I was too - and to be frank: it's dishonestly revisionist to say this was a topic in the public eye.
There's a very good reason a book (and movie) like The Big Short was such a big hit. It's because it was about the handful of people who actually saw the crash coming and were confident enough to put their money and reputation on the line.
> Not financial advice, but: Honestly it’s pretty hard and I wouldn’t recommend it. Shorting stocks and getting into bonds / default swaps but the system is broadly rigged against small players doing well here. Ie in the Big Short see everything that was needed for two guys to bet with their own money.
Do you base your knowledge on anything other than a very mediocre movie?
If an "investor" believes the market will sell off drastically, there are many, many ways they can express that bet in the open market. They can short index futures, buy put options, long volatility... so many options that depend only on the thesis being right. It does not sound as sexy as "look kid, the billionaires rigged the system!", but it's true.
To parallel to The Big Short this is the point in the movie where folks realize it’s mathematically impossible for things to not implode and so players are quietly positioning themselves for that eventuality before things are allowed to blow.
It’s been a dramatic shift these last six months but everywhere I look now folks are quietly preparing their battle armor to survive what’s about to unfold.
The tech will stay, but the AI business landscape will have a market-cleansing forest fire.
There’s a whole generation in tech now that’s never seen what it looks like when a bubble like this unravels.
I do definitely watch TV and movies from time to time. Really my beef is with social media. TV and movies as media, that's a wagon I just largely fell off of at some point.
I'll still watch a good movie, for sure. Interstellar, Primer, Coherence, Run Lola Run, The Big Short, Contact, Excalibur... But The Expanse, Project Hail Mary, The Martian... I enjoyed the books more than than the movies, and the movies were good. Still haven't read Contact, shamefully.
The narrative of the Big Short omits something big i.m.o.: encouragement of easy mortgage lending standards by Washington politicians. Is this line about the SEC the only reference to government in the movie?
Always loved this from The Big Short (movie):
"In the years that followed, hundreds of bankers and rating agency's executives went to jail. The SEC was completely overhauled, and Congress had no choice but to break up the big banks and regulate the mortgage and derivatives industries.
Just kidding.
Banks took the money the American people gave them, and they used it to pay themselves huge bonuses, and lobby the Congress to kill big reform. And then they blamed immigrants and poor people, and this time even teachers. And when all was said and done, only one single banker went to jail."
Edit: I see I'm not the first to quote The Big Short in reply - such a good movie (and book)!
It's not interesting to say "this is a bubble!" I've heard that about virtually everything (and in many cases it's likely true). What is interesting is pointing out the mechanics that make the bubble pop.
This is precisely what makes the movie the Big Short interesting: we see that people did identify, within a reasonable time frame, when people would start defaulting and how that would cascade into a true crisis.
It's pretty clear that while the fruits of AI are quite useful, the entire thing is rife with very questionable financial engineering... but I still don't know what it is that makes all of this break. For example, it's obvious that the SpaceX IPO is a massive wealth transfer program, but it's not obvious that it will immediately end in a crash. Given how irrational the stock market has been, I don't see a reason it can't continue to be irrational for long after the bag has been handed over to the retail investors and retirement funds.
Not related to AI but, I recently rewatched "The Big Short" and your comment reminded me of it. I can't testify the accuracy of the movie, but for over year, Michael Burry was viewed as in the same manner for shorting the market, while the economy was was in a hype cycle.
I had mortage on a condo for $460k. total money paid to pay it off via debt, little over $1m. I sell 30 years later for $460k I just lost $550k :) (I didn’t, paid it off in 5 years saving myself 100’s of thousands …)
ask yourself why “we” think that some debt (e.g. real estate) is great) while others (e.g. vehicle) is bad? it just might ge that one is looked at as appreciating asset while the other not so much.
comments like yours always remind of the stripper scene from the movie “big short”
having debt also makes you a forever slave (true capitalism at work). God forbid you lose your source(s) of income and don’t have FU money or significant stash, now you fucked. with no debt and roof over your head life is infinitely better even during trying times..
There are some great movies that deal with this: Wall Street, The Firm, The Big Short, Suicide Kings, Michael Clayton, among others.
One can even consider the never ending Ethics classes in college an ironic form of corruption that never teaches anything we don't already know by secondary school, but used to pad credit numbers and tuition revenue.
Jared Vennett (narration):
"In the years that followed, hundreds of bankers and rating agency's executives went to jail. The SEC was completely overhauled, and Congress had no choice but to break up the big banks and regulate the mortgage and derivatives industries."
"Just kidding. Banks took the money the American people gave them, and they used it to pay themselves huge bonuses, and lobby the Congress to kill big reform. And then they blamed immigrants and poor people, and this time even teachers."
To understand Bitcoin you need to forget the technology and first understand the problem. You need to understand what caused the 2008 financial crisis and how it resulted in us collectively funnelling more value into the hands of useless bankers. You need to understand that there are people who are literally spending their days playing games with each other, trading bits of paper and making silly deals and bets. If you don't understand the word "literally" or don't believe it, read more, study harder. If you don't understand a zero sum game or how this nonsense fucks up the lives of regular people, read more.
Read The Big Short by Michael Lewis. You could even start with the film by Adam McKay who also gets it. Then read Other People's Money by John Kay.
Only once you understand the problem can you begin to understand why a trustless digital cash would be good for us. Bitcoin is simply the first viable solution to the problem. If you can come up with a better one you'll change the world.
> I feel like the stock market is pretty divorced from fundamentals at this point i.e. speculation makes it more like a Keynesian beauty contest (picking stocks you think other people will think are valuable).
Contrarians betting against the herd have often been very successful. For example, John Paulson and Michael Burry made billions by shorting CDOs that lead to the 2008 crisis. The movie "The Big Short" is an Ok dramatization of how it all unfolded.
In the Big Short movie there is a scene where the old trader scolds two newbies: "why are you so happy? don't you understand that if your bet is right, it means the american economy is going to crash, that millions will lose their jobs?"
Right now we're betting on sp500 going up, which is mostly backed by the belief that machines are going to replace us soon.
The existing financial system is one where the money supply is controlled by private bankers. Money is created by banks when they issue loans (mostly mortgages) and destroyed when people pay the loans back. When a bank issues a mortgage to a first time buyer of, say, 300,000 credits, that 300k is brand new money injected into the system. The loan will be slowly paid off, but over the span of maybe 30 years that single loan will contribute on average 150k of money in the system. Almost all of the money in the system is just people's loans they haven't paid back yet. If the banks issue more loans, the money supply increases, if they issue fewer it decreases.
This sounds stupid and most people usually think "there must be something more to it, but I don't understand". Well, there isn't. Money is just made up numbers that we use to do accounting. The only thing that is real is physical (houses, food, minerals, energy etc.)
To attempt to reign in the stupidity, governments have created layers upon layers of regulation to the extent that much of finance is basically working out how to keep legally creaming off the top of the money supply. They play silly games with each other where they trade bits of paper until one of them is left holding the bag. The trouble is the silly games end up affecting everyone else because we actually use this money to do real finance, like paying for food and shelter, insurance, savings etc.
Read up on the 2008 financial crisis. There's a very entertaining book and subsequent film called The Big Short which is highly recommended. Bitcoin was started as a direct response to the events that played out around 2008.
Your question can be answered without giving away control and access to unauthorised and inexperienced auditors.
Governance, Risk, and Compliance has been missing. Too many decades of nepotism, insider trading, corruption ( starting with lobbying ), have led to the lack of transparency. The movie “The Big Short” has explained some of these issues.
For comedy one needs to subvert expectations, and this is why making light of grave events (Black Comedy) is a big phenomenon.
There are many examples from WW2 comedy to 9/11 memes. Sometimes the examples are more indirect, like in film: American Psycho, American Beauty, Wolf of Wall Street, The Big Short, Fargo, Don't Look Up, Fight Club, Quentin Tarantino's stuff, etc. All of them deal with dark themes in a light way.
Given the prevalence of this in our culture, the author seems a bit surprised. Maybe they didn't connect it to dark comedy.
Office Space, Demolition Man, Fight Club, City of Ghosts (2004), The Big Short, Ghost Dog, Slacker, most Tarantinos, various 60s italo-westerns, BTTF 1 & 2.
But there's a lot more movies coming to mind that deserve a 2nd watching imo, just haven't done so yet. Eg. most Coen Bros ones come to mind.
This is a nice marketing article, and while I completely support the transition off fossil fuels and onto renewables, I don't think it's the right approach - it's better to be upfront about the challenges involved in feeding intermittent energy streams into an electricity grid where demand is not aligned closely with primary production, neither on a daily nor a seasonal basis.
The authors of this kind of thing should take a cue from the financial reporting on the 2008 economic crash and films like the Big Short - people can handle complexity, they're interested in hearing about default credit swaps and CDOs and the internal mechanisms of complex financial instruments - so they can certainly handle somewhat difficult energy concepts.
Thus, you can tell people that if you want to run 24/7 on solar inputs alone, then at peak noon you might need your solar system to be producing twice as much power as demand is drawing from the grid, so that the rest can be diverted to storage for use in the evening and morning. If you want to get through a cold wet northern hemisphere December, then you'll need even more solar to divert to chemical fuel storage of some kind for that time period.
> Risk-sharing mutual aid societies are now among the largest and best-funded organisations on the planet - we call them "governments".
I'm not aware of any mutual aid society that shot an unarmed man SEVEN TIMES IN THE HEAD because they misidentified him. The Metropolitan Police did, and none of the officers were disciplined.
That right there is a great example of the bias of the BBC.
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The article is engaging but doesn't give a good explanation of the difference between "insurance" and "gambling".
At the very end it brings up financial derivatives but again does not explain them well or the danger they caused.
Is "insurance" a type of "gambling"? Maybe. But it's quite different from gambling in a US casino (and I presume UK casino).
In the US, "gambling" refers to wagers placed at known odds, sometimes against other players; legal gambling has limitations on how much money the House can take: e.g. if a casino "wins" $100, they must also pay $80 to someone.
Again in the US, "insurance" (excepting health "insurance", which is mostly not insurance) is someone paying a regular premium and the insurer promising to pay if certain events happening to the person, with the government requiring that the insurer keep financial reserves to pay out claims. If you stop paying your premiums, you lose your insurance. If the insured events never happen, the insurer keeps your money.
In a sense, insurance is a type of gambling, but closer to buying an umbrella in the morning in case it rains in the afternoon.
Financial derivatives were portrayed as insurance but were not regulated as such, and the banks did not keep reserves to pay them out; because folks were also taking "insurance" against events that happened to third-parties (i.e. not themselves) it looks a lot like gambling (though they weren't regulated as that, either).
I highly recommend the film "The Big Short" to explain the 2008 financial crisis in fairly plain terms. (I finally picked up the book but it's in the queue on my shelf.)
Nah I like New Scientist and Quanta Magazine etc… to give me an insight into a complicated topic. It isn’t adequate for a professor to understand the subject to write a thesis sure, but there is no harm in more people kinda understanding something. This is especially true of the sort of dumbing down the big short film did, when the impact on society means everyone should sort of understand what happened Nd why the economy tanked.
This sounds interesting enough. Could I have it as a more detail text based novel (150-250 pages) or if it's possible a full fledged movie, maybe in similar style as "Big Short"?
Or do you think it has to be a TV show, maybe like "Succession" - do you think you'd be able to write something like "Succession"?
PSA: you basically have to have seen the movie "The Big Short" to understand the analogy in the article. Or at least this scene: https://www.youtube.com/watch?v=xbiDrzTd8fE
I don't know what the mathematical underpinnings of those mortgage-backed derivatives were, but I know someone somewhere looked at all that math and decided the risk burden was acceptable. No one said hey, wait, the model is only as good as the assumptions you feed into it. The movie The Big Short got at this, but it was just a movie with Steve Carell standing in for that shocked person who doesn't seem to have really existed until after the assumptions failed and the collapse was inevitable.
There was a mania around residential real estate, adjustable rate mortgages, swaps, cdos and synthetic cdos, that all hinged on adjustable rates resetting up starting in 2007 that drove the 2008 crises. The movie “The Big Short” does a good job explaining it for us laymen imo.
The quote "The market can stay irrational longer than you can stay solvent" is attributed to John Maynard Keynes many years before "the big short" movie even came out.
It's more that, if you take a meaningful amount of money from N people, the likelihood of financial hardship putting someone in mortal danger (eg, by causing them to lose access to housing or medication, or causing them to be suicidally despondent because they've lost their ability to retire) approaches 1 as N increases. When N is high enough that there are multiple people in mortal danger - it becomes pretty likely that some of them succumb.
This is even discussed in the film version of The Big Short.
I liked The Big Short, movie and the book, as a story and also because the author claims that it's based on true events. Now after seeing Michael Lewis fumble all over the place about SBF I'm not sure about the latter anymore.
Maybe Michael Lewis got too attached to his subjects and was hoodwinked or maybe he knew it was not all true and went along with them because they made for a good story.
All in all he lost his credibility big time, at least among lay (i.e., outsiders of Wall Street) readers. Later I read somewhere on Twitter that apparently WS folks knew his book to be a BS anyway.
They didn't say that they have a Pavlovian response to the phrase "mortgage securities", trained only on surface-level knowledge of a Ryan Gosling film.
They were simply reminded of the scene from The Big Short with the stripper talking about all the properties she has loans for.
I'm not the OP you replied to, but there's a scene from the movie the big short that really punched the understanding into my head:
Michael Burry: I may have been early but I'm not wrong
some exec: It's the same thing!
I believe that a lot of HN posts are probably "right", but they are so far in the future and so non-applicable to day-to-day life, that it's indistinguishable from wrong. For example, everyone predicting Google is going to end - yeah all great companies eventually come to an end - if you want to be insightful, you actually have to be on time with it.
I think since the GFC he has taken a bit of a turn in that he sees the traditional economy/financial markets/players as rigged against the little guy.. and taken a sort of oppositional defiance disorder approach to the whole thing.
So any Don Quixote will look like Robin Hood to him.
Flash Boys was just taking sides in a dispute with no real good guys, but the upstart/little guy to him was default "good guy".
He took some more explicitly political positions in some of his other books.
And now his SBF/FTX fanboyism falls under the same category that "the little guy" has to be the good guy.
The Big Short is probably his last great book / and film.
The Big Short was able to depict financial instruments in an appealing way.
Partly by interjecting a scene where Margot Robbie explains the mortgage bond market and short selling while wearing very little, but people seemed to like that movie.
If you want to consider the effects of war, inflation, something like the 2008 housing crash, economic depression, COVID, hurricanes, train derailments, etc., sure, if those hypothetical changes still yield an LP (linear program), can just solve the resulting LPs and display the resulting data in a way can visualize and get some intuitive insight.
But there is another way: Let insurance companies consider history and set insurance premiums for disasters, all disasters, ever seen before or not, and they will have quite good data, likely, sorry, better than get from RL (reinforcement learning) or, really, anything that can be obtained from anything like current analysis of data from Web crawling. A common assumption, understanding in business is that it is possible to get insurance on nearly anything against nearly anything. E.g., the whole thing about the book and movie The Big Short was that it was possible to get insurance on the BBB tranches of housing mortgage bonds, make a bet that the tranches would fail. For this would have to pay monthly premiums but when the tranches failed make huge returns on the premiums paid.
With their good data and history, an insurance company will be able to set insurance premiums that give you some good information about the seriousness of the disasters, on your list of disasters or not, you are concerned about. If seeing the premiums you are still highly concerned, then pay the premiums and relax.
As in The Big Short, call up Goldman-Sachs and see if they will write you some insurance on what you want protected.
Sure, if I were to invest, what for me are big bucks, in raising a flock of chickens, maybe I'd get some insurance against any disease, e.g., bird flu, attacks by rabid foxes, wolves, raccoons, fire, flood, tornado, etc. destroying the flock.
Sure, once I did some Monte Carlo work essentially to evaluate the odds of some survivors in a really complex, goofy situation -- with those odds, could have found premiums for writing insurance policies. The issue was, if there were global nuclear war limited to sea, how long would the US SSBN fleet survive? For input, I used some encounter rate probability derivations Koopman did as part of ocean search in WWII. Then I used some detection radii of Red-Blue pairs and battle result probabilities (one dies, the other dies, both die, neither dies). My work passed technical review by a world-class probability professor. My summary results were a graph over time of the expected number of SSBNs surviving. Also the Monte Carlo result could have also reported the probabilities of other aspects of the scenario, e.g., the probability that at least 10 survived for 30 days, enough to write an insurance policy!
The professor tried to object: He said how could I hope to "fathom" the huge state space? I responded, ..., using the strong law of large numbers ..., and he agreed with me. So, some times can analyze situations where some of the possibilities, actually nearly all, are never encountered or sampled. So, that would beat running LP many times one at a time on many disasters could describe.
Lesson: Sometimes it's possible to do Monte Carlo under some seemingly wildly complicated situations.
Net, I would advise pricing some insurance instead of some DIY (do it yourself) with either LP or RL.
More broadly and by analogy, a hammer and a screwdriver are both good tools, but no sense in asking which is better. Maybe the same for LP and RL. And for one more tool, insurance policies.
Arrival, The Martian, Moneyball, The Big Short, there's something magical about these movies that no matter how many times they are on TV I will just sit and watch them again. I don't know what it is about the stories but it probably has has something to do with that XKCD comic about the scene in apollo 13.
It's simple to have information about the future in entirely legal ways. Usually the future information is available, just unequally distributed.
The best example of this is the movie "The Big Short" where it the information about the upcoming crash of subprime-backed bonds just required people to bother reading large amounts of bond composition documents. Only 3 groups really did this.
Another good examples is how some funds pay for logistics intelligence (via satellite reconnaissance, customs declarations etc) to forecast sales figures.
This was super cool to click around on the various techniques and see the examples.
(Questions/Thoughts)
- I was looking to see if there was a Steadicam group, wondering if I would see a gif of Henry and Karen walking into the Copa, that's got to be one of the most famous shots in film in the last 40 years (not a critique, totally possible it's there under a different name I'm not aware of as a layperson, I didn't peruse every group.) [Edit note added]
- "Fourth Wall" should include a gif of "The Big Short", breaking the fourth wall was a great way to get the minutiae of the financial subject out of the way and return to the characters.
- Bonus upvote for finding a shot from "Halt and Catch Fire"! (dolly zoom)
Edit: I knew I was forgetting the proper term for my question about Goodfellas, it's a tracking shot. I didn't see the movie in there though, I think it should be added :)
Community-scale banks (aka credit unions) are a better idea for local-regional communitie (aka cities and towns and agricultural regions) because their managers have to live with their clients.
Take a community of 100,000 families, in an economic system where they're all collecting income and paying bills and so on. The idea behind a bank is that they hold the community's money securely while making their own money by providing loans at a greater interest rate than the interest rate they pay out to their depositors. Fundamentally, this means the bank is dependent on the fact that customers don't try to withdraw all their money at once (as the above dynamic means the bank is never able to meet this demand).
FDIC guarantees by governments are intended to bolster this customer trust, as if everything goes sour the deposits (to a certain limit) are guaranteed. The important point is that the regional bank has a profit model based on giving successful loans to individuals and small businesses for things like houses, cars, business expansion, etc. The bank will of course want to know a fair amount about the people they are loaning to (drug addicts are not good bets, etc.) in order to ensure they get paid back.
I hear people laughing in the background about the naivete of this picture in the modern American financial system. Since this post is already a bit long, go watch the movies "Margin Call" and "The Big Short" to get an idea of what's actually been going on.
I wonder how many of the people in this thread bringing up the completely irrelevant and unrelated MBS stuff from 2008 would have had any idea what they were if movies like The Big Short or Margin Call hadn't been made.
There were also short positions on SVB taken out after some of those financials.
Startup founders/teams should not be spending their time reading their 40 year old bank's quarterly financials, analyzing various short positions, or hiring resources to do so. Then there's (as always) the absurdity of making significant financial decisions for your startup based on a more-or-less random fund/personality twitter account that may have an undisclosed short position spreading FUD (or just be flat-out wrong).
Hindsight is 20/20 and even the most sophisticated actors taking short positions have failed spectacularly. For cases as dramatic as this ($200b bank failure) it's the stuff they make movies of ("The Big Short").
The fact remains that other than a few hawks this came out of nowhere last Thursday, and as the article and other sources describe not even Thiel and other sophisticated insiders were that far ahead but as we all know when it comes to a bank run those hours are precious.
Because you're a greedy human and you will find a way to take a larger slice of the pie. It happens every single time. You'd think this would be obvious by now.
How you think the banking system works is how "educated" people think it works and even that isn't correct, by the way. There is no reserve. The funds aren't real. It's all just made up numbers. There have been several Hollywood films made about it (e.g. The Big Short and Margin Call). It's almost so stupid you think there must be something else to it, but it's just people playing with numbers.
query = f"The guidelines for approving or denying a loan are:
{guidelines}.
Here are sample application that were approved:
{sample_approvals}.
Here are sample applications that were denied:
{sample_denials}.
Please write a loan application which is very likely to be approved. Provide necessary supporting details.
> telling two or more people they own the same dollar
This is the main issue, and it's called a "reserve requirement", which is a percentage of the deposits that the bank must keep on hand to mitigate risk of issues like this.
In March 2020 the US Federal Reserve lowered it from 8% to 0%, which is where it is today. Just to give you an idea of how the economy works then, let's say you put $100 into your account at Bank A. Company X takes a loan from the bank for $100. Where do they put their money from the loan? Well, they spend most of it but part of it ends up in, let's say, Bank B. Bank B then takes that money and loans it out 100% to Company Y, who spends some of it and also puts some reserve into their bank account in Bank A. Which lends it out 100%.
So this is an over-simplified example but just to give a visual that this is where inflation is coming from. The "government" isn't printing money -- the banks are. It's a deck of cards with no safety net.
Watch the movie "The Big Short" and tell me how this isn't the same situation.
For an explanation of the shift in policy around 2006 that caused the Great Recession and the current housing shortage, I recommend Kevin Erdmann, “Housing Policy, Monetary Policy, and the Great Recession” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667309 and his other articles https://www.mercatus.org/scholars/kevin-erdmann. Erdmann disputes the standard explanation of the Great Recession that excess credit and behavioral economics caused a housing construction boom which caused a pop (e.g. the first Planet Money podcast The Giant Pool of Money, the movie The Big Short, the book House of Debt). Instead, he claims that there was never a construction boom at all; regulators killed the housing construction sector and entry-level mortgages because they mistook a shortage of homes in the Bay Area for a glut of homes in Las Vegas, and unrelated cities such as Atlanta were innocent victims.
> You're basically betting that the crypto market will collapse
By coincidence, my wife was watching The Big Short (2015) with our eldest two kids tonight, it really is worth watching [again] if you've not seen it [recently].
> ... but the exchange/broker/whoever you're dealing with will survive and have the necessary funds to cover your short
Michael Burry has pretty much exactly that conversation with Goldman in the film.
The actual big short (haven't seen the movie) was on a credit default swap index[1] (it was on one of the CMBX series which have commercial mbs as underlying[2]. There are also RMBX series for residential mortgages). CDSs are a swap (ie they are synthetic by definition) where one person is long the risk (short the protection) and one person is long the protection (and therefore short the risk). So the concept of who is long and short can be a little confusing.
[1]Source: worked at Goldman as a strat (quant developer) on the mortgages desk at the time. I knew and worked with pretty much all of the people involved although I was based in London. The actual person who came up with the research behind the short idea was a fellow strat and brilliant econometrician[3] and most of the trading guys fought him like hell over it only to later found hedge funds and pretend that it was their idea all along.
Screenwriting for The Big Short was magic. There were probably still too many complicated threads to keep straight but a really good cut on the source material for film.
Well, as a big fan of Michael Lewis, I never would have thought Moneyball and The Big Short would make good movies, but here we are. Good scriptwriters are wizards.
Lots of critical takes here - this book will be a yuge bestseller and the movie a nerdy blockbuster on par with The Big Short or WeCrashed - which was a book by my friend Eliot Brown!
Michael Lewis, the author of “The Big Short", is the true winner of this whole debacle. He was/is allegedly following SBF around, working on a book covering his raise to fame and riches and his influence in US politics. Seems he's getting the extra chapters he needed to turn it into a best-seller and another movie adaption.
The Big Short and Boiler room are incredible movies. The only real competition is Wolf of Wall Street, which goes too deep into the debauched party lifestyle at the expense of the more interesting financial story, and Margin Call which has the opposite problem since it’s completely inaccessible to most people.
Right. But (1) The Big Short was not a very good movie, and (2) it was about the collapse of the entire housing market. This is about the collapse of an abstract metaPonzi scheme.
Comedy moved to Youtube and TikTok and big-Hollywood can't compete with more tailored, specific, comedy.
What's the funniest thing I've watched recently? ProZD, CarbotAnimations, CalebCity, Door Monster.
They're quite specific to my tastes (Anime, Video Games, and Dungeons and Dragons), that most others wouldn't get. But there's simply no way that a big Hollywood / general production can make a joke as specific as Door Monster and/or CarbotAnimation skits.
https://www.youtube.com/watch?v=mCEZ2hIcUW0
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Longer bits of comedy can be found in longer-form Youtube videos, such as Oversimplified.
https://www.youtube.com/watch?v=yRmOWcWdQAo
I don't think any of these online cartoons or Youtubers have much mainstream appeal. But they're funny enough for me.
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I also seem to remember some relatively mainstream comedies out there: Harley Quinn was pretty good (though that tickles my taste in DC Superheroes). Knives Out was absolutely hilarious. But I admit I don't watch too many movies in general.
The Big Short was funny (though inaccurate to the history of the time), if people want a more recent somewhat political flick.
Highly recommend Flash Boys by Michael Lewis (author of The Big Short which was also a great film adaptation). It follows the trail of High Frequency Trading to uncover how this was used to front load orders and along with other unsavory tactics like dark pools essentially turn the stock market into a rigged game. Of course they’re effects have been dampened in the decade since, due to regulatory pressures once it was more generally understood what HFT firms were actually doing.
I’m not sure to what extent it constituted financial crime versus just being an ethical grey zone, and the book is of course not without its share of criticism, but it was certainly an enjoyable read.
I watch Pluto-TV for the exact same reason: it reminds me of old school cable-TV. I turn it on and "veg out", just like when I was a teenager. I tend to watch it before I go to sleep when I'm trying to shut down anyway.
The movie, The Big Short, was on heavy rotation about a year ago. Good movie. They have an entire channel dedicated to Narcos, so I'm basically fluent in Spanish now - well, "drug dealer Spanish", at least.
FWIW when I was doing some banking courses, as I was working in DeFi and wanted to know more about CeFi, they have synthetic assets too. Which are derivatives. In fact in the Big Short movie I'm 100% they call derivates synthetics!
In the immortal words of the character Mark Baum (based on Steve Eisman) in "The Big Short":
"That's hilarious".
I am referencing the scene when he meets the CDO manager, and he said this with the utmost sarcasm. A great scene, based on true events, in a great movie.
> And I assume you are substantially short these markets then given that you know this for a fact and it's trivially easy to become wealthy one you know this for a fact?
That's not a safe bet.
https://en.wikipedia.org/wiki/Michael_Burry, which the film "The Big Short" is based off, correctly predicted the 2007-2009 collapse of the housing market, but nearly lost everything waiting for it to occur.
> During his payments toward the credit default swaps, Burry suffered an investor revolt, where some investors in his fund worried his predictions were inaccurate and demanded to withdraw their capital. Eventually, Burry's analysis proved correct: He made a personal profit of $100 million and a profit for his remaining investors of more than $700 million. Scion Capital ultimately recorded returns of 489.34% (net of fees and expenses) between its November 1, 2000 inception and June 2008. The S&P 500, widely regarded as the benchmark for the US market, returned just under 3%, including dividends over the same period.
You can be right and still not be able to safely profit. Especially in crypto, where shady exchanges can wipe out a big short position pretty much at will with some wash trading.
Banks and large investment firms are more than happy to create exotic instruments. With enough money at stake, you can definitely find an institution willing to take the other side of a bet against crypto (specifically BTC or ETH).
If you want proof, refer to what happened in the lead-up to the 2008 Sub-Prime Mortgage crisis (or check out the movie The Big Short if you want somewhere to begin).
