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Principles of Finance: Unit 2, The Big Short 6 Views


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Description:

Missed the movie The Big Short? After watching this video, you'll feel as if you've seen it. (But... you should still see it anyway.)

Language:
English Language

Transcript

00:00

principles of finance a la shmoop the big short wait the big short like

00:07

the movie the one with Steve Carell and Christian Bale and that guy from lala [movie actors in a line]

00:11

land yeah that's the one well we're gonna

00:14

give you the quick and dirty plot summary why well because as outlandish [man drinks champagne in bathtub]

00:17

as the story may seem all this really happened I'm gonna be summarizing from

00:23

this bathtub a la Margot Robbie in the movie a because like why not and be

00:28

because while I really need to exfoliate anyway okay so basically the big short [man exfoliates leg in bathtub]

00:32

focuses on the investor who predicted the collapse of the housing bubble in

00:36

2008 and he bet the ranch almost literally that the markets would [Christian Bale holding balloon]

00:40

collapse he recognized that overly easy terms had been given to too many

00:45

borrowers and that the market was poised for a massive correction to reflect the

00:50

inability to pay of oh so many marginal borrowers yeah big bubble yeah kind of

00:55

like that one by deeply analyzing the data and zeroing in on the ignorance and [stock market data]

01:00

a quasi corruption of the players responsible for this financial crisis

01:04

this hedge fund manager Michael burry who looks a little bit like Batman there [man working at computer in the dark]

01:09

yeah realizes that a collapse is imminent and decides to warn everyone

01:13

shouting from the rooftops that the economy is in major trouble and that

01:17

people should sell and get out just kidding he totally does the opposite he

01:21

quietly on his own figures out how to take best advantage of that situation

01:25

for himself and his shareholders well that's what they hired him to do anyway

01:29

right okay well how does he do this well he invests in a credit default swap and [writing on white board]

01:34

starts essentially shorting the housing market much to the temporary dismay of

01:38

his clients and even of the vaunted goldman sachs who he warns could almost

01:43

go bankrupt and they literally laugh at him and they almost do to refresh

01:47

shorting is the act of selling a security at say the par value of a

01:51

thousand bucks in the case of a bond and then betting that you can buy it back

01:54

later for say yeah 400 bucks at some future date in the same vein a credit

01:59

default swap is basically life insurance sold by the issuer in this case mortgage

02:04

selling banks such that if the bonds went bankrupt while the banks would be [bank on a hook in the ocean]

02:08

on the hook not only for the bonds themselves but for the entire package of

02:12

bonds and given mortgage portfolio well it turns

02:15

out that Batman was right and a few others catch wise as well including the

02:19

guy from lala land and the guy from 40 year old virgin they identify the

02:23

culprit cdo's AKA collateralized debt obligations basically giant pools of [writing on white board]

02:29

mortgages all packaged up in one investment vehicle

02:32

they've been rated by the credit rating organizations like Moody's and SPS in

02:36

the gang way higher than they should have been and it's the public's faith in

02:41

these bogus loan packages that has been steadily driving the market over a cliff [cars driving over cliff]

02:46

so in the end it was the ratings agencies and their tendency to hand out [trick or treaters on halloween]

02:50

triple-a ratings like their Milky Way bars on Halloween that led to this

02:54

horrible mortgage crisis that almost bankrupted our country well a lot of

02:58

very smart and observant people made fortunes shorting all of this when they

03:02

recognized it in advance while the rest of the world well had yet to uh figure

03:06

it out and guess that's how Batman was able to afford his Batcave regardless

03:10

this is a must watch movie for anyone who cares about government regulations

03:14

irresponsible fiduciary dealings by banks and those evil money-grubbing

03:18

bankers who just live to make the commission of another quick buck and if

03:23

you're here because you were looking for the biopic of Danny DeVito you actually

03:28

want to watch the little short

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