You won’t find a rooting interest beyond that in The Big Short. But at least one-Mark Baum-wants to somehow teach the banks, investment houses and the government itself a lesson. They’re just looking for ways to make money in the midst of a bad situation. Michael and the other subprime characters in The Big Short buy and create, essentially, insurance policies against the mortgage bonds-betting that the bonds will fall “short.” Most invest because that’s what investors do. Because sometimes the best time to make a buck is when no one else has a buck to spend. It could shake the world in ways not seen since 1929.Īnd in that moment, Michael knows exactly what he must do: Bet against the world economy. housing market-nay, the whole global economy-was a couple of years away from spectacularly imploding. Just like the thin air that’s in the middle of a bubble. Nothing solid, anyway-nothing on which the world’s biggest economy should be built on. I mean, why spend all your due-diligence time doing that? People pay their mortgages, right?īut then one day, financial wunderkind Michael Burry decided to get under the skin of those little bonds. Nobody was actually looking inside these bonds to see whether they were as solid as supposed. Home prices continued to rise, and more people owned one than ever before.

Until subprime mortgages became all the rage, giving homeowners the ability to pay a little at first … in exchange for a lot later.īy the mid-2000s, everything looked just fine. Until ratings agencies started automatically stamping all those housing bonds with AAA ratings, even if the bond’s mortgages were more like, um, ZZZ. Until banks started letting folks who couldn’t afford a home get a loan for one anyway. People tend to pay their mortgages, right? So creating an investment that (for lack of a better word) bets people will pay them is like, well, money in the bank.Īnd the system worked great for a while … until home prices began rising faster than the incomes of the people who bought them. The element that set the whole bubble rolling-bonds constructed of massive collections of stable, 30-year mortgages-was initially a rock-solid idea. But according to The Big Short, a big bubble was in fact the foundation of the United States’ economy for years. Bubbles just aren’t ideal foundations for stable housing-much less an entire economy built on the back of that housing. The Bible doesn’t say anything explicitly about building your house on a bubble, but the same principle would seem to apply. The Bible tells us to never build a house on sand: It’s a good way to lose your house.

The big short online