companies over the long term is a relatively easy strategy to create generational wealth. My "boring" REITs portfolio paid me over $4,000 in dividends last month.
It's time to make high value games! Discounted dividend stocks. Ever grateful to my CFP "Eileen Ruth Sparks", I now have a six-figure REIT portfolio, which includes, but is not limited to; AMT, SPG & PSA.... I now have 606 shares of AMT which pays dividends of $3800 per year.
I want to play the long term game with well diversified fund. Please how can i reach this CFP of yours?
Most likely, you can find her basic information online; you are welcome to do further study.
Thanks for this tip. Her website popped up on the first page immediately I searched her, I read through her resume and it seems pretty tight. So, I dropped a message & hopefully she replies soon.
As much as I love this movie I personally feel where they really missed the mark was failing to highlight in any way the governments involvement in the financial crises. The government aided and abetted the behavior of the banks. Bad government policies allowed the problem to grow to its ultimate scope.
Spot on!!
After this happened there were only four AAA rated banks left in the world, the largest Australian banks. The heavy regulations they operated under prevented them from doing any thing stupid. Strange how American banks didn't ask for more regulation after they lost so much.
That was the point of the movie, to absolve the gov. Hollywood is a propaganda machine.
That wasn't the vid's primary purpose.
For that half of the story, watch the movie Too Big To Fail.
Brownfield actually had that same strategy for their whole time they ran the fund. They would buy options and other financial instruments for events that were really unlikely to happen. But, because the instruments were so underpriced, even if the market just moved 1% they were able to make a lot of low risk money.
I feel the script for this video was done by ChatGPT it's got a lot of info, but there isn't any clarity like earlier videos.
I'm angry that you've upset Patrick Boyle and I still love this video.
Patrick Boyle lacks taste in good music
@@HowMoneyWorks no u
@@HowMoneyWorks
Do you have problems with your ears?
I can't believe he traumatized our man Patrick like that. Does his mother know what kind of monster she's raised?
@@HowMoneyWorks hahahah!!
To my understanding this just proves how much we need an edged as an investors because playing the market like everyone else just isn’t good enough. I’ve been quite ensured about investing in this current market and at the same time I feel it’s the best time to get started on the market, what are your thoughts?!
That’s true , I’ve been getting assisted by ‘Margaret Johnson Arndt’ for almost a year now , I started out less than $200k and I’m just $19,000 short of half a million in profits.
I am being advised by Margaret Johnson Arndt, an experienced financial professional. If you're interested, you can easily find more information about her as she has accumulated years of expertise in the financial market.
This is an angry comment as suggested by Patrick Boyle over referencing the Winklevoss twin’s band. Grrr!!!! 😅
One of my favorite movies. Entertaining and educational all at once.
The big short CRUSHES wolf of Wall Street as a movie.
Two different types of movies
@@dinocrest1946 People often use that argument to defend a movie that is still vastly inferior. Spiderman 3 (the Sam Rami one) and Spiderman: Into the Spiderverse are also two very diffirent kinds of films. But the latter still crushes the former.
That's an egregiously low threshold.
@@daysandwordsGonna cry?
…
But seriously, I agree with spiderverse.
You guys cant even stick to one set of similar movies 😂
Mars Junction?
I'll never recover from this.
Mars Junction got robbed of a Grammy
@@HowMoneyWorks Mars Junction was robbed of talent.
@@scottn7cy LOL
Video starts at 4:00. You're welcome.
As an lnvesting enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?.
Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks
I agree with you. I started out with investing on my own, but I lost a lot of money. I was able to pull out about $200k after the 2020 crash. I invested the money using an analyst, and in seven months, I raked in almost $673,000
@@SethDonald-mf4vm I agree with you. I started out with investing on my own, but I lost a lot of money. I was able to pull out about $200k after the 2020 crash. I invested the money using an analyst, and in seven months, I raked in almost $673,000
@@ChristopherHoward-kf7yk Please will you be kind enough to share the details of the man that helped you?