I agree. Margin Call and The Big Short (the book is sooo good even if you've seen the movie!) are the best two movies that came out of that entire debacle. That scene was enjoyable. They really nailed the casting and conversations.
Big Short was a movie that other people loved but I just didn’t really like all that much. I don’t even know why. I think maybe the cameo scenes made it feel a little dumbed down?
I’d also watched Inside Job not long prior and really enjoyed it, but others found it too dry. Different strokes I guess.
You’ve just described the Glass-Steagall act. It has a long and storied history.
It was created in response to the Great Depression, then repealed by the Gramm-Leach-Bliley act because money. Then the Dodd-Frank act tried to have it reinstated but failed, also because money.
You may already be familiar with all of this but mentioning in case you’re not.
There’s a quite brilliant documentary that came out in 2010, Inside Job, that covers this, but which was completely overshadowed by the much less informative The Big Short which came out 5 years later.
There's a famous scene in the movie "The Big Short" where a character is talking to a stripper about her investment properties. The movie is about the 2008 housing bubble.
Where is the "pedantic technicality" though? Looks more like a continuum to me.
Consider, here are some activities I do, which of them are you sure is "watching TV" and which aren't? Is it such a clear bright line?
* I watch "Only Connect" - a very difficult BBC Two quiz show - on the iPlayer web site. There aren't any adverts of course because it's the BBC, but this was made to be shown on a broadcast TV channel even if I haven't watched it that way for years.
* I watch the Two Ronnies "Mastermind" sketch on Youtube. Once again this was made to be shown on broadcast TV, decades ago, as part of an episodic show - but now this is just one sketch
* I re-watch the final sale decision scene from The Big Short on Youtube. The Big Short is a movie, this was never made for broadcast TV, and all I'm watching is one clip from a much longer work.
* I watch previews of a friend's review of the entire Nightmare on Elm Street franchise. Most of these were movies. (but there is a TV series) and he doesn't include clips but he does talk about them. This will eventually be a Youtube video, but I'm watching the preview.
* I watch an SC2 AI Arena playback of a match that happened recently between two AIs. It's video, at least by the time it reaches me, but it was never intended to be broadcast anywhere, many of these videos are never watched by anyone they're generated automatically so why not.
* I play a video game with an FMV cut scene, such as Command & Conquer: Red Alert.
* I play another video game with a cut scene but it's in-engine using the game's 3D assets, such as GTA3.
* I join a Teams call with colleagues to discuss progress on our main Project
* I watch a rather hypnotic screensaver of overlapping fractal shapes.
* I read a web page with some simple animated multi-step tutorials. Is it important whether they're animated with Javascript, GIFs or MPEG video?
Also d) "Scientists" are some ill-defined profession without any ties to anybody.
In the real world, "scientists" are researchers from corporations, government bureaucrats (the number of PhD in the CDC is insane), and other such people. There's no such thing as an "unbiased scientist". Never was, never will be. Its Hollywood fiction.
e) "Bureaucrats" are often seen as some unified mass of individuals. This is false. Real-world bureaucrats are segmented into different groups and argue with each other. CDC and FDA got into an argument over language a few months ago for example, and people didn't know what to recommend. There's also Army vs Navy vs Air Force, which are three separate organizations that often get in each other's way.
In the real world, different groups of bureaucrats argue with each other a lot. Even the bureaucrats within a group argue a lot, that's why it takes a while to reach consensus, and why they need meetings to come up with a document.
Its already a bureaucratic mess trying to get the US Army to do something or agree to a plan. But then when you need coordination between multiple groups, say a US Army + US Marine Force joint operation, that requires an additional meeting that slows things down even more.
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In the real world, its important to know what the different organizations are doing. What they were chartered to do, and even who the department heads are (since the leadership can change each election, what was true 4 years ago is no longer true today).
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In my experience, the typical American is horribly ignorant of how the world works. Of how consensus is built. Of how experts talk with each other. Or the facts on the ground.
Hollywood is just a reflection of that. Without hammering "reality" into these neat little molds, the typical American frankly wouldn't understand the story.
Compare and contrast a big Hollywood production like "The Big Short" (which was taken seriously by most of my friends), with the more realistic documentaries on the subject (such as Frontline's Money, Power, and Wall Street). People need the tropes to understand the story, but the tropes stand in the way.
Furthermore, real-world documentaries (ex: Money, Power, and Wall Street) are long, boring, convoluted and offer no easy answers. You don't feel good watching it at all. You get to hear from the bankers and their perspective, which might go against your politics. Or you might hear from government officials and their perspective, which similarly goes against your politics (left or right), and makes you feel bad.
Ultimately, Hollywood is an entertainment industry, not an educational one. So we become dumber if we ever rely upon these tropes for a serious argument.
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EDIT: Bureaucracy is a system in place that allows for arguments to happen at rapid intervals. These arguments are called "meetings", maybe "congresses" if you want to be fancy. People sit in the meeting and hashes things out.
After rapidly advancing the state of arguments, the papers and recommendations that come out of a bureaucracy are many arguments ahead of what is being discussed in the public sector and seem alien. In some cases, the meetings go wrong and nonsense has been made, but in most cases, the discussion and meetings do represent the will of many important people who have thought very hard on any particular issue.
It turns out that individual people want a piece of paper to say something they agree with before they sign the bottom of the piece of paper. It doesn't matter if its a law, or if its a health recommendation from the CDC, or a discussion about climate change (or whatever issue) from weathermen or whatever other groups there are.
Two that come to mind are The Big Short and The Trial of the Chicago Seven.
Two movies in a rich fabric that give me no confidence in the reality of consequences of bad behaviour that my parents drilled into me since I was born.
Both movies give me the impression that no lessons have been learned by either experience.
This is the most important financial lesson of the pandemic for me.
There is something deeply wrong with many parts of our economy and financial system, any one who is an expert in any specific area will tell you that things seem weird and don't make sense.
A great example of this is ad tech. I've worked in ad tech for many years and strongly agree with Tim Hwang's Subprime Attention Crisis. Everything is a house of cards, fraud (intentional or not) is wide spread.
However one thing that Hwang (or anyone pointing out that our systems are houses of cards, scams, or otherwise unsound) fails to answer is the question "what makes it fall apart?"
I'm a huge fan of at least the film version of the Big Short, which does a great job exploring the 2008 financial crisis and how unstable our financial system can be. But it's important to recognize that a key part of everyone's discovery isn't just realizing "this is all bullshit" it's realizing precisely when and why reality will come crashing in. There's even a great scene where Michael Burry calls the major banks and realizes that they essentially won't let the market collapse until they get their piece, that they can essentially push back reality a bit until they get theirs.
So crypto may be unquestionably a ponzi scheme, but what will make that scheme fall apart? ad tech might be mostly bs, but what will make everyone stop paying into it? stock prices maybe completely out of line with reality (with inflation and cash injections who even knows) but what will force them to face reality?
We may all be living in la la land, a wild fever dream, but pointing out you're in a dream doesn't always make you wake up. The question is "what precisely will wake us up". And for all the things that seem very wrong with our current world, I have yet to hear anyone give a concise answer or even guess as to what this is. If the pandemic didn't knock over our house of cards, I'm not entirely sure what will or when it will happen. If Wile E. Coyote never looks down after running of a cliff, will he still fall?
Have you ever seen the movie "The Big Short", where they go to Florida and meet a stripper who owns 4 McMansions and a minimum-wage lawnmower who is buying a giant, expensive house? Those were realistic depictions of the fraud happening at the retail level which created the entire problem.
The people defaulting on their mortgages were people who had committed fraud by lying about their incomes and assets in order to take out massive loans they could never repay, because they thought they could flip the house for a profit before paying any principal. Foreclosing on those people is the good and right thing to do, they were criminal fraudsters not victims.
Of course, the ripple effect when half the market turns out to be fraudulent is that prices go down when the bubble bursts which also hurts legitimate buyers who bought at inflated prices, but that's secondary to what caused the wave of defaults.
The 2012 lookback has a bit more depth, since it had more time to do interviews and stuff: https://www.pbs.org/wgbh/frontline/film/money-power-wall-street/
There's of course, "The Big Short" if you want a stupid 2-hour movie. But that movie glosses over so many details and is straight up hyperbole at many points... so its not "realistic" but maybe a better thing to watch if you really don't want to put in much effort?
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I guess my post was based off of the Bloomberg blogpost "Looking for Tether’s Money" by Matt Levine. So read that for my original inspiration, though you may need a Bloomberg subscription to be able to read it.
> the Empire tried to cope with decline by debasing currency
That sounds like, "The spouse tried to cope with the failed marriage by cheating." Maybe, but maybe also it played a role in the marriage failing. Can you truly separate the two things?
Listen, you could be right. I would definitely say that I've never been one to be "obsessed with pure commodity money." But I've also steadily lowered my respect for the entire branch of Economics over time. What's that H.L. Mencken quote? "It is difficult to get a man to understand something when his income depends on his not understanding it." When you watch the film The Big Short, it seems to talk down to the audience but it's also talking down to the entire finance industry and population at large. It all seems so patently obvious in hindsight -- but it was obvious in foresight too, if anyone wanted to look. (Note: We're facing the same thing now, in greater degrees, but with different names (CDO's? Horrible! BTO's? Sure!) and we're about to be humiliated once again.)
I'll repeat what I said initially. I used to be Keynesian. I used to think that inflation allowed for growth. It encouraged investment. I saw the opposition as a fringe group: gold bugs and conspiracy theorists, frankly.
But what I came to realize is that, long-term, it can't work. It's not a Nash equilibrium (see: https://blankpoole.com). It doesn't encourage investment; it demands it. And that, to repeat myself, removes the coupling to value. Your local coffee shop is only worth so much, based on its revenues. Period. If you go above that, you're speculating -- fine; but you continue past that and you're in "growth investing" land, where you quite literally know that the coffee shop isn't worth that but you expect someone to be the greater fool.
People right now, unironically, say that the market always goes up. I'm not joking. You've probably heard it yourself. Economists could fight it but they enable it instead. "Just put your money in the market and wait. There is always a greater fool." Shame on them.
As that article I linked to points out, while the coffee shop shares can only be worth so much, any scare resource widely viewed as a currency, such as precious metals, have no such restriction. It's a Nash equilibrium. If field of Economics was minutely honest, if it had a mote of respectability, it would recognize that and stand firm despite what its income depends on.
1. You can just go to the show's subreddit and browse, or browse with filters such as top, hot, etc. And you can filter the time period.
2. You can use Google. This works great for me. Just type "the wire reddit" or "site:reddit.com the wire", and the first result will be the subreddit page, but if you scroll down, you will start to see threads from other subs as well. This way you can access more discussions outside of the dedicated subreddit.
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In a more general note, you can find all sorts of different stuff by using Google to browse reddit this way.
I have watched quite a few really good movies by searching "your top 5 movies reddit", "your favorite movies reddit", or "best movies reddit". I just go through the past viral threads and find highly upvoted responses, or responses with some of movies I liked and some that I haven't watched.
I have discovered Clue, Primer, Hot Fuzz, Tropic Thunder, The Big Short, etc. this way.
Because they don’t care. The loan is collateralized and sold as a financial instrument and the bank is no longer involved. The loan holders should care but the loans are owned by hundreds or thousands of organizations and individuals who don’t have the mechanism to see what the underlying assets in their financial instruments are doing.
The movie “The Big Short” actually does a great job of showing this but for the 08 financial crisis.
Anyone invested in crypto should read Bennett Tomlins blog about tether https://bennettftomlin.com/2021/06/21/a-non-exhaustive-list-of-bitfinex-and-tethers-misdeeds-and-red-flags/
I think there's a 90 percent chance that this will blow up and a movie like the Big Short will be made about the story behind it.
Tl;Dr
Tether is ran by very dubious people, don't trust anything they do or say
> he's made similar predictions including: a couple weeks after the movie's release (https://nymag.com/intelligencer/2015/12/big-short-genius-say...), in 2017
His predictions sound spot on.
Here's what Burry said about the state of the economy back in 2017.
> Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest rates on a global scale. This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the system, and any fault lines there will certainly harm the outlook.
Now that half a decade passed between that article was published and right now, do you see any failure in the analysis?
Well, that'd be exhausting, but it didn't take long to find that since he became a celeb-investor in late 2015 (when the movie came out), he's made similar predictions including: a couple weeks after the movie's release (https://nymag.com/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html), in 2017 (https://www.lombardiletter.com/michael-burry-stock-market-crash/10895/), in 2019 (https://www.cnbc.com/2019/09/04/the-big-shorts-michael-burry-says-he-has-found-the-next-market-bubble.html), and now obviously in 2021.
Continually predicting the market is about to crash seems to be his thing.
I worked for an internet company in 2000 and was a stay at home parent looking for a job so as to avoid losing my HSBC mortgaged house in the fall of 2008 but still I share this feeling. I got a job hen and enjoyed the Big Short tremendously. I think the crypto documentaries will have nicer rich people details tho, tho sports cars etc.
Possibly worth noting that Burry is not the only Big Short figure to openly opine that Tesla's pricing seems way out of whack compared to its fundamentals. Steve Eisman (aka Mark Baum in the movie) was publicly short Tesla for a bit. I think he ended up closing out and losing money at some point with a rueful "It's very hard to short a stock that's a cult."
It's possible both of them are wrong and Tesla has fundamental value at a level they were unable to analyze. Or it's possible that Tesla's future will be determined by things beyond fundamental value. But it's also possible they're right on some timeline.
Imagine I have a bit of paper and I tell you in 3 years time, someone will want to buy this piece of paper for 10 million. I will sell it to you for 1 million now. If you believe me, it would be stupid to decline this offer.
Here it's explained in comedy form: https://www.youtube.com/watch?v=ZiJa9diJOMk
You can also watch the film The Big Short for another view into finance.
The most important thing to grasp is, don't think this can't be true because it's so stupid. It's exactly as stupid as it sounds.
For a more serious look, listen to John Kay: https://www.youtube.com/watch?v=SX3E-CbY1uE Or read the corresponding book Other People's Money.
> Big Short style doesn't always end in a lionizing outcome.
That movie was the worse thing that ever happened for a generation of traders. It reinforces all the worse biases traders tend to have. The moral of the story was to make a single concentrated bet, to throw risk management to the wind, to double down as you lost money, and to completely ignore any expert that disagreed with your investment thesis.
In reality for every Michael Burry, there's 100 stubborn overconfident idiots who YOLO everything into a bet that blows up in their face. First off, it's much better to make as many small independent bets than to have one big trade. It's also better to make trades with a fixed, ideally short, time horizon. Even if you're ultimately right, without a catalyst, the market can remain irrational longer than you can remain solvent.
Finally the best traders tend to be extremely open minded and willing to change their views on a dime. The human mind is heavily biased towards overconfidence. Good traders should be flipping their views as evidence comes in. This has been empirically verified by Philip Tetlock. The best forecasters are those who are quickest to change their mind. If they hear some expert with an opposing opinion, they don't dig in their heels like the heroes of The Big Short.
The problem is the qualities that make a great narrative hero are almost exactly the opposite of those that make a great trader or forecaster. We love a story about a bold contrarian, who goes all in on a single bet, and sticks to his guns no matter what obstacles come his way. The story practically writes itself.
But it's precisely this mythologizing that causes this style of trading to be the least rewarded in the market. Everybody wants to be the hero of their own story. There's way too many Michael Burry wannabes, and not nearly enough George Soroses.
I recommend 3 movies to every family member willing to deal with financial topics as a form of edutainment. The Big Short and Margin Call are two of them.
The 3rd one is 99 Homes. The key line is: "Don't get emotional about real estate." What is sold as a place for family memories for some, is just another asset class for others.
Margin Call was exactly what I was thinking as I read this. Underappreciated movie - definitely worth a watch for a more realistic take on 2008nthan The Big Short.
A lot of banks saw what was going on in the market, and decided to "cover their ass" just in case the mortgage industry collapsed. They didn't quite go short like Burry (and everyone else in the movie), they just "hedged", to protect themselves just in case of a collapse.
Any bank that was worried about what was going on would have bought a few credit-default swaps from AIG (not that everyone knew that AIG was the main CDO counterparty: they bought CDS from the market and AIG happened to be one of those sellers).
If AIG went bankrupt, a huge number of shorts (well, "protection buyers") on the mortgage market would have gone bankrupt with them.
AIG isn't covered in the movie because it runs entirely counter to the narritive the movie is trying to build. A huge number of banks did in fact see the mortgage crisis and take moves to protect themselves.
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That's the thing about CDS and going short on the mortgage market: even if you were right about it, you had to also be right about the so called "counterparty risk". The bank who took up the long-side of the bet against you still needed to be around to make the payout.
That's why AIG was bailed out. Also: because the collapse of Lehman Brothers / Washington Mutual and other financial companies was wreaking havoc on the economy.
The movie wanted to focus on the narrative that "Bailouts are bad". Well, sure. But its pretty easy to build that narrative by ignoring the AIG situation, as well as Lehman Brothers / Washington Mutual.
If you go back and look at the actual history and debate of the bailout, the question is way more ambiguous.
>> the upshot that the AAA's were in a position to be unstable and possibly cause an economic collapse was in fact very true
That's not what the Jenga scene implied.
https://www.youtube.com/watch?v=3hG4X5iTK8M
You know what a number of my friends took from that scene?
"Wow, the banks are so stupid. Why would AAAs rely upon the B-tranche?"
Yeah, cause that scene is misinformed. The Jenga Tower is upside-down. America's Mortgage market wouldn't really collapse until the AAAs were being threatened (which eventually, they were, but because of CDO-squared and Synthetic CDO leverage).
But yeah, its a long story. You'd expect that the core of the story would be covered by a reasonable documentary. But "The Big Short" isn't one, its an entertainment movie.
The book “The Big Short” is a documentary. The movie is based reasonably closely on the book. The movie is a fictional re-telling, but the people are real and their motivations and actions are accurate.
I have friends who keep citing 'The Big Short' for what's wrong with our financial system.
A lot of people can't tell the difference between fact movies and fiction movies.
And that doesn't even get into clearly biased documentaries (but I assume that most documentaries are at least trying to be factual instead of entertainment...)
Watch the movie "the big short". It's really good. This is from one of the scenes where too guys try to get a license. Although the manage a few million dollars, in order to get the license they should have even more. Or as it turns out the right connections.
Kind of ancillary to the story, but can someone explain to me why "Hollywood" would even need any specific individual to be on board with a movie about this? It seems you could compose a character from many of the generic aspects without any specific viewpoint, and the entire point of this phenom was there wasn't a specific individual. I'm no screen writer but why couldn't you create the next "social network" or "big short" just from all the feedstock material?
The market can stay irrational longer than you can stay solvent and all that. Read/watch The Big Short if you haven't. (Most/all? of the people in the movie made out but almost didn't.)
Why short selling is legal at all? Well, why not? There are two or three parties to every short, all engaging in the activity because they expect to benefit.
1. The lender of the stock, who gets interest payments like any other lender
2. The short seller, who of course expects to pocket the difference if the stock goes down
3. The person who buys the stock from the short seller, presumably expecting it to go up (this party could, knowingly or not, be the same person as #1)
Sure, the short seller is taking the risk of a massive loss in a scenario like this, but that's their problem. And if they fail so hard they can't possibly return what they owe, then it becomes the lender's problem. But that's true of any loan, so it's up to the lender to set the terms in a way that limits their risk (e.g. not lending to "risky" borrowers, not lending too much of what they have in reserve). What's the difference with other forms of lending?
In the movie "The Big Short", weren't the short sellers the heroes of the tale -- the ones who really looked into the underlying assets, looked past the exuberance and overconfidence, and found the system to be rotting?
what is the truth though?
As someone who only knows about stocks from 'big short' film and 5min video on youtube and wsb thread. I genuinely curious what are the ways this could play out.
is there a deadline on short sellers to close their positions?
what is reasonable limit for the stock to go to?
what happens if hypothetically nobody of wsb would sell their stocks?
It’s a fabulous movie. It perfectly balances the nuances of the 2008 crash with the human side of the story. I watch it once a few month and discover a new aspect.
I recommend “Margin Call”. Though I felt it overbalanced on the human drama it nicely complemented The Big Short.
Can someone explain why my perspective is wrong on hedgefunds please?
My understanding is that the GFC happened because the whole economy was levered to hell. At the risk of referencing the big short, there was a scene in that film where a stripper has levered herself up so much she owns five home. The reason the GFC happened was in reality because average people were levered up on real estate and couldn't afford their repayments.
I fully understand that the financial system also took on too much risk and many understood those risks, but the narrative that hedgefunds are entirely to blame for the GFC, and that they were the only ones being irresponsible with leverage, is surely wrong?
If the blame was with anyone it should be the regulators... Why were individuals and hedgefunds able to take so much risk? In the absent of regulation individuals and hedgefunds should be expected to take maximum risk for their own gain. Just like how WSBs did when they were all exploiting the infinite leverage glitch.
Another thing that I don't think is true here is that the government is only there for the hedgefunds... If this last year has proven anything it's that the government is perfectly wiling to bail out individuals if they feel it's necessary to save the economy. And if the financial system is so rigged against individuals then isn't it odd how those individuals seem to be so able to destroy the hedgefunds with relative ease from a free smart phone app?
I'm not trying to be edgy, I genuinely don't understand why people seem to blame hedgefunds for every inequality problem in society.
What reason? Because it demystifies the room. It pulls the veil off and we get to see behind the curtain.
Strangely enough, I had a fleeting thought that this is why few firms went under and most got bailed out. I actually had this thought after watching the Big Short or another Wall Street movie about the 2008 crash. I thought that it was strange that Lehman was the odd one out and it struck me as a frat party. Only the cool kids survive.
@numair, you sound very candid and forthright. I appreciate it. I find it's difficult for people to mask their tone and reading this honest tone is refreshing. I wish you success in your endeavors.
One person's spending is another person's income. The more economic activity there is, the more people feel confident about their future, the more they spend.
They may at some point become "too confident" and start feeling that the 'party' may never end. So they go out and spend more and more: on new clothes, on renovations, or second (or third) houses, on new cars, boats, etc.
However, there's only so much capacity for (say) manufacturing: only so many cars can be built, and if you really want one, then you'll be will to pay $40K to get the new shiny instead of trying to haggle down to $37K. There's only so many housing builders and lumber that is available: and if you want more square footage, they'll be setting the price that you have to pay.
I'm not sure how old you are, but in the 2006-2007 timeframe there was a lot of "irrational exuberance" before people over-extended themselves.
The movie The Big Short is an entertaining and fairly accurate take.
I don't want to make false statement but "The Big Short" movie really helped me better understand what's going on in those days.
I know that maybe reading some book is better but i'm not in to market and economics and the movie was nice
Wait, I thought Goldman came out ahead from the crisis.
They had the, "we didn't avoid the mortgage mess, we just made more money on shorts than we lost" and "we are very well positioned" emails that became evidence in the Senate investigation into the GFC. The ones are the namesake for the book/movie The Big Short.
Most buyers didn’t get mortgages from their retail bank, they got them through mortgage brokers.
Maybe there were lots of hapless old people who were misled by some bank they mistakenly trusted for years.
I don’t think so, the many examples I personally knew from that period were getting loans from specialized banks that set up mortgage shops, like Washington Mutual.
The book (and movie) The Big Short digs into this how regular people were overextending.
To clarify, the banks were bad actors by offering and participating. But reasonable people were avoiding the situation until the whole system tipped over. Someone borrowing at 40% debt to income or higher should never have done that, even if they trusted their local banker who was saying it was fine. Finance requires personal responsibility and people need education to help make these decisions (and they shouldn’t get this help from someone with a vested adversarial financial interest).
You're literally describing gambling. I watch people drop entire paychecks on scratchers at the local liquor store every week in hopes of a new mustang. If I head up north to the Chumash Casino, I'll find hundreds playing Keno with their entire lifesavings trying to win it big. WSB's is no different. Hell, it's even in the name of the sub!
Also, although WSB has had some affect on the GME squeeze, it was originally identified by no other than Michael Burry, the guy from the movie the Big Short. He's been in the GME game long before the reddit army joined in.
I remember hearing about Michael Burry [1] also looking into aquifers and future water shortages.
[1] https://en.wikipedia.org/wiki/Michael_Burry
> Burry has focused much of his attention on investing in water, gold, and farm land. Burry has been quoted saying "Fresh, clean water cannot be taken for granted. And it is not—water is political, and litigious."[20] At the end of the 2015 biographical dramedy film The Big Short, a statement regarding Burry's current interest reads, "The small investing he still does is all focused on one commodity: water."[20]
While the Big Short is a good movie, this scene reeks a little bit of the same type of "eureka-insights" that permeate Hollywood fiction like the West Wing and pop-not-science books like those written by Malcolm Gladwell.
Obviously unemployment is bad for people, and it had adverse effects on people leading to depression and suicide. But the 1%-unemployment-40k-deaths stat seems too neat to use as a statistic, because there are so many variables that affect health & suicide in a community to make drawing a specific numbered correlation like this accurate.
Interestingly and a bit off-topic, Michael Burry (of The Big Short movie/Scion Capital fame) had a few plays on almond farms regarding water scarcity. It seems that he left his positions a few years ago, but the whole California water wars thing is quite unsettling.
“It’s not just that they missed it, they positively denied that it would happen,” says Wharton finance professor Franklin Allen, arguing that many economists used mathematical models that failed to account for the critical roles that banks and other financial institutions play in the economy. “Even a lot of the central banks in the world use these models,” Allen said. “That’s a large part of the issue. They simply didn’t believe the banks were important.”
They were fundamentally unprepared and many were unwilling to even entertain the idea that the housing market could collapse. That’s what made stories like The Big Short so surreal, they had all these experts telling them that they were wrong, and economists played a major role in that episode.
I would suggest "The Big Short". It mainly focuses on the huge disaster of the 2008 financial bubble, and what led up to it.
Before watching the movie I had this feeling of how impossible it could have been for so many normal people to be screwed over so royally. The crisis obviously happened, but I lacked the understanding of how something like that could have happened. After the movie it was clear to me how systemic issues can be institutionalized if everyone is willing to look the other way.
Also, if you watch that movie and start hating everyone working with finance I recommend watching "Margin Call" and you'll only hate some people working in finance.
Preeeeeetty sure that's a joke, likening the events of the previous big crash to a film.
Speaking of films about the previous big crash, you could try "Margin Call" if you want a very straight-faced (to say nothing of po-faced) take, or "The Big Short" if you prefer something that, while no more genuinely incisive, is at least willing to pretend as though it were.
Both of the movies The Big Short and Too Big To Fail have a moment where they're watching people come out of a subway or walk down the street, and say something like, "They don't have any idea what's about to hit them."
It sort of feels like that now. Lots of normality still. There is definitely something not right about the stock market not feeling the impact of millions of unemployed and more than half of retail stores missing rent payments.
Maybe there's macroeconomic explanations involving credit and the Fed. Maybe the stock market is in fact disconnected from the general economy as a whole, and is really just a plaything for giant corporations and the 1%. Maybe it's not as bad as it seems. Maybe everyone's betting on a V shaped recovery after the virus fades. But as we saw during the financial crisis, everything seems fine until it isn't - then things go pear shaped in a hurry.
Growth in the US is 20% real, 80% bubble. Every now and then the bubbles burst, the baloons deflate to their actual value. And then greed accelerates things again. Unfortunately the acceleration happens on the "promise", not the actual.
If I may add a chart, the red line is for me the actual value of the US economy (DJIA)
https://www.tradingview.com/x/fvtBtRx6/
Top line is promised profits/accident waiting to happen.
Bottom line is actual value.
Another thing that pisses me off was depicted in the movie "The Big Short". There is not enough actual money/products/things to go around, so we do derivatives. I remember derivatives from my Uni years. We don't have enough/good numbers? Drop a derivative of something, inflate it, mask it, and sit back and wait. And then the balloon gets too much air, it will deflat, people (retail) will lose their money, and here we go again.
It's not growth (in the USA) unless there is a 10-year-looping wealth redistribution.
There is a very real, if hidden, cost to economic suppression, especially in the United States where social safety nets are few and far between.
