Investment Analyst Explains: The Big Short
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- Опубліковано 17 сер 2023
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This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).
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What if I like the risk?
The claim that VPNs provide any meaningful cybersecurity benefit is misleading marketing nowadays. The vast majority of internet traffic, including everything remotely security sensitive, goes through encrypted channels (HTTPS, TLS) anyway, so an attack on the connection doesn't expose or compromise any of the data. The only advantage of using a VPN nowadays is hiding what websites you visit, or to circumvent IP-based geographical restrictions, by tunneling through a different country. I wish people understood that VPN does almost nothing to protect against data breaches, and VPN providers are just taking advantage of their uninformedness through fearmongering.
@@placeholderdoe Go buy HE!
Bro you should have made a short about this.
Thank you Hans for such nice movie review
As a cybersecurity professional, I gotta say that a lot of the claims that are made about the added layer of protection that a VPN offers are overblown. They don't protect against malware, phishing, ransomware, most data leaks, and they aren't a perfect protection against tracking since a lot of that is done through cookies or browser fingerprinting. The protection they do offer is that they add a layer of encryption, but since most internet traffic is encrypted already nowadays, that too is of limited value. I agree that joining a shady wifi network is probably a bad idea without a VPN, but my solution to that would be to use the hotspot on my phone. That's always safer.
Sorry to bust your sponsor's balls, Richard, I don't mean you harm. Love your channel and all, just thought I'd share some of my professional expertise.
Maybe we might just be living in a VPN bubble and you are the Jared Venett of this story and I am Mark Baum who randomly found this out. So how do we short VPNs now anyways?
i think they know we just use them to acsess content in different areas and bypass network restrictions but thats a bad look for nord lol
its still useful for hiding what websites you visit from your isp
What about changing locations?
@@shaunsensei6948 how about a VPN squared? A VPN of a VPN. Maybe even a synthetic VPN
Almost 10 yrs after that movie came out i found that sea food stew analogy not only apt for the said situation but also very useful explanations of most things in life 😂😂😂😂
Yeap. Its the simple things...
I mean, as a chef and someone who holds Anthony Bourdain with high regards, I think I can speak for most restaurants about serving customers ‘fish stew’ that we do it naturally 😂
For sure, it’s an old concept. “Lipstick on a pig” and whatnot.
Using credit default swaps to make money off of the housing market crashing sounds an awful lot like taking out a life insurance policy on a dying man that nobody realizes is sick in order to get a big payout when the man does indeed croak.
That is in effect what it is. Brad Pitt's character even emphasizes exactly that immoral aspect in one scene where he points out that even though anyone betting against the housing market stand to make a lot of money, that it isn't exactly something to be proud or happy about.
To quote the character; *"For every 1% rise in unemployment, 40.000 people die."* - (Do keep in mind that there seem to be no proof to this statistical claim)
In the movie Ryan Gosling's character says he's selling fire insurance on a building that is on fire.
It is pretty much the same thing
Yes, that is indeed the premise of this movie.
Isn’t it funny how the movie tries to portray these guys as some sort of heroes? The reality is that they all seek the same thing: profit
Next one should be the movie Too Big to Fail. HBO had a decent cast and follows the book by Andrew Ross Sorkin surprisingly well.
It's April 27 2024 and I just saw this video and its GOLD. I went to a private prescreening of TBS (The Big Short) and I remember walking out looking like I'd seen ghost only to be interviewed on the way out. I actually invited a few clients to screen with with me who was in the banking industry. I am in the financial services industry so it was a good watch for me. This movie does a great job showcasing what goes on in the world of Big Finance.
Another good watch is The Inside Job, it's more of a documentary style but it's on this level. It follows some of the big players who allowed all this to happen including our government!
I watch this movie every year. It's so epic. I work in the industry and I'll tell you now, absolutely nothing has changed.
facts. i worked at BoA 2yrs after the collapse. The execs of Countrywide went on to found PennyMac. none were ever punished. They must likely got their multi million payout upon departure. The American people got screwed so badly. they have no idea how much money was wasted
ikr
greed is good
thats kinda scary
You're 100% correct on how it hasn't changed one bit. We are ready for another one soon.