@@DylanMoore-cb7if Actually its a Lady. Yes my go to person is a "Monica Shawn Marti". So easy and compassionate Lady. You should take a look at her work
This video was horrible at describing the different tranches of mbs. The lower ratings of each "bucket" as they 're called here was strictly because of the credit rating of the borrowers and the actual product. There were loans given out back prior to the great recession known as "liar loans". There were actually loans available where the borrower could state their income on the mortgage application and no income verification would be done. You could make $74,000 a year and claim you made $200,000 a year and no one would verify this. There were also variable rate loans and other time bomb loans. There were many bad loan products that were doomed to fail back in the days prior to the great recession. These loans would be insured by companies like AIG and others. This insurance would vault these bbb rated loans to AAA status. Then groups of these loans would be sold off to investment banks and the like. Problem was that these banks thought they were buying AAA rated securities when in fact they were buying garbage products dressed up to look like AAA rated ones. Couple that with property appraisers on the take and making inflated appraisals and you have a recipe for disaster. There are still calls to this day to bring back liar loans (and similar bad mortgage products). The dolt at the start who talked about no one going to jail. Well, there weren't just a few people responsible for this. You couldn't build enough jails to hold the number of people that were responsible. The crimes were committed from the top of these banks all the way down to loan officers and appraisers.
Excellent analysis!!!
Often, mortgage brokers were filling out loan applications for borrowers (who had, up to that point, told the truth about their income) - and the broker would quietly plug in whatever income level was needed to qualify for the loan! Borrowers wouldn’t even see the application with the false info until they were seated at the closing table signing a stack of legal documents. For most borrowers, at that point, it felt rather late in the process to pull out of the deal-if they even noticed the discrepancy.
Thanks for the video! Honestly, I'm still not entirely sure where the movie went wrong. I understand that CDS are basically insurance with premiums, but the other differences seem pretty subtle.
The movie was accurate but apparently Michael didn't "invent" the finantial instrument since the banks were already using it at the time.
He didn't invent CDS. But he was the first to buy them against CDOs.
Jeremy Strong portrayed Vincent Daniel, who did not go to prison LOL.
Him and Porter Collins run there own fund and are great guys! They spoke with my finance class about their time at Frontpoint and it was great!
Patrick Boyle sent me here to berate you for subjecting us to horrible music, and I ended up learning something from this extremely inciteful, and very well-made video. Now, I don't know where to register my rage!!!!
Always interesting, thank you.
7:50 see, this is what I don't understand. Why can this not be done with a simple portfolio loan? That is, under a portfolio loan, why can't the bank just use the funds from mortgage payments for whatever it wants, like creating new mortgages?
I remember going into an elevator and telling my friend that the bubble is gonna burst. The person who overheard our conversation laughed and said a bubble was just a myth. I told him to be patient and just wait. He just shook his head. This was in 1998.
_I may have been a decade early but I wasn't wrong._
Wrong on timing.
There’s a saying in short positions.
“The market can be wrong longer than you can stay solvent”
If the bubble dragged on longer, m.burry could have been insolvent and have to dissolve his fund with big losses.
I have a question on the policy regarding the returns in the tranched structure of the MBS.
Now, good mortgages were pooled together with bad ones, but there was a cascade-esque structure to it.
The investors who bought AAA, AA+ rated ones were paid first (safer investment, but lower payoff), while the ones who bought the C and B- were paid last, and were more likely to lose their investment in the event of homeowners defaulting on their payment.
My question is this - were the MBS designed in a way that investors who purchased AAA bonds were paid first by default, regardless of which tranche the inflow of payment was coming from?
(Intuitively, since the bonds are paid for by homeowners paying their mortgages, the AAA & AA+ bonds would likely get paid first anyway - because those mortgages are of homeowners that supposedly have good incomes, good credit scores, etc.)
However, let's hypothetically assume (just for the sake of argument), that in a certain MBS, the homeowners associated with the AAA & AA+ tranches were the ones who actually ended up defaulting on their loans, while the homeowners associated with the C & B- mortgages actually ended up paying their mortgages properly.
In this case, would the ones who purchased AAA & AA+ tranches still get paid first, or would the ones who purchased the B- & C tranches get paid, given that the cash flow has actually come from their corresponding mortgages?
One thing I don't get: at 6:47 he says that
Mortgage backed securities HAVE to pay out a fixed amount of money to their investors, that's why they have "insurance". In case they can't. But the later analogy at 11:16 with buckets says that the B bucket doesn't always gets filled and that's why they are "riskier investments". But how can there even be risk with MBS if they have insurance (CDS) to pay in case the bucket doesn't get filled?