There's a line in the Big Short: "Whenever unemployment drops 1%, 40,000 people die". Surprisingly; this is more or less true, not movie drama. Its obviously difficult to draw causation between these two things, but there is causation. People have reduced access to healthcare. They have anxiety and depression from staying inside and being unable to socialize. They aren't working out as much. They can't take care of their family.
Let me present you this: People need N95 masks. Thank goodness, 3M is now churning out millions of them. But, wait... 3M is a company, but its staffed with people. So, those people need to go back to work, right? Those people need to drive to work, so they need gas stations, maybe even car maintenance. They need food, so supermarkets and restaurants need to stay open. Apply the same to people working in pharma factories, or our heroic healthcare workers, or many other industries.
The United States does not have a system that can stop. Some countries are built to be more resilient to stopping, and can do so over short periods of time. The United States is not one of them. If we don't get the economy started again, soon, people will die because we stopped the economy. Its a catch-22. There is no right way out, except to, hopefully, be more prepared and cautious the next time this comes around. But that doesn't help us today.
Quote from the movie The Big Short: "Every 1 percent unemployment goes up, 40,000 people die, did you know that?". That is probably an exaggeration, but I really hope people in power know what they are doing at the moment.
I just happened to have watched The Big Short [0] yesterday.
In the movie (based on real events) the same thing happened: during the housing crash suddenly every bank had 'technical issues' when people tried to sell their stocks.
As someone living in Hong Kong, it kind of blows my mind how little attention Americans have given this situation. All but a few Americans have their head in the sand on this, and the markets have not at all priced in the all but certain long term impact of this.
I've personally broken my long-time rule of no trading public markets and opened a Robinhood account to hedge against this. So far this week I'm up 5x on those hedges. Markets are starting to realize, but I don't think we're even close to having fully priced in the impact of this.
Everybody remembers the 2008 recession. A subset of people during that recession made a killing. The Big Short was a great book (and movie) about this. This is probably the first new opportunity to be a "big shorter."
Your comment illustrates what I found so frustrating about The Big Short, and people who cite it whenever CDOs are brought up: the filmmakers made no effort in understanding the theory behind CDOs, nor did they attempt to explain the potential benefits.
Now... it's possible that the way human nature works, CDOs will always result in companies engage in collective delusion that results in a similar meltdown. I think The Big Short would have been more interesting if it made that argument, rather than merely "CDOs are evil."
EDIT: I was reacting to the movie adaptation; I haven't read Michael Lewis's book.
Humans have a natural tendency to discount things that are unpleasant. A site like this one contains a lot of people that have a lot to lose if the economy makes a downturn.
This kind of blind spot was featured prominently in The Big Short, especially the Brownfield Capital plot line (2015 film).
There have been multiple Hollywood movies depicting how big business and agribusiness are screwing up the environment. The Big Short was a great film about how Wall Street is totally corrupt and straight up caused the housing crisis.
Should we have a movie made about ad tech and social media and their deleterious effects on society? Just to make it even.
Most of Silicon Valley isn’t working on ad tech, yeah, I get it. But for crying out loud what the hell are they working on? Thats my point. How this is interpreted outside of tech circles is that “tech” is just a thing to make “tech” people more rich.
Edit: I’d actually like to know what percentage of SV is working on ad tech, which I consider useless for American society at best and dangerous at worst.
This is a very good comment. Is this line of reasoning fleshed out and written up somewhere so I could point people to it? (Also, I would like to think more deeply about its implications)
> What models/theories of customer behavior were your experiments designed to distinguish between? My guess is "none" because someone thinking about the problem scientifically would start with a single experiment whose results are maximally dispositive and go from there.
This is how science is (at least, ought to be) done. This way, the goal is to always be improving your understanding of objective reality.
> They wouldn't spend a bunch of time up-front designing 12 distinct experiments. [...] So it wasn't really an experiment in the scientific sense, but rather a kind of random optimization exercise: do 12 somewhat-less-than-random things and see which, if any, improve the metrics we care about.
The problem is that a lot of AI salesmen tend to hype the "model-free" nature of "predictive" AI towards optimizing outcomes/goals, and people who don't know better get carried away with the bandwagon. Overly business-oriented people are susceptible to the ostrich mentality of not wanting to understand problems with bad tools -- they are too focused on the possibility of optimizing money-making. I find the movie "The big short" to be a fantastic illustration of this psychology.
It's probably going to lead to a very bad hangover, but for the moment the party's still going on and nobody likes the punch bowl being yanked away.
As explained in the post, you have to bite off very high levels of counterparty risk to short. Cryptocurrency exchanges die in something like 20% of exchange-years, and your estimate of an exchange dying _contingent on me being right_ should be biased towards the high side if they are exposed to the risks of using tether.
This is a subplot of the Big Short, and cost several groups of the protagonists a lot of money: they were so right about their prediction regarding the housing market that e.g. the banks who had brokered their swaps might have gone under, which would have impeded their ability to get paid. (There are several variants of the same thing discussed; the book is marginally clearer than the movie about them.)
> After every large financial event you are going to find some person who predicted it.
Yes, but not so many made a fortune from it, and even fewer who gave a proper explanation of why the crisis is going to happen and weren't just lucky.
These guys from "The Big Short" movie were explicitly betting against CDO, not against SNP500 as other lucky folks who also made a lot of money.
> I think you'll have a hard time finding someone who made more than one correct prediction (and none, or at least very few incorrect ones).
Predicting one of 5 crisis during lifetime (with real money) and simply not losing money during other 4 crisis is a huge success for predictor I think.
> It's easy to be correct if you just throw everything at the wall as see what sticks.
Only those predictors who throw real money at the wall count, not these endless newspaper analysts.
TL;DR I don't believe those folks from the movie were just lucky.
If I knew I'd be rich. If we knew what particular aspect was going to be the cause of the recession, the market would already have priced that in and we would evade the recession. There are undoubtedly a few people who will know, and a few years after the recession big short type films will be made about them.
I've seen "The Big Short" movie lately and I was flabbergasted about how the finance industry works. I'm beginning to realize that this pattern is universal in all industries.
I also see that we as a species are suffering from the same mechanism. We won't learn until it is too late. I want to understand the pattern so I can find a way out of it somehow.
So, for a fix, first, mostly ignore the newsies (a word from a Bogart character in the movie The Maltese Falcon).
Second, much of politics is trying to get votes from name recognition from shocking statements based on gossip, lies, distortions, made up nonsense, etc.
Well, then, the newsies and the politicians have a strong interest in common: For name recognition for votes the politicians want their shocking stories told, and for ad revenue from eyeballs the newsies want shocking stories to tell. There was a similar remark in the movie Lawrence of Arabia.
So, the second step is mostly to ignore the politicians.
A third step is, for information that might be in the news, fall back to and insist on at least common high school term paper writing standards, rational, responsible content with thorough references to objective, credible, primary sources. With this third step will entertain:
Believe none of what you hear and only half of what you see and still will believe twice too much.
Measure twice and saw once.
Essentially everything you see in the media was put there and paid for by someone who wants to influence your opinion (Sharyl Attkissson).
It's not what you don't know that gets you into trouble. It's what you do know for sure that just ain't so (In the movie The Big Short and there attributed to Mark Twain).
Will conclude that for nearly all the news, printed on paper it can't compete with Charmin and on the Internet is useless for wrapping dead fish heads.
A hope is that the Internet will enable many more new information sources with some with lots of credibility and narrow specialization and that the best of these sources will help the US and civilization.
Flash boys was pretty much one sided incorrect views about how HFTs work designed as an advertisement for a new exchange.
It was highly read and picked up by armchair experts everywhere leading to lots of outrage against... not much in particular other than evil Wall Street people stealing muh money.
The Big Short is in a similar category although it wasn’t really an ad so much as an excuse for everyone who overleveraged on their mortgage to pat themselves on the back and shirk the responsibility of financial ignorance onto “evil Wall Street people”. The movie (while entertaining) was even worse.
>As we can obviously see, even professionals in medical sciences were wrong about Theranos. How did John Carreyrou, a WSJ reporter, do such a good job reporting on them?
Simple, medical professionals aren’t equipped to sniff out business fraud signals like investigators of businesses. Given that Theranos didn’t have technology, it didn’t take any more medical expertise to explain that then it took medical expertise to explain Bernie Madoff.
Yes, it's an incredibly complex topic. Most people without a strong background in finance pick up their education on the topic from oversimplified source, such as:
- their family/friends' opinions,
- Wikipedia,
- documentaries,
- movies like The Big Short
To be frank, unless someone has spent a significant amount of time doing hard research on the topic or is a professional in the industry, they shouldn't assign any confidence to their opinions about what caused the crisis. They can agree it's bad and shouldn't happen again, but beyond that most message board conversation is simultaneously prescriptive, uncritical and conflicting.
In this particular case, we're seeing people talk about the topic who are evidently unfamiliar with the legitimate use of risk pooling in finance. It's rather too complicated to be summarized in a few paragraphs on HN.
Thinking about this reminded me of the line from the movie "The Big Short" where Michael Burry says one of the indicators of the coming crisis was an increase in the rate of fraud. Juxtapose that with what feels like an uptick in white collar fraud these past couple years. ie: Theranos, Fyre, 1MDB, numerous crypto token related scams.
Just as vast fortunes were made during the financial crisis of 2008 by selling the markets short ( see the film "The Big Short")
I would expect there are people betting on climate change continuing down its current tragectory, and these people now have a vested interest in making this happen.
I don't know how many other billionaires are putting their money on the pro climate change side but wouldn't a smart investor diversify their portfolio by betting on both the pro and con sides of climate change?
I don't know what the form of such investments would take but can think of a simple one being investing in real estate northern regions where temperatures are currently too cold to support agriculture. Possibly an investment in water desalination plants would also see a gain from climate change.
I'm sure there are many more better examples, my concern is that for every billionaire looking to save the world, there is another looking to make a buck off its collapse.
So what happens when more of these profateers decide to use their vast fortunes to tip the scales further towards the collapse rather than salvation?
Unrelated to the topic of the student debt bubble, the opening paragraph left a bad taste in my mouth:
> I hated the film adaptation of The Big Short. The acting was good and it did have a surprising amount of energy for a story that centers around men in suits doing math. But I felt condescended to. Maybe director Adam McKay tested an original cut—one minus Margot Robbie—and realized a good amount of the audience couldn't follow the plot without having a sexy lady in a bathtub break the fourth wall to explain subprime mortgages and the financial crisis.
Sounds awfully pompous, like it came from r/iamverysmart. Much of the impetus behind The Big Short certainly was to break down the 2008 financial crisis to those that aren't economics/finance wonks, or for whom a narrative holds more weight than a several-hundred page non-fiction book about it.
It's not that I want journalists to coddle their audience, I just think it's a bad look to completely dump on other creators to inflate one's ego while trying to make a point.
How about this, which still includes a bit of criticism of the director (but milder):
"While the film adaptation of The Big Short had good acting and a surprising amount of energy for a story that centers around men in suits doing math, it wasn't exactly my cup of tea. Perhaps it's because I felt Adam McKay didn't trust his audience quite enough to understand the ins-and-outs of complex subprime mortgages and the financial crisis, instead falling back on gimmicks like having Margot Robbie in a bathtub break the fourth wall to explain it all.
"In some ways, America's student-debt crisis is a lot simpler than all that."
I don't know, maybe that's not any better: and maybe by criticizing the author I've become the thing I set out to...criticize. Whatever.
They ring true. Some moments don't even have to exaggerated to be funny. That is exactly how being "cool" works in parts of India, and just the fact is enough to make a person from the west crack up.
Dinesh is one of the few nerdy Indian stereotypes that I do not mind. All the others seem like caricatures and generalizations of South Asians. Dinesh on the other hand, could be sitting right across my table, coding....
If The Big Short is considered a great "documentary" for the 2008 crisis, then SV does even better for the Valley.
I get what you are going through. I overbuy products when I find something that I like because I get anxious that I won't be able to find it again. I have stockpiles that irritate my wife and take up space.
Do you have a wife and kids to support, by chance?
If yes -> is this effecting them?
If no -> have you fallen on hard times before? Or has a family member and you were not able to help them out?
Money is far from one of my concerns in life. For me, I meditate, I read books, I enjoy friends, I enjoy making pour-overs, I enjoy walks, etc.
Maybe you just need to slow down a bit? While slowing down take a look at the things you enjoy and try to make a plan to enjoy them more.
The thing about money is that when you have it you want more, you won't ever have enough.
Have you watched "The Big Short"? Perhaps do and realize that as people make money others tend to lose money, jobs, houses, etc. From the movie for every 1% unemployment goes up, 40,000 people die.
I agree, The Big Short was insightful and you come out of it with a better understanding of the financial industry. The Wolf of Wall Street glossed over the financial information to focus on the debauchery, which to me is far less interesting.
Boiler Room and The Smartest Guys in the Room are my other go-to business movies.
You could watch Crazy, Stupid Love (very funny movie with ensemble cast), you could watch The Big Short (again, ensemble cast), you could watch The Place Beyond The Pines...
I absolutely loved the film and thought it was an incredible piece of art and a piercingly realistic depiction of a certain VERY REAL type of masculinity. You're lucky that you find it unbelievable / overdramatic.
Anyway, when I was a kid I used to love seeing those burnt capsules in the Science Museum in London. So crazy to see the story rendered to beautifully, along with the politics, the oxygen fires, the bouncing off the atmosphere... I couldn't have asked for anything more.
I thought his portrayal was a realistic vision of the pitfalls of masculinity, and not melodramatic at all. My dad's like that, except he smiles instead of having the blank Gosling face. My dad didn't cry even at his own mother's funeral.
Seeing Gosling/Armstrong closing up the notebooks where he'd been trying to figure out how to cure his daughter's brain cancer, seeing him cover his face to cry silently, seeing him snap at his friend "Do you think I left there because I wanted to talk?", his fear of his emotions... It was just so true to life. I cried multiple times in that film. Of course films are always a bit romanticised - I have to say at no point was the illusion broken for me.
I think that film gets into my top 3 films along with Gattaca and The Matrix.
I love Drive but it was really Blade Runner 2049 that made me realise that his "silent" roles are actually a deceptively simple comment of the state of masculinity, kind of like American Psycho (film > book IMO - interestingly the screenwriter of the film was a woman and the directory of the film was a woman, and the film & book are a critique of that version of masculinity).
Also Ryan's performance in The Big Short made me realise that he is CHOOSING to do his "silent" stuff when he does. He's a very talented actor.
- "The big short" (https://www.imdb.com/title/tt1596363/?ref_=nv_sr_1):
Good actors, nice style, sometimes funny, interesting. Again some good explanations and examples about how short selling works, recap about the US housing bubble, rating agencies and the whole finance industry in general.
I can think that probably the point of this film is to make people get rid of their naive view of the financial market/industry? E.g. in my case I always tended to think that it involved cause&effect / action&reaction but this does not seem to be always true.
It triggers indirectly a lot of thoughts about many other themes (e.g. is self-regulation effective, impact of governments getting rid of existing regulations, complexity and interconnections in the financial markets, risk analysis, etc...).
- "Active measures" (https://www.imdb.com/title/tt8135494/?ref_=nv_sr_1): pending... (cannot hear about this stuff anymore, but the documentary has a high rating, so I'll give it a try)
My knowledge here comes from the film Big Short so take that with a grain of salt lol, but they explained it as a step beyond what you describe in that a synthetic CDO as more a bet or insurance on the underlying bundled debt. So like placing a bet of $1000 that the $100 debt owed to alice wont default.
Could you dig up a few of those CDO washing theses?
The Inside Job documentary showcased a few economists that had conflict of interest, but haven't mentioned anything concrete about CDOs.
> Much to the contrary, they went on enjoying the same mind-boggling luxurious elite lifestyle they always did.
The culprits had money and they will have money. They own the banks, and of course they opposed regulation.
But they are not the same as those who know what's going on.
"It is well known and documented that the financial crisis was no accident; everybody who headed the financial services industry to the state it was in did so knowingly, knowing full well the inevitable consequences, but not giving a damn because the arrangement let them to become handsomely wealthy, beyond our imagination."
This is incorrect. Some knew and bet on it. (See the Big Short for example.) Some knew and exploited it. (See Goldman Sachs selling shit to clients, for which it paid 550M USD, and the guy got charged with fraud, etc.)
It was an emergent phenomenon. It's not an accident as a car accident, where you look away for a sec and you rear end someone because someone stepped before the car before you, but it's very much not a conspiracy.
It was a systemic breakdown, fueled by the very much gutted oversight and misaligned incentives created by money in politics. And that's something very hard to escape.
The lack of jail-time verdicts is not surprising, after all the laws are very much set by those who have the most money, and they usually don't like to go to jail if caught.
So we're left with DPAs ( https://www.penningtons.co.uk/news-publications/latest-news/2018/deferred-prosecution-agreements-five-years-on,-what-have-we-learned/ ) and they are pretty effective from time to time ( https://www.osler.com/en/blogs/risk/december-2017/the-long-arm-of-the-law-multilateral-enforcement ) but it needs investigators, staffing, and cooperating legislators.
Banks (and the financial industry) listen to incentives. Jail time is meaningless if all you can get is some middle manager. For that the reporting and compliance regulations help - as higher ups have to sign off on certain stuff, so they can't deny knowing this or that - but this means that really shady things will turn into compliance issues, and into fines. (Which is a lot better than remaining in the dark without any consequences, as it was before compliance regulations.)
In 2005 I received a postcard from my former next door neighbor, a realtor, offering a townhouse in our old neighborhood in South Florida for $300,000. I couldn't believe it: they'd been $100,000 when they were built, six years before. I'd bought mine for $140,000 in 2001 (much to the doubt and disbelief of my neighbors at the time, thinking it too much to pay.) When the advertised townhouse sold for $300,000, I started to ask 'Where did all this money come from?' I read voraciously, came to the same big picture conclusions that the people in 'The Big Short' did (I recommend both the book and the movie, at your preference), but didn't learn to make money off of it the way they did.
This is the correct answer, I think. The people who made the mortgages were no longer the people that owned the mortgages. The banks didn't even hold on to them, they sold them in tranches to investors. So no one in the actual industry had any incentive to do anything other than close mortgages.
People could get no down-payment mortgages, could get mortgages with bad credit, could get mortgages on houses they couldn't afford, because all the mortgage originators just fudged the paperwork. No one wanted to find a reason to not provide the mortgage.
Everyone being able to buy a house heated the market up, and as people got used to the market going up and up, it was seen as a good investment, and more people bought more expensive houses they couldn't afford, and mortgage originators did more shady things to make it happen.
A lot of these mortgages were adjustable rates that started at a really low rate, and in 3 years could shoot up to a much higher rate. An optimistic consumer wouldn't worry much about that. But when the time came, some people couldn't pay the crazy increase in their mortgage. The foreclosures coming onto the market depressed the market.
So the bubble finally popped, and someone owned a house that they bought for $750,000 with no money down, an adjustable mortgage for the whole $750,000 that started at 4% and in three years shot up to 8%, and when that happened the house could only be sold for $450,000. So they just stopped paying the mortgage and walked away. The foreclosures further depressed prices, created a very nasty cycle.
I worked in land records at the time, and the standards for the mortgage originators were just horrible. Not bothering to record mortgages in the correct town, not bothering to do a lot of things.
There are a few movies that are really interesting that described what happened, real life thrillers IMO. "Margin Call" is awesome, "The Big Short" explains what happened really well and is pretty funny at times, and "Too Big to Fail" is from the regulators point of view. It's kind of awkward but still really interesting.
Even in this headline, there's some pretty interesting equivocation happening between techies and CEOs overall. The article makes a decent case for why there's collective anxiety about tech companies, but neglects the question of "why only tech?"
The ~1990s had a whole string of movies with bankers and investors as villains: American Psycho, Rogue Trader, Glengarry Glen Ross, Wall Street, Boiler Room, and so on. Lately, we had had Wolf of Wallstreet and The Big Short, but in a post-2008 world where banking already has trashed the economy we're surprisingly short on bankers-as-villains films.
We got a couple of global warming films in the 2000s, and a couple more in the 2010s, but I can't think of one which makes a serious attempt to cast oil CEOs as villains - certainly not in the sense that e.g. tobacco companies have been. Avatar is probably the closest thing to "CEOs trashing the environment" that's been a hit.
Pharma companies lend themselves to human-interest tragedies, and we did get Dallas Buyer's Club. But there's no whole genre here like there used to be with "the bank takes the farm".
So there's the missing question: why tech companies specifically? The most obvious answer is just "more impressive visuals". I'm not sure we're talking about a particular anxiety of the moment, or if it's just that banks and oil companies work better on the page than on the screen.
I would recommend learning more about the things you hate.
I used to hate modern art. I thought it was only for obnoxious people. Then I decided to take a college course on it and it's my favorite period of art because I learned to understand it. For the same reasons, I decided to take a course on the black power movement. My parents were racist so I was probably racist so I wanted to learn more. I learned about the Civil rights movement and discovered many personal heroes. I used to dislike John McCain and politics even though I knew very little about either, until I saw a documentary about McCain and learned he was literally a hero. I used to think finance, statistics, and programming were for smart people unlike me, until I learned more and developed a love for it.
I used to think the red pill was complete trash until someone forced me to watch the red pill documentary. It led to a painful breakup where we both weren't able to empathize with each other's traumas. I could not empathize with his pain of feeling inferior (because that's my status quo) and he could not empathize with the systemic oppression and violence against women (physical, sexual, and emotional). I feel he felt that his father may have been taken advantage of, abused and used financially and feared that for himself. While I watched my father abuse my mother, emotionally and financially, and feared that for myself. It was strange how we both felt strongly about both sides, the same problem, except we were passionately divided simply because of gender. I learned a lot and probably will always be learning from that experience.
Every time I've challenged my views, I've been rewarded.
Two books I've enjoyed or am enjoying that are about chaos:
Evicted by Mathew Desmond covers American poverty from a housing perspective.
The Big Short covers the 2008 financial crisis and it's much more informative than the film.
It happened with books too: See "Liar’s Poker", by Michael Lewis. He says that he wrote it "so that fewer idealistic college kids would dream of working on Wall Street. ... Somehow that message failed to come across ... They'd read my book as a how-to manual."
Start of the Great Recession. S&P 500 went from 1400 to 800 in six months. I lost 40% of my retirement investment and it was ... distressing to say the least.
Movie recommendations:
Margin Call https://www.youtube.com/watch?v=Hhy7JUinlu0
The Big Short https://www.youtube.com/watch?v=MesrrYyuoa4
Basically, everybody wanted to ride the gravy train and nobody wanted to be the killjoy that pulled the brakes before it flew off of the cliff. There was a lot of money to be made and nobody thought they would be the ones left holding the bag.
The movie The Big Short explained this pretty well.
Interesting. Have you see "The Big Short"? Towards the end there's some scenes where banks aren't paying out on Credit Default Swaps (I think) even though the mortgages were failing. The movie didn't really touch on why this was happening. Was this caused by the second manipulation that you mentioned?
I strongly believe that USDT isn't fully backed by USD. They have repeatedly said it is but I do not believe it.
Now we have a bit of proof that Tether has been lying or misleading via this Bitfinexed employee?
If it is backed by one or more cryptocurrencies that is better than nothing, but it means that there is significant risks that in a large market correction in cryptocurrency the backing of USDT can vanish from underneath it.
Back in the dotcom bubble nearly every company was causing the market to go up because they were all spending VC. It was sort of an fragile ecosystem because no one was making money, but everyone was spending it, and then the music stopped and a good portion were wiped out.
The music could stop and USDT could run into significant issues.
I am reminded of the movie The Big Short. I do think there is a bet here (like many others), but how to actually realize it and also how long will it take for this to be exposed?
"The Market Can Remain Irrational Longer Than You Can Remain Solvent"
More and more I'm reminded of the scene from the movie The Big Short: "I'll do the deal, but I need one thing from you: tell me how you're going to fuck me." I just plain dumped FB, but every time I have an interaction with Google, Microsoft, and many others, that scene comes to mind. Only unlike the movie, I'm never going to get that answer; it's up to me to just guess, and my guesses are not flattering to the company.
Whereas when I spend money with Apple, AFAICT it's a simple, "give us some money, and we'll give you software, a service, or a physical object that we and you hope will solve a problem for you. Then we're done." Sure, Apple costs extra, but I'm willing to pay extra as long as our transactions stay the way they are.
Reminds me of the film, The Big Short, where the main characters find out from an adult entertainer that she is buying multiple houses.
The interviewer asks this woman about the future of Bitcoin when she's clearly not an expert because shes says, Bitcoin "will be too high for individuals to invest in." One could buy a fraction of a Bitcoin to "invest" as little as $5.
The question is not whether we're in a bubble, but when it will pop.
I believe all BTC trading spikes are driven by some of the existing owners swapping coins and cash every now and then to keep the trading volume high. It is in their best interest to get the prices bounce back higher whenever it goes down.
Once the price is manipulated higher, they can sell and keep the cash when someone who thought BTC is the next "I-Dont-Know-What-It-Is-But-Its-Going-Higher-Everyday" buys it. Since there are no regulators to protect against market manipulation, it's a fairly easy thing to do 'legally'.
As per GDAX you only need 10s of millions of dollars worth of coins to manipulate and mint money on this. Ordinary folks can't do it, but those who have been holding a few thousand or tens of thousands of coins can easily do this. The bitcoin billionaire brothers for example can do this. Buy every low priced limit order until it hits the price they want and then sell it off based on the frenzy buying on the back of the "always-bouncing-back-safe-harbor-currency".
Rinse and repeat every time price takes a dip.
I hope at some point someone will step into regulate things around bitcoin so that the real market demand will determine its prices. I read an article that people are mortgaging their homes to buy BTC.
If nothing changes, we might be looking at a sequel of the movie "The Big Short"
The financial crisis has many facets. I was deeply interested in the subject at the and in the ensuing years afterwards. I highly recommend Michael Lewis' books on the subject, especially "The Big Short." The film was decent, but didn't go into the same amount of detail as the book.
There was much fraud, especially in two places: At the ratings agencies who turned garbage bonds into A+++ good to go, never-gonna-lose investments. They should have all gone to jail for that.
The second place was at the banks doing no-doc mortgages because the bankers had huge demand for the crap bonds and the result was that lenders were both outright fabricating loans or lending money to illegal immigrants who couldn't speak any English and didn't even have jobs. Tons of un-prosecuted fraud all over the place there. A few people went to jail, not many. Look at Wachovia Bank and Countrywide as two examples.
The other place there was not fraud but enormous unethical behavior was in the sale of CDOs--the "insurance" policies that backed up all the garbage bonds with huge leverage. CDOs took down Bear Stearns and in all honesty, should have taken down all the big players including Goldman Sachs, but the Fed stepped in and bailed them out to the tune of trillions of dollars.
The American public paid the price. If you recall the $4-5+/gal gasoline from 2009 and on? That was all part of the bailout scheme. And your 401K took a huge hit, some people still haven't recovered from that time period.
Regular people paid literally out of their own pockets so that a bunch of shitbirds could stay billionaires. We allowed corrupt politicians to bail out their pals and we didn't do anything. We the people should have revolted and shot every one of those stinking crooks. Instead, we the people are treated for what we are--a bunch of doormats.
I can't help but think of the movie the Big Short. There's a large pool of social media marketers, influencers and other tangentially related businesses, all in some way propped up by this fake activity. They're not unlike all the hands that got involved in the mortgage business and securitizing of sub-par, high risk loans. If only there was a way to "short" the Instagram industry.
p.s. To those debating what constitutes a "fake" account, don't forget that the term was only recently invented: https://www.avclub.com/merriam-webster-points-out-that-trump-didnt-invent-fak-1819298951
Considering the fact that Richard Thaler made a cameo in The Big Short Movie that was primarily demeaning Wall Street Banks and Economists who played along in the crisis, itself makes him an Economist who stands out. http://www.chicagobusiness.com/article/20160226/NEWS01/160229871/u-of-c-prof-in-big-short-cameo-is-a-stock-picking-star
He wrote the book Nudge with Cass R. Sunstein, about nudging people towards better decisions by reframing them or changing defaults.
Tversky/Kahneman got the Nobel Memorial price in Econ also for behaviour econ ("Prospect theory"), in 2002.
From the article:
> Asked how he would spend the prize money, he replied: "This is quite a funny question." He added: "I will try to spend it as irrationally as possible."