This was long due!
it was a Big Due
More like SHORT due
This was long, dude.
8 years by my count.
He couldn't release it earlier, had to hold it to maturity.
My absolute favorite movie about this era in financial history. Once again you have done a masterful job of explaining the sometimes arcane, but always interesting, story and details of these very complicated financial instruments. Thanks for this excellent run down! Keep up the great work. Your channel, along with Patrick Boyle's, is THE ABSOLUTE BEST!
One of my top favourite films and really appreciate you providing this additional explanatory video. It helps me to understand the film and its message more!
"out of spite" Ya know what, best reason ever.....
UA-cam recommended “Enron: The Smartest Guys in the Room” with this video. It’s a documentary, but I’d like to see you do a video on Enron for guys like me who were too young to really understand what happened back then.
Enron scandal was basically an accounting scam involving the top guys at the company to inflate Enron's revenue, profit, and share price.
They took advantage of an accounting practice called "mark-to-market” that allowed the company to book unrealized future gains from some trading contracts into current income statements, thus giving the illusion of higher current profits. They also hide loses by transferring them out of Enron books and into the books of these specially created corporate vehicles.
Essentially, it's an accounting scam that went on for years because the outside auditor, which was one of the biggest accounting firms in the world at that time, were compliant fools.
Enron's story is somewhat more boring because it was really just fraud at a massive scale.
I thought I saw you do a video on Big Short a while ago, so I checked and it turns out it has been three years already! Damn, time flies! Never got tired of your content, I love it.
That cut to "theres a bubble" fuckin killed me 😂😂😂😂
You consistently have fantastic and interesting content. Thank you!
Love the Plain Bagel, plain explations of complex stuff. Well done! You should have 7 million subscribers!
Happy channel birthday, Plain Bagel! Big fan of your work here on UA-cam and your capacity to solidly staying put in the no-BS lane! 🎉 l do really, really appreciate it.
A more accounting related movie but “Smartest Guys in the Room” is for sure one that should be reviewed!
@9:06 one thing that’s worth noting here is that the idea behind the CDO, at least in the beginning, is a sound one. If you believe that bubbles in housing were regional (I.e there might be a housing bubble in a particular city or state but not nation wide), then a CDO makes sense. By pooling together the lower tranches of various mortage-backed securities, you end up with a security that pays out as long as housing remains stable on a national scale. Of course in 2008, housing collapsed nationwide which is why these CDOs ended up being worthless, but the CDO is the perfect example of yet another idea that made sense in the beginning but got totally out of hand
Thanks for doing this. There were definitely some questions I still had after watching the movie and this helped a lot!
nobody seem to realize that the scariest line of the movie is at the end, when it says that Michal Burry is focused now on only one commodity: water.
“They weren't being stupid, they just didn't care.” was more eye opening
Will need to re-watch this video 3 times to dive deep but as usual, immense content! Thanks from Italy!
I like that you got technical with the explanations. keep up the good work
For real watched this movie again yesterday!
And now you are talking about it…
Awesome timing man
It's not timing bro
Thank you, even as someone who understood the housing crisis, you still helped me pick up details and things I missed during the movie. Thank you!
I remember when I was buying my house one of the options I had was to use an adjustable rate interest only loan. My mortgage guy explained how it worked. automatically I came a parent to me that this was unsustainable. Last time went on a few years later I asked him how to short the market and he wasn't sure. Either way I don't have that kind of money. I could never have done that. The only good thing was I took a conventional loan and I bought a house so I could afford.
This was a pretty complex and dense video. I had to pause and rewind your explanation multiple times to understand. As a test I urge everyone to reformulate in your own words all that the Plain Bagel explained in this video including just as an example how the synthetic CDO works where the money comes from and goes too and why.
