Betting against the housing market?
Discussion
I nearly posted this on the 'questions you always wanted to know the answers to' thread but thought I'd try it on here.
In the (brilliant) film the Big Short, they bet against the housing market after realising the credit crunch was about to happen. Given that it brought down the major banks, who paid them the money that they were owed when the market crashed?
In the (brilliant) film the Big Short, they bet against the housing market after realising the credit crunch was about to happen. Given that it brought down the major banks, who paid them the money that they were owed when the market crashed?
I watched this over Christmas too, a bloody brilliant film. They were hedging Credit Default Swaps, as I understand it?
https://en.wikipedia.org/wiki/Credit_default_swap
Nope, I'm none the wiser either! In my simple head it was a spread bet that worked in their favour and 'other banks' or ultimately the US Treasury had to pay them their profit on the spread?
https://en.wikipedia.org/wiki/Credit_default_swap
Nope, I'm none the wiser either! In my simple head it was a spread bet that worked in their favour and 'other banks' or ultimately the US Treasury had to pay them their profit on the spread?
Frimley111R said:
I nearly posted this on the 'questions you always wanted to know the answers to' thread but thought I'd try it on here.
In the (brilliant) film the Big Short, they bet against the housing market after realising the credit crunch was about to happen. Given that it brought down the major banks, who paid them the money that they were owed when the market crashed?
The big banks didnt get brough down - a couple did like Lehman and Bear Stearns.In the (brilliant) film the Big Short, they bet against the housing market after realising the credit crunch was about to happen. Given that it brought down the major banks, who paid them the money that they were owed when the market crashed?
They sold before the ones they held with tanked - thats why at the end one of the guys is saying it was a tightrope in that 'its now or never [or the bank may be gone anyway]'. Someone must have bought them from them so someone obviously thought they could still make a bit off them going even lower.
In the end the banks were bailed out anyway.
One of my faves too... have watched it a few times and always watch the final scenes with incredulity...
I'm no expert either but the two 'kids' who get Brad Pitt to get them in on the game, ended up with something like $285m in default swpa things...
Brad is sat in a pub in England and phones a Credit Suisse was it?...another bank anyway and sells all of the stuff to them...
"Yep they're absolute dog-s
t...we want $100m......90....84...84...." etc
So another bank bought and paid them...
And Mark Baums lot, the last to 'sell'... the same... "its now or never Mark"...."ok sell"
At the very end there were (I think) institutions buying up these toxic debt things...and paying.
I'm no expert either but the two 'kids' who get Brad Pitt to get them in on the game, ended up with something like $285m in default swpa things...
Brad is sat in a pub in England and phones a Credit Suisse was it?...another bank anyway and sells all of the stuff to them...
"Yep they're absolute dog-s
t...we want $100m......90....84...84...." etcSo another bank bought and paid them...
And Mark Baums lot, the last to 'sell'... the same... "its now or never Mark"...."ok sell"
At the very end there were (I think) institutions buying up these toxic debt things...and paying.
p1stonhead said:
They sold before the ones they held with tanked - thats why at the end one of the guys is saying it was a tightrope in that 'its now or never [or the bank may be gone anyway]'.
Ah, I see, thanksAnd yes, it's one of my favourite films of all time. I have lost count of the the times I've told people to watch it. Clips pop up on my YT feed and I can't help watching them over and over again.
I thought they had got into a position which was "houses go up, bank A wins: houses go down, our hedge fund wins".
At the point they sold, it wasn't the belief that houses had reached their lowest price which was their trigger. Instead it was the realisation that, because house prices were tanking so badly, bank A might lose so much on their bet (with the hedgefund) that it may not exist any more and thus could not pay the HF anything.
So in effect Mark Baums was letting the bank escape their position by buying it back from him. He was tortured because he wanted to make them suffer as much as possible, but realised he didn't want them to be destroyed completely.