The bucket situation is the reason why the insurance is taken out. So the bucket situation happens before and to protect themselves the buyers take out the insurance against the possibility that the buckets won't get filled.😁
It might be that , their lower B rated MBS products insurance covers their face value but because they are riskier ones , their premium could be higher in which case , the insurance company loses much less than they are supposed to do . They always have an ultimatum
I am still confused here too , correct me if I am wrong
angry comment
Furious reply
Rage bait comment
As a p&c underwriter, it blows my mind that you can buy insurance on something you don’t own. In p&c insurance you have to have “insurable interest” in a something to insure it, usually meaning you own it.
And that was the most common way for CDS's to be sold: to bond holders and lenders to insure the loans they were issuing. But these banks were so certain that the housing market would not collapse that they were comfortable selling "naked" CDS's to these investors.
It’s banks selling insurance on something they have no idea how to insure.
Imagine a P&C selling insurance assuming things don’t catch fire or ain’t no such thing as hurricanes 🎶….or pandemics.
9:45 incorrect. The movie did mention this, with the pseudonym of the one Morgan Stanley trader who made the 5th largest bond loss in history, by attempting to short MBS's two years before Burry.
Even today “home value will always go up, it’s a great investment.” People making $50k gross are being approved for $300k homes.. come on.
Well depending on if multiple people living there are making 50K and all paying to live there each year...
It's ridiculously obvious we are in another bubble (several, actually -- Real estate, but then higher ed is likely to burst soon, also), but just like last time everyone I say that to in my community thinks I'm nuts. It's shocking how people are able to not see what they don't want to see.
I’m a realtor no one is being approved for 300k with 50k u need 85k for that homes are going up cuz companies are buying them instead of ppl
I don't think higher Ed is popping anytime soon, huge business model, will not br allowed to fail@@Ryan-zv6xw
@@saulw6270 85k gross is still very little imo, unless the down payment is like 40%.
We are in a bubble.
i love your videos man , you always add some salt of reality not like any other influencer
Haven't understood a single thing, but enjoyed movie scenes. Keep it up, mate!
Let's pretend you wanted to be a homebuyer in 2004: You would get to the local bank and take out a mortgage and buy a home. You were obligated to pay a monthly amount until you paid off the whole loan. The local bank would sell your loan (you would still pay to them, but they would wire the money to the loan buyer) and a big bank would buy it. They clumped thousands of bought loans into packages and sold them to investment companies (to use the money to buy more loans like yours). The hedgefunds and investment companies bought them so they would get a return on the amount given (e.g. gave 10 mil and expected 15 mil back).
Having 1000 different loans in the same pack, meant that if some of the mortgages (like yours) would default, the interest from the others + the value of the sold house would cover the losses and still turned a profit.
The guys in the video figured out that more and more packs contained more and more bad loans (the local bans would lend huge amounts of money to people with bad credit history and they would buy overpriced houses, thus they couldn't make their payments and big banks bought them just to sell them fast to the next sucker). When they figured it, they took insurance saying: if the packs won't turn a profit, pay us a sum of money that covers our losses and turns a profit for us. For the isurance to work, they paid tens of millions to the insurance companies and waited for the price of the houses to fall abruptly.
In 2007-2008 the prices of houses fell greatly and many people were unable or unwilling to make payment and defaulted on the loan en-masse (for 1000 in a pack, 600 or 800 defaulted) and as the packs wouldn't return money, the hedge funds, investment companies and banks started to not get paid for what they gave for the packs and some went bankrupt. The ones taht took insurance against the packs, had to be paid in full by the insurance companies and they were paid when the Congress voted to send money to the insurance companies to pay their policies and the insured parties got away from the crisis scot-free.
tl;dr - small banks gave bad mortgages, those got bought by big banks, big banks clump thousands of loans into packs and sell the packs to investors. Mortgages default en-masse and cause the investors to lose everything (except for those insured).