So, if the CDS are basically like insurance contracts (or sideline bets) for the MBS, then the synthetic CDOs are like insurance contracts/sideline bets for the CDOs? Which are pools of the worst rated mortgages?
Did I get it right?
i watched the other UA-cam before this - and it helped allot in understanding this one - thank you for sharing that info !!! what a great channel - thank you !!
I loooooved this video a lot. Mainly cause it’s one of my favourite movies 😂 but I loved your perspective on it due to your professional background. More please!!
Love these technical deep dives! do more!!
some people, I don't know cut out audio while using music, it gives the music a new life, thanks for the edit, truly one of the best, I ever watched
So glad I found your channel! I learned a lot from your engaging explanation here- even though I saw the movie. Can’t wait to dive into more of your content
spite is perhaps the single greatest motivator of all human action.
One thing often missed is the bad incentives that all this loose credit had on the construction industry itself. It's not that much more expensive to build a luxury property compared to a normal one, especially not compared to the difference in sale price. What normally keeps construction companies from only making luxury properties, besides regulation, is the difficulty in finding buyers for those projects. BUT if the banks are willing to make preposterous loans to people as part of a scheme to resell the mortgages then... that incentive disappears. They WILL find buyers.
Speculators, bad loans, and just greedy investors drove home prices way up but they also drove the actual construction industry toward unsustainably pricey units. Even after the subprime crash, two of those forces are still active.
This was very helpful. Thank you and congratulations Richard 🎉❤
Barbie and Ken left the barbie world to go be financial advisers during the 2008 crisis
Commenting mostly to improve engagement, I think it's silly to have your previous video demonetized. Always love your work Richard!
Hey richard make a video on recent news of michael burry shorting US market
US market is probably overvalued but where else are you going to put your money? Real estate just got a lot more expensive to own. Starting a business is a lot of work and labor costs are high. If population trends continue I don't doubt that S&P 500 P/E average could drop back down from it's 25 to 1 to 15 to 1 or so but I'd suspect that'll take decades to happen.
Probably no big news to most here... But one more addendum: In the end the movie also states that Michael Burry is only investing in water now. Michael Burry is very much still doing long and short bets on the stock market.
Maybe it was a joke? XD
Maybe it was /partially/ true at the time? I mean now his SEC filings show lots of energy companies so definitely not true atm.
Iirc his investment in "water" was actually investment in almonds (which require a lot of water to grow), so it was kind of true but perhaps a bit misleading to begin with.
What an incredible coincidence that I literally finished watching The Big Short on Prime, and then see YT notification from our Bagel over the same. Ha!
That's not a coincidence. That's your devices paying attention.
I’ve needed this! I just watched the big short a few days ago
I was kind of surprised that Kyle Bass wasn't talked about in the film despite being one of the most profitable short sellers against the sub prime mortgage crisis
This was a great explaination . I had just watched this video 3-4 days ago , It's one of the best financial movies ever,
You are doing a great work putting this out
Breathtakingly elegant analysis/dissection🎞👏🏿
20:49 steve carell’s face is my favorite reaction ever
You took one of your good videos and made it even better! Kudos
The thumbnail is just art lol
I saw this movie while researching information about 401ks when I started my current job almost 5 years ago: how much to put in, how much to diversify, how big a match, the pros and cons, and somehow this film ends up on a recommendation on youtube.
I watch the film and my jaw hit the floor. Not only was it pretty informative, as well as being a movie that starts as a comedy, turns into a drama, and ends as a horror movie, but it made me read the book it's based on written by Michael Lewis.
Since then, Ive always recommended people to watch the movie and read the book to understand what is going on now and how to best prepare their finances for an inevitable drop or crash.
Thanks for putting your thoughts on this film and better explaining some of the stuff that wasn't fully explained.
Even my cousin, who is a financial advisor, i remember speaking to him about how i have my 401k invested and such and he was very impressive at my knowledge of it and i said i saw and read The Big Short and then follow-up on reading Millionaire Next Door and The Intelligent Investor and he felt everything I was doing was perfect and to keep it up.
