"now is the time to buy", "here's my thoughts", etc. Effort: Posts must meet standards of effort: Do not post just an article, highlight the parts of the article you find relevant or offer some commentary surrounding the article.Īdditionally do not just make a self post to offer some simple thoughts. Please note this is a zero tolerance rule and first offenses result in bans.Ħ. Posts that are strictly self-interested or intended to "build awareness" are not acceptable.ĥ Follow the guidelines listed in this thread and this thread with regard to political topics or general corporate news. We generally expect that people who come here are not using the forum to build a brand, generate clicks, or shill. Do not post your app, tool, blog, referral code, event, etc. Off topic comments, attacks or insults will not be tolerated.Ĥ. Keep discussions civil, informative and polite. And if your post should have been a google search then it will likely be removed.ģ. Likewise if you're asking about a given feature at a broker then direct those questions to the broker not Reddit. This would include most "ask reddit" style questions. If your question likely has a "right answer", is a beginner topic, you simply need help finding general intro to investing information, or if it's asking for general input on what to do with your investments then post in the "Daily Advice Thread". We generally expect that your topic incites responses relating to investing.ĭo not make posts looking for advice about your personal situation. We are not a politics or general "corporate" news forum. Posts must be news items relevant to investors. Few of them understood the connections between housing prices and poor lending practices the connection from poor lending practices to complex, highly rated securities the connection between those securities to the balance sheets of major banks and the peril to the economy if just a few of them faltered.1. But there’s a broader one, which explains why most everyone, including regulators (and journalists), was caught by surprise by the ferocity of the financial crisis.Ī lot of people thought a decade ago that there might be a housing bubble.
One simple lesson of this is kind of obvious: It is hard to make a boatload of money trading financial assets, even if you are brilliant. We hear of a Morgan Stanley trader who had the insight that B-rated mortgage securities were at major risk, but believed that AA-rated securities would be fine, and so offset his bet against the former with a bet for the latter.
#The big short explained movie
Indeed, the movie has a glancing reference to how hard it is to translate the basic insight about mortgage securities into profits. “It’s the same thing,” a skeptical investor retorts.) (“I may have been early, but I’m not wrong,” says one character, the hedge fund manager Michael Burry as portrayed by Christian Bale. The movie captures this well, as the characters face a crisis of confidence when foreclosures begin to rise and their big bets against mortgage-backed securities aren’t yet paying off. Either way the global credit system froze.īut even if you were clever enough in 2005 to see all of this coming, you wouldn’t necessarily have been able to cash in as successfully as the characters in ” The Big Short.” Figuring out exactly what securities to bet against - and how and when - mattered as much as the basic insight. Some banks blew up others were bailed out. Global banks had loaded up on these supposedly safe securities, and were at risk of becoming insolvent when their true value became known. The key transmission mechanism that turned a simple correction in the housing market into a global financial crisis were those bonds.
When no-money-down home loans were commonplace and home prices were soaring, there was widespread discussion of the possibility that the United States was experiencing a housing bubble.
“The Big Short” makes a big deal of its protagonists realizing that there was a giant housing bubble in the middle of the last decade at a time no one else could see it. (Turns out, the best way to explain synthetic collateralized debt obligations involves a blackjack table and the singer Selena Gomez.) But a different, perhaps unintentional, lesson of the movie stands out to me. The movie does an impressive job of conveying arcane financial concepts that are very hard for a general audience to grasp. Spoiler alert: In the end, the global economy collapses. It is the strongest film explanation of the global financial crisis. “The Big Short,” the movie version of the Michael Lewis book about a bunch of misfits who foresaw the housing and mortgage bubble a decade ago and profited handsomely from its popping, is to be released widely Wednesday.