Geek Lab Movie
Excellent movie that manages to explain the truth behind the housing market crash.
If anything The Big Short is a lesson in Economics and Finance. Based on the book, The Big Short: Inside the Doomsday Machine by Michael Lewis, Director Adam McKay manages to take the complex idiocy, that brought down the housing market in 2007, and makes it understandable. How by putting Margot Robbie in a bubble bath.
Release Date: December 11, 2015
Writer: Charles Randolf based on the book by Michael Lewis
Director: Adam McKay
Cast: Christian Bale, Brad Pitt, Steve Carrell, Ryan Gosling
In 2007, the Housing Market bubble burst to send the U.S. and world economies into a tailspin. The Big Short follows a hand full of savvy investors, who saw the evitable economic disaster and bet everything against America.
The movie starts by following Dr. Michael Burry (Christian Bale), who left his medical practice to start a highly successful hedge fund. Burry was the first to see the inevitable failure of the housing market and convinced the major banks to let him bet against the real estate market by creating the Credit Default Swap. Even I was told during this time that nothing bad could ever happen to the real estate, so the banks were more than willing to take his money. All Burry had to do was make the initial investment and then make monthly premium payments for the life of the investment. Everyone thought Burry was crazy, even the investors in his hedge fund.
Next we follow trader Jared Vennett (Ryan Gosling), who catches wind of what Dr. Burry was doing, and convinces hedge fund manager, Mark Baum (Steve Carrell) to provide the money he needs to invest in the Credit Default Swap. Even Baum is skeptical of Burry and Vennett and Baum needs proof that the housing market is inevitable going to crash. Baum is somewhat of an economic activist, his team of investors are always looking for corruption and greed in the banking industry. Baum’s team goes to Florida to inspect million dollar homes in foreclosure, interviews real estate agents and brokers about the incentives they receive to sign no check, no income verification loans and then attends a mortgage bankers conference. After realizing the entire industry is managed by greedy idiots, he immediately invests in the Credit Default Swap.
Then there’s young small time investors, Charles Geller (John Magaro) and Jamie Shipley (Finn Wittrock). They stumble across Vennett prospectus and look into investing as well. Because they are small time investors, no one will allow them to invest. They decide to hook up with former investor Ben Rickert (Brad Pitt), who has the clout to make the investments for them.
Writer Charles Randolph and director Adam McKay should be commended for taking on a subject that would go over the heads of even the best investor and explain what was happening in a language that the average movie audience can understand. For example, he uses Margot Robbie to explain subprime loans and its contribution to the market crash. Then chef and world traveler Anthony Bourdain to explain what banks would do with an excess inventory of bad mortgage loans. And finally, pop star Selina Gomez to explain how banks could spend billions investing in bad loans and not care.
Initially, I thought The Big Short was an indictment of the evil capitalist system, but instead, it’s an honest account of what exactly happened to the housing market, why it happened and the people to became rich betting against America.
Like any movie based on a true story, there are over-the-top moments that were created to make a dramatic point in the movie. Most of the over-the-top moments in The Big Short happened in real life. There is the moment that Mark Baum interrupted the keynote speech at the American Securitization Forum in Las Vegas.
The Big Short, if anything, is not a warning but more an account of how insane finance in the world operates. What is even scarier is that this world will never learn from its mistakes.