The Big Short Page #9

Honestly I don't know!

The, the...

The bonds aren't going down!

They won't move!

It's possible

that we are in a completely

fraudulent system.

Or... you're,

you're wrong.

Sure!

It's possible,

I just don't know how!

I guess...

When...

Someone's wrong, they never..

They never...

Know how!

See you in the morning!

Yeah.

Even bear up their prices!

They keep calling us brownhall

you just don't have the money or the

reputation, don't take it personal!

I don't think I have

the strip-club in me

tonight I'm just gonna

get some drinks around.

Watch some pay-per-view

book us some flights out for the morning.

D- d-deal, we need a deal, right, a deal.

Uhm, we need a deal we can afford,

we need a deal they're not gonna refuse!

So... what can we do?

We can...

The aa-tranches,

what if we bet against the aa-tranches?

Who's not gonna take that bet?

We know that they say

they're ninety-five percent AAA-rated

but in reality, they're

more like twenty-five

percent, some of them

are zero percent!

We also know that if the bottom-tranches

fail at over eight percent

the upper-tranches are affected

and they go to zero.

I'll bet you right now,

that those aa's are actually like b's!

I rarely ever say these words

but I think Charlie is right!

Look, Ben!

Pay-off!

Is 200-to-1, but they're all

taking the ratings off face value

they're charging penny's on the dollar

to bet against double-a's

just when I start thinking

you guys are clowns!

No-one on the planet is

betting against double-a's

the banks will think we're either high,

or having a stroke

and they'll take every

dime we have to offer!

Kind of brilliant!

This is what we did,

that no-one else thought of.

Not even baum or Berry thought

to short the double-a's

but we did.

Little brownhall capitol

so we're interesting in shorting

some of the aa-tranches of cdo's

come on guys, what's the angle?

I've got no angle, we're new to this,

we're just so hyped!

We wanna do fifteen million

in swaps on the double-a tranche

I don't understand!

You can buy as much

double-a tranches as you want!

Forty million against the double-a

brother, I would sell you

as much as you want!

I understand perfectly Bob!

Want the deal?

That's cool, that's alright with me!

He's gone!

Don't do that!

Stop, stop!

Stop that!

Charlie!

Wooooh!

Stop it, stop!

What?

Do you have any idea what you just did?

Come on, we just made the deal of

our lifetime, we should celebrate!

You just bet against the American economy!

F*** yeah we did!

Yeah!

Which means!

F*** yeah! Oh!

Which means...

If we're right...

If we're right, people lose homes!

People lose jobs!

People lose retirement savings,

people lose pensions!

You know what I hate about f***ing banking!

It reduces people to numbers!

Here's a number!

Every one percent unemployment goes up,

40 thousand people die!

Did you know that?!

Did you know that?

No, I didn't know that!

We were just excited!

Just don't f***ing dance!

Alright!

Where are you going?

Whoah, I just got really scared!

First of all, great show today!

You were terrific!

Thank you!

Your big mouth was a revelation!

I appreciate that!

You worried you,

and your swaps were getting played?

Well, this is an opportunity for you

to meet who you're betting against!

Try not to get too righteous

and listen a little!

Ok, fine!

Who is this guy?

A real solid-gold a**hole!

I'm a cdo-manager

a cdo-manager?

Yup, at Harding advisors

I didn't realize that there

was anything to manage with cdo's

oh, well.

We select the securities that go into

the cdo-portfolio and monitor the assets

I do most of meryll-lynch's cdo's

do you represent the

investors or meryll-lynch?

The investors!

You do.

Yeah!

But...

Meryll-lynch isn't gonna send you

any costumers unless you put

merrill-lynch's bonds in your cdo...

Good question!

Let's just assume merrill and I have a...

We have a good relationship

you have a good relationship

with merrill-lynch?

We've been doing business together

and so the cdo's..

That you create

are, are, are, of the highest quality

and the highest of value!

Absolutely!

Absolutely!

Are you at all concerned

about the rising default-rates?

I assume no risk for

this produce myself mark

okay!

So let me get this straight

the bank calls you up

they give you the bonds they wanna sell

they give you clients,

they give you money to run your business,

give you fat fee's for doing so

but you represent the investors?

Is that right?

Yeah!

But we're not in the

merrill-lynch building!

Ok, where are you?

We're in New Jersey!

You're twenty minutes away!

Five, if you use the helicopter!

That's funny eh?

That's hilarious!

Oh boy!

Your boss is about to explode!

No, he's too curious to explode!

Hold on, say that again!

Cdo a, has parts of cdo b

and cdo b, has parts of cdo a

and then they both get put inside cdo c.

Yeah and that one is called cdo square!

A cdo of a cdo!

Right?

And then there's cdo's

made up of the opposite

sides of the bet you

made with the swaps

we call them, synthetic cdo's

what did you just say? Synthetic cdo's?

That is f***ing crazy!

It's not!

It's awesome!

His face is starting to boil

he looks like the bad guy from doom

alright, let's say...

You have a pool of 50

million in sub-prime loans

how much money could be

out there betting on it

in your synthetic cdo's and swaps?

Right now! Tonight!

50 million.. Hmm..

A billion dollars

what?

If the mortgage-bonds that

Michael burry discovered were the match...

How much bigger is the market for insuring

mortgage bonds than for actual mortgages?

About twenty times!

If the mortgage bonds were the match...

Then the cdo's were the

kerosene soaked rags.

Then the synthetic cdo was the atomic bomb

with a drunk president holding

his finger over the button

it was at that moment

in that dumb restaurant

with that stupid look on his face

that mark baum realized

the whole world economy might collapse!

And I know what you're thinking!

What the f*** is a synthetic cdo?

Well, here's Dr. thaler,

father of behavioral

economics, and Selena

Gomez to explain!

Ok, so here's how a synthetic cdo works!

Let's say I bet ten million

o a black Jack hand.

Ten million, because this hand is

to represent a single mortgage bond

okay, Selena has a pretty good hand here!

Showing eighteen, dealer showing seven

that's a really good hand for Selena!

Good odds,

in fact her chances of winning this hand

are eighty-seven percent

so, my odds are good

I'm on a winning streak

everybody in this place

wants to get in on the action

how could I lose right?

Now this is a classic error

in basketball it's called

the hot-hand-fallacy

a player makes a bunch of shots in a row

people are sure they're

gonna make the next one

people think, whatever is happening now

is gonna continue to

happen into the future!

During the real-estate boom

markets were going up and up!

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