Hope this helps, I tried to simplify this as much as I could
@@andrekovski Thanks, I must've not payed enough attention. I knew finance world was/is fucked up, but didn't expect it to be so damn stupid
Great video. Great content. Thank you. One recommendation is to slow the cadence down a bit. Felt like a race. It would be more enjoyable and easier to glean some of the facts with a little bit slower pace.
A Credit Default Swap is basically insurance if the basket of mortgage Defaulted. Had AAA rated mortgages ever Defaulted NO. So they created this Swap and he paid a high premium to keep it, not a very low premium like regular insurance.
I recommend the book The Lords of Easy Money by Christopher Leonard. The similar thing is happening yet nobody knows or cares
I just finished watching this movie and it was great, much better IMO that wolf in wall street.
What about the two guys that started in their garage? What were they doing? please explain.
One question. Why should I buy growth share which don't pay money. If someone buy that share then only I get money. What if no one buy it. In that case what will happened
That is how the market works... you pay for the opinion of others. If the big players doesn't think stock ABC will go up, than it wont because they don't buy it. That is the risk.... luckily we can short🤷🏻♂️
1) Nothing happens, you just have a share and no money.
2) If no one buys, then the price will go to 0 as holders try to undercut eachother to sell.
"Play." "Betting." I understand it is high risk, but at the end of the day just trying to distill a) why this makes markets more efficient, and b) what parts of this system were corrupt.
It's about time you make a video about the scammers using bots to promote "investment coach's" in the comments section of every video you release.
When something bad happens, the question should not be, “well, who goes to jail over this, who shall be the scapegoat?” The system had weaknesses. That’s it.
I just noticed you have 600k
Damn I remember being here when you had less than 10k
974k now
It's absolutely disgusting how Credit Default Swaps would be allowed... we hear about millionaries and the occasioanal billionaire individuals, but a company being able to save TRILLIONS in an "insurance" sounds like a corrupt scheme on an entirely different level
so this time is the commercial subprime . How do I profit from it???
I didn't like that you 🤕 Patrick Boyle 👂.
New to the channel, great content☺️!
Error at 16:13, you put the same text twice. Wrong
I enjoyed watching this movie though it took time to get it,but it was very good😎and the best part was they got the point that all those housing loans and bonds that were given it was not based on actual money or assets,that base of the horrendous financial catastrophe was a bubble
If people went to jail then it probably wouldn’t be so close to happening again!
Facts 💯
In 2005 I was interested in business. Then I started to get interested in God and took a long break from those dreams. I didn't even feel the crisis but I look back and I'm on finance as it relates to business now and I still don't regret not starting sooner.
speaking of making money, the first in-video ad was interrupted by a RUclips ad. lol
The details in the movie that "were not quite right" or "not explained in enough detail" is for a couple of reasons. Firstly, its a movie, and entertainment product which in this case is also a learning product to further the general publics understanding of a complicated subject. And you have to get it across to them in about two hours, without losing their attention by throwing too much technical jargon at them. For example the scene where Dr. Burry first attempts to get the bank to make him a contract the woman repeats back to him "so you want to bet against the housing market?" In reality that would have never been said but its there to make sure people understand basically why hes there and what hes trying to do. Its super hard to make learning entertaining at the same time. But they did just that.
Thank you for this. Now I almost understand Margin Call.
This Mars Junction business just opened a jar of spicey pickles that you want no part of. Life choices is not like choosing the right pickle.
I am participating in Patrick Boyle's insidious scheme to boost you in the RUclips algorithm.
Thanks from Ukraine for your video!
Stay strong Ukraine!
news without politics, WOW. and you learn more in a short time than taking a college class on it
Soooooo informative!!!
I made some real estate transactions in 2020 and am now anticipating a market downturn so I can acquire properties at a low cost. I've been giving thought to investing in stocks as an alternate option; do you think this is a wise move at this time? I hear people commenting that the current market is chaotic and volatile, yet I still come across reports of traders earning over $225,000 per week. How can this be achieved?
it depends on your exit and entry strategy, most folks are used to a bull market and can't handle a crash, but if you know how to navigate and where to look, you'll make a killing.
Dc.
True, the US-Stock Mrkt had been on it’s longest bull-run in history, so the mass hysteria and panic is relatable, considering we’re not accustomed to such troubled mrkts, but as you mentioned there are avenues lurking around if you know where to look, I’ve netted over $850k in the past 10months and it wasn't some rocket-science strat. I applied , I just knew I needed a firm and reliable technque to navigate better in these times, so I hired a portfoilo advlsor.
