Investopedia.com defines the term short as follows: “A short position is the sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.” Basically borrowing something you don’t own and selling it at the current price, hoping that its value will fall.
The Big Short is a film, based on a non-fiction book, about how a few individuals determined that investments based on mortgage lending were not what they were being sold as and made a lot of money short-selling them. And it is much, much more. Most of the characters in the film are based on real people, although Dr. Michael Burry (Christian Bale) is a real person, the founder of Scion Capital. He has an unusual background and it’s worth allowing you to see how it develops on screen rather than giving spoilers. Suffice it to say he’s not what one thinks of as an investment fund manager. He is the first to uncover the fact that the system of Mortgage Backed Securities may look like an extremely solid investment, but is actually built on a foundation of loans that almost certainly will wind up in default.
“Mark Baum” (Steve Carrell, playing a character based on the real Steve Eisman), on the other hand, looks like a prototype of the angry, aggrieve Wall Street type. After suffering a tragic loss he becomes even more of a crusader against corruption and other things he considers ‘wrong.’ He becomes aware of the impending crisis through “Jared Vennett” (Ryan Gosling, playing a character based on the real Greg Lippman), who is the film’s narrator. He is the first, but not the last to break the ‘fourth wall’ and each of these breaks is useful and placed extremely well.
Two other investment managers, who run a shoestring operation in Colorado, “Charlie Geller” (Magaro, playing a character based on the real Charlie Ledley) and “Jamie Shipley” (Finn Wittrock, playing a character based on the real Jamie Mai). They worked with a retired trader “Ben Rickert” (Brad Pitt, playing a character based on the real Ben Hockett).
There wasn’t even a market to short mortgage based securities but the potential profits from such investments had investment banks like Lehman Brothers and Bear Stearns salivating over the opportunity; so they created one. Credit debt swaps are just one of the complicated terms one must understand in order to grasp what really went on before that bubble burst wide open. Director Adam McKay found an excellent way to make terms like credit debt swap, mortgage backed securities, sub-prime and collateralized debt obligations. He used celebrities and put them in interesting situations where they made the terms very easy to understand. These little explanation vignettes were informative and highly entertaining as well.
All of these characters are very interesting and the actors who portray them were all excellent. The Big Short is informative and entertaining as well.