Some folks seem confused, but what I think happened here: 1) FrontPoint investigated the mortgage market, and realised it was a ticking time bomb. People were taking out loans that ultimately they couldn't repay and banks were handing these loans out like candy at Halloween. In other words, Vennett was right. 2) Having concluded Vennett was right, Mark instructed Vince to buy $50 million dollars worth of CDS ("the insurance on the bonds") on BBB mortgage bonds, which were some of the most vulnerable to failing and were going to be some of the first to go bust. 3) Vinny still had reservations, and asked Vennett straight out what his motives were. 4) Vennett said he was motivated by selling swaps, as he had a "$20 million negative carry" and his bosses wanted to pull the plug. A negative carry is the cost of holding an asset or security (e.g. CDS) exceeding the money said asset/security is bringing in. Vennett then said swaps were a "dark market". This means that the sale of the CDS wouldn't go through the normal main exchanges that other shares/assets/securities do. It wouldn't have as much transparency or a publicly listed price which say, buying shares from a publicly listed company on NYSE would. 5) As the swaps were a dark market, Vennett would set the price. Whatever price he wanted. It could be $100 per CDS or $100,000 per CDS. Vennett implies the CDS' will be expensive, but that it shouldn't bother FrontPoint as when they call in the CDS' they'll make a killing that will far exceed the price of buying the securities from Vennett. 6) Vinny, having heard the reasoning behind Vennett's motives accepts that he is being upfront with them and agrees to the trade. 7) As to why Vennett sold such lucrative CDSs in the first place rather than just holding them, my theory is that his whole department didn't believe him, so they put him under pressure to start offloading some CDS' as they were costing too much to hold on the books at his bank, and frankly his bosses sounded sceptical about the mortgage market crashing. That's my understanding on it but I don't have a background in finance or economics! If I've gotten any of that wrong please feel free to correct me.
@ScottE-GDP
5 жыл бұрын
Basically yeah. Also Vennett wouldn't have access to type of cash to make or sustain this move personally. As noted the 3 "protagonists" were hemorrhaging cash to upkeep their swaps before everything went down.
@demzerocool7475
4 жыл бұрын
@@ScottE-GDP Why does it cost Vennett money to keep the CDS on the books? And isn't it Vennett's bank that would pay out on the CDSs if the mortgages went bust? Wouldn't that get him into trouble?
@iorekby
4 жыл бұрын
@@demzerocool7475 Well, a CDS is (in my limited understanding) essentially an insurance contract on the bond. So, like any insurance contract, there would likely be payments/premiums that would have to be paid to keep the insurance "valid". I suppose it's not unlike house or car insurance: If you stopped paying your insurance policy, you won't have insurance any more. So, Vennett had thought housing was about to crash. He goes out and buys a bunch of "insurance contracts" on the CDOs, which are costing his bank $20 million a month to maintain. He bought them as he believed he could make a market for them with some savvy traders. He would sell these "insurance contracts" to Frontpoint at the price he set, which would in essence mean Frontpoint would likely have to also start paying the contract (this is referenced later in the movie). As for where he got the CDS from, it could be from any financial institution who agreed to "insure" the CDOs in in the unlikely event of a mortgage crash. It was most likely another bank or financial institution. As shown in the movie, Michael Burry bought CDS from a variety of institutions, not just Deutsche.
@philosophiliac
2 жыл бұрын
@@demzerocool7475 Very likely that other desks in Vennett's bank were long on this stuff and would have ended up losing tons of money, as well as most other banks. Lippman (who Vennett is based on) was one of the only / first people to recognise the impending crash and take a short position. And yes, the poster below is correct that you have to pay premiums on these kinds of derivatives - that's the negative carry referred to. You hold the product, you have to pay the premium. If you don't pay the premium, you default on the swap which might have all kinds of effects (depending on the particular instrument) - the whole thing might be void, or you might just have to pay a default, or some other security might be tied up in it as well. $20 million per month suggests that Vennett's short position was astronomical - far larger than the $50mil he offloads in this clip (which would both cover his premiums/negative carry for a while but also reduce it somewhat). Suspect his desk would have made a monumental amount of money (hence the $47mil personal bonus he received).
@f8head
2 жыл бұрын
@@philosophiliac If Venette sold the insurance to Front Point, then his bank would be the ones to pay Front Point when the market crashed, causing them to loose hundreds of millions of dollars correct? Where did Venette's $47 million bonus come from?
@kckcmctcrc
6 жыл бұрын
it was cut a little early but, I loved at the end of this scene how he walks over the starts high-fiving complete strangers on the treadmill.
@vladimirhorowitz
6 жыл бұрын
That was the best part of the scene. People don't know how to edit.
