How The Big Short Actually Worked

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The Big Short with it’s all star cast recounts the events of three groups of traders that bet against the housing market in the years before the sub prime mortgage crisis that would eventually result in the failure of key financial institutions.

The Big Short is unique as a high budget Hollywood production that actually takes the time to properly portray the way that finance really worked behind the scenes and uses financial events to progress the plot rather than focusing on wild parties, sports cars and sexy ladies like some other movies that took a very different approach to storytelling.

Similarly to the Wolf of Wall Street, the big short is a move based off a book only the wolf of wall street was an autobiography written by Jordan Belfort himself and The Big Short: Inside The Doomsday Machine, was a standard non-fiction title that described the role of several players in the creation of the credit default market betting against the American housing market.

The Big Short was written by Michael Lewis, a veteran financial journalist and the book really does read like a 320-page financial article, in that it’s very information dense but also very well researched and verified.

For this video we will only be looking at the players that are in the movie, but the book does go into detail on some people that were either entirely cut from the film or merged into other characters to make the movie entertaining to a broader audience.

Unfortunately, in the process of making it appealing as possible to cinema goers the movie did cut out some very important details, and also just straight up got some things wrong.

So, it’s time to lean How Money Works and give you guys the investment banker’s insight into what really happened in the Big Short.

#thebigshort #investing #finance
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Edited By: Andrew Gonzales

Music Courtesy of: Epidemic Sound

Select Footage Courtesy of: Getty Images

All materials in these videos are for educational purposes only and fall within the guidelines of fair use. No copyright infringement intended. This video does not provide investment or financial advice of any kind.

[danielhale]

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!

[David.Marquez]

It's crazy how despite some inaccuracies this movie still ends up being quite loyal to what actually happened

[MagnusAnand]

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.

[williamc]

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.

[Oklahoma-Dreaming]

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?”

[ckarnik]

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.

[juselara]

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!

[oneiljerry]

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.

[liamhegarty]

That was hugely informative...thank you!

[Raymondjohn]

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?

[TheMarkEntwistle]

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.

[andresbard]

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.

[justinschrank]

The big short CRUSHES wolf of Wall Street as a movie.

[kenyanr]

Thank you for this. Now I almost understand Margin Call.

[thejoker]

i love your videos man , you always add some salt of reality not like any other influencer

[gavinshickle]

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.

[markwmosley]

One of my favorite movies. Entertaining and educational all at once.

[johnl.]

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.

[matthewnelson]

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

[merlinfitz]

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?.