How do I know what to do with my 401k
@@poisonpotato1 , spend the money on a reputable fiduciary financial advisor, note that I used the word fiduciary, to guide you. It will be worth the investment.
Great video. Thank you very much for your informative and entertaining content.
I actually just watched this for the first time a few weeks ago since it was free on UA-cam, which is surprising to me since I have an Econ degree, work in Finance (healthcare, not investments but still) and enthuse in the policy and market responses that preceded and came as a result of the Great Recession.
Appreciate the content on this channel. Would it be possible for you to make an educational video highlighting some pros and cons of investing in a dividend ETF vs index fund? Would be interesting to hear your two cents on the topic.
Really glad helped me understand many scenarios in a much depth which I knew little about while watching the movie and helped in getting more clarity.
Love your channel! I am learning so much, and even when it’s topics I understand very well, I massively enjoy your neutral and comprehensive analysis of things.
Cheers from Israel 🇮🇱 😊
love that you finally reviewed my comfort film
Spite uploads are the best type of video essays 😂
Bro this was an amazing video. Good job.
I love that you waited for it to be free on UA-cam to make a review video.
This is one of the best movies that doesn’t require guns and explosions to capture the audience’s attention.
Fun facts: The Big Short is on Bulgarian Netflix, but a cutout version, which is why I consider buying a VPN. Another fun fact is that I can't find my previous comment that said the same thing, because I described the scene that was missing - the one where Mike Baum and Co. meet with the young brokers and the lady with the five properties, and I mentioned her occupation. Is UA-cam censoring things now?
Anyways, I wanted to also mention that since there are literally zero good contemporary films on Bulgarian Netflix, Big Short is indeed an undervalued film. If it was valued, it wouldn't have been on our Netflix 😁
I appreciate this breakdown. Thank you
One of the biggest problems with the false AAA ratings for a lot of the MBS products was that many of them were - technically - 100% insured by the U.S. government (as a part of W. Bush's policy that as many Americans as possible should own a home). This "100% insurance" was only technically insuring a massive default, though, because it accounted for less than 0,1% of the total volume of MBS products on the market. Looking at an individual product, the rating agencies could concur that it was "100% insured" and therefore a "safe" AAA bet, yet, looking at the bigger picture, lots of those MBS should have been C+ at best.
Love the thumbnails for this series
Love this explanation! This is my favorite movie of all time. To those who love this movie, I recommend the following movies. Watching them is like seeing the 2007 crash from different perspectives:
(1) Too Big To Fail
(2) Inside Job
(3) Margin Call
you miss this: THE BIG SHORT.
Good coverage, congratulations on turning six!
Thank you! and the technical part is what made it good!
I didn’t understand the film when I watched it but you’ve explained it all really well.
great explanation on everything thank you
Rogue Trader please
i bought a condo in 2008, as a canadian i knew nothing except that we needed a place to raise our kid, we bought a condo for 220,000 at 6.5% for five years, only for the rates and the prices to drop ever since, now inflation is rising and intrest rates are finally rising... only for the wrong reasons...
Excellent outline of The Big Short
Do we think it was really a wrong number... or a well disguised cold call?
also the prospectus was likely left on the table as bait for somebody. An cornwall cap bit. More brilliant marketing.
Well done explanative review!
I'm pretty sure they stop right in the middle of that particular scene to say it didn't actually happen that way. They did not just happen to find the prospectus randomly sitting on a coffee table in the lobby.
Excellent reviews and explanation on the concept, you have no idea how much time you have saved me explaining the movie and the entire idea of what happened in the debacle to the youth and the otherwise uninformed or mal informed individuals I run into about this subject.
one of my favorite films of all time covered by my favorite "finance" (?) youtuber
Just want to say - thumbnail? Top tier!