> Professor Thaler had a cameo appearance, alongside the actress and singer Selena Gomez, in the film "The Big Short," in which he used behavioral economics to help explain the causes of the financial crisis. Asked about his
"short Hollywood career," he joked that he was disappointed his acting prowess had not been mentioned during the summary of his achievements when the award was announced.
Funny you suggest market competition. In The Big Short movie, it's competition that the ratings agency rep played Melissa Leo cites to explain their corrupt ratings:
Georgia: If we don't give them the rating, they go to Moody's. Right down the street. If we don't work with them, they will go to our competitors. Not our fault. Simply the way the world works.
You're right. I rather meant to say "people were manipulated into buying...". It's always the same, people don't understand because they lack education and some rich guy will take advantage of that. The movie "The Big Short" [0] sums it all up very well.
Have a look at "The Big Short" (the book, not the movie). Reading how clueless those idiots at those Rating Agencys were is fascinating. The had no idea, basically just rating every pile of horseshit AAA because they are dumb and have no idea what they are doing.
What it would betray is the reality that not all wealth is earned equally. Yes, there are plenty of people that earn through effort and merit. But to look at one's environment (wether in a first, second, or third world country) and not see how much wealth is created through cheating is ludicrous. When someone walks into a bank with a gun and empties the registers, it's easy for us to see how that's criminal. But someone who empties a bank via Wall Street, etc. is just doing their job I suppose.
What about The Big Short? No sex or violence there. Or what about Spirited Away? I'm sure there's some ostensible violence here and there, but the conflict in that film I think comes from things being out of place, not from overt danger.
Sex and violence are overrepresented in media because they are easy. A writer who has drank too much coffee and is out of ideas for the 10th day in a row can put some sex or violence up without thinking much and get a reaction. That doesn't mean these things are the only source of conflict in the world, or in storytelling. Just the easiest.
I think part of the problem comes from the illegibility* of trust.
In the specific example of mortage-backed securities, as much as it disrupted the (debt? non-finance guy here) industry, it also enabled opportunistic behaviour in people at the micro level.(Think that stripper with 5 houses mortgaged from "The Big Short" movie) and at the macro level(think rating agencies vs the big bankers). At the end of the day, any disruption of the finance industry that cannot check(not necessarily stop) this kind of opportunistic behaviour will always be liable to bubbles and big crashes. The checks might simply be limiting the amount of loss in crash. Not sure how to develop something like that though..
I've read through many of Michael Burry's old (early-mid 2000s) forecasts on the Value Investors Club forums, and I have to say, I'm not as impressed as the hype would suggest. Don't get me wrong, he's clearly very intelligent and understands the underlying theory. But a lot of the legend ascribed to him is less impressive when you consider the fact that shorting a market/security requires being more than just right, it requires being right at the right time. It's not enough to say, "We're in a tech bubble!" or, "We're in a housing bubble!"; any number of credible analysts is doing this all the time - what is actually difficult, and consequently profitable, is to forecast both the correct trend and the correct time in which the market will collectively "realize" the trend. On a long enough timeline, any reasonable forecast can be vindicated. 18 months, 12 months - not even six months is a sufficiently narrow slice of time for forecasting a market correction. I see a lot of people (not necessarily you) using Burry as an ideological example of someone who stood up to Wall St and beat them at their own game. The narrative of Burry as a heroic figure who beat a bunch of traders and hedge funds through superlative intellectual prowess scratches a fundamental underdog itch in storytelling (and for some, it also appeases a political ideation about Wall St as well). But I think the evidence that he could really pinpoint exactly when the crash would happen is inconclusive at best.
As one example, we can look at the forecast Burry is best known for, from The Big Short (and the corollary film depiction), and I found myself identifying much more with Michael Burry's investors than those who praised him at the end of the story. Scion Capital was hemorrhaging its investors' money, and for a nontrivial amount of time even after it became widespread knowledge among the institutional elite, the market failed to crash and vindicate Burry's short. From Burry's perspective, everyone around him thought he was wrong, but this misses a lot of the nuance. His fund's investors weren't necessarily concerned with him being right or wrong per se, they were concerned with the ridiculously inane risk he decided to take with the entirety of the firm's capital. It's great that his bet turned out so well for him, but calling it genius (as many do) is so charitable as to be almost literally incredible. Michael Burry could have easily been right but unlucky, and simply run out of capital before he could make a return on the short. This is why the saying, "The market can stay irrational longer than you can stay solvent" is so important.
Look at this from the perspective of Burry's investors, not the retrospective story of Burry's victory. If you were an investor in a hedge fund, and one day out of the blue the CEO emailed to inform you that the entirety of the fund's capital would be liquified to leverage a single market position, and that you would not be allowed to withdraw any of your capital, would you react with approval, lukewarm disinterest or abject horror? Even if you bought fully into Burry and his strategy, would you have the requisite nerve to be comfortable with such an astronomically risky and contrarian position?
That said, one of the things that impressed me most about Burry is that he could withstand such intense and prolonged pressure from both investors (harassing, suing and ostracizing him) and significant financial loss (albeit ultimately unrealized). It takes incredible fortitude to be able to lose that much capital in the pursuit of a positive return.
Here's the kind of thing he has been writing on reddit:
>I'm driven by facts and evidence and not by some big name person investing money. These people sometimes invest based on ego (which pretty much explains Google Glass). I would suggest you watch the movie "The Big Short" (not totally factual but it gets the point across). [1]
My eyes rolled when I read that quote from him: he started his whole debunking-Magic-Leap blog series by making a disclaimer that he was buying eMagin and trying to pump them up by showing that Magic Leap might be using them.
Only egotists would invest in hyped-up Google glass! That's why he wishes he did:
> The last time I played this game of “what’s inside” I was the first to identify that a Himax LCOS panel was inside Google Glass which resulted in their market cap going up almost $100M in a couple of hours.
A little bit of ego there, huh? Why, he was personally responsible for $100M of market cap and wishes he could have bought in so that he could dump the position during the hype, knowing that Google Glass itself wouldn't take off in the long run.
And even after missing out on that opportunity, he missed another:
>About the time Himax stock hit its high, I found out about the Seeking Alpha article and posted a comment reiterating what my blog post had stated that I didn’t think the Himax panel was used in the newest prototypes (there were also comments from others stating the same). Himax then stock dropped back about 16% or about $135M in market cap. (Gad, I should have shorted before I wrote that comment ).
None of this is some huge moral indictment; just be aware the guy is now openly thinking along these lines when he writes technical analysis on his blog.
I think for a Hollywood movie, The Big Short has a lot of great tidbits of information and lessons in the housing market, especially if you're in North America. Worth watching when you're unwinding from all that learning. :)
"I'll pay you to go watch The Big Short and then try to tell me that again"
That's the problem with 'The Big Short'. It's a terrible film because it mostly points the finger at bankers as somehow 'guilty of some crime' - and they are not. They are 'guilty' of doing some things, but not breaking the law for the most part, and they didn't get into some other issues, particularly they didn't want to point fingers at the millions of Americans who lied on their mortgage applications.
There weren't really any crimes obviously committed in the 'big short'.
Maybe the hucksters in Florida overlooking issues on loan applications.
Maybe the ratings agencies ... but it would be extremely hard to prove this one.
Ultimately, the banks stupidly gave credit to people they should not have, and it inflated really badly and got out of hand. Stupid lazy bankers all around bought crap without doing due diligence and they paid the price.
It was people making a lot of bad bets due to the underlying failure of information the system.
All the individuals lying on their loan forms are at least as guilty as anyone else.
"At banks. At rating agencies. At investment firms. In the government"
You'll have to list specific examples, because I see greedy people making stupid decisions, not fraud.
The ratings agencies didn't commit 'fraud' - they did not accept 'money to change their ratings', this would be fraud. What they didn't do well is their actual jobs, because to do it well would have meant less business. So this was a conflict of interest that led to a really bad outcome, but it's not outright fraud.
Movies seem to really be hollowing out the middle more. You've got a lot of very low-budget fliers and indie prestige stuff and a lot of $100M+ mega-movies, drifting now into attempts at Marvel-esque cinematic universe perpetual money-printing machines for increasingly dubious IPs.
I'm not sure I agree. Those two types have certainly risen, but if you look at films from last year, there a are still a ton of "middle" films with decent budgets (10-30M) and high praise from the critics - Selma, Spotlight, Carol, The Big Short, etc. I don't see a hollow middle.
Sure, tuition was cheaper. Doesn't mean it was cheap. And when future you is talking to a 20-year-old, they'll be lambasting you about how easy your life was when a 4-year degree from a public instituion only cost you $80,000.
If you're truly ignorant of the subprime mortgage crisis a few years back, you can check out The Big Short (book or movie, but I'm told the book is much better) for good insight into history and mechanics.
Point is that the economy has changed a LOT in the last 15 years, and lots and lots of people suffered. Generation X is not the Baby Boom generation. I think you sound a bit foolish/ignorant appropriating the "Baby Boomers ruined the economy!" rhetoric and applying it to the generation-and-a-half that followed them.
Christian Bale's character's hedge fund wanted to make a big bet that mortgage backed securities would fail.
So he shopped the banks for those that would take that bet.
The ones that agreed to take the bet, he paid them a negotiated monthly amount (basically rent) to keep the bet in effect. If he stopped paying rent, the bet was off.
The banks thought it would never happen and it was free money coming in. Since they thought the risk was 0% it was free money coming in.
... basically, the banks thought he was crazy, but would take his money to keep the bet going.
In the movie, Bale's fund gradually loses money paying "rent" on this bet / option / contract. Things get dicey when conditions that should result in the bet paying off get covered up by the banks and government, and the investors in his fund get pissed they aren't getting any return on their money as promised.
I'd agree that the US housing and derivatives markets are in a much better position than in 2007-2008. Atleast people who are getting mortgages now have some form of documentation, and risk manages are being asked to do their jobs.
The crisis now is that, and this is just my opinion, low rates are here to stay. with the amount of money in the system, people are being priced out of homes and as time goes on the amount by which they are priced out in the big cities is only going to grow.
As an aside...
I'm not a lawyer but I've heard people say My cousin Vinny is the most accurate court room movie ever. In a similar vein, I'd nominate the Big Short as one of the more accurate wall street movies ever made.
It showed the lone wolf who not only saw the coming crash, this was far and away the easiest part, but figured out how to profit form it by getting the banks to write him a CDS.
The two smart kids working out of their garage that were smart enough to succeed despite all their mistakes.
The hedge fund who did an incredible amount of due diligence, going to properties, knocking on doors, talking to people inside the industry to put together the pieces that no one else could.
The wall street sales guy who sold the CDS knowing that it might bankrupt his company but figured he'd make a killing on his commissions long before that happened.
And the most accurate part of the movie was that it showed the anguish that each of these people went through. They'd seen something no one else had, been right about it, had the event happen and even then everyone else continued to plug their ears and pretend nothing was going on while they continued to bleed money each month.
It really did a good job of showing that you can be right about everything and still not make money if the rest of the market continues to act insane.
In 2007 there really was a sense that people knew things were way out of hand but everyone was thinking, "If I can just get one or two more years on the bonus cycle, I'll be able to get out". To be fair, this type of thinking probably ins't going away anytime soon.
Very surprised Bloomberg would put out such a fluff piece about the Vancouver Real Estate market.
There are very serious issues in Vancouver, and some suspect Canada is in for a ruder awakening than the US.
http://www.vice.com/en_ca/read/meet-the-wall-street-short-seller-betting-against-canadian-real-estate
1) Canadian Real Estate is being used as a money laundering facility http://www.huffingtonpost.ca/ike-awgu/canadian-real-estate-foreign-buyers_b_10329000.html .
2) Canada also has a healthy (well, actually unhealthy) sub-prime lending market http://www.huffingtonpost.ca/2016/05/18/subprime-lending-canada-transunion_n_10011578.html
3) Then there is the issue of occupancy. The reason the 15% tax was brought in is because money was coming in to purchase houses which then sat empty. Many have become derelict. When I lived in Vancouver, Yaletown was full of apartment towers, but where were all the people (I believe occupancy in that area has improved). http://www.theglobeandmail.com/real-estate/vancouver/poking-holes-in-vancouvers-housing-vacancy-study/article29181730/
4) Lastly, the shadow flipping, again, mentioned in the article, but didn't get the attention it deserved http://bc.ctvnews.ca/house-flipping-concerns-as-368-vancouver-homes-sold-at-least-twice-since-2014-1.2769801
Don't worry if you don't want to read the articles, it will be a movie in a few years along the lines of The Big Short.
No, the movie also includes it (though the specific words "side pocket" are not mentioned, it is clear that it was a legal option available to the fund manager). It's directly in the text of the e-mail that Burry types out to his investors. From the screenplay text[1]:
> Mike types an email. He is alone in the office with empty desks outside.
> "As you may know, our agreement allows me to take extraordinary measures when markets aren't functioning properly. I currently have reason to believe the mortgage bond market is fraudulent. So in order to protect investors from this fraudulent market I've decided to restrict investors’ withdrawals until further notice.
Sincerely. Dr. Michael Burry."
I've edited my comment to make it clear that by "The Big Short" I had understood that we were discussing the movie of that name.
It's probably safe to say that the editors/director of the movie knew what they were doing when they omitted any explanation of the possible side-pocket situation. The overall impression given is in keeping with the passages you've quoted.
It reminds me a little of the phenomena of efficient market theory in economics / finance. Academics were drawn to it partly because it enables them to do a lot of fancy mathematics whereas if you look at inefficiencies like the stuff that went on in the movie The Big Short then the academics don't really have much of an edge against people working in the field. So much academic stuff goes 'assuming efficient markets', blah blah... which is not actually wrong but maybe a misallocation of resources from looking at bubbles and crashes which could have helped avoid the whole 2006 episode.
Saw The Big Short movie--does the book go into much more realistic (ie. non-Hollywood) technical detail?
Will check out Margin Call.
What about outside of huge industry shifts like The Big Short portrayed? I'm most interested in how this plays out in the day-to-day when there isn't a huge industry-wide scandal at play.
You get downvoted, but IMO you make a good point. There's a lot of things on ZH that are far-fetched, many articles by guest writers that are clearly in the 'conspiracy theory' corner, but if you use your brain to filter out the noise, there's a lot of truth to be found on ZH that most other media outlets don't want to report on (for whatever reason).
It's not just HN commenters who are typically poorly educated about finance, almost nobody thinks any more about these things than what they get from the mainstream media.
Years later, after things have crashed and burned and many of the 'conspiracy theories' that had been on ZH years before they turned out to be (at least partially) true, those same people flock to movies like 'The Big Short' in large numbers, and the talk of town is 'how nobody could have seen this coming'... :-/
The movie "The Big Short" has a brief scene with reference to this that you reminded me of and I highly recommend the movie. In the scene one of the main characters is discussing with his brother's ex who is an SEC regulator and she says something to the affect of "the regulators are a revolving door of industry insiders and you aren't going to get looked at when applying for the cushy bank job if you're known as the stickler regulator."
Lots of comments here regarding 'blame'. On that subject, I found this interview with Michael Burry (featured in the book and movie "The Big Short") to be worth reading:
The selection on Netflix started out bad years ago and declined from there. I've started using VidAngel for almost all of my movie streaming lately. They've got a great selection of movies/shows including new releases (e.g., The Martian, The Big Short, The Good Dinosaur, etc.) that I can stream for $1 (or keep if I prefer). The filtering is a nice bonus (no more JarJar Binks). They even have a "Not on Netflix" section.
I realize that the above sounds like an advertisement. It's not meant to, I truly use it daily.
http://www.vidangel.com (naked link)
or
https://www.vidangel.com?vip=c5smk9fr71 (referral link)
Thanks for all of your insights here, this was very interesting to digest.
I just started reading "A Random Walk Down Wall Street" and it is solid so far. How good of an investing primer would you say it is for a novice? Are there other good books you'd recommend?
Also, I do modeling for advertising as part of my day job, but I've always been curious how much of that analysis/optimization skillset is applicable to trading and risk modeling. Are there any good introductory primers you'd recommend?
Lastly, in The Big Short movie, how accurate is the scene where they first have discussions with Goldman about the bespoke instrument? It looks like the quant sits there listening, the two Goldman folks whisper a bit, and then they say they'll do it under XYZ terms. I'm guessing in real life they'd meet, Goldman would go back and model stuff on their end to determine the terms, then come back with what they'd be willing to do and it wouldn't happen in the span of a conversation like that. Can you shed any light?
"To my knowledge you can't even trade in stock futures with sufficiently distant expiration dates to do this."
To put this as politely as possible, you are incorrect. When you have more than $1 billion under management there are numerous counter parties more than willing to design bespoke financial instruments to suit your needs. My first role in finance involved modeling the risk associated with the bespoke instruments that people were asking my tiny (<$1 billion) firm to create. If you watch 'The Big Short' 1/3rd of the movie is devoted the creation, acquisition, and distribution of a bespoke financial instrument traded upon layers of bespoke instruments (Credit Default Swaps, Credit Default Obligitions, rolled bond instruments, etc.) Remember when Christian Bale's character gets chewed out for losing so much money a month? It's because he's paying to maintain his bespoke put options on mortgage backed securities.
"What's the time frame you'd be willing to stake your career on for a startup"
I left the industry, I find it pretty disgusting to be quite honest. However you're missing the fact that these hedge funds don't invest in one startup, they invest in dozens in an effort to diversify their risk. Furthermore, if you think a fund manager is "staking their career" by making these bets you missed two important facts:
* 2 and 20, they're taking home 2% under management even if they lose it all.
* By the time someone is in the position to manage that many investments they are both able to retire and sell themselves into any position. There's as many, if not more, investment managers that lose money as make it. Their job is to quantify and tolerate risk, quite often that entails losing money on some investments.
Anecdotally, when I first started in the industry we had a director who lost $30MM in the course of 2 weeks on an investment. We had hit a risk case that exceeded the 99th percentile on an investment strategy he had developed. A month later we had recouped the $30MM with an additional $60MM of profit. He took an educated risk and it could have made us take a loss for the year. Importantly, all of our other investments performed wholly within expectations during that time frame. So, while we were losing money hand over fist during those weeks it was never an existential risk to the company.
I agree with you for the most part and it is possible-- quite likely even, that I am saying my example is the exception to the rule, but generally it is not the case. However, I am not domain squatting and the economnics aren't there to do that anyway, it was to illustrate the larger point that some domains, like real estate assets and "tech" companies are very valuable while apparently similar substitutes are not value and actually quite dangerous.
Currently, subtle differences make a big impact on metrics(growth, value, price) & the market is beginning to price these in. If you have seen the big short, it is a great movie, but the opening line is something like:
It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.
So try to check myself when I think about something like this, although it is obviously difficult. In this current framing, certainly one or both of us, is wrong and it is sort of a matter of timing.
I think we are in 1993 and you think(I don't want to put words in your mouth) are in 98'. Either way, if you were in 93 or 98 and knew what to look for you could have made a lot of money, and you yourself may have because you were fundamentally correct when others weren't.
So on balance, I think you are totally correct and I do not disagree with you. However, my estimation is that many people are making the mistake of grouping unrelated things together and drawin g a conclusion, when I think that in fact, the opposite could be true currently.
While some fields have higher-end media outlets like TED talks or infotainment-style demoware, or like Richard Thaler's role in the recent movie The Big Short, other fields might have less sensationalist outlets like a Senate subcommittee hearing, a scientific press release, or inclusion in a documentary film or important literary outlet -- and any of these can lead to follow-on speaking engagements or invitations as an academic adviser or dignitary in various circumstances. And even in the case of Senate hearings, it's often not about accuracy or objectivity, but instead about Supporting The Correct Team.
The point is not what is the maximum media exposure of a given field. The point is that in any field, there is a small elite class who mostly controls (as cultural gatekeepers) the ability for lower-status and aspiring researchers to advance, much like party politics. They form networks of editorial boards, committees for awarding tenure, and have nebulous connections through upper management of academia, corporate boards, endowments, politics, and celebrities. Yes it can vary by field, but you see the same pattern either at a big scale or a smaller scale.
I certainly believe many researchers enter the research profession with pure motives. But it is the ones who quickly learn to sublimate their desire for intellectually rigorous research and social betterment in favor of political skills who naturally rise to the gatekeeper positions.
Sadly, the pure and highly impressive research labor of a lot of these lower-status academics is just pure waste. I don't mean to denigrate the academics for this -- their motives are pure; they are just operating in a rigged system where the only means to significant success is to "wise up" and realize that the best "product" you can provide is to sort of auction off the ability to affiliate with you by sublimating yourself to someone's coalition in exchange for resources and notoriety provided by that coalition.
Not much in the way of bs in the big short tbh. A little dramatisation of the characters probably but hey, gotta sell a book right? Facts were pretty spot on. The book atleast; no clue about the movie.
This isn't bad:
http://www.wsj.com/articles/what-the-big-short-movie-gets-rightand-wrongabout-the-financial-crisis-1449843231
While Big Short doesn't seem as factually challenged as Flash Boys, it is over-simplified. Either Michael Lewis falls short of his goal of producing an unbiased representation complex issues in a "pop non-fiction" form, or his goal is different and he is a biased observer forming a cohesive story from a cherry-picked selection of facts.
A really good movie based on the book, with the same name, just came out. Watched it yesterday and I recommend it a lot.
http://www.rottentomatoes.com/m/the_big_short/
The most recent instance I've seen of this pop culture/dry theory combo was in the movie The Big Short.
They have Margot Robbie (Australian supermodel) sip champagne in a bubble bath while explaining the dynamics of the derivatives market and how it created a bubble in 2008. There's also a scene where Anthony Bourdain (celebrity chef) is prepping food in a kitchen and talking about fish stew as a metaphor for securitization and CDO's.
I find that the best teachers have such a complete mastery of a subject that they can almost perfectly translate it into a common language (pop culture) to make it more relatable and entertaining. They let inquisitive students probe deeper, past the metaphor. The worst teachers usually keep things as academic and dry as possible as a shield against understanding, which leads to questioning, which might call the teacher's knowledge into question or derail the class.
Interestingly, this fact is used in the The Big Short as Michael Burry's insight for spotting the housing bubble and beginning the short.
There is plenty of artistic license in that film so I don't know how true that really is but its quite exciting for small counter-intuitive "surprises" like this to be the early indicators for massive global events.
I just saw the movie "The Big Short", about the guys who saw that the mortgage collapse was coming and figured out how to short it. They had to talk a bank into creating a new kind of derivative so they could short mortgages. There's an opportunity here. Someone needs to come up with a way to short startups. There are a lot of "unicorns" worth shorting.
Ah, I moved from finance into software, although I write financial software. Great books, some embellish the truth a bit though, take it as entertainment value. They all provide great insight though! I've been re-reading the big short by Michael Lewis for the movie coming out this month. I recommend that for insight into the 07-08 collapse. It's a really good book
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Or as the point was made in The Big Short movie https://m.youtube.com/watch?v=TpCb3xjh-Kk&t=127s
I was too - and to be frank: it's dishonestly revisionist to say this was a topic in the public eye.
There's a very good reason a book (and movie) like The Big Short was such a big hit. It's because it was about the handful of people who actually saw the crash coming and were confident enough to put their money and reputation on the line.
> Not financial advice, but: Honestly it’s pretty hard and I wouldn’t recommend it. Shorting stocks and getting into bonds / default swaps but the system is broadly rigged against small players doing well here. Ie in the Big Short see everything that was needed for two guys to bet with their own money.
Do you base your knowledge on anything other than a very mediocre movie?
If an "investor" believes the market will sell off drastically, there are many, many ways they can express that bet in the open market. They can short index futures, buy put options, long volatility... so many options that depend only on the thesis being right. It does not sound as sexy as "look kid, the billionaires rigged the system!", but it's true.
It’s not a question of if but when at this point.
To parallel to The Big Short this is the point in the movie where folks realize it’s mathematically impossible for things to not implode and so players are quietly positioning themselves for that eventuality before things are allowed to blow.
It’s been a dramatic shift these last six months but everywhere I look now folks are quietly preparing their battle armor to survive what’s about to unfold.
The tech will stay, but the AI business landscape will have a market-cleansing forest fire.
There’s a whole generation in tech now that’s never seen what it looks like when a bubble like this unravels.
I do definitely watch TV and movies from time to time. Really my beef is with social media. TV and movies as media, that's a wagon I just largely fell off of at some point.
I'll still watch a good movie, for sure. Interstellar, Primer, Coherence, Run Lola Run, The Big Short, Contact, Excalibur... But The Expanse, Project Hail Mary, The Martian... I enjoyed the books more than than the movies, and the movies were good. Still haven't read Contact, shamefully.
The narrative of the Big Short omits something big i.m.o.: encouragement of easy mortgage lending standards by Washington politicians. Is this line about the SEC the only reference to government in the movie?
Always loved this from The Big Short (movie): "In the years that followed, hundreds of bankers and rating agency's executives went to jail. The SEC was completely overhauled, and Congress had no choice but to break up the big banks and regulate the mortgage and derivatives industries.
Just kidding.
Banks took the money the American people gave them, and they used it to pay themselves huge bonuses, and lobby the Congress to kill big reform. And then they blamed immigrants and poor people, and this time even teachers. And when all was said and done, only one single banker went to jail."
Edit: I see I'm not the first to quote The Big Short in reply - such a good movie (and book)!
It's not interesting to say "this is a bubble!" I've heard that about virtually everything (and in many cases it's likely true). What is interesting is pointing out the mechanics that make the bubble pop.
This is precisely what makes the movie the Big Short interesting: we see that people did identify, within a reasonable time frame, when people would start defaulting and how that would cascade into a true crisis.
It's pretty clear that while the fruits of AI are quite useful, the entire thing is rife with very questionable financial engineering... but I still don't know what it is that makes all of this break. For example, it's obvious that the SpaceX IPO is a massive wealth transfer program, but it's not obvious that it will immediately end in a crash. Given how irrational the stock market has been, I don't see a reason it can't continue to be irrational for long after the bag has been handed over to the retail investors and retirement funds.
Not related to AI but, I recently rewatched "The Big Short" and your comment reminded me of it. I can't testify the accuracy of the movie, but for over year, Michael Burry was viewed as in the same manner for shorting the market, while the economy was was in a hype cycle.
I had mortage on a condo for $460k. total money paid to pay it off via debt, little over $1m. I sell 30 years later for $460k I just lost $550k :) (I didn’t, paid it off in 5 years saving myself 100’s of thousands …)
ask yourself why “we” think that some debt (e.g. real estate) is great) while others (e.g. vehicle) is bad? it just might ge that one is looked at as appreciating asset while the other not so much.
comments like yours always remind of the stripper scene from the movie “big short”
having debt also makes you a forever slave (true capitalism at work). God forbid you lose your source(s) of income and don’t have FU money or significant stash, now you fucked. with no debt and roof over your head life is infinitely better even during trying times..
There are some great movies that deal with this: Wall Street, The Firm, The Big Short, Suicide Kings, Michael Clayton, among others.
One can even consider the never ending Ethics classes in college an ironic form of corruption that never teaches anything we don't already know by secondary school, but used to pad credit numbers and tuition revenue.
From the Big Short (movie)
Jared Vennett (narration): "In the years that followed, hundreds of bankers and rating agency's executives went to jail. The SEC was completely overhauled, and Congress had no choice but to break up the big banks and regulate the mortgage and derivatives industries."
"Just kidding. Banks took the money the American people gave them, and they used it to pay themselves huge bonuses, and lobby the Congress to kill big reform. And then they blamed immigrants and poor people, and this time even teachers."
To understand Bitcoin you need to forget the technology and first understand the problem. You need to understand what caused the 2008 financial crisis and how it resulted in us collectively funnelling more value into the hands of useless bankers. You need to understand that there are people who are literally spending their days playing games with each other, trading bits of paper and making silly deals and bets. If you don't understand the word "literally" or don't believe it, read more, study harder. If you don't understand a zero sum game or how this nonsense fucks up the lives of regular people, read more.
Read The Big Short by Michael Lewis. You could even start with the film by Adam McKay who also gets it. Then read Other People's Money by John Kay.
Only once you understand the problem can you begin to understand why a trustless digital cash would be good for us. Bitcoin is simply the first viable solution to the problem. If you can come up with a better one you'll change the world.
