The Big Short Page #4

And if they rise to eight percent...

And they will!

A lot of these bbb's

are going to zero too.

And that...

You're too close...

Is an opportunity.

Ok, you're saying that at 8 percent the

bonds fail and we're already at 4 percent?

That's right.

If they go to eight... it's Armageddon.

Yeah that's right.

How come nobody's talking about this?

And you're completely sure of the math?

Look at him...

That's my quant!

Your what?

My quantitative... my maths specialist!

Look at him!

You notice anything different about him?

Look at his face!

Look at his eyes!

I'll give you a hint..

His name is Yang!

He won a national maths competition..

In China!

He doesn't even speak English!

Yeah!

I'm sure of the math.

Actually, my name is jeong,

and... I do speak English

Jared likes to say it though.. Because he

thinks it makes me seem more authentic

and... I got second in that

national math competition

so... you're offering us a chance

to short this pile of blocks?

How?

With something called a

credit default swap.

It's like insurance on the bond, and

if it goes bust, you can make 10-to-1.

Even 20-to-1 return,

and it's already slowly going bust.

10-to-1, 20-to-1...

No way!

And no-one is paying attention.

No-one is paying attention.

Because the banks are too busy getting

paid obscene fees to sell these bonds.

But wait... you are the bank

you work for the bank,

I bet your margins are pretty nice and fat.

Let's not talk about my margins by the way.

Being nice and fat... that's a nice

shirt, do they make it for men?

Aren't you the bank?

I work for the bank!

I don't think like a bank

big banks, small bank...

I like to make money.

Alright...

Let me put it this way...

I'm standing in front of a burning house,

and I'm offering you fire insurance on it

how can these underlying bonds be...

As bad as you say?

It wouldn't be legal!

Nobody knows what's in them!

Nobody knows, what's in the bonds,

I've seen some that are

65 percent AAA-rating.

That I know, for a fact, are filled

with 95 percent sub-prime sh*t.

With fico's below 550

get the f*** out of here!

Want me to really blow your mind?

When the market deems a bond too risky

to buy, what do you think we do with it?

Take a guess! Wi don't

I don't know, you tell me!

Alright...

You think we just warehouse

it on the books?

No, we just repackage it,

with a bunch of other sh*t that didn't sell

and put it into a cdo.

A cdo?

Yes... a cdo.

What is that? W

where we take a bunch of

Bs, bb's and bbb's that haven't sold,

and we put em in a pile...

And when the pile gets large enough, the

whole is suddenly considered 'diversified'.

And then... the whores

of the rating agency,

give it a 92 / 93 percent AAA-rating,

no questions asked...

Holy... what!

Say that again!

Collateralized debt obligations

it's important to understand, because

it's what allowed the housing crisis

become a nationwide economic disaster.

Here's world-famous chef

Anthony bourdain to explain.

Ok, I'm a chef on a Sunday-afternoon

setting the menu of a big restaurant.

I ordered my fish on Friday, which is the

mortgage bond that Michael burry shorted.

But... some of the fresh doesn't sell..

I don't know why, maybe it just came out,

how Anthony has the

intelligence of a dolphin.

So... what am I gonna do?

Throw all this unsold fish, which is

the BBB-level of bond, in the garbage?

And take the loss?

No way!

Being a crafty and

morally honorous chef that I am...

Every crappy levels of the bond I don't

sell... I throw into a seafood stew.

It's not old fish!

It's a whole new thing!

The best part is...

They're eating retailed halibut!

That... is a cdo.

I just need to know

how these could possibly be correlated.

You're like d-d-

Dora the explorering,

you're the first person

who has found this...

So.. Hold on..

So mortgage bonds are dogshit?

Cdo's are dogshit wrapped in catshit.

Yeah... that's right!

Institutions treat these cdo's like

they're as solid as treasury bonds.

And they're going to zero..

No, that can't be right,

there, there, are 500

billion in housing bonds

sold last year alone

ratings agencies, the banks...

The f***ing government?

You're saying they're all

asleep at the wheel?

Yeah!

My whole department is long on this stuff.

They call me chicken little.

They call me bubble-boy.

A's... zero.

B's.. Zero,

bb's... zero.

Bbb's... zero.

And then that happens!

What... is that?

That's America's housing market.

Thank you.

F***ing a Jared!

Shut your f***ing mouth!

Bye Jared!

I don't like it!

He's playing us.

He's playing us, he's got too much skin in

the game, and he's dumping his position.

What if he's right?

You want him to be right!

Yes, I do!

The banks have given us twenty-five percent

interest rates on credit cards.

They have screwed us on student-loans,

so we can never get out from under.

Then this guy, walks

into my office and says:

"Those same banks got greedy,

they lost track of the market"

and I can profit off of their stupidity

f***! Yeah!

I want him to be right!

I mean, how come you don't hate this guy?

He's everything you taught us not to trust!

You can't hate him! He is so transparent in

his self-interest that I kinda respect him.

Would I buy a car from him?...

No!

Is he right about the mortgage market?

Let's find out. Let's find out!

Look... it's two very simple questions:

Is there a housing bubble? And if there

is... how exposed are the banks?

Let's get on this quickly too,

because if he is right...

Every loser with a couple million bucks

in a fund is gonna be jumping on us.

Let's go!

J.P. Morgan-chase, j.P. Morgan-chase.

Ok.. Don't!...

Stop saying j.P. Morgan-chase!

I got a good feeling about this

just a meeting though, you know...

It's just a meeting!

People have meetings all the time...

You know!

People drink their coffee,

they have a meeting...

Brownfield funds?

Yes! Yes!

Hello, hey!

Chris... I'm on Ted's desk.

I'm Charlie, I'm Charlie Geller,

I'm Jamie, Jamie shipley.. Hi!

We're so excited to get setup

on your trading platform!

Here, eh.. Have a seat a second.

Alright!

So I... Ted did ask Ehm..

To do us some meeting in front.

But I eh... I couldn't find

any marketing material on you guys..

Oh... we just moved here from Boulder.

Oh, can we see some of

your offering documents?

Well brownfield has it own... money...

It's our money... yeah.

Well can you tell us how much you manage?

Of course!

We're doing 30 million right now... eh...

But we started four years ago,

with a hundred-ten thousand.

Wow!

So as you can see,

that's pretty phenomenal returns.

We wanna get an

isda-agreement with j.P. Morgan,

so we can deal in long-term options.

That's really cool!

Yeah!

That is so cool!

Thank you!

But eh.. You guys are under

the capitol requirements for an isda.

By how much?

Er.. How much eh...

One billion four-hundred-seventy millions

so...

A lot!

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