At the point they sold, it wasn't the belief that houses had reached their lowest price which was their trigger. Instead it was the realisation that, because house prices were tanking so badly, bank A might lose so much on their bet (with the hedgefund) that it may not exist any more and thus could not pay the HF anything.
So in effect Mark Baums was letting the bank escape their position by buying it back from him. He was tortured because he wanted to make them suffer as much as possible, but realised he didn't want them to be destroyed completely.
aww999 said:
So in effect Mark Baums was letting the bank escape their position by buying it back from him. He was tortured because he wanted to make them suffer as much as possible, but realised he didn't want them to be destroyed completely.
I thought he was tortured because he was profiting from a fraudulent system....and in the knowledge that the "little guy" would bail them out so the big institutions wouldn't suffer at really... obviously Bear and Leemans suffered but across the piece...big bail outs...one guy goes to prison, government lobbied to not impose major change etc etc...Quickmoose said:
aww999 said:
So in effect Mark Baums was letting the bank escape their position by buying it back from him. He was tortured because he wanted to make them suffer as much as possible, but realised he didn't want them to be destroyed completely.
I thought he was tortured because he was profiting from a fraudulent system....and in the knowledge that the "little guy" would bail them out so the big institutions wouldn't suffer at really... obviously Bear and Leemans suffered but across the piece...big bail outs...one guy goes to prison, government lobbied to not impose major change etc etc...On a side note, Mark Baum was interviewed on Radio 4 yesterday morning...
He's shorting 3 British banks in lieu of the Brexit mess......3 banks.
The interview continued, whereby he repeated..."Dude...no-one knows what will happen, both sides projecting stuff whereby this will happen or won't happen are talking out of their hats...no-one knows"
"And if Corbyn becomes Prime Minister?...do you have a plan for that?"
"I have a list of probable British companies to short"
"A list? how many?"
"Around thirty"
30!
sorry...thread digression.... very interesting bloke though...shooting from the hip.
He's shorting 3 British banks in lieu of the Brexit mess......3 banks.
The interview continued, whereby he repeated..."Dude...no-one knows what will happen, both sides projecting stuff whereby this will happen or won't happen are talking out of their hats...no-one knows"
"And if Corbyn becomes Prime Minister?...do you have a plan for that?"
"I have a list of probable British companies to short"
"A list? how many?"
"Around thirty"
30!
sorry...thread digression.... very interesting bloke though...shooting from the hip.
p1stonhead said:
Quickmoose said:
aww999 said:
So in effect Mark Baums was letting the bank escape their position by buying it back from him. He was tortured because he wanted to make them suffer as much as possible, but realised he didn't want them to be destroyed completely.
I thought he was tortured because he was profiting from a fraudulent system....and in the knowledge that the "little guy" would bail them out so the big institutions wouldn't suffer at really... obviously Bear and Leemans suffered but across the piece...big bail outs...one guy goes to prison, government lobbied to not impose major change etc etc...The bit in the Japanese resteraunt where the guys explains that he must be intrinsically right and better than Steve Carrels character because he has accumulated more wealth and then goes on to explain the synthesised CDSs at which point Carell walks away and says "Short everything that man has ever touched" is classic.
Derek Chevalier said:
p1stonhead said:
Quickmoose said:
aww999 said:
So in effect Mark Baums was letting the bank escape their position by buying it back from him. He was tortured because he wanted to make them suffer as much as possible, but realised he didn't want them to be destroyed completely.
I thought he was tortured because he was profiting from a fraudulent system....and in the knowledge that the "little guy" would bail them out so the big institutions wouldn't suffer at really... obviously Bear and Leemans suffered but across the piece...big bail outs...one guy goes to prison, government lobbied to not impose major change etc etc...VINNY
Mark?
Can we sell now? The fund’ll make
almost a billion dollars... You’ll
clear 200 mill Mark.
MARK
You know once we sell we’re just
like all the rest...