> I feel like the stock market is pretty divorced from fundamentals at this point i.e. speculation makes it more like a Keynesian beauty contest (picking stocks you think other people will think are valuable).
Momentum investing is a thing:
* https://www.investopedia.com/terms/m/momentum.asp
* https://en.wikipedia.org/wiki/Momentum_investing
A number of people make / made money when The Market became "divorced from fundamentals": see The Big Short.
* https://en.wikipedia.org/wiki/The_Big_Short_(film)
Just remember: "The market remain irrational longer than you can remain solvent." — Keynes, https://www.goodreads.com/quotes/603621
Contrarians betting against the herd have often been very successful. For example, John Paulson and Michael Burry made billions by shorting CDOs that lead to the 2008 crisis. The movie "The Big Short" is an Ok dramatization of how it all unfolded.
Same herd mentality, different soapbox.
In the Big Short movie there is a scene where the old trader scolds two newbies: "why are you so happy? don't you understand that if your bet is right, it means the american economy is going to crash, that millions will lose their jobs?"
Right now we're betting on sp500 going up, which is mostly backed by the belief that machines are going to replace us soon.
The existing financial system is one where the money supply is controlled by private bankers. Money is created by banks when they issue loans (mostly mortgages) and destroyed when people pay the loans back. When a bank issues a mortgage to a first time buyer of, say, 300,000 credits, that 300k is brand new money injected into the system. The loan will be slowly paid off, but over the span of maybe 30 years that single loan will contribute on average 150k of money in the system. Almost all of the money in the system is just people's loans they haven't paid back yet. If the banks issue more loans, the money supply increases, if they issue fewer it decreases.
This sounds stupid and most people usually think "there must be something more to it, but I don't understand". Well, there isn't. Money is just made up numbers that we use to do accounting. The only thing that is real is physical (houses, food, minerals, energy etc.)
To attempt to reign in the stupidity, governments have created layers upon layers of regulation to the extent that much of finance is basically working out how to keep legally creaming off the top of the money supply. They play silly games with each other where they trade bits of paper until one of them is left holding the bag. The trouble is the silly games end up affecting everyone else because we actually use this money to do real finance, like paying for food and shelter, insurance, savings etc.
Read up on the 2008 financial crisis. There's a very entertaining book and subsequent film called The Big Short which is highly recommended. Bitcoin was started as a direct response to the events that played out around 2008.
Your question can be answered without giving away control and access to unauthorised and inexperienced auditors.
Governance, Risk, and Compliance has been missing. Too many decades of nepotism, insider trading, corruption ( starting with lobbying ), have led to the lack of transparency. The movie “The Big Short” has explained some of these issues.
For comedy one needs to subvert expectations, and this is why making light of grave events (Black Comedy) is a big phenomenon.
There are many examples from WW2 comedy to 9/11 memes. Sometimes the examples are more indirect, like in film: American Psycho, American Beauty, Wolf of Wall Street, The Big Short, Fargo, Don't Look Up, Fight Club, Quentin Tarantino's stuff, etc. All of them deal with dark themes in a light way.
Given the prevalence of this in our culture, the author seems a bit surprised. Maybe they didn't connect it to dark comedy.
Office Space, Demolition Man, Fight Club, City of Ghosts (2004), The Big Short, Ghost Dog, Slacker, most Tarantinos, various 60s italo-westerns, BTTF 1 & 2.
But there's a lot more movies coming to mind that deserve a 2nd watching imo, just haven't done so yet. Eg. most Coen Bros ones come to mind.
This is a nice marketing article, and while I completely support the transition off fossil fuels and onto renewables, I don't think it's the right approach - it's better to be upfront about the challenges involved in feeding intermittent energy streams into an electricity grid where demand is not aligned closely with primary production, neither on a daily nor a seasonal basis.
The authors of this kind of thing should take a cue from the financial reporting on the 2008 economic crash and films like the Big Short - people can handle complexity, they're interested in hearing about default credit swaps and CDOs and the internal mechanisms of complex financial instruments - so they can certainly handle somewhat difficult energy concepts.
Thus, you can tell people that if you want to run 24/7 on solar inputs alone, then at peak noon you might need your solar system to be producing twice as much power as demand is drawing from the grid, so that the rest can be diverted to storage for use in the evening and morning. If you want to get through a cold wet northern hemisphere December, then you'll need even more solar to divert to chemical fuel storage of some kind for that time period.
Before we delve into everything else...
> Risk-sharing mutual aid societies are now among the largest and best-funded organisations on the planet - we call them "governments".
I'm not aware of any mutual aid society that shot an unarmed man SEVEN TIMES IN THE HEAD because they misidentified him. The Metropolitan Police did, and none of the officers were disciplined.
https://en.wikipedia.org/wiki/Shooting_of_Jean_Charles_de_Menezes
That right there is a great example of the bias of the BBC.
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The article is engaging but doesn't give a good explanation of the difference between "insurance" and "gambling".
At the very end it brings up financial derivatives but again does not explain them well or the danger they caused.
Is "insurance" a type of "gambling"? Maybe. But it's quite different from gambling in a US casino (and I presume UK casino).
In the US, "gambling" refers to wagers placed at known odds, sometimes against other players; legal gambling has limitations on how much money the House can take: e.g. if a casino "wins" $100, they must also pay $80 to someone.
Again in the US, "insurance" (excepting health "insurance", which is mostly not insurance) is someone paying a regular premium and the insurer promising to pay if certain events happening to the person, with the government requiring that the insurer keep financial reserves to pay out claims. If you stop paying your premiums, you lose your insurance. If the insured events never happen, the insurer keeps your money.
In a sense, insurance is a type of gambling, but closer to buying an umbrella in the morning in case it rains in the afternoon.
Financial derivatives were portrayed as insurance but were not regulated as such, and the banks did not keep reserves to pay them out; because folks were also taking "insurance" against events that happened to third-parties (i.e. not themselves) it looks a lot like gambling (though they weren't regulated as that, either).
I highly recommend the film "The Big Short" to explain the 2008 financial crisis in fairly plain terms. (I finally picked up the book but it's in the queue on my shelf.)
Nah I like New Scientist and Quanta Magazine etc… to give me an insight into a complicated topic. It isn’t adequate for a professor to understand the subject to write a thesis sure, but there is no harm in more people kinda understanding something. This is especially true of the sort of dumbing down the big short film did, when the impact on society means everyone should sort of understand what happened Nd why the economy tanked.
This sounds interesting enough. Could I have it as a more detail text based novel (150-250 pages) or if it's possible a full fledged movie, maybe in similar style as "Big Short"?
Or do you think it has to be a TV show, maybe like "Succession" - do you think you'd be able to write something like "Succession"?
PSA: you basically have to have seen the movie "The Big Short" to understand the analogy in the article. Or at least this scene: https://www.youtube.com/watch?v=xbiDrzTd8fE
Brings to mind this quote from the film The Big Short:
"Tell me the difference between stupid and illegal and I'll have my wife's brother arrested."
(based on the book of the same name by Michael Lewis, a name I've seen elsewhere in these comments: go figure)
I don't know what the mathematical underpinnings of those mortgage-backed derivatives were, but I know someone somewhere looked at all that math and decided the risk burden was acceptable. No one said hey, wait, the model is only as good as the assumptions you feed into it. The movie The Big Short got at this, but it was just a movie with Steve Carell standing in for that shocked person who doesn't seem to have really existed until after the assumptions failed and the collapse was inevitable.
My point is you can't plead 20-20 hindsight.
There was a mania around residential real estate, adjustable rate mortgages, swaps, cdos and synthetic cdos, that all hinged on adjustable rates resetting up starting in 2007 that drove the 2008 crises. The movie “The Big Short” does a good job explaining it for us laymen imo.
The quote "The market can stay irrational longer than you can stay solvent" is attributed to John Maynard Keynes many years before "the big short" movie even came out.
It's more that, if you take a meaningful amount of money from N people, the likelihood of financial hardship putting someone in mortal danger (eg, by causing them to lose access to housing or medication, or causing them to be suicidally despondent because they've lost their ability to retire) approaches 1 as N increases. When N is high enough that there are multiple people in mortal danger - it becomes pretty likely that some of them succumb.
This is even discussed in the film version of The Big Short.
I liked The Big Short, movie and the book, as a story and also because the author claims that it's based on true events. Now after seeing Michael Lewis fumble all over the place about SBF I'm not sure about the latter anymore.
Maybe Michael Lewis got too attached to his subjects and was hoodwinked or maybe he knew it was not all true and went along with them because they made for a good story.
All in all he lost his credibility big time, at least among lay (i.e., outsiders of Wall Street) readers. Later I read somewhere on Twitter that apparently WS folks knew his book to be a BS anyway.
They didn't say that they have a Pavlovian response to the phrase "mortgage securities", trained only on surface-level knowledge of a Ryan Gosling film.
They were simply reminded of the scene from The Big Short with the stripper talking about all the properties she has loans for.
Why the need for hyperbole?
Lots of classic movies about or that came roughly around the 2008 financial crisis:)
Wolf of Wall Street
Margin Call
The Big Short
I'm not the OP you replied to, but there's a scene from the movie the big short that really punched the understanding into my head:
Michael Burry: I may have been early but I'm not wrong
some exec: It's the same thing!
I believe that a lot of HN posts are probably "right", but they are so far in the future and so non-applicable to day-to-day life, that it's indistinguishable from wrong. For example, everyone predicting Google is going to end - yeah all great companies eventually come to an end - if you want to be insightful, you actually have to be on time with it.
I think since the GFC he has taken a bit of a turn in that he sees the traditional economy/financial markets/players as rigged against the little guy.. and taken a sort of oppositional defiance disorder approach to the whole thing.
So any Don Quixote will look like Robin Hood to him.
Flash Boys was just taking sides in a dispute with no real good guys, but the upstart/little guy to him was default "good guy". He took some more explicitly political positions in some of his other books. And now his SBF/FTX fanboyism falls under the same category that "the little guy" has to be the good guy.
The Big Short is probably his last great book / and film.
The Big Short was able to depict financial instruments in an appealing way.
Partly by interjecting a scene where Margot Robbie explains the mortgage bond market and short selling while wearing very little, but people seemed to like that movie.
That reminds me of the lines from movie of the Big Short:
"They're not confessing", "They're bragging".
> common in LP formulations?
If you want to consider the effects of war, inflation, something like the 2008 housing crash, economic depression, COVID, hurricanes, train derailments, etc., sure, if those hypothetical changes still yield an LP (linear program), can just solve the resulting LPs and display the resulting data in a way can visualize and get some intuitive insight.
But there is another way: Let insurance companies consider history and set insurance premiums for disasters, all disasters, ever seen before or not, and they will have quite good data, likely, sorry, better than get from RL (reinforcement learning) or, really, anything that can be obtained from anything like current analysis of data from Web crawling. A common assumption, understanding in business is that it is possible to get insurance on nearly anything against nearly anything. E.g., the whole thing about the book and movie The Big Short was that it was possible to get insurance on the BBB tranches of housing mortgage bonds, make a bet that the tranches would fail. For this would have to pay monthly premiums but when the tranches failed make huge returns on the premiums paid.
With their good data and history, an insurance company will be able to set insurance premiums that give you some good information about the seriousness of the disasters, on your list of disasters or not, you are concerned about. If seeing the premiums you are still highly concerned, then pay the premiums and relax.
As in The Big Short, call up Goldman-Sachs and see if they will write you some insurance on what you want protected.
Sure, if I were to invest, what for me are big bucks, in raising a flock of chickens, maybe I'd get some insurance against any disease, e.g., bird flu, attacks by rabid foxes, wolves, raccoons, fire, flood, tornado, etc. destroying the flock.
Sure, once I did some Monte Carlo work essentially to evaluate the odds of some survivors in a really complex, goofy situation -- with those odds, could have found premiums for writing insurance policies. The issue was, if there were global nuclear war limited to sea, how long would the US SSBN fleet survive? For input, I used some encounter rate probability derivations Koopman did as part of ocean search in WWII. Then I used some detection radii of Red-Blue pairs and battle result probabilities (one dies, the other dies, both die, neither dies). My work passed technical review by a world-class probability professor. My summary results were a graph over time of the expected number of SSBNs surviving. Also the Monte Carlo result could have also reported the probabilities of other aspects of the scenario, e.g., the probability that at least 10 survived for 30 days, enough to write an insurance policy!
The professor tried to object: He said how could I hope to "fathom" the huge state space? I responded, ..., using the strong law of large numbers ..., and he agreed with me. So, some times can analyze situations where some of the possibilities, actually nearly all, are never encountered or sampled. So, that would beat running LP many times one at a time on many disasters could describe.
Lesson: Sometimes it's possible to do Monte Carlo under some seemingly wildly complicated situations.
Net, I would advise pricing some insurance instead of some DIY (do it yourself) with either LP or RL.
More broadly and by analogy, a hammer and a screwdriver are both good tools, but no sense in asking which is better. Maybe the same for LP and RL. And for one more tool, insurance policies.
Arrival, The Martian, Moneyball, The Big Short, there's something magical about these movies that no matter how many times they are on TV I will just sit and watch them again. I don't know what it is about the stories but it probably has has something to do with that XKCD comic about the scene in apollo 13.
> How, uh, do you do this legally?
It's simple to have information about the future in entirely legal ways. Usually the future information is available, just unequally distributed.
The best example of this is the movie "The Big Short" where it the information about the upcoming crash of subprime-backed bonds just required people to bother reading large amounts of bond composition documents. Only 3 groups really did this.
Another good examples is how some funds pay for logistics intelligence (via satellite reconnaissance, customs declarations etc) to forecast sales figures.
Yeah those are fun too eg. Wolf of Wallstreet, Big Short
But I was more looking at the tech ones eg. hardware/software I know HFT, I don't mean that
I'd throw The Aviator in there but again not tech, but that idea swimming in money, possibility, changing the future. One day a movie about EM ha.
Anyway I wish I had my thing I was chasing/something novel. Maybe one day.
If we are talking just general business movies, some more are: 'The Big Short', 'Wolf of Wall Street'.
This was super cool to click around on the various techniques and see the examples.
(Questions/Thoughts)
- I was looking to see if there was a Steadicam group, wondering if I would see a gif of Henry and Karen walking into the Copa, that's got to be one of the most famous shots in film in the last 40 years (not a critique, totally possible it's there under a different name I'm not aware of as a layperson, I didn't peruse every group.) [Edit note added]
- "Fourth Wall" should include a gif of "The Big Short", breaking the fourth wall was a great way to get the minutiae of the financial subject out of the way and return to the characters.
- Bonus upvote for finding a shot from "Halt and Catch Fire"! (dolly zoom)
Edit: I knew I was forgetting the proper term for my question about Goodfellas, it's a tracking shot. I didn't see the movie in there though, I think it should be added :)
Community-scale banks (aka credit unions) are a better idea for local-regional communitie (aka cities and towns and agricultural regions) because their managers have to live with their clients.
Take a community of 100,000 families, in an economic system where they're all collecting income and paying bills and so on. The idea behind a bank is that they hold the community's money securely while making their own money by providing loans at a greater interest rate than the interest rate they pay out to their depositors. Fundamentally, this means the bank is dependent on the fact that customers don't try to withdraw all their money at once (as the above dynamic means the bank is never able to meet this demand).
FDIC guarantees by governments are intended to bolster this customer trust, as if everything goes sour the deposits (to a certain limit) are guaranteed. The important point is that the regional bank has a profit model based on giving successful loans to individuals and small businesses for things like houses, cars, business expansion, etc. The bank will of course want to know a fair amount about the people they are loaning to (drug addicts are not good bets, etc.) in order to ensure they get paid back.
I hear people laughing in the background about the naivete of this picture in the modern American financial system. Since this post is already a bit long, go watch the movies "Margin Call" and "The Big Short" to get an idea of what's actually been going on.
I wonder how many of the people in this thread bringing up the completely irrelevant and unrelated MBS stuff from 2008 would have had any idea what they were if movies like The Big Short or Margin Call hadn't been made.
There were also short positions on SVB taken out after some of those financials.
Startup founders/teams should not be spending their time reading their 40 year old bank's quarterly financials, analyzing various short positions, or hiring resources to do so. Then there's (as always) the absurdity of making significant financial decisions for your startup based on a more-or-less random fund/personality twitter account that may have an undisclosed short position spreading FUD (or just be flat-out wrong).
Hindsight is 20/20 and even the most sophisticated actors taking short positions have failed spectacularly. For cases as dramatic as this ($200b bank failure) it's the stuff they make movies of ("The Big Short").
The fact remains that other than a few hawks this came out of nowhere last Thursday, and as the article and other sources describe not even Thiel and other sophisticated insiders were that far ahead but as we all know when it comes to a bank run those hours are precious.
Because you're a greedy human and you will find a way to take a larger slice of the pie. It happens every single time. You'd think this would be obvious by now.
How you think the banking system works is how "educated" people think it works and even that isn't correct, by the way. There is no reserve. The funds aren't real. It's all just made up numbers. There have been several Hollywood films made about it (e.g. The Big Short and Margin Call). It's almost so stupid you think there must be something else to it, but it's just people playing with numbers.
"It's not a panic if you're the first one out the door."
Another great quote from Margin Call. Love every bit of that movie. Very underrated too, as it was (unfairly) overshadowed by The Big Short.
You've seen the movie The Big Short?
Someone is likely coding:
query = f"The guidelines for approving or denying a loan are: {guidelines}. Here are sample application that were approved: {sample_approvals}. Here are sample applications that were denied: {sample_denials}. Please write a loan application which is very likely to be approved. Provide necessary supporting details.
Im shocked i never heard of that movie until 5-6 years after it’s release.
It’s on par with the Big Short in terms of telling a great story about the economic crisis.
> telling two or more people they own the same dollar
This is the main issue, and it's called a "reserve requirement", which is a percentage of the deposits that the bank must keep on hand to mitigate risk of issues like this.
https://en.wikipedia.org/wiki/Reserve_requirement#United_States_2
In March 2020 the US Federal Reserve lowered it from 8% to 0%, which is where it is today. Just to give you an idea of how the economy works then, let's say you put $100 into your account at Bank A. Company X takes a loan from the bank for $100. Where do they put their money from the loan? Well, they spend most of it but part of it ends up in, let's say, Bank B. Bank B then takes that money and loans it out 100% to Company Y, who spends some of it and also puts some reserve into their bank account in Bank A. Which lends it out 100%.
So this is an over-simplified example but just to give a visual that this is where inflation is coming from. The "government" isn't printing money -- the banks are. It's a deck of cards with no safety net.
Watch the movie "The Big Short" and tell me how this isn't the same situation.
source: I am also a lot of fun at parties
For an explanation of the shift in policy around 2006 that caused the Great Recession and the current housing shortage, I recommend Kevin Erdmann, “Housing Policy, Monetary Policy, and the Great Recession” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667309 and his other articles https://www.mercatus.org/scholars/kevin-erdmann. Erdmann disputes the standard explanation of the Great Recession that excess credit and behavioral economics caused a housing construction boom which caused a pop (e.g. the first Planet Money podcast The Giant Pool of Money, the movie The Big Short, the book House of Debt). Instead, he claims that there was never a construction boom at all; regulators killed the housing construction sector and entry-level mortgages because they mistook a shortage of homes in the Bay Area for a glut of homes in Las Vegas, and unrelated cities such as Atlanta were innocent victims.
> You're basically betting that the crypto market will collapse
By coincidence, my wife was watching The Big Short (2015) with our eldest two kids tonight, it really is worth watching [again] if you've not seen it [recently].
> ... but the exchange/broker/whoever you're dealing with will survive and have the necessary funds to cover your short
Michael Burry has pretty much exactly that conversation with Goldman in the film.
The actual big short (haven't seen the movie) was on a credit default swap index[1] (it was on one of the CMBX series which have commercial mbs as underlying[2]. There are also RMBX series for residential mortgages). CDSs are a swap (ie they are synthetic by definition) where one person is long the risk (short the protection) and one person is long the protection (and therefore short the risk). So the concept of who is long and short can be a little confusing.
[1]Source: worked at Goldman as a strat (quant developer) on the mortgages desk at the time. I knew and worked with pretty much all of the people involved although I was based in London. The actual person who came up with the research behind the short idea was a fellow strat and brilliant econometrician[3] and most of the trading guys fought him like hell over it only to later found hedge funds and pretend that it was their idea all along.
[2] https://www.investopedia.com/terms/c/cmbx_indexes.asp
[3] Michael Marschoun https://www.researchgate.net/scientific-contributions/Michael-Marschoun-2015589984
Weren't all the big shorts essentially synthetic longs?
(Edit: Context: the movie "The Big Short")
The Goal is interestingly written as a work of narrative fiction. Which threw me off at the very start.
I feel like it would make a great movie a la The Big Short.
The academic paper in the appendix is super useful as well.
https://www.youtube.com/watch?v=LtFyP0qy9XU
- John Tuld ( Jeremy Irons )
If you haven't I do recommend watching the whole movie, or more like a mini documentary. Much Much better than the Big Short.
Moneyball and The Big Short were about major events that Americans noticed and cared about. Flash Boys wasn't. Most Americans never even heard of HFT.
I still think it would be a great movie, but it never had the same relevance.
Screenwriting for The Big Short was magic. There were probably still too many complicated threads to keep straight but a really good cut on the source material for film.
Well, as a big fan of Michael Lewis, I never would have thought Moneyball and The Big Short would make good movies, but here we are. Good scriptwriters are wizards.
Lots of critical takes here - this book will be a yuge bestseller and the movie a nerdy blockbuster on par with The Big Short or WeCrashed - which was a book by my friend Eliot Brown!
Michael Lewis, the author of “The Big Short", is the true winner of this whole debacle. He was/is allegedly following SBF around, working on a book covering his raise to fame and riches and his influence in US politics. Seems he's getting the extra chapters he needed to turn it into a best-seller and another movie adaption.
The Big Short and Boiler room are incredible movies. The only real competition is Wolf of Wall Street, which goes too deep into the debauched party lifestyle at the expense of the more interesting financial story, and Margin Call which has the opposite problem since it’s completely inaccessible to most people.
Right. But (1) The Big Short was not a very good movie, and (2) it was about the collapse of the entire housing market. This is about the collapse of an abstract metaPonzi scheme.
Comedy moved to Youtube and TikTok and big-Hollywood can't compete with more tailored, specific, comedy.
What's the funniest thing I've watched recently? ProZD, CarbotAnimations, CalebCity, Door Monster.
They're quite specific to my tastes (Anime, Video Games, and Dungeons and Dragons), that most others wouldn't get. But there's simply no way that a big Hollywood / general production can make a joke as specific as Door Monster and/or CarbotAnimation skits.
https://www.youtube.com/watch?v=mCEZ2hIcUW0
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Longer bits of comedy can be found in longer-form Youtube videos, such as Oversimplified.
https://www.youtube.com/watch?v=yRmOWcWdQAo
I don't think any of these online cartoons or Youtubers have much mainstream appeal. But they're funny enough for me.
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I also seem to remember some relatively mainstream comedies out there: Harley Quinn was pretty good (though that tickles my taste in DC Superheroes). Knives Out was absolutely hilarious. But I admit I don't watch too many movies in general.
The Big Short was funny (though inaccurate to the history of the time), if people want a more recent somewhat political flick.
Simple - they get clicks.
Pop culture knows the movie 'Big Short', but they probably have never heard of a Nobel prized economist.
I came across this movie a few years back and it's fantastic. It think it's a lot more realistic than The Big Short.
"Every one percent unemployment goes up, 40,000 people die" – this comes from the film The Big Short.
Highly recommend Flash Boys by Michael Lewis (author of The Big Short which was also a great film adaptation). It follows the trail of High Frequency Trading to uncover how this was used to front load orders and along with other unsavory tactics like dark pools essentially turn the stock market into a rigged game. Of course they’re effects have been dampened in the decade since, due to regulatory pressures once it was more generally understood what HFT firms were actually doing.
I’m not sure to what extent it constituted financial crime versus just being an ethical grey zone, and the book is of course not without its share of criticism, but it was certainly an enjoyable read.
I watch Pluto-TV for the exact same reason: it reminds me of old school cable-TV. I turn it on and "veg out", just like when I was a teenager. I tend to watch it before I go to sleep when I'm trying to shut down anyway.
The movie, The Big Short, was on heavy rotation about a year ago. Good movie. They have an entire channel dedicated to Narcos, so I'm basically fluent in Spanish now - well, "drug dealer Spanish", at least.
FWIW when I was doing some banking courses, as I was working in DeFi and wanted to know more about CeFi, they have synthetic assets too. Which are derivatives. In fact in the Big Short movie I'm 100% they call derivates synthetics!
In the immortal words of the character Mark Baum (based on Steve Eisman) in "The Big Short":
"That's hilarious".
I am referencing the scene when he meets the CDO manager, and he said this with the utmost sarcasm. A great scene, based on true events, in a great movie.
> And I assume you are substantially short these markets then given that you know this for a fact and it's trivially easy to become wealthy one you know this for a fact?
That's not a safe bet.
https://en.wikipedia.org/wiki/Michael_Burry, which the film "The Big Short" is based off, correctly predicted the 2007-2009 collapse of the housing market, but nearly lost everything waiting for it to occur.
> During his payments toward the credit default swaps, Burry suffered an investor revolt, where some investors in his fund worried his predictions were inaccurate and demanded to withdraw their capital. Eventually, Burry's analysis proved correct: He made a personal profit of $100 million and a profit for his remaining investors of more than $700 million. Scion Capital ultimately recorded returns of 489.34% (net of fees and expenses) between its November 1, 2000 inception and June 2008. The S&P 500, widely regarded as the benchmark for the US market, returned just under 3%, including dividends over the same period.
You can be right and still not be able to safely profit. Especially in crypto, where shady exchanges can wipe out a big short position pretty much at will with some wash trading.
I can highly recommend watching the 'big short' to understand all of this while watching a really entertaining movie
Banks and large investment firms are more than happy to create exotic instruments. With enough money at stake, you can definitely find an institution willing to take the other side of a bet against crypto (specifically BTC or ETH).
If you want proof, refer to what happened in the lead-up to the 2008 Sub-Prime Mortgage crisis (or check out the movie The Big Short if you want somewhere to begin).
I agree. Margin Call and The Big Short (the book is sooo good even if you've seen the movie!) are the best two movies that came out of that entire debacle. That scene was enjoyable. They really nailed the casting and conversations.
Big Short was a movie that other people loved but I just didn’t really like all that much. I don’t even know why. I think maybe the cameo scenes made it feel a little dumbed down?
I’d also watched Inside Job not long prior and really enjoyed it, but others found it too dry. Different strokes I guess.
It’s a terrific movie that perfectly complements The Big Short.
Reminds me of the movie "The Big Short", specifically the "Brownfield Capital" subplot.
I'd love to hear some of these stories. I've never had any visibility into the world of insurance, but it's always kinda fascinated me.
You’ve just described the Glass-Steagall act. It has a long and storied history.
It was created in response to the Great Depression, then repealed by the Gramm-Leach-Bliley act because money. Then the Dodd-Frank act tried to have it reinstated but failed, also because money.
You may already be familiar with all of this but mentioning in case you’re not.
(https://en.m.wikipedia.org/wiki/Glass–Steagall_legislation)
There’s a quite brilliant documentary that came out in 2010, Inside Job, that covers this, but which was completely overshadowed by the much less informative The Big Short which came out 5 years later.
> Slices of all mortgages are less risky than a single mortgage
If you've not watched The Big Short (2015)[0], it's a really excellent film.
[0] https://www.imdb.com/title/tt1596363/
There's a famous scene in the movie "The Big Short" where a character is talking to a stripper about her investment properties. The movie is about the 2008 housing bubble.
Where is the "pedantic technicality" though? Looks more like a continuum to me.
Consider, here are some activities I do, which of them are you sure is "watching TV" and which aren't? Is it such a clear bright line?
* I watch "Only Connect" - a very difficult BBC Two quiz show - on the iPlayer web site. There aren't any adverts of course because it's the BBC, but this was made to be shown on a broadcast TV channel even if I haven't watched it that way for years.