I think its probably useful to explain the basic mechanism of how to short a stock instead of simply saying you bet against it
Also in Michael Lewis book it also explained thar DB was only the middle charging fees for sellinf credit default swap
The institute that underwrote them was AIG (which IMO was a massive part thet thr film left out)
Thanks! Great job! I'm impressed!
Cracking film, I wondered how accurate it really was, I guess im about to find out...
hi, i like Plain Bagel, i suscribed. The analytics are just secondary. Thank you.
Since this movie hit Netflix, I watched it 3 times and always discover something new. Thank you for this video!
Love your explanation!
Great explanation. I love the movie and your video has given me more depth for future rewatches!
Thanks for the video. Learned something. Any suggestions for other useful financial channels like yours?
It's interesting how in hindsight we can say there were many bad incentive structures in place, yet there is no traction to draw any conclusions about say the liberal democratic political system because until some watershed moment happens, everyone is still incentivized to go along with it for status
My favorite thing to point out about subprime mortgage was that "subprime" referred to the borrower being subprime haha .. which is in a roundabout way pretty accurate haha
The thing that I'm surprised about is that the banks didn't get in trouble for is improperly marking the swaps. I guess that's the risk you run when you're in an illiquid market, but surprised it wasn't illegal activity.
It is very common for the banks to be the ones deciding the value of the underlying. They justify it by the fact that the desk running derivatives is completely independent from the traders that do the marking but everybody knows they are not. Leverage longs are even more brutal on the markings
well seeing as how they pretty much own congress, they knew any wrong doing wouldn’t have consequences and the taxpayers would bail them out.
They pretty much all got away with their shady stuff. I do think the ratings agency deserve an even worse fate, it is a given that banks try to make their products look good, but the agencies should be able to see when you give them a polished turd instead of a good product.
Pretty much all the higher up guys deserve to be in prison for their whole life for this but they got away with it. Madoff is a saint compared to them.
@@MoonShineKidBaby I don't think they could have known they would have gotten a bailout since it came from Treasury making the recommendation. I just think the individuals in the firms didn't care what would happen because they all got rich in the process.
It was an issue of misaligned incentives with the individual employees versus the organization.
thank you, finally an explanation of the "carry"
I still don't fully understand this part. What is Jared's negative carry? Does he own credit default swaps himself? That's what I've always understood since he says his entire department is long on "this stuff" and that they call him chicken little/bubble boy I.e. scared the sky is falling. I don't understand how he can stand to make money simultaneously owning and selling credit default swaps and even if that's not where his negative carry is coming from I still don't understand why he personally stands to make so much money from buying back the swap at a low price when he was the one who made the deal in the first place - any losses the company makes on that deal should be considered his losses, no?
The concept of CDO, which obscure the true rating, is already nuts. CDO squared and synthetic CDO take craziness to a whole ungodly level.
Nice one, thanks Richard.
So, what of the future?
Do you think we will experience anything dramatic like the GFC anytime soon?
Long overdue, but very much appreciated.
Great video. Congrats and thanks!
I’ve just finishing watching this movie 🎥
"I'm jacked! I'm jacked to the tits!!!!!!!" - Ryan Gosling, Noah Calhoun, The Driver, Jared Vennett, Officer K, Ken, Literally Me
It's literally me buying FDs on margin
I love that movie, thanks for the explainer!
Thank you for this video 😊
I do believe this tragedy started during the Carter administration when they forced banks or mortgage loan companies to lower the financial qualifying standards on applying for a home loans, the focus was to allow home ownership for low wage earning minorities or folks with high economic risk- allowing them the "American Dream of home ownership". In reality, some folks just should not own a home because they don't know anything about financial budgets or they don't understand the small print on the negative amortization loan they just signed their names too.
The Big short is one of my favorite movies of all time. I did not know what actually happened in the financial crisis until I saw the movie. I liked your analysis. I can’t believe more people didn’t go to jail for fraud. Capitalism is really disgusting at times.
Great analysis
Nice video, you are filling the gaps of the movie.
Great timing it just got put on Netflix