VINNY
No we’re not Mark... We didn’t prey
on people’s dreams of owning a
home... They did. And now we can
kick em in the teeth.
MARK
A billion dollars...
VINNY
That’s right. But we’ve got to sell
or it could be zero. It’s now or
never. It really is.
MARK
Okay... Sell it all.
Edited by p1stonhead on Thursday 17th January 14:02
p1stonhead said:
Derek Chevalier said:
p1stonhead said:
Quickmoose said:
aww999 said:
So in effect Mark Baums was letting the bank escape their position by buying it back from him. He was tortured because he wanted to make them suffer as much as possible, but realised he didn't want them to be destroyed completely.
I thought he was tortured because he was profiting from a fraudulent system....and in the knowledge that the "little guy" would bail them out so the big institutions wouldn't suffer at really... obviously Bear and Leemans suffered but across the piece...big bail outs...one guy goes to prison, government lobbied to not impose major change etc etc...VINNY
Mark?
Can we sell now? The fund’ll make
almost a billion dollars... You’ll
clear 200 mill Mark.
MARK
You know once we sell we’re just
like all the rest...
VINNY
No we’re not Mark... We didn’t prey
on people’s dreams of owning a
home... They did. And now we can
kick em in the teeth.
MARK
A billion dollars...
VINNY
That’s right. But we’ve got to sell
or it could be zero. It’s now or
never. It really is.
MARK
Okay... Sell it all.
Edited by p1stonhead on Thursday 17th January 14:02
Frimley111R said:
I nearly posted this on the 'questions you always wanted to know the answers to' thread but thought I'd try it on here.
In the (brilliant) film the Big Short, they bet against the housing market after realising the credit crunch was about to happen. Given that it brought down the major banks, who paid them the money that they were owed when the market crashed?
The book is equally brilliant and explains how it all works in more detail. I can't remember the answer! In the (brilliant) film the Big Short, they bet against the housing market after realising the credit crunch was about to happen. Given that it brought down the major banks, who paid them the money that they were owed when the market crashed?
Quickmoose said:
On a side note, Mark Baum was interviewed on Radio 4 yesterday morning...
He's shorting 3 British banks in lieu of the Brexit mess......3 banks.
The interview continued, whereby he repeated..."Dude...no-one knows what will happen, both sides projecting stuff whereby this will happen or won't happen are talking out of their hats...no-one knows"
"And if Corbyn becomes Prime Minister?...do you have a plan for that?"
"I have a list of probable British companies to short"
"A list? how many?"
"Around thirty"
30!
sorry...thread digression.... very interesting bloke though...shooting from the hip.
In all of my 46 years I have never listened to anything on Radio 4 - too much of a swerve towards sensibility for a kid who grew up with Steve Wright in the Afternoon! He's shorting 3 British banks in lieu of the Brexit mess......3 banks.
The interview continued, whereby he repeated..."Dude...no-one knows what will happen, both sides projecting stuff whereby this will happen or won't happen are talking out of their hats...no-one knows"
"And if Corbyn becomes Prime Minister?...do you have a plan for that?"
"I have a list of probable British companies to short"
"A list? how many?"
"Around thirty"
30!
sorry...thread digression.... very interesting bloke though...shooting from the hip.
I'd like to listen to this, presumably it is on the iPlayer. Which show was it on?
Zarco said:
Frimley111R said:
I nearly posted this on the 'questions you always wanted to know the answers to' thread but thought I'd try it on here.
In the (brilliant) film the Big Short, they bet against the housing market after realising the credit crunch was about to happen. Given that it brought down the major banks, who paid them the money that they were owed when the market crashed?
The book is equally brilliant and explains how it all works in more detail. I can't remember the answer! In the (brilliant) film the Big Short, they bet against the housing market after realising the credit crunch was about to happen. Given that it brought down the major banks, who paid them the money that they were owed when the market crashed?
Another good one from the point of view of a bank trying to get ahead of it is Margin Call.
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