* I watch the Two Ronnies "Mastermind" sketch on Youtube. Once again this was made to be shown on broadcast TV, decades ago, as part of an episodic show - but now this is just one sketch
* I re-watch the final sale decision scene from The Big Short on Youtube. The Big Short is a movie, this was never made for broadcast TV, and all I'm watching is one clip from a much longer work.
* I watch previews of a friend's review of the entire Nightmare on Elm Street franchise. Most of these were movies. (but there is a TV series) and he doesn't include clips but he does talk about them. This will eventually be a Youtube video, but I'm watching the preview.
* I watch an SC2 AI Arena playback of a match that happened recently between two AIs. It's video, at least by the time it reaches me, but it was never intended to be broadcast anywhere, many of these videos are never watched by anyone they're generated automatically so why not.
* I play a video game with an FMV cut scene, such as Command & Conquer: Red Alert.
* I play another video game with a cut scene but it's in-engine using the game's 3D assets, such as GTA3.
* I join a Teams call with colleagues to discuss progress on our main Project
* I watch a rather hypnotic screensaver of overlapping fractal shapes.
* I read a web page with some simple animated multi-step tutorials. Is it important whether they're animated with Javascript, GIFs or MPEG video?
* I read this comment on Hacker News.
The Big Short (great movie) had a good scene on the productization of mortgages.
https://www.youtube.com/watch?v=xbiDrzTd8fE
If you liked all those books, I'd also recommend Den of Thieves, about the junk bond trading in the 80s.
I've read an interesting book about Bear Stearns but unfortunately I dont remember the name, it was > 10 years ago.
If you haven't read The Big Short, or seen the movie, it is a pretty popular one
Also d) "Scientists" are some ill-defined profession without any ties to anybody.
In the real world, "scientists" are researchers from corporations, government bureaucrats (the number of PhD in the CDC is insane), and other such people. There's no such thing as an "unbiased scientist". Never was, never will be. Its Hollywood fiction.
e) "Bureaucrats" are often seen as some unified mass of individuals. This is false. Real-world bureaucrats are segmented into different groups and argue with each other. CDC and FDA got into an argument over language a few months ago for example, and people didn't know what to recommend. There's also Army vs Navy vs Air Force, which are three separate organizations that often get in each other's way.
In the real world, different groups of bureaucrats argue with each other a lot. Even the bureaucrats within a group argue a lot, that's why it takes a while to reach consensus, and why they need meetings to come up with a document.
Its already a bureaucratic mess trying to get the US Army to do something or agree to a plan. But then when you need coordination between multiple groups, say a US Army + US Marine Force joint operation, that requires an additional meeting that slows things down even more.
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In the real world, its important to know what the different organizations are doing. What they were chartered to do, and even who the department heads are (since the leadership can change each election, what was true 4 years ago is no longer true today).
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In my experience, the typical American is horribly ignorant of how the world works. Of how consensus is built. Of how experts talk with each other. Or the facts on the ground.
Hollywood is just a reflection of that. Without hammering "reality" into these neat little molds, the typical American frankly wouldn't understand the story.
Compare and contrast a big Hollywood production like "The Big Short" (which was taken seriously by most of my friends), with the more realistic documentaries on the subject (such as Frontline's Money, Power, and Wall Street). People need the tropes to understand the story, but the tropes stand in the way.
Furthermore, real-world documentaries (ex: Money, Power, and Wall Street) are long, boring, convoluted and offer no easy answers. You don't feel good watching it at all. You get to hear from the bankers and their perspective, which might go against your politics. Or you might hear from government officials and their perspective, which similarly goes against your politics (left or right), and makes you feel bad.
Ultimately, Hollywood is an entertainment industry, not an educational one. So we become dumber if we ever rely upon these tropes for a serious argument.
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EDIT: Bureaucracy is a system in place that allows for arguments to happen at rapid intervals. These arguments are called "meetings", maybe "congresses" if you want to be fancy. People sit in the meeting and hashes things out.
After rapidly advancing the state of arguments, the papers and recommendations that come out of a bureaucracy are many arguments ahead of what is being discussed in the public sector and seem alien. In some cases, the meetings go wrong and nonsense has been made, but in most cases, the discussion and meetings do represent the will of many important people who have thought very hard on any particular issue.
It turns out that individual people want a piece of paper to say something they agree with before they sign the bottom of the piece of paper. It doesn't matter if its a law, or if its a health recommendation from the CDC, or a discussion about climate change (or whatever issue) from weathermen or whatever other groups there are.
Two that come to mind are The Big Short and The Trial of the Chicago Seven.
Two movies in a rich fabric that give me no confidence in the reality of consequences of bad behaviour that my parents drilled into me since I was born.
Both movies give me the impression that no lessons have been learned by either experience.
> it might stick around for a long time now
This is the most important financial lesson of the pandemic for me.
There is something deeply wrong with many parts of our economy and financial system, any one who is an expert in any specific area will tell you that things seem weird and don't make sense.
A great example of this is ad tech. I've worked in ad tech for many years and strongly agree with Tim Hwang's Subprime Attention Crisis. Everything is a house of cards, fraud (intentional or not) is wide spread.
However one thing that Hwang (or anyone pointing out that our systems are houses of cards, scams, or otherwise unsound) fails to answer is the question "what makes it fall apart?"
I'm a huge fan of at least the film version of the Big Short, which does a great job exploring the 2008 financial crisis and how unstable our financial system can be. But it's important to recognize that a key part of everyone's discovery isn't just realizing "this is all bullshit" it's realizing precisely when and why reality will come crashing in. There's even a great scene where Michael Burry calls the major banks and realizes that they essentially won't let the market collapse until they get their piece, that they can essentially push back reality a bit until they get theirs.
So crypto may be unquestionably a ponzi scheme, but what will make that scheme fall apart? ad tech might be mostly bs, but what will make everyone stop paying into it? stock prices maybe completely out of line with reality (with inflation and cash injections who even knows) but what will force them to face reality?
We may all be living in la la land, a wild fever dream, but pointing out you're in a dream doesn't always make you wake up. The question is "what precisely will wake us up". And for all the things that seem very wrong with our current world, I have yet to hear anyone give a concise answer or even guess as to what this is. If the pandemic didn't knock over our house of cards, I'm not entirely sure what will or when it will happen. If Wile E. Coyote never looks down after running of a cliff, will he still fall?
Have you ever seen the movie "The Big Short", where they go to Florida and meet a stripper who owns 4 McMansions and a minimum-wage lawnmower who is buying a giant, expensive house? Those were realistic depictions of the fraud happening at the retail level which created the entire problem.
The people defaulting on their mortgages were people who had committed fraud by lying about their incomes and assets in order to take out massive loans they could never repay, because they thought they could flip the house for a profit before paying any principal. Foreclosing on those people is the good and right thing to do, they were criminal fraudsters not victims.
Of course, the ripple effect when half the market turns out to be fraudulent is that prices go down when the bubble bursts which also hurts legitimate buyers who bought at inflated prices, but that's secondary to what caused the wave of defaults.
I know what you mean about The Social Network and Silicon Valley. Not tech specifically, but definitely motivating and inspiring for me are:
Moneyball Margin Call Limitless The Big Short Wolf of Wall Street That Fyre documentary and at Christmas - Trading Places
For 2008, I think one of the most approachable references is the PBS "Inside the Meltdown": https://www.pbs.org/wgbh/pages/frontline/meltdown/
* https://www.pbs.org/wgbh/frontline/film/meltdown/
The 2012 lookback has a bit more depth, since it had more time to do interviews and stuff: https://www.pbs.org/wgbh/frontline/film/money-power-wall-street/
There's of course, "The Big Short" if you want a stupid 2-hour movie. But that movie glosses over so many details and is straight up hyperbole at many points... so its not "realistic" but maybe a better thing to watch if you really don't want to put in much effort?
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I guess my post was based off of the Bloomberg blogpost "Looking for Tether’s Money" by Matt Levine. So read that for my original inspiration, though you may need a Bloomberg subscription to be able to read it.
Bennett has done a fantastic job. There WILL be a movie about this company when investors lose faith. Like next decades, "the big short".
> the Empire tried to cope with decline by debasing currency
That sounds like, "The spouse tried to cope with the failed marriage by cheating." Maybe, but maybe also it played a role in the marriage failing. Can you truly separate the two things?
Listen, you could be right. I would definitely say that I've never been one to be "obsessed with pure commodity money." But I've also steadily lowered my respect for the entire branch of Economics over time. What's that H.L. Mencken quote? "It is difficult to get a man to understand something when his income depends on his not understanding it." When you watch the film The Big Short, it seems to talk down to the audience but it's also talking down to the entire finance industry and population at large. It all seems so patently obvious in hindsight -- but it was obvious in foresight too, if anyone wanted to look. (Note: We're facing the same thing now, in greater degrees, but with different names (CDO's? Horrible! BTO's? Sure!) and we're about to be humiliated once again.)
I'll repeat what I said initially. I used to be Keynesian. I used to think that inflation allowed for growth. It encouraged investment. I saw the opposition as a fringe group: gold bugs and conspiracy theorists, frankly.
But what I came to realize is that, long-term, it can't work. It's not a Nash equilibrium (see: https://blankpoole.com). It doesn't encourage investment; it demands it. And that, to repeat myself, removes the coupling to value. Your local coffee shop is only worth so much, based on its revenues. Period. If you go above that, you're speculating -- fine; but you continue past that and you're in "growth investing" land, where you quite literally know that the coffee shop isn't worth that but you expect someone to be the greater fool.
People right now, unironically, say that the market always goes up. I'm not joking. You've probably heard it yourself. Economists could fight it but they enable it instead. "Just put your money in the market and wait. There is always a greater fool." Shame on them.
As that article I linked to points out, while the coffee shop shares can only be worth so much, any scare resource widely viewed as a currency, such as precious metals, have no such restriction. It's a Nash equilibrium. If field of Economics was minutely honest, if it had a mote of respectability, it would recognize that and stand firm despite what its income depends on.
This is backwards.
And whatever this is, does not make sense to me.
1. You can just go to the show's subreddit and browse, or browse with filters such as top, hot, etc. And you can filter the time period.
2. You can use Google. This works great for me. Just type "the wire reddit" or "site:reddit.com the wire", and the first result will be the subreddit page, but if you scroll down, you will start to see threads from other subs as well. This way you can access more discussions outside of the dedicated subreddit.
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In a more general note, you can find all sorts of different stuff by using Google to browse reddit this way.
I have watched quite a few really good movies by searching "your top 5 movies reddit", "your favorite movies reddit", or "best movies reddit". I just go through the past viral threads and find highly upvoted responses, or responses with some of movies I liked and some that I haven't watched.
I have discovered Clue, Primer, Hot Fuzz, Tropic Thunder, The Big Short, etc. this way.
I’m reminded of one of my favorite characters from The Big Short talking about things we don’t think about with regard to financial numbers.
> Pitt’s Rickert chastises his colleagues for acting so happy and says: “Every 1 percent unemployment goes up, 40,000 people die. Did you know that?”
I recently rewatched that movie and his character nailed pretty much everything that is happening now. He even wears a mask on the escalator.
Because they don’t care. The loan is collateralized and sold as a financial instrument and the bank is no longer involved. The loan holders should care but the loans are owned by hundreds or thousands of organizations and individuals who don’t have the mechanism to see what the underlying assets in their financial instruments are doing.
The movie “The Big Short” actually does a great job of showing this but for the 08 financial crisis.
Anyone invested in crypto should read Bennett Tomlins blog about tether https://bennettftomlin.com/2021/06/21/a-non-exhaustive-list-of-bitfinex-and-tethers-misdeeds-and-red-flags/
I think there's a 90 percent chance that this will blow up and a movie like the Big Short will be made about the story behind it.
Tl;Dr Tether is ran by very dubious people, don't trust anything they do or say
> he's made similar predictions including: a couple weeks after the movie's release (https://nymag.com/intelligencer/2015/12/big-short-genius-say...), in 2017
His predictions sound spot on.
Here's what Burry said about the state of the economy back in 2017.
> Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest rates on a global scale. This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the system, and any fault lines there will certainly harm the outlook.
Now that half a decade passed between that article was published and right now, do you see any failure in the analysis?
Well, that'd be exhausting, but it didn't take long to find that since he became a celeb-investor in late 2015 (when the movie came out), he's made similar predictions including: a couple weeks after the movie's release (https://nymag.com/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html), in 2017 (https://www.lombardiletter.com/michael-burry-stock-market-crash/10895/), in 2019 (https://www.cnbc.com/2019/09/04/the-big-shorts-michael-burry-says-he-has-found-the-next-market-bubble.html), and now obviously in 2021.
Continually predicting the market is about to crash seems to be his thing.
I worked for an internet company in 2000 and was a stay at home parent looking for a job so as to avoid losing my HSBC mortgaged house in the fall of 2008 but still I share this feeling. I got a job hen and enjoyed the Big Short tremendously. I think the crypto documentaries will have nicer rich people details tho, tho sports cars etc.
Possibly worth noting that Burry is not the only Big Short figure to openly opine that Tesla's pricing seems way out of whack compared to its fundamentals. Steve Eisman (aka Mark Baum in the movie) was publicly short Tesla for a bit. I think he ended up closing out and losing money at some point with a rueful "It's very hard to short a stock that's a cult."
It's possible both of them are wrong and Tesla has fundamental value at a level they were unable to analyze. Or it's possible that Tesla's future will be determined by things beyond fundamental value. But it's also possible they're right on some timeline.
Imagine I have a bit of paper and I tell you in 3 years time, someone will want to buy this piece of paper for 10 million. I will sell it to you for 1 million now. If you believe me, it would be stupid to decline this offer.
Here it's explained in comedy form: https://www.youtube.com/watch?v=ZiJa9diJOMk
You can also watch the film The Big Short for another view into finance.
The most important thing to grasp is, don't think this can't be true because it's so stupid. It's exactly as stupid as it sounds.
For a more serious look, listen to John Kay: https://www.youtube.com/watch?v=SX3E-CbY1uE Or read the corresponding book Other People's Money.
> Big Short style doesn't always end in a lionizing outcome.
That movie was the worse thing that ever happened for a generation of traders. It reinforces all the worse biases traders tend to have. The moral of the story was to make a single concentrated bet, to throw risk management to the wind, to double down as you lost money, and to completely ignore any expert that disagreed with your investment thesis.
In reality for every Michael Burry, there's 100 stubborn overconfident idiots who YOLO everything into a bet that blows up in their face. First off, it's much better to make as many small independent bets than to have one big trade. It's also better to make trades with a fixed, ideally short, time horizon. Even if you're ultimately right, without a catalyst, the market can remain irrational longer than you can remain solvent.
Finally the best traders tend to be extremely open minded and willing to change their views on a dime. The human mind is heavily biased towards overconfidence. Good traders should be flipping their views as evidence comes in. This has been empirically verified by Philip Tetlock. The best forecasters are those who are quickest to change their mind. If they hear some expert with an opposing opinion, they don't dig in their heels like the heroes of The Big Short.
The problem is the qualities that make a great narrative hero are almost exactly the opposite of those that make a great trader or forecaster. We love a story about a bold contrarian, who goes all in on a single bet, and sticks to his guns no matter what obstacles come his way. The story practically writes itself.
But it's precisely this mythologizing that causes this style of trading to be the least rewarded in the market. Everybody wants to be the hero of their own story. There's way too many Michael Burry wannabes, and not nearly enough George Soroses.
I recommend 3 movies to every family member willing to deal with financial topics as a form of edutainment. The Big Short and Margin Call are two of them.
The 3rd one is 99 Homes. The key line is: "Don't get emotional about real estate." What is sold as a place for family memories for some, is just another asset class for others.
Margin Call was exactly what I was thinking as I read this. Underappreciated movie - definitely worth a watch for a more realistic take on 2008nthan The Big Short.
AIG is very important to the story.
A lot of banks saw what was going on in the market, and decided to "cover their ass" just in case the mortgage industry collapsed. They didn't quite go short like Burry (and everyone else in the movie), they just "hedged", to protect themselves just in case of a collapse.
Any bank that was worried about what was going on would have bought a few credit-default swaps from AIG (not that everyone knew that AIG was the main CDO counterparty: they bought CDS from the market and AIG happened to be one of those sellers).
If AIG went bankrupt, a huge number of shorts (well, "protection buyers") on the mortgage market would have gone bankrupt with them.
AIG isn't covered in the movie because it runs entirely counter to the narritive the movie is trying to build. A huge number of banks did in fact see the mortgage crisis and take moves to protect themselves.
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That's the thing about CDS and going short on the mortgage market: even if you were right about it, you had to also be right about the so called "counterparty risk". The bank who took up the long-side of the bet against you still needed to be around to make the payout.
That's why AIG was bailed out. Also: because the collapse of Lehman Brothers / Washington Mutual and other financial companies was wreaking havoc on the economy.
The movie wanted to focus on the narrative that "Bailouts are bad". Well, sure. But its pretty easy to build that narrative by ignoring the AIG situation, as well as Lehman Brothers / Washington Mutual.
If you go back and look at the actual history and debate of the bailout, the question is way more ambiguous.
>> the upshot that the AAA's were in a position to be unstable and possibly cause an economic collapse was in fact very true
That's not what the Jenga scene implied.
https://www.youtube.com/watch?v=3hG4X5iTK8M
You know what a number of my friends took from that scene?
"Wow, the banks are so stupid. Why would AAAs rely upon the B-tranche?"
Yeah, cause that scene is misinformed. The Jenga Tower is upside-down. America's Mortgage market wouldn't really collapse until the AAAs were being threatened (which eventually, they were, but because of CDO-squared and Synthetic CDO leverage).
But yeah, its a long story. You'd expect that the core of the story would be covered by a reasonable documentary. But "The Big Short" isn't one, its an entertainment movie.
AIG wasn't even in "The Big Short".
That's how crappy of a movie it was from a documentary perspective. They're missing the perspective of one of the major players entirely.
The book “The Big Short” is a documentary. The movie is based reasonably closely on the book. The movie is a fictional re-telling, but the people are real and their motivations and actions are accurate.
Same.
By the way, I thought Inside Job was a vastly better film about the crisis that was criminally under-rated. Definitely worth checking out.
Not perfect by any means, but far more informative than The Big Short, and not as dumbed down.
I have friends who keep citing 'The Big Short' for what's wrong with our financial system.
A lot of people can't tell the difference between fact movies and fiction movies.
And that doesn't even get into clearly biased documentaries (but I assume that most documentaries are at least trying to be factual instead of entertainment...)
It's happened before. Watch or read 'The Big Short'. Both the film and book are fantastic.
Also a good movie, but wrong. The Big Short is correct.
Watch the movie "the big short". It's really good. This is from one of the scenes where too guys try to get a license. Although the manage a few million dollars, in order to get the license they should have even more. Or as it turns out the right connections.
Kind of ancillary to the story, but can someone explain to me why "Hollywood" would even need any specific individual to be on board with a movie about this? It seems you could compose a character from many of the generic aspects without any specific viewpoint, and the entire point of this phenom was there wasn't a specific individual. I'm no screen writer but why couldn't you create the next "social network" or "big short" just from all the feedstock material?
The market can stay irrational longer than you can stay solvent and all that. Read/watch The Big Short if you haven't. (Most/all? of the people in the movie made out but almost didn't.)
Why short selling is legal at all? Well, why not? There are two or three parties to every short, all engaging in the activity because they expect to benefit.
1. The lender of the stock, who gets interest payments like any other lender
2. The short seller, who of course expects to pocket the difference if the stock goes down
3. The person who buys the stock from the short seller, presumably expecting it to go up (this party could, knowingly or not, be the same person as #1)
Sure, the short seller is taking the risk of a massive loss in a scenario like this, but that's their problem. And if they fail so hard they can't possibly return what they owe, then it becomes the lender's problem. But that's true of any loan, so it's up to the lender to set the terms in a way that limits their risk (e.g. not lending to "risky" borrowers, not lending too much of what they have in reserve). What's the difference with other forms of lending?
In the movie "The Big Short", weren't the short sellers the heroes of the tale -- the ones who really looked into the underlying assets, looked past the exuberance and overconfidence, and found the system to be rotting?
what is the truth though? As someone who only knows about stocks from 'big short' film and 5min video on youtube and wsb thread. I genuinely curious what are the ways this could play out.
is there a deadline on short sellers to close their positions? what is reasonable limit for the stock to go to? what happens if hypothetically nobody of wsb would sell their stocks?
It’s a fabulous movie. It perfectly balances the nuances of the 2008 crash with the human side of the story. I watch it once a few month and discover a new aspect.
I recommend “Margin Call”. Though I felt it overbalanced on the human drama it nicely complemented The Big Short.
Can someone explain why my perspective is wrong on hedgefunds please?
My understanding is that the GFC happened because the whole economy was levered to hell. At the risk of referencing the big short, there was a scene in that film where a stripper has levered herself up so much she owns five home. The reason the GFC happened was in reality because average people were levered up on real estate and couldn't afford their repayments.
I fully understand that the financial system also took on too much risk and many understood those risks, but the narrative that hedgefunds are entirely to blame for the GFC, and that they were the only ones being irresponsible with leverage, is surely wrong?
If the blame was with anyone it should be the regulators... Why were individuals and hedgefunds able to take so much risk? In the absent of regulation individuals and hedgefunds should be expected to take maximum risk for their own gain. Just like how WSBs did when they were all exploiting the infinite leverage glitch.
Another thing that I don't think is true here is that the government is only there for the hedgefunds... If this last year has proven anything it's that the government is perfectly wiling to bail out individuals if they feel it's necessary to save the economy. And if the financial system is so rigged against individuals then isn't it odd how those individuals seem to be so able to destroy the hedgefunds with relative ease from a free smart phone app?
I'm not trying to be edgy, I genuinely don't understand why people seem to blame hedgefunds for every inequality problem in society.
I find this refreshing actually.
What reason? Because it demystifies the room. It pulls the veil off and we get to see behind the curtain.
Strangely enough, I had a fleeting thought that this is why few firms went under and most got bailed out. I actually had this thought after watching the Big Short or another Wall Street movie about the 2008 crash. I thought that it was strange that Lehman was the odd one out and it struck me as a frat party. Only the cool kids survive.
@numair, you sound very candid and forthright. I appreciate it. I find it's difficult for people to mask their tone and reading this honest tone is refreshing. I wish you success in your endeavors.
One person's spending is another person's income. The more economic activity there is, the more people feel confident about their future, the more they spend.
They may at some point become "too confident" and start feeling that the 'party' may never end. So they go out and spend more and more: on new clothes, on renovations, or second (or third) houses, on new cars, boats, etc.
However, there's only so much capacity for (say) manufacturing: only so many cars can be built, and if you really want one, then you'll be will to pay $40K to get the new shiny instead of trying to haggle down to $37K. There's only so many housing builders and lumber that is available: and if you want more square footage, they'll be setting the price that you have to pay.
I'm not sure how old you are, but in the 2006-2007 timeframe there was a lot of "irrational exuberance" before people over-extended themselves.
The movie The Big Short is an entertaining and fairly accurate take.
I don't want to make false statement but "The Big Short" movie really helped me better understand what's going on in those days. I know that maybe reading some book is better but i'm not in to market and economics and the movie was nice
Wait, I thought Goldman came out ahead from the crisis.
They had the, "we didn't avoid the mortgage mess, we just made more money on shorts than we lost" and "we are very well positioned" emails that became evidence in the Senate investigation into the GFC. The ones are the namesake for the book/movie The Big Short.
Most buyers didn’t get mortgages from their retail bank, they got them through mortgage brokers.
Maybe there were lots of hapless old people who were misled by some bank they mistakenly trusted for years.
I don’t think so, the many examples I personally knew from that period were getting loans from specialized banks that set up mortgage shops, like Washington Mutual.
The book (and movie) The Big Short digs into this how regular people were overextending.
To clarify, the banks were bad actors by offering and participating. But reasonable people were avoiding the situation until the whole system tipped over. Someone borrowing at 40% debt to income or higher should never have done that, even if they trusted their local banker who was saying it was fine. Finance requires personal responsibility and people need education to help make these decisions (and they shouldn’t get this help from someone with a vested adversarial financial interest).
You're literally describing gambling. I watch people drop entire paychecks on scratchers at the local liquor store every week in hopes of a new mustang. If I head up north to the Chumash Casino, I'll find hundreds playing Keno with their entire lifesavings trying to win it big. WSB's is no different. Hell, it's even in the name of the sub!
Also, although WSB has had some affect on the GME squeeze, it was originally identified by no other than Michael Burry, the guy from the movie the Big Short. He's been in the GME game long before the reddit army joined in.
[1]https://www.businesswire.com/news/home/20190819005633/en/
I remember hearing about Michael Burry [1] also looking into aquifers and future water shortages.
[1] https://en.wikipedia.org/wiki/Michael_Burry
> Burry has focused much of his attention on investing in water, gold, and farm land. Burry has been quoted saying "Fresh, clean water cannot be taken for granted. And it is not—water is political, and litigious."[20] At the end of the 2015 biographical dramedy film The Big Short, a statement regarding Burry's current interest reads, "The small investing he still does is all focused on one commodity: water."[20]
While the Big Short is a good movie, this scene reeks a little bit of the same type of "eureka-insights" that permeate Hollywood fiction like the West Wing and pop-not-science books like those written by Malcolm Gladwell.
Obviously unemployment is bad for people, and it had adverse effects on people leading to depression and suicide. But the 1%-unemployment-40k-deaths stat seems too neat to use as a statistic, because there are so many variables that affect health & suicide in a community to make drawing a specific numbered correlation like this accurate.
Sound like a movie script. I’ve even got a title in mind: Big Short.
Interestingly and a bit off-topic, Michael Burry (of The Big Short movie/Scion Capital fame) had a few plays on almond farms regarding water scarcity. It seems that he left his positions a few years ago, but the whole California water wars thing is quite unsettling.
From an analysis by the Wharton school[0]:
“It’s not just that they missed it, they positively denied that it would happen,” says Wharton finance professor Franklin Allen, arguing that many economists used mathematical models that failed to account for the critical roles that banks and other financial institutions play in the economy. “Even a lot of the central banks in the world use these models,” Allen said. “That’s a large part of the issue. They simply didn’t believe the banks were important.”
They were fundamentally unprepared and many were unwilling to even entertain the idea that the housing market could collapse. That’s what made stories like The Big Short so surreal, they had all these experts telling them that they were wrong, and economists played a major role in that episode.
0: https://knowledge.wharton.upenn.edu/article/why-economists-failed-to-predict-the-financial-crisis/
I would suggest "The Big Short". It mainly focuses on the huge disaster of the 2008 financial bubble, and what led up to it.
Before watching the movie I had this feeling of how impossible it could have been for so many normal people to be screwed over so royally. The crisis obviously happened, but I lacked the understanding of how something like that could have happened. After the movie it was clear to me how systemic issues can be institutionalized if everyone is willing to look the other way.
Also, if you watch that movie and start hating everyone working with finance I recommend watching "Margin Call" and you'll only hate some people working in finance.
Preeeeeetty sure that's a joke, likening the events of the previous big crash to a film.
Speaking of films about the previous big crash, you could try "Margin Call" if you want a very straight-faced (to say nothing of po-faced) take, or "The Big Short" if you prefer something that, while no more genuinely incisive, is at least willing to pretend as though it were.
Both of the movies The Big Short and Too Big To Fail have a moment where they're watching people come out of a subway or walk down the street, and say something like, "They don't have any idea what's about to hit them."
It sort of feels like that now. Lots of normality still. There is definitely something not right about the stock market not feeling the impact of millions of unemployed and more than half of retail stores missing rent payments.
Maybe there's macroeconomic explanations involving credit and the Fed. Maybe the stock market is in fact disconnected from the general economy as a whole, and is really just a plaything for giant corporations and the 1%. Maybe it's not as bad as it seems. Maybe everyone's betting on a V shaped recovery after the virus fades. But as we saw during the financial crisis, everything seems fine until it isn't - then things go pear shaped in a hurry.
Growth in the US is 20% real, 80% bubble. Every now and then the bubbles burst, the baloons deflate to their actual value. And then greed accelerates things again. Unfortunately the acceleration happens on the "promise", not the actual.
If I may add a chart, the red line is for me the actual value of the US economy (DJIA)
https://www.tradingview.com/x/fvtBtRx6/
Top line is promised profits/accident waiting to happen. Bottom line is actual value.
