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Message: <blockquote data-quote="Anon08" data-source="post: 73350"><h2>The Big Short</h2>Well, it had to be done...! The film known and loved by all keen, upcoming investment bankers and commercial lawyers - The Big Short really is the film for all things commercial.Now, I assume almost all of you have watched The Big Short, in which case, I apologise for bringing it up again! However, for those who haven't...where have you been! The film has a star-studded cast, fantastic cinematography and editing, and a plot that only the 2007-2009 financial crisis could beat...<h3>Plot (SPOILERS)</h3>[ISPOILER]The plot is based of the real world events surrounding the 2007-2009 financial crisis, with some of the characters you see actually being real people. Naturally, certain aspects are fictionalised and dramatised for the purposes of Hollywood; however, it does a great job of capturing the super important, very real characteristics of the subprime mortgage crash. There are multiple subplots going on, so I'll focus on the main arc. A hedge fund manager spots a bubble forming the the US housing market. Essentially, the banks are giving out loans for people to buy houses. However, a lot of these people really shouldn't have loans - they can't afford to pay them back. Nevertheless, the banks keep lending to these individuals because they make a killing out of packaging up these bad loans into financial products (a collateralised debt obligation, CDO, or a mortage backed security, MBS) and selling them to other investors/banks. This causes the housing market to boom and prices to rise, which fuels more confidence in the housing market, which fuels more loans to people who shouldn't have loans...you get the idea.Okay, so, this hedge fund manager, seeing what he thinks to be this bubble, decides to bet against the housing market because, well, this bubble has got to burst at some point, and when it does, he'll make a killing. He does this by creating a financial instrument known as a credit default swap (CDS). The banks happily go into business with the manager on these CDSs because for them its easy money - "who doesn't pay their mortgage?"...Some other people find out about the CDS, and after a bit of digging, they find that the ratings agencies are giving out ratings to these MBSs & CDOs that aren't accurate. These financial products are filled with junk and lower investment grade rated debts, but are rated as AAA by the agencies because they're in cahoots with the banks! What transpires is that everyone thinks that these AAA packages are safe, when in actuality, they're time-bombs...Okay, so a variety of people take out these CDSs and pray that the housing market is going to go boom. And, well, it does. The world economy is shaken to its core but a select few individuals make an absolute fortune.[/ISPOILER]<h3>Benefits of Watching</h3>To be honest, whilst The Big Short has a great plot, many people watch the film to get a better understanding of the GFC and how some derivatives can work. The film has whole scenes dedicated to stopping the plot and explaining financial terminology and processes in an engaging and accessible way. For example, Margot Robbie is in a bathtub drinking champagne explaining frailty of MBSs, Selena Gomez explains how CDOs could affect so many people while playing blackjack, and Anthony Bourdain explains how bad debts are packaged up in CDOs while making fish stew.The terminology might be frightning to read about, but the film goes to great lengths to explaining the concepts in ways that you'll want to never forget!For those who are just getting into the nitty gritty of commerce/finance, there is no better place to start. After watching, you will have learnt about the GFC, debt markets, and derivatives, and have had a great time doing so. So, if you haven't watched it, or you have watched it and need a refresher, rent a copy of the film this weekend, sit back, relax and enjoy two hours of Ryan Gosling and Steve Carell.</blockquote>

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