@@henrech I want direction so I can rescue my port-folio because of the huge plunges and think of better methodologies. How might one arrive at this counselor?
The adviser I use is actually quite known, you might have heard of her KIMBERLY JEAN HEAVNER, she's been featured on several platforms including CNBC and Bloomberg, you can search her name.
@@henrech Thank you for this Pointer. Your handler, who appeared to be highly competent and versatile, was easy to find. I scheduled a session with her.
i was having so much trouble with a lot of what the movie said. i couldn't wrap my head around the CDO's The movie didn't explain them well. You give a better explanation as to what they were and how they worked. The whole part of the movie with Selena Gomez in it is a bad analogy. At least that's how I see it.
I really appreciate your efforts! A bit off-topic, but I wanted to ask: My OKX wallet holds some USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). Could you explain how to move them to Binance?
i think it is eleventh time i try to understand this film, but when it comes to cdo I always give up :(
You're not alone; CDO investors didn't understand them either.
My own "Big Short" was welching out on 6 figures of my unsecured debt in a Chapter 7 bankruptcy during that time, while I kept my fat 401K (OK, it was trimmed down by then, LOL), cheap house that I bought literally an hour before officially filing, and a grand piano (that is exempt in my state, LOL).
Thank you
JUSTICE FOR PATRICK
Mars Junction is terrible. You should feel ashamed of yourself.
@HowMoneyWorks
At 16:14 you've got three quotes on the screen for a brief moment, but two of the quotes are the same.
To be fair, the differences between the movie and the real life were minimal. But the video essay was good, tho.
Great job!
1:46 got me a little confused because it seemed like the guy was inside his own head skipping his internal dialogue to reach the conclusion
What site did you use to view Cornwall's 13F?
The most hilarious/horrible part of this is that the greatest possible returns on this trade were available mere months prior to the crash of the CDOs. Swaps on the AAs were still available for almost nothing in the summer.
6:30 still confused
Just found your channel. I went to Wharton, worked in investment banking during this period, and was trying to explain this movie to my teenage son. This video and all others are awesome, keep on telling the real story. Kudos.
This is why banking regulations are important and necessary. All you have to do is compare the U.S. banking system to the European system where this kind of thing can't happen.
Off to a hot start on content this year 😎
Came here because of Patrick Boyle, he said you owe him a beer or tea, or something...whatever you guys drink while looking into financial statements from the hedge funds or those complicated words...😄
Thing is how often do people offer put options at such high margins? If seller thinks highly the stock will soar then no need to offer put option. Just buy stock now at higher price. You think it will keep going so why need to risk it. In other words if someone makes a lot of money from put option then they have to spend a lot. An amount that probably is not even worth risking. At some point enough is enough. All this only happens because of fiat money system. Is not regulated enough. Money is cheap so bankers just throw it around. They can always make more or get bailed out.
The other thing that is interesting about this is that Paulson was actually selecting individual MBS with Goldman - maybe that’s the allusion they were making in the Burry scene with GS
Every time i read or watch something on the financial crisis i briefly trick myself into thinking i learned something only to realize ive just gotten more confused
its been a decade and a half
Mars Junction...? Patrick "P. Biddy" Boyle deserves better
Maybe I missed it but a critical piece of this puzzle appears to be Harry Markowitz's Modern Portfolio Theory (for which he jointly won a Nobel Prize) . The theory states that the act of diversification in a portfolio will reduce the risk of that portfolio to below that of its average asset. And so, when Bear Stearns bundled a bunch of subprime mortgages from across the US (or even internationally), there was a theoretical basis for the bond rating agencies to rate this syndication of subpri me mortgages as AAA. The diversification justified the increased ratings. And all of this was consistent with the signature works of Nobel Prize winning economists.
And that is one of the challenges of applying MPT: you need to estimate how much correlation exists between assets in order for it to correctly estimate the risk. But, when things go horribly wrong, assets tend to be much more highly correlated than during normal times.
Mars Junction sucks. Did you warn anyone at least?
16:04 Why the banks are desperate for insurance back after all this mess ?
Awesome video