Another thing that pisses me off was depicted in the movie "The Big Short". There is not enough actual money/products/things to go around, so we do derivatives. I remember derivatives from my Uni years. We don't have enough/good numbers? Drop a derivative of something, inflate it, mask it, and sit back and wait. And then the balloon gets too much air, it will deflat, people (retail) will lose their money, and here we go again.
It's not growth (in the USA) unless there is a 10-year-looping wealth redistribution.
There is a very real, if hidden, cost to economic suppression, especially in the United States where social safety nets are few and far between.
There's a line in the Big Short: "Whenever unemployment drops 1%, 40,000 people die". Surprisingly; this is more or less true, not movie drama. Its obviously difficult to draw causation between these two things, but there is causation. People have reduced access to healthcare. They have anxiety and depression from staying inside and being unable to socialize. They aren't working out as much. They can't take care of their family.
Let me present you this: People need N95 masks. Thank goodness, 3M is now churning out millions of them. But, wait... 3M is a company, but its staffed with people. So, those people need to go back to work, right? Those people need to drive to work, so they need gas stations, maybe even car maintenance. They need food, so supermarkets and restaurants need to stay open. Apply the same to people working in pharma factories, or our heroic healthcare workers, or many other industries.
The United States does not have a system that can stop. Some countries are built to be more resilient to stopping, and can do so over short periods of time. The United States is not one of them. If we don't get the economy started again, soon, people will die because we stopped the economy. Its a catch-22. There is no right way out, except to, hopefully, be more prepared and cautious the next time this comes around. But that doesn't help us today.
As in a memorable scene from the film The Big Short, (nsfw/expletives):
https://www.youtube.com/watch?v=7eYcWpgCb7o
Quote from the movie The Big Short: "Every 1 percent unemployment goes up, 40,000 people die, did you know that?". That is probably an exaggeration, but I really hope people in power know what they are doing at the moment.
You can't go wrong with 'The Big Short'. I saw the film a few times before I ever bought the book, and it's still enlightening.
I just happened to have watched The Big Short [0] yesterday.
In the movie (based on real events) the same thing happened: during the housing crash suddenly every bank had 'technical issues' when people tried to sell their stocks.
[0] https://en.wikipedia.org/wiki/The_Big_Short_(film)
So in movies like the big short when they day they have a negative carry on assuming that means they're paying instead of being paid?
As someone living in Hong Kong, it kind of blows my mind how little attention Americans have given this situation. All but a few Americans have their head in the sand on this, and the markets have not at all priced in the all but certain long term impact of this.
I've personally broken my long-time rule of no trading public markets and opened a Robinhood account to hedge against this. So far this week I'm up 5x on those hedges. Markets are starting to realize, but I don't think we're even close to having fully priced in the impact of this.
Everybody remembers the 2008 recession. A subset of people during that recession made a killing. The Big Short was a great book (and movie) about this. This is probably the first new opportunity to be a "big shorter."
Your comment illustrates what I found so frustrating about The Big Short, and people who cite it whenever CDOs are brought up: the filmmakers made no effort in understanding the theory behind CDOs, nor did they attempt to explain the potential benefits.
Now... it's possible that the way human nature works, CDOs will always result in companies engage in collective delusion that results in a similar meltdown. I think The Big Short would have been more interesting if it made that argument, rather than merely "CDOs are evil."
EDIT: I was reacting to the movie adaptation; I haven't read Michael Lewis's book.
Reminds me of all the scenes from the movie "The Big Short."
Humans have a natural tendency to discount things that are unpleasant. A site like this one contains a lot of people that have a lot to lose if the economy makes a downturn.
This kind of blind spot was featured prominently in The Big Short, especially the Brownfield Capital plot line (2015 film).
[1] https://en.wikipedia.org/wiki/Negativity_bias#Decision-making
There have been multiple Hollywood movies depicting how big business and agribusiness are screwing up the environment. The Big Short was a great film about how Wall Street is totally corrupt and straight up caused the housing crisis.
Should we have a movie made about ad tech and social media and their deleterious effects on society? Just to make it even.
Most of Silicon Valley isn’t working on ad tech, yeah, I get it. But for crying out loud what the hell are they working on? Thats my point. How this is interpreted outside of tech circles is that “tech” is just a thing to make “tech” people more rich.
Edit: I’d actually like to know what percentage of SV is working on ad tech, which I consider useless for American society at best and dangerous at worst.
This is a very good comment. Is this line of reasoning fleshed out and written up somewhere so I could point people to it? (Also, I would like to think more deeply about its implications)
> What models/theories of customer behavior were your experiments designed to distinguish between? My guess is "none" because someone thinking about the problem scientifically would start with a single experiment whose results are maximally dispositive and go from there.
This is how science is (at least, ought to be) done. This way, the goal is to always be improving your understanding of objective reality.
> They wouldn't spend a bunch of time up-front designing 12 distinct experiments. [...] So it wasn't really an experiment in the scientific sense, but rather a kind of random optimization exercise: do 12 somewhat-less-than-random things and see which, if any, improve the metrics we care about.
The problem is that a lot of AI salesmen tend to hype the "model-free" nature of "predictive" AI towards optimizing outcomes/goals, and people who don't know better get carried away with the bandwagon. Overly business-oriented people are susceptible to the ostrich mentality of not wanting to understand problems with bad tools -- they are too focused on the possibility of optimizing money-making. I find the movie "The big short" to be a fantastic illustration of this psychology.
It's probably going to lead to a very bad hangover, but for the moment the party's still going on and nobody likes the punch bowl being yanked away.
As explained in the post, you have to bite off very high levels of counterparty risk to short. Cryptocurrency exchanges die in something like 20% of exchange-years, and your estimate of an exchange dying _contingent on me being right_ should be biased towards the high side if they are exposed to the risks of using tether.
This is a subplot of the Big Short, and cost several groups of the protagonists a lot of money: they were so right about their prediction regarding the housing market that e.g. the banks who had brokered their swaps might have gone under, which would have impeded their ability to get paid. (There are several variants of the same thing discussed; the book is marginally clearer than the movie about them.)
The assets were always risky, way before the panic set in.
I recommend the books After the Music Stopped or The Big Short for background on the crisis. (Also the movie The Big Short is excellent).
> After every large financial event you are going to find some person who predicted it.
Yes, but not so many made a fortune from it, and even fewer who gave a proper explanation of why the crisis is going to happen and weren't just lucky.
These guys from "The Big Short" movie were explicitly betting against CDO, not against SNP500 as other lucky folks who also made a lot of money.
> I think you'll have a hard time finding someone who made more than one correct prediction (and none, or at least very few incorrect ones).
Predicting one of 5 crisis during lifetime (with real money) and simply not losing money during other 4 crisis is a huge success for predictor I think.
> It's easy to be correct if you just throw everything at the wall as see what sticks.
Only those predictors who throw real money at the wall count, not these endless newspaper analysts.
TL;DR I don't believe those folks from the movie were just lucky.
Some people can predict a crisis, they make films about these people: https://en.wikipedia.org/wiki/The_Big_Short_(film)
But yes, a significantly large number of people cannot predict a crisis, it is catch-22.
If I knew I'd be rich. If we knew what particular aspect was going to be the cause of the recession, the market would already have priced that in and we would evade the recession. There are undoubtedly a few people who will know, and a few years after the recession big short type films will be made about them.
What about the guy played by Christian Bale in The Big Short[0]? Surely his models were not BS.
[0] https://en.m.wikipedia.org/wiki/The_Big_Short_(film)
Michael Lewis (Moneyball, Big Short) interviewed Alex Kogan:
https://atrpodcast.com/episodes/the-alex-kogan-experience-s1!d20f3
After listening to this, it sounds like Cambridge Analytica was overblown, in the sense that the information wasn’t as useful as claimed.
"One of the hallmarks of mania is the rapid rise in the complexity and rates of fraud." -- Michael Burry, The Big Short (Film)
I've seen "The Big Short" movie lately and I was flabbergasted about how the finance industry works. I'm beginning to realize that this pattern is universal in all industries. I also see that we as a species are suffering from the same mechanism. We won't learn until it is too late. I want to understand the pattern so I can find a way out of it somehow.
BTW: where do you work as a CTO?
The problem is old, going back, one example after another, continually to a famous quote of Jefferson about sewage news at
http://press-pubs.uchicago.edu/founders/documents/amendI_speechs29.html
So, for a fix, first, mostly ignore the newsies (a word from a Bogart character in the movie The Maltese Falcon).
Second, much of politics is trying to get votes from name recognition from shocking statements based on gossip, lies, distortions, made up nonsense, etc.
Well, then, the newsies and the politicians have a strong interest in common: For name recognition for votes the politicians want their shocking stories told, and for ad revenue from eyeballs the newsies want shocking stories to tell. There was a similar remark in the movie Lawrence of Arabia.
So, the second step is mostly to ignore the politicians.
A third step is, for information that might be in the news, fall back to and insist on at least common high school term paper writing standards, rational, responsible content with thorough references to objective, credible, primary sources. With this third step will entertain:
Believe none of what you hear and only half of what you see and still will believe twice too much.
Measure twice and saw once.
Essentially everything you see in the media was put there and paid for by someone who wants to influence your opinion (Sharyl Attkissson).
It's not what you don't know that gets you into trouble. It's what you do know for sure that just ain't so (In the movie The Big Short and there attributed to Mark Twain).
Will conclude that for nearly all the news, printed on paper it can't compete with Charmin and on the Internet is useless for wrapping dead fish heads.
A hope is that the Internet will enable many more new information sources with some with lots of credibility and narrow specialization and that the best of these sources will help the US and civilization.
I remember at the end of the movie The Big Short, it had said Dr. Burry was investing all of his money on his next big bet: water.
Flash boys was pretty much one sided incorrect views about how HFTs work designed as an advertisement for a new exchange.
It was highly read and picked up by armchair experts everywhere leading to lots of outrage against... not much in particular other than evil Wall Street people stealing muh money.
The Big Short is in a similar category although it wasn’t really an ad so much as an excuse for everyone who overleveraged on their mortgage to pat themselves on the back and shirk the responsibility of financial ignorance onto “evil Wall Street people”. The movie (while entertaining) was even worse.
>As we can obviously see, even professionals in medical sciences were wrong about Theranos. How did John Carreyrou, a WSJ reporter, do such a good job reporting on them?
Simple, medical professionals aren’t equipped to sniff out business fraud signals like investigators of businesses. Given that Theranos didn’t have technology, it didn’t take any more medical expertise to explain that then it took medical expertise to explain Bernie Madoff.
Yes, it's an incredibly complex topic. Most people without a strong background in finance pick up their education on the topic from oversimplified source, such as:
- their family/friends' opinions,
- Wikipedia,
- documentaries,
- movies like The Big Short
To be frank, unless someone has spent a significant amount of time doing hard research on the topic or is a professional in the industry, they shouldn't assign any confidence to their opinions about what caused the crisis. They can agree it's bad and shouldn't happen again, but beyond that most message board conversation is simultaneously prescriptive, uncritical and conflicting.
In this particular case, we're seeing people talk about the topic who are evidently unfamiliar with the legitimate use of risk pooling in finance. It's rather too complicated to be summarized in a few paragraphs on HN.
Thinking about this reminded me of the line from the movie "The Big Short" where Michael Burry says one of the indicators of the coming crisis was an increase in the rate of fraud. Juxtapose that with what feels like an uptick in white collar fraud these past couple years. ie: Theranos, Fyre, 1MDB, numerous crypto token related scams.
Just as vast fortunes were made during the financial crisis of 2008 by selling the markets short ( see the film "The Big Short") I would expect there are people betting on climate change continuing down its current tragectory, and these people now have a vested interest in making this happen. I don't know how many other billionaires are putting their money on the pro climate change side but wouldn't a smart investor diversify their portfolio by betting on both the pro and con sides of climate change?
I don't know what the form of such investments would take but can think of a simple one being investing in real estate northern regions where temperatures are currently too cold to support agriculture. Possibly an investment in water desalination plants would also see a gain from climate change. I'm sure there are many more better examples, my concern is that for every billionaire looking to save the world, there is another looking to make a buck off its collapse. So what happens when more of these profateers decide to use their vast fortunes to tip the scales further towards the collapse rather than salvation?
Unrelated to the topic of the student debt bubble, the opening paragraph left a bad taste in my mouth:
> I hated the film adaptation of The Big Short. The acting was good and it did have a surprising amount of energy for a story that centers around men in suits doing math. But I felt condescended to. Maybe director Adam McKay tested an original cut—one minus Margot Robbie—and realized a good amount of the audience couldn't follow the plot without having a sexy lady in a bathtub break the fourth wall to explain subprime mortgages and the financial crisis.
Sounds awfully pompous, like it came from r/iamverysmart. Much of the impetus behind The Big Short certainly was to break down the 2008 financial crisis to those that aren't economics/finance wonks, or for whom a narrative holds more weight than a several-hundred page non-fiction book about it.
It's not that I want journalists to coddle their audience, I just think it's a bad look to completely dump on other creators to inflate one's ego while trying to make a point.
How about this, which still includes a bit of criticism of the director (but milder):
"While the film adaptation of The Big Short had good acting and a surprising amount of energy for a story that centers around men in suits doing math, it wasn't exactly my cup of tea. Perhaps it's because I felt Adam McKay didn't trust his audience quite enough to understand the ins-and-outs of complex subprime mortgages and the financial crisis, instead falling back on gimmicks like having Margot Robbie in a bathtub break the fourth wall to explain it all.
"In some ways, America's student-debt crisis is a lot simpler than all that."
I don't know, maybe that's not any better: and maybe by criticizing the author I've become the thing I set out to...criticize. Whatever.
They ring true. Some moments don't even have to exaggerated to be funny. That is exactly how being "cool" works in parts of India, and just the fact is enough to make a person from the west crack up.
Dinesh is one of the few nerdy Indian stereotypes that I do not mind. All the others seem like caricatures and generalizations of South Asians. Dinesh on the other hand, could be sitting right across my table, coding....
If The Big Short is considered a great "documentary" for the 2008 crisis, then SV does even better for the Valley.
I get what you are going through. I overbuy products when I find something that I like because I get anxious that I won't be able to find it again. I have stockpiles that irritate my wife and take up space.
Do you have a wife and kids to support, by chance?
If yes -> is this effecting them?
If no -> have you fallen on hard times before? Or has a family member and you were not able to help them out?
Money is far from one of my concerns in life. For me, I meditate, I read books, I enjoy friends, I enjoy making pour-overs, I enjoy walks, etc.
Maybe you just need to slow down a bit? While slowing down take a look at the things you enjoy and try to make a plan to enjoy them more.
The thing about money is that when you have it you want more, you won't ever have enough.
Have you watched "The Big Short"? Perhaps do and realize that as people make money others tend to lose money, jobs, houses, etc. From the movie for every 1% unemployment goes up, 40,000 people die.
I agree, The Big Short was insightful and you come out of it with a better understanding of the financial industry. The Wolf of Wall Street glossed over the financial information to focus on the debauchery, which to me is far less interesting.
Boiler Room and The Smartest Guys in the Room are my other go-to business movies.
You could watch Crazy, Stupid Love (very funny movie with ensemble cast), you could watch The Big Short (again, ensemble cast), you could watch The Place Beyond The Pines...
I absolutely loved the film and thought it was an incredible piece of art and a piercingly realistic depiction of a certain VERY REAL type of masculinity. You're lucky that you find it unbelievable / overdramatic.
Anyway, when I was a kid I used to love seeing those burnt capsules in the Science Museum in London. So crazy to see the story rendered to beautifully, along with the politics, the oxygen fires, the bouncing off the atmosphere... I couldn't have asked for anything more.
I thought his portrayal was a realistic vision of the pitfalls of masculinity, and not melodramatic at all. My dad's like that, except he smiles instead of having the blank Gosling face. My dad didn't cry even at his own mother's funeral.
Seeing Gosling/Armstrong closing up the notebooks where he'd been trying to figure out how to cure his daughter's brain cancer, seeing him cover his face to cry silently, seeing him snap at his friend "Do you think I left there because I wanted to talk?", his fear of his emotions... It was just so true to life. I cried multiple times in that film. Of course films are always a bit romanticised - I have to say at no point was the illusion broken for me.
I think that film gets into my top 3 films along with Gattaca and The Matrix.
I love Drive but it was really Blade Runner 2049 that made me realise that his "silent" roles are actually a deceptively simple comment of the state of masculinity, kind of like American Psycho (film > book IMO - interestingly the screenwriter of the film was a woman and the directory of the film was a woman, and the film & book are a critique of that version of masculinity).
Also Ryan's performance in The Big Short made me realise that he is CHOOSING to do his "silent" stuff when he does. He's a very talented actor.
Thank you!
- "The big short" (https://www.imdb.com/title/tt1596363/?ref_=nv_sr_1):
Good actors, nice style, sometimes funny, interesting. Again some good explanations and examples about how short selling works, recap about the US housing bubble, rating agencies and the whole finance industry in general.
I can think that probably the point of this film is to make people get rid of their naive view of the financial market/industry? E.g. in my case I always tended to think that it involved cause&effect / action&reaction but this does not seem to be always true. It triggers indirectly a lot of thoughts about many other themes (e.g. is self-regulation effective, impact of governments getting rid of existing regulations, complexity and interconnections in the financial markets, risk analysis, etc...).
- "Active measures" (https://www.imdb.com/title/tt8135494/?ref_=nv_sr_1): pending... (cannot hear about this stuff anymore, but the documentary has a high rating, so I'll give it a try)
Watch the Big Short.
And given the times, really make sure you watch all the Russian/Putin/Trump documentaries - specifically "Active Measures"
My knowledge here comes from the film Big Short so take that with a grain of salt lol, but they explained it as a step beyond what you describe in that a synthetic CDO as more a bet or insurance on the underlying bundled debt. So like placing a bet of $1000 that the $100 debt owed to alice wont default.
https://www.youtube.com/watch?v=EEXTqtH-Oo4 https://en.wikipedia.org/wiki/Synthetic_CDO
Could you dig up a few of those CDO washing theses?
The Inside Job documentary showcased a few economists that had conflict of interest, but haven't mentioned anything concrete about CDOs.
> Much to the contrary, they went on enjoying the same mind-boggling luxurious elite lifestyle they always did.
The culprits had money and they will have money. They own the banks, and of course they opposed regulation.
But they are not the same as those who know what's going on.
"It is well known and documented that the financial crisis was no accident; everybody who headed the financial services industry to the state it was in did so knowingly, knowing full well the inevitable consequences, but not giving a damn because the arrangement let them to become handsomely wealthy, beyond our imagination."
This is incorrect. Some knew and bet on it. (See the Big Short for example.) Some knew and exploited it. (See Goldman Sachs selling shit to clients, for which it paid 550M USD, and the guy got charged with fraud, etc.)
It was an emergent phenomenon. It's not an accident as a car accident, where you look away for a sec and you rear end someone because someone stepped before the car before you, but it's very much not a conspiracy.
It was a systemic breakdown, fueled by the very much gutted oversight and misaligned incentives created by money in politics. And that's something very hard to escape.
The lack of jail-time verdicts is not surprising, after all the laws are very much set by those who have the most money, and they usually don't like to go to jail if caught.
So we're left with DPAs ( https://www.penningtons.co.uk/news-publications/latest-news/2018/deferred-prosecution-agreements-five-years-on,-what-have-we-learned/ ) and they are pretty effective from time to time ( https://www.osler.com/en/blogs/risk/december-2017/the-long-arm-of-the-law-multilateral-enforcement ) but it needs investigators, staffing, and cooperating legislators.
Banks (and the financial industry) listen to incentives. Jail time is meaningless if all you can get is some middle manager. For that the reporting and compliance regulations help - as higher ups have to sign off on certain stuff, so they can't deny knowing this or that - but this means that really shady things will turn into compliance issues, and into fines. (Which is a lot better than remaining in the dark without any consequences, as it was before compliance regulations.)
> It's feudalism with extra steps.
Agreed.
The Big Short - nice movie, check it out :-)
In 2005 I received a postcard from my former next door neighbor, a realtor, offering a townhouse in our old neighborhood in South Florida for $300,000. I couldn't believe it: they'd been $100,000 when they were built, six years before. I'd bought mine for $140,000 in 2001 (much to the doubt and disbelief of my neighbors at the time, thinking it too much to pay.) When the advertised townhouse sold for $300,000, I started to ask 'Where did all this money come from?' I read voraciously, came to the same big picture conclusions that the people in 'The Big Short' did (I recommend both the book and the movie, at your preference), but didn't learn to make money off of it the way they did.
This is the correct answer, I think. The people who made the mortgages were no longer the people that owned the mortgages. The banks didn't even hold on to them, they sold them in tranches to investors. So no one in the actual industry had any incentive to do anything other than close mortgages.
People could get no down-payment mortgages, could get mortgages with bad credit, could get mortgages on houses they couldn't afford, because all the mortgage originators just fudged the paperwork. No one wanted to find a reason to not provide the mortgage.
Everyone being able to buy a house heated the market up, and as people got used to the market going up and up, it was seen as a good investment, and more people bought more expensive houses they couldn't afford, and mortgage originators did more shady things to make it happen.
A lot of these mortgages were adjustable rates that started at a really low rate, and in 3 years could shoot up to a much higher rate. An optimistic consumer wouldn't worry much about that. But when the time came, some people couldn't pay the crazy increase in their mortgage. The foreclosures coming onto the market depressed the market.
So the bubble finally popped, and someone owned a house that they bought for $750,000 with no money down, an adjustable mortgage for the whole $750,000 that started at 4% and in three years shot up to 8%, and when that happened the house could only be sold for $450,000. So they just stopped paying the mortgage and walked away. The foreclosures further depressed prices, created a very nasty cycle.
I worked in land records at the time, and the standards for the mortgage originators were just horrible. Not bothering to record mortgages in the correct town, not bothering to do a lot of things.
There are a few movies that are really interesting that described what happened, real life thrillers IMO. "Margin Call" is awesome, "The Big Short" explains what happened really well and is pretty funny at times, and "Too Big to Fail" is from the regulators point of view. It's kind of awkward but still really interesting.
> tech bro... CEOs
Even in this headline, there's some pretty interesting equivocation happening between techies and CEOs overall. The article makes a decent case for why there's collective anxiety about tech companies, but neglects the question of "why only tech?"
The ~1990s had a whole string of movies with bankers and investors as villains: American Psycho, Rogue Trader, Glengarry Glen Ross, Wall Street, Boiler Room, and so on. Lately, we had had Wolf of Wallstreet and The Big Short, but in a post-2008 world where banking already has trashed the economy we're surprisingly short on bankers-as-villains films.
We got a couple of global warming films in the 2000s, and a couple more in the 2010s, but I can't think of one which makes a serious attempt to cast oil CEOs as villains - certainly not in the sense that e.g. tobacco companies have been. Avatar is probably the closest thing to "CEOs trashing the environment" that's been a hit.
Pharma companies lend themselves to human-interest tragedies, and we did get Dallas Buyer's Club. But there's no whole genre here like there used to be with "the bank takes the farm".
So there's the missing question: why tech companies specifically? The most obvious answer is just "more impressive visuals". I'm not sure we're talking about a particular anxiety of the moment, or if it's just that banks and oil companies work better on the page than on the screen.
I would recommend learning more about the things you hate.
I used to hate modern art. I thought it was only for obnoxious people. Then I decided to take a college course on it and it's my favorite period of art because I learned to understand it. For the same reasons, I decided to take a course on the black power movement. My parents were racist so I was probably racist so I wanted to learn more. I learned about the Civil rights movement and discovered many personal heroes. I used to dislike John McCain and politics even though I knew very little about either, until I saw a documentary about McCain and learned he was literally a hero. I used to think finance, statistics, and programming were for smart people unlike me, until I learned more and developed a love for it.
I used to think the red pill was complete trash until someone forced me to watch the red pill documentary. It led to a painful breakup where we both weren't able to empathize with each other's traumas. I could not empathize with his pain of feeling inferior (because that's my status quo) and he could not empathize with the systemic oppression and violence against women (physical, sexual, and emotional). I feel he felt that his father may have been taken advantage of, abused and used financially and feared that for himself. While I watched my father abuse my mother, emotionally and financially, and feared that for myself. It was strange how we both felt strongly about both sides, the same problem, except we were passionately divided simply because of gender. I learned a lot and probably will always be learning from that experience.
Every time I've challenged my views, I've been rewarded.
Two books I've enjoyed or am enjoying that are about chaos:
Evicted by Mathew Desmond covers American poverty from a housing perspective.
The Big Short covers the 2008 financial crisis and it's much more informative than the film.
> It's because film is a visual medium,
It happened with books too: See "Liar’s Poker", by Michael Lewis. He says that he wrote it "so that fewer idealistic college kids would dream of working on Wall Street. ... Somehow that message failed to come across ... They'd read my book as a how-to manual."
http://www.gatsby.ucl.ac.uk/~pel/misc/The-End-of-Wall-Streets-Boom.html https://danwang.co/liars-poker-by-michael-lewis/
Michael Lewis also wrote "Moneyball" and "The Big Short" which were made into films.
Start of the Great Recession. S&P 500 went from 1400 to 800 in six months. I lost 40% of my retirement investment and it was ... distressing to say the least.
Movie recommendations: Margin Call https://www.youtube.com/watch?v=Hhy7JUinlu0 The Big Short https://www.youtube.com/watch?v=MesrrYyuoa4
"I am happy when I'm unhappy" - a line from the movie, The Big Short
Basically, everybody wanted to ride the gravy train and nobody wanted to be the killjoy that pulled the brakes before it flew off of the cliff. There was a lot of money to be made and nobody thought they would be the ones left holding the bag.
The movie The Big Short explained this pretty well.
it'd be like the big short but the whole movie is the Vegas scene and they lose money in the end
Interesting. Have you see "The Big Short"? Towards the end there's some scenes where banks aren't paying out on Credit Default Swaps (I think) even though the mortgages were failing. The movie didn't really touch on why this was happening. Was this caused by the second manipulation that you mentioned?
I strongly believe that USDT isn't fully backed by USD. They have repeatedly said it is but I do not believe it.
Now we have a bit of proof that Tether has been lying or misleading via this Bitfinexed employee?
If it is backed by one or more cryptocurrencies that is better than nothing, but it means that there is significant risks that in a large market correction in cryptocurrency the backing of USDT can vanish from underneath it.
Back in the dotcom bubble nearly every company was causing the market to go up because they were all spending VC. It was sort of an fragile ecosystem because no one was making money, but everyone was spending it, and then the music stopped and a good portion were wiped out.
The music could stop and USDT could run into significant issues.
I am reminded of the movie The Big Short. I do think there is a bet here (like many others), but how to actually realize it and also how long will it take for this to be exposed?
"The Market Can Remain Irrational Longer Than You Can Remain Solvent"
More and more I'm reminded of the scene from the movie The Big Short: "I'll do the deal, but I need one thing from you: tell me how you're going to fuck me." I just plain dumped FB, but every time I have an interaction with Google, Microsoft, and many others, that scene comes to mind. Only unlike the movie, I'm never going to get that answer; it's up to me to just guess, and my guesses are not flattering to the company.
Whereas when I spend money with Apple, AFAICT it's a simple, "give us some money, and we'll give you software, a service, or a physical object that we and you hope will solve a problem for you. Then we're done." Sure, Apple costs extra, but I'm willing to pay extra as long as our transactions stay the way they are.
Reminds me of the film, The Big Short, where the main characters find out from an adult entertainer that she is buying multiple houses.
The interviewer asks this woman about the future of Bitcoin when she's clearly not an expert because shes says, Bitcoin "will be too high for individuals to invest in." One could buy a fraction of a Bitcoin to "invest" as little as $5.
The question is not whether we're in a bubble, but when it will pop.
So what do you guys think of this?
I believe all BTC trading spikes are driven by some of the existing owners swapping coins and cash every now and then to keep the trading volume high. It is in their best interest to get the prices bounce back higher whenever it goes down.
Once the price is manipulated higher, they can sell and keep the cash when someone who thought BTC is the next "I-Dont-Know-What-It-Is-But-Its-Going-Higher-Everyday" buys it. Since there are no regulators to protect against market manipulation, it's a fairly easy thing to do 'legally'.
As per GDAX you only need 10s of millions of dollars worth of coins to manipulate and mint money on this. Ordinary folks can't do it, but those who have been holding a few thousand or tens of thousands of coins can easily do this. The bitcoin billionaire brothers for example can do this. Buy every low priced limit order until it hits the price they want and then sell it off based on the frenzy buying on the back of the "always-bouncing-back-safe-harbor-currency".
Rinse and repeat every time price takes a dip.
I hope at some point someone will step into regulate things around bitcoin so that the real market demand will determine its prices. I read an article that people are mortgaging their homes to buy BTC.
If nothing changes, we might be looking at a sequel of the movie "The Big Short"
The financial crisis has many facets. I was deeply interested in the subject at the and in the ensuing years afterwards. I highly recommend Michael Lewis' books on the subject, especially "The Big Short." The film was decent, but didn't go into the same amount of detail as the book.
There was much fraud, especially in two places: At the ratings agencies who turned garbage bonds into A+++ good to go, never-gonna-lose investments. They should have all gone to jail for that.
The second place was at the banks doing no-doc mortgages because the bankers had huge demand for the crap bonds and the result was that lenders were both outright fabricating loans or lending money to illegal immigrants who couldn't speak any English and didn't even have jobs. Tons of un-prosecuted fraud all over the place there. A few people went to jail, not many. Look at Wachovia Bank and Countrywide as two examples.
The other place there was not fraud but enormous unethical behavior was in the sale of CDOs--the "insurance" policies that backed up all the garbage bonds with huge leverage. CDOs took down Bear Stearns and in all honesty, should have taken down all the big players including Goldman Sachs, but the Fed stepped in and bailed them out to the tune of trillions of dollars.
The American public paid the price. If you recall the $4-5+/gal gasoline from 2009 and on? That was all part of the bailout scheme. And your 401K took a huge hit, some people still haven't recovered from that time period.
Regular people paid literally out of their own pockets so that a bunch of shitbirds could stay billionaires. We allowed corrupt politicians to bail out their pals and we didn't do anything. We the people should have revolted and shot every one of those stinking crooks. Instead, we the people are treated for what we are--a bunch of doormats.
Nobody did it until someone did. Then it went big! For reference watch the movie: The big short.
I can't help but think of the movie the Big Short. There's a large pool of social media marketers, influencers and other tangentially related businesses, all in some way propped up by this fake activity. They're not unlike all the hands that got involved in the mortgage business and securitizing of sub-par, high risk loans. If only there was a way to "short" the Instagram industry.
p.s. To those debating what constitutes a "fake" account, don't forget that the term was only recently invented: https://www.avclub.com/merriam-webster-points-out-that-trump-didnt-invent-fak-1819298951
Considering the fact that Richard Thaler made a cameo in The Big Short Movie that was primarily demeaning Wall Street Banks and Economists who played along in the crisis, itself makes him an Economist who stands out. http://www.chicagobusiness.com/article/20160226/NEWS01/160229871/u-of-c-prof-in-big-short-cameo-is-a-stock-picking-star
He wrote the book Nudge with Cass R. Sunstein, about nudging people towards better decisions by reframing them or changing defaults.
Tversky/Kahneman got the Nobel Memorial price in Econ also for behaviour econ ("Prospect theory"), in 2002.
From the article:
> Asked how he would spend the prize money, he replied: "This is quite a funny question." He added: "I will try to spend it as irrationally as possible."
> Professor Thaler had a cameo appearance, alongside the actress and singer Selena Gomez, in the film "The Big Short," in which he used behavioral economics to help explain the causes of the financial crisis. Asked about his "short Hollywood career," he joked that he was disappointed his acting prowess had not been mentioned during the summary of his achievements when the award was announced.
Funny you suggest market competition. In The Big Short movie, it's competition that the ratings agency rep played Melissa Leo cites to explain their corrupt ratings:
Georgia: If we don't give them the rating, they go to Moody's. Right down the street. If we don't work with them, they will go to our competitors. Not our fault. Simply the way the world works.
Vinnie: Holy shit.
Georgia: Yes, now you see. And I never said that.
https://www.youtube.com/watch?v=mwdo17GT6sg&feature=youtu.be&t=3m18s
Put another way: if you've seen the movie The Big Short, it's like they cut out all the Florida scenes.
If you haven't seen The Big Short, it's still on Netflix.
You're right. I rather meant to say "people were manipulated into buying...". It's always the same, people don't understand because they lack education and some rich guy will take advantage of that. The movie "The Big Short" [0] sums it all up very well.
[0] http://www.imdb.com/title/tt1596363
Have a look at "The Big Short" (the book, not the movie). Reading how clueless those idiots at those Rating Agencys were is fascinating. The had no idea, basically just rating every pile of horseshit AAA because they are dumb and have no idea what they are doing.
Respectfully, you're dancing around the issue.
What it would betray is the reality that not all wealth is earned equally. Yes, there are plenty of people that earn through effort and merit. But to look at one's environment (wether in a first, second, or third world country) and not see how much wealth is created through cheating is ludicrous. When someone walks into a bank with a gun and empties the registers, it's easy for us to see how that's criminal. But someone who empties a bank via Wall Street, etc. is just doing their job I suppose.
http://www.imdb.com/title/tt1596363/
You might be interested by the book (or the movie) The Big Short: https://en.m.wikipedia.org/wiki/The_Big_Short
> All conflict originates from sex or violence.
What about The Big Short? No sex or violence there. Or what about Spirited Away? I'm sure there's some ostensible violence here and there, but the conflict in that film I think comes from things being out of place, not from overt danger.
Sex and violence are overrepresented in media because they are easy. A writer who has drank too much coffee and is out of ideas for the 10th day in a row can put some sex or violence up without thinking much and get a reaction. That doesn't mean these things are the only source of conflict in the world, or in storytelling. Just the easiest.
I think part of the problem comes from the illegibility* of trust. In the specific example of mortage-backed securities, as much as it disrupted the (debt? non-finance guy here) industry, it also enabled opportunistic behaviour in people at the micro level.(Think that stripper with 5 houses mortgaged from "The Big Short" movie) and at the macro level(think rating agencies vs the big bankers). At the end of the day, any disruption of the finance industry that cannot check(not necessarily stop) this kind of opportunistic behaviour will always be liable to bubbles and big crashes. The checks might simply be limiting the amount of loss in crash. Not sure how to develop something like that though..
* -- http://www.ribbonfarm.com/2010/07/26/a-big-little-idea-called-legibility/
I've read through many of Michael Burry's old (early-mid 2000s) forecasts on the Value Investors Club forums, and I have to say, I'm not as impressed as the hype would suggest. Don't get me wrong, he's clearly very intelligent and understands the underlying theory. But a lot of the legend ascribed to him is less impressive when you consider the fact that shorting a market/security requires being more than just right, it requires being right at the right time. It's not enough to say, "We're in a tech bubble!" or, "We're in a housing bubble!"; any number of credible analysts is doing this all the time - what is actually difficult, and consequently profitable, is to forecast both the correct trend and the correct time in which the market will collectively "realize" the trend. On a long enough timeline, any reasonable forecast can be vindicated. 18 months, 12 months - not even six months is a sufficiently narrow slice of time for forecasting a market correction. I see a lot of people (not necessarily you) using Burry as an ideological example of someone who stood up to Wall St and beat them at their own game. The narrative of Burry as a heroic figure who beat a bunch of traders and hedge funds through superlative intellectual prowess scratches a fundamental underdog itch in storytelling (and for some, it also appeases a political ideation about Wall St as well). But I think the evidence that he could really pinpoint exactly when the crash would happen is inconclusive at best.
As one example, we can look at the forecast Burry is best known for, from The Big Short (and the corollary film depiction), and I found myself identifying much more with Michael Burry's investors than those who praised him at the end of the story. Scion Capital was hemorrhaging its investors' money, and for a nontrivial amount of time even after it became widespread knowledge among the institutional elite, the market failed to crash and vindicate Burry's short. From Burry's perspective, everyone around him thought he was wrong, but this misses a lot of the nuance. His fund's investors weren't necessarily concerned with him being right or wrong per se, they were concerned with the ridiculously inane risk he decided to take with the entirety of the firm's capital. It's great that his bet turned out so well for him, but calling it genius (as many do) is so charitable as to be almost literally incredible. Michael Burry could have easily been right but unlucky, and simply run out of capital before he could make a return on the short. This is why the saying, "The market can stay irrational longer than you can stay solvent" is so important.
Look at this from the perspective of Burry's investors, not the retrospective story of Burry's victory. If you were an investor in a hedge fund, and one day out of the blue the CEO emailed to inform you that the entirety of the fund's capital would be liquified to leverage a single market position, and that you would not be allowed to withdraw any of your capital, would you react with approval, lukewarm disinterest or abject horror? Even if you bought fully into Burry and his strategy, would you have the requisite nerve to be comfortable with such an astronomically risky and contrarian position?
That said, one of the things that impressed me most about Burry is that he could withstand such intense and prolonged pressure from both investors (harassing, suing and ostracizing him) and significant financial loss (albeit ultimately unrealized). It takes incredible fortitude to be able to lose that much capital in the pursuit of a positive return.
There's bias and then there's financial bias.
Here's the kind of thing he has been writing on reddit:
>I'm driven by facts and evidence and not by some big name person investing money. These people sometimes invest based on ego (which pretty much explains Google Glass). I would suggest you watch the movie "The Big Short" (not totally factual but it gets the point across). [1]
My eyes rolled when I read that quote from him: he started his whole debunking-Magic-Leap blog series by making a disclaimer that he was buying eMagin and trying to pump them up by showing that Magic Leap might be using them.
Only egotists would invest in hyped-up Google glass! That's why he wishes he did:
> The last time I played this game of “what’s inside” I was the first to identify that a Himax LCOS panel was inside Google Glass which resulted in their market cap going up almost $100M in a couple of hours.
A little bit of ego there, huh? Why, he was personally responsible for $100M of market cap and wishes he could have bought in so that he could dump the position during the hype, knowing that Google Glass itself wouldn't take off in the long run.
And even after missing out on that opportunity, he missed another:
>About the time Himax stock hit its high, I found out about the Seeking Alpha article and posted a comment reiterating what my blog post had stated that I didn’t think the Himax panel was used in the newest prototypes (there were also comments from others stating the same). Himax then stock dropped back about 16% or about $135M in market cap. (Gad, I should have shorted before I wrote that comment ).
None of this is some huge moral indictment; just be aware the guy is now openly thinking along these lines when he writes technical analysis on his blog.
[1] https://www.reddit.com/r/magicleap/comments/5fyq6b/some_more_info_on_the_state_of_fiber_scanning/dao4lds/
I think for a Hollywood movie, The Big Short has a lot of great tidbits of information and lessons in the housing market, especially if you're in North America. Worth watching when you're unwinding from all that learning. :)
"I'll pay you to go watch The Big Short and then try to tell me that again"
That's the problem with 'The Big Short'. It's a terrible film because it mostly points the finger at bankers as somehow 'guilty of some crime' - and they are not. They are 'guilty' of doing some things, but not breaking the law for the most part, and they didn't get into some other issues, particularly they didn't want to point fingers at the millions of Americans who lied on their mortgage applications.
There weren't really any crimes obviously committed in the 'big short'.
Maybe the hucksters in Florida overlooking issues on loan applications.
Maybe the ratings agencies ... but it would be extremely hard to prove this one.
Ultimately, the banks stupidly gave credit to people they should not have, and it inflated really badly and got out of hand. Stupid lazy bankers all around bought crap without doing due diligence and they paid the price.
It was people making a lot of bad bets due to the underlying failure of information the system.
All the individuals lying on their loan forms are at least as guilty as anyone else.
"At banks. At rating agencies. At investment firms. In the government"
You'll have to list specific examples, because I see greedy people making stupid decisions, not fraud.
The ratings agencies didn't commit 'fraud' - they did not accept 'money to change their ratings', this would be fraud. What they didn't do well is their actual jobs, because to do it well would have meant less business. So this was a conflict of interest that led to a really bad outcome, but it's not outright fraud.
Movies seem to really be hollowing out the middle more. You've got a lot of very low-budget fliers and indie prestige stuff and a lot of $100M+ mega-movies, drifting now into attempts at Marvel-esque cinematic universe perpetual money-printing machines for increasingly dubious IPs.
I'm not sure I agree. Those two types have certainly risen, but if you look at films from last year, there a are still a ton of "middle" films with decent budgets (10-30M) and high praise from the critics - Selma, Spotlight, Carol, The Big Short, etc. I don't see a hollow middle.
Sure, tuition was cheaper. Doesn't mean it was cheap. And when future you is talking to a 20-year-old, they'll be lambasting you about how easy your life was when a 4-year degree from a public instituion only cost you $80,000.
If you're truly ignorant of the subprime mortgage crisis a few years back, you can check out The Big Short (book or movie, but I'm told the book is much better) for good insight into history and mechanics.
Point is that the economy has changed a LOT in the last 15 years, and lots and lots of people suffered. Generation X is not the Baby Boom generation. I think you sound a bit foolish/ignorant appropriating the "Baby Boomers ruined the economy!" rhetoric and applying it to the generation-and-a-half that followed them.
Here is a quite amusing clip "Jenga" from the movie The Big Short on this topic. https://www.youtube.com/watch?v=QpsI_Gvn7C8
BTW, most quants that I know don't find the term derogatory, quite the opposite.
As I understood it in the Big Short:
Christian Bale's character's hedge fund wanted to make a big bet that mortgage backed securities would fail.
So he shopped the banks for those that would take that bet.
The ones that agreed to take the bet, he paid them a negotiated monthly amount (basically rent) to keep the bet in effect. If he stopped paying rent, the bet was off.
The banks thought it would never happen and it was free money coming in. Since they thought the risk was 0% it was free money coming in.
... basically, the banks thought he was crazy, but would take his money to keep the bet going.
In the movie, Bale's fund gradually loses money paying "rent" on this bet / option / contract. Things get dicey when conditions that should result in the bet paying off get covered up by the banks and government, and the investors in his fund get pissed they aren't getting any return on their money as promised.
I'd agree that the US housing and derivatives markets are in a much better position than in 2007-2008. Atleast people who are getting mortgages now have some form of documentation, and risk manages are being asked to do their jobs.
The crisis now is that, and this is just my opinion, low rates are here to stay. with the amount of money in the system, people are being priced out of homes and as time goes on the amount by which they are priced out in the big cities is only going to grow.
As an aside...
I'm not a lawyer but I've heard people say My cousin Vinny is the most accurate court room movie ever. In a similar vein, I'd nominate the Big Short as one of the more accurate wall street movies ever made.
It showed the lone wolf who not only saw the coming crash, this was far and away the easiest part, but figured out how to profit form it by getting the banks to write him a CDS.
The two smart kids working out of their garage that were smart enough to succeed despite all their mistakes.
The hedge fund who did an incredible amount of due diligence, going to properties, knocking on doors, talking to people inside the industry to put together the pieces that no one else could.
The wall street sales guy who sold the CDS knowing that it might bankrupt his company but figured he'd make a killing on his commissions long before that happened.
And the most accurate part of the movie was that it showed the anguish that each of these people went through. They'd seen something no one else had, been right about it, had the event happen and even then everyone else continued to plug their ears and pretend nothing was going on while they continued to bleed money each month. It really did a good job of showing that you can be right about everything and still not make money if the rest of the market continues to act insane.
In 2007 there really was a sense that people knew things were way out of hand but everyone was thinking, "If I can just get one or two more years on the bonus cycle, I'll be able to get out". To be fair, this type of thinking probably ins't going away anytime soon.
Investors short all the time. Your comment seems to be irrelevant to the discussion.
How about this famous short? Soros made a billion dollars.
https://priceonomics.com/the-trade-of-the-century-when-george-soros-broke/
Did you see/read "The Big Short?"
https://en.m.wikipedia.org/wiki/The_Big_Short_(film)
Very surprised Bloomberg would put out such a fluff piece about the Vancouver Real Estate market.
There are very serious issues in Vancouver, and some suspect Canada is in for a ruder awakening than the US. http://www.vice.com/en_ca/read/meet-the-wall-street-short-seller-betting-against-canadian-real-estate
1) Canadian Real Estate is being used as a money laundering facility http://www.huffingtonpost.ca/ike-awgu/canadian-real-estate-foreign-buyers_b_10329000.html .
2) Canada also has a healthy (well, actually unhealthy) sub-prime lending market http://www.huffingtonpost.ca/2016/05/18/subprime-lending-canada-transunion_n_10011578.html
3) Then there is the issue of occupancy. The reason the 15% tax was brought in is because money was coming in to purchase houses which then sat empty. Many have become derelict. When I lived in Vancouver, Yaletown was full of apartment towers, but where were all the people (I believe occupancy in that area has improved). http://www.theglobeandmail.com/real-estate/vancouver/poking-holes-in-vancouvers-housing-vacancy-study/article29181730/
4) Lastly, the shadow flipping, again, mentioned in the article, but didn't get the attention it deserved http://bc.ctvnews.ca/house-flipping-concerns-as-368-vancouver-homes-sold-at-least-twice-since-2014-1.2769801
Don't worry if you don't want to read the articles, it will be a movie in a few years along the lines of The Big Short.
No, the movie also includes it (though the specific words "side pocket" are not mentioned, it is clear that it was a legal option available to the fund manager). It's directly in the text of the e-mail that Burry types out to his investors. From the screenplay text[1]:
> Mike types an email. He is alone in the office with empty desks outside.
> "As you may know, our agreement allows me to take extraordinary measures when markets aren't functioning properly. I currently have reason to believe the mortgage bond market is fraudulent. So in order to protect investors from this fraudulent market I've decided to restrict investors’ withdrawals until further notice. Sincerely. Dr. Michael Burry."
> Mike breathes deep, and hits SEND.
[1]: http://www.paramountguilds.com/pdf/the-big-short.pdf
I've edited my comment to make it clear that by "The Big Short" I had understood that we were discussing the movie of that name.
It's probably safe to say that the editors/director of the movie knew what they were doing when they omitted any explanation of the possible side-pocket situation. The overall impression given is in keeping with the passages you've quoted.
The book/movie "The Big Short" dramatizes this really nicely.
It reminds me a little of the phenomena of efficient market theory in economics / finance. Academics were drawn to it partly because it enables them to do a lot of fancy mathematics whereas if you look at inefficiencies like the stuff that went on in the movie The Big Short then the academics don't really have much of an edge against people working in the field. So much academic stuff goes 'assuming efficient markets', blah blah... which is not actually wrong but maybe a misallocation of resources from looking at bubbles and crashes which could have helped avoid the whole 2006 episode.
I agree the blog seems very good.
Saw The Big Short movie--does the book go into much more realistic (ie. non-Hollywood) technical detail?
Will check out Margin Call.
What about outside of huge industry shifts like The Big Short portrayed? I'm most interested in how this plays out in the day-to-day when there isn't a huge industry-wide scandal at play.
The Big Short (Book) is the easiest way to be introduced to these concepts of contracts and risk.
'Margin Call' is an excellent and thrilling film that dramatizes these concepts and shows how they can play out on the trading floor.
You get downvoted, but IMO you make a good point. There's a lot of things on ZH that are far-fetched, many articles by guest writers that are clearly in the 'conspiracy theory' corner, but if you use your brain to filter out the noise, there's a lot of truth to be found on ZH that most other media outlets don't want to report on (for whatever reason).
It's not just HN commenters who are typically poorly educated about finance, almost nobody thinks any more about these things than what they get from the mainstream media.
Years later, after things have crashed and burned and many of the 'conspiracy theories' that had been on ZH years before they turned out to be (at least partially) true, those same people flock to movies like 'The Big Short' in large numbers, and the talk of town is 'how nobody could have seen this coming'... :-/
The movie "The Big Short" has a brief scene with reference to this that you reminded me of and I highly recommend the movie. In the scene one of the main characters is discussing with his brother's ex who is an SEC regulator and she says something to the affect of "the regulators are a revolving door of industry insiders and you aren't going to get looked at when applying for the cushy bank job if you're known as the stickler regulator."
Lots of comments here regarding 'blame'. On that subject, I found this interview with Michael Burry (featured in the book and movie "The Big Short") to be worth reading:
http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html
The selection on Netflix started out bad years ago and declined from there. I've started using VidAngel for almost all of my movie streaming lately. They've got a great selection of movies/shows including new releases (e.g., The Martian, The Big Short, The Good Dinosaur, etc.) that I can stream for $1 (or keep if I prefer). The filtering is a nice bonus (no more JarJar Binks). They even have a "Not on Netflix" section.
I realize that the above sounds like an advertisement. It's not meant to, I truly use it daily.
http://www.vidangel.com (naked link) or https://www.vidangel.com?vip=c5smk9fr71 (referral link)
That baby should be wrapped up in a AAA CDO!
Disclosure. Everything I know about cdos are from the big short movie.
Thanks for all of your insights here, this was very interesting to digest.
I just started reading "A Random Walk Down Wall Street" and it is solid so far. How good of an investing primer would you say it is for a novice? Are there other good books you'd recommend?
Also, I do modeling for advertising as part of my day job, but I've always been curious how much of that analysis/optimization skillset is applicable to trading and risk modeling. Are there any good introductory primers you'd recommend?
Lastly, in The Big Short movie, how accurate is the scene where they first have discussions with Goldman about the bespoke instrument? It looks like the quant sits there listening, the two Goldman folks whisper a bit, and then they say they'll do it under XYZ terms. I'm guessing in real life they'd meet, Goldman would go back and model stuff on their end to determine the terms, then come back with what they'd be willing to do and it wouldn't happen in the span of a conversation like that. Can you shed any light?
"To my knowledge you can't even trade in stock futures with sufficiently distant expiration dates to do this."
To put this as politely as possible, you are incorrect. When you have more than $1 billion under management there are numerous counter parties more than willing to design bespoke financial instruments to suit your needs. My first role in finance involved modeling the risk associated with the bespoke instruments that people were asking my tiny (<$1 billion) firm to create. If you watch 'The Big Short' 1/3rd of the movie is devoted the creation, acquisition, and distribution of a bespoke financial instrument traded upon layers of bespoke instruments (Credit Default Swaps, Credit Default Obligitions, rolled bond instruments, etc.) Remember when Christian Bale's character gets chewed out for losing so much money a month? It's because he's paying to maintain his bespoke put options on mortgage backed securities.
"What's the time frame you'd be willing to stake your career on for a startup"
I left the industry, I find it pretty disgusting to be quite honest. However you're missing the fact that these hedge funds don't invest in one startup, they invest in dozens in an effort to diversify their risk. Furthermore, if you think a fund manager is "staking their career" by making these bets you missed two important facts:
* 2 and 20, they're taking home 2% under management even if they lose it all.
* By the time someone is in the position to manage that many investments they are both able to retire and sell themselves into any position. There's as many, if not more, investment managers that lose money as make it. Their job is to quantify and tolerate risk, quite often that entails losing money on some investments.
Anecdotally, when I first started in the industry we had a director who lost $30MM in the course of 2 weeks on an investment. We had hit a risk case that exceeded the 99th percentile on an investment strategy he had developed. A month later we had recouped the $30MM with an additional $60MM of profit. He took an educated risk and it could have made us take a loss for the year. Importantly, all of our other investments performed wholly within expectations during that time frame. So, while we were losing money hand over fist during those weeks it was never an existential risk to the company.
I agree with you for the most part and it is possible-- quite likely even, that I am saying my example is the exception to the rule, but generally it is not the case. However, I am not domain squatting and the economnics aren't there to do that anyway, it was to illustrate the larger point that some domains, like real estate assets and "tech" companies are very valuable while apparently similar substitutes are not value and actually quite dangerous.
Currently, subtle differences make a big impact on metrics(growth, value, price) & the market is beginning to price these in. If you have seen the big short, it is a great movie, but the opening line is something like:
It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.
So try to check myself when I think about something like this, although it is obviously difficult. In this current framing, certainly one or both of us, is wrong and it is sort of a matter of timing.
I think we are in 1993 and you think(I don't want to put words in your mouth) are in 98'. Either way, if you were in 93 or 98 and knew what to look for you could have made a lot of money, and you yourself may have because you were fundamentally correct when others weren't.
So on balance, I think you are totally correct and I do not disagree with you. However, my estimation is that many people are making the mistake of grouping unrelated things together and drawin g a conclusion, when I think that in fact, the opposite could be true currently.
While some fields have higher-end media outlets like TED talks or infotainment-style demoware, or like Richard Thaler's role in the recent movie The Big Short, other fields might have less sensationalist outlets like a Senate subcommittee hearing, a scientific press release, or inclusion in a documentary film or important literary outlet -- and any of these can lead to follow-on speaking engagements or invitations as an academic adviser or dignitary in various circumstances. And even in the case of Senate hearings, it's often not about accuracy or objectivity, but instead about Supporting The Correct Team.
The point is not what is the maximum media exposure of a given field. The point is that in any field, there is a small elite class who mostly controls (as cultural gatekeepers) the ability for lower-status and aspiring researchers to advance, much like party politics. They form networks of editorial boards, committees for awarding tenure, and have nebulous connections through upper management of academia, corporate boards, endowments, politics, and celebrities. Yes it can vary by field, but you see the same pattern either at a big scale or a smaller scale.
I certainly believe many researchers enter the research profession with pure motives. But it is the ones who quickly learn to sublimate their desire for intellectually rigorous research and social betterment in favor of political skills who naturally rise to the gatekeeper positions.
Sadly, the pure and highly impressive research labor of a lot of these lower-status academics is just pure waste. I don't mean to denigrate the academics for this -- their motives are pure; they are just operating in a rigged system where the only means to significant success is to "wise up" and realize that the best "product" you can provide is to sort of auction off the ability to affiliate with you by sublimating yourself to someone's coalition in exchange for resources and notoriety provided by that coalition.
Not much in the way of bs in the big short tbh. A little dramatisation of the characters probably but hey, gotta sell a book right? Facts were pretty spot on. The book atleast; no clue about the movie.
This isn't bad: http://www.wsj.com/articles/what-the-big-short-movie-gets-rightand-wrongabout-the-financial-crisis-1449843231
While Big Short doesn't seem as factually challenged as Flash Boys, it is over-simplified. Either Michael Lewis falls short of his goal of producing an unbiased representation complex issues in a "pop non-fiction" form, or his goal is different and he is a biased observer forming a cohesive story from a cherry-picked selection of facts.
Agreed, his books are good. People should also watch the movie "The Big Short."
A really good movie based on the book, with the same name, just came out. Watched it yesterday and I recommend it a lot. http://www.rottentomatoes.com/m/the_big_short/
The most recent instance I've seen of this pop culture/dry theory combo was in the movie The Big Short.
They have Margot Robbie (Australian supermodel) sip champagne in a bubble bath while explaining the dynamics of the derivatives market and how it created a bubble in 2008. There's also a scene where Anthony Bourdain (celebrity chef) is prepping food in a kitchen and talking about fish stew as a metaphor for securitization and CDO's.
I find that the best teachers have such a complete mastery of a subject that they can almost perfectly translate it into a common language (pop culture) to make it more relatable and entertaining. They let inquisitive students probe deeper, past the metaphor. The worst teachers usually keep things as academic and dry as possible as a shield against understanding, which leads to questioning, which might call the teacher's knowledge into question or derail the class.
Interestingly, this fact is used in the The Big Short as Michael Burry's insight for spotting the housing bubble and beginning the short.
There is plenty of artistic license in that film so I don't know how true that really is but its quite exciting for small counter-intuitive "surprises" like this to be the early indicators for massive global events.
I just saw the movie "The Big Short", about the guys who saw that the mortgage collapse was coming and figured out how to short it. They had to talk a bank into creating a new kind of derivative so they could short mortgages. There's an opportunity here. Someone needs to come up with a way to short startups. There are a lot of "unicorns" worth shorting.
Ah, I moved from finance into software, although I write financial software. Great books, some embellish the truth a bit though, take it as entertainment value. They all provide great insight though! I've been re-reading the big short by Michael Lewis for the movie coming out this month. I recommend that for insight into the 07-08 collapse. It's a really good book
The movie version of this: "The Big Short", now playing in selected theaters. General release on December 23.