@genericname34
7 жыл бұрын
The title of this video is oddly specific...
@youseff500
6 жыл бұрын
Syed Haider That's just over doing it
@nateflora732
2 жыл бұрын
So used to clickbait
@j-doomer7421
8 ай бұрын
"There's a bubble" would've been a much better and much more ominous title for clickbait
@austinh7110
4 ай бұрын
@@j-doomer7421more topical now lmao 🫠
@MKRfootball2010
6 жыл бұрын
Vennett is a hell of a salesman
@styxkeeper
6 жыл бұрын
you cut the part where he screams in the gym and highfives everyone, thats the best part!
@carlosc.1568
6 жыл бұрын
Goddamnit..... I came here for the *YEEEEEESSSS!!!!!!...... that's right *highfiving people**
@kr-sd3ni
6 жыл бұрын
wat about "im psyched! im psyched to the tits!"
@kr-sd3ni
6 жыл бұрын
jacked*
@lobsterdfw1
5 жыл бұрын
"When you come to the pay day Imma rip your eyes out". At least he's honest I guess
@NESherv
7 жыл бұрын
"There's a nice way to say that, Vinnie." I don't know if this was an intentional easter egg or not, but HOLY SHIT did I just burst out laughing. In La La Land, Ryan Gosling has the exact same line: "There's a nice way to say that, Karen." Not only that - but both Ryan Gosling and Emma Stone have uttered it to each other frequently throughout press interviews for the film. I don't know whether or not they have realized that their inside joke was actually first said in The Big Short.
@coshcosh3753
6 жыл бұрын
NESherv EXACTLY!!!
@ModeratelyAmused
5 жыл бұрын
This isn't the easter egg. Anytime it's said after this would be the easter egg. I would give 2-1 odds that Emma once said it to Ryan after seeing the movie as a teasing jab and it stuck.
@norpriest521
5 жыл бұрын
@@ModeratelyAmused So I don't know what he meant by saying that "how are you fucking us?" What was that supposed to mean lol 😂
@ModeratelyAmused
5 жыл бұрын
@@norpriest521 Because the guy is a banker and telling them how to short his bank. Think of it like a neighbor telling you, just so you know I have a safe in my master bedroom closet with $10k cash and the combo is 1 2 3 4. Next time I go on vacation you should make a withdrawal. Your first thought is, why he is doing it and what's in it for him and then you think why is he telling me is this a set up. "How are you fucking us" is the shortest possible way of saying "I'm suspicious so tell me honestly what you are getting out of this and what we are risking."
@ModeratelyAmused
5 жыл бұрын
The answer being "I'm close to being unemployed, your cash now will make my boss happy, i'll get a nice bonus and later you will get much much more."
@pyhna-lol2625
Ай бұрын
"Hey, There's a bubble"
@JChengZhang
6 жыл бұрын
Oh man they shouldn't have cut out Jared's high high five, that was gold
@curleyhurleyfosho
6 жыл бұрын
Oh no! You cut out the high fives!
@dshim4731
6 жыл бұрын
this clip reminded me i have ice cream in my freezer :)
@jgfunk
7 жыл бұрын
I loved this movie. Then I read the book. Now I am not sure if I'm more confused or less confused.
@sexysheela4990
7 жыл бұрын
what book? book name?
@jgfunk
7 жыл бұрын
Sexy Sheela The Big Short: Inside the Doomsday Machine. Authored by Michael Lewis
@slewone4905
2 жыл бұрын
That is why they got away with it. DOn't buy stuff you don't understand. The purposefully made things complicated to hide stuff and make sure those who invented it has job security. Remember Obama's explanation on why he allowed banks to give bonuses. The people who screwed us over are the only ones who can unravel the mess. But what a BS, banks have to give them a bonus because they might quit. WHo was hiring bankers then?
@LoiceLabs
6 жыл бұрын
oh I love this scene, its how you convince someone to buy you product.
@camilogyllback7193
3 жыл бұрын
I agree. Especially in finance. Everybody knows that you are there to make money, and that the investor will take a risk. Be upfront about it and don´t try to shy away. People will respect you for it. Like Vinnie did.
@slewone4905
2 жыл бұрын
It's how you get someone who is prudent to buy your product. People don't do good things , there is self interest. YOu need to make sure their interest will help yours. I see people ask how to get rich quick. My answer was tricking people to think they can get rich quick.
@adamkiala6774
6 жыл бұрын
The sundae with the sprinkles
@NVRAMboi
Жыл бұрын
This movie along with Charles Ferguson's "An Inside Job" should (seriously) be required viewing for most any responsible adult who wishes to be more aware of the world we live in.
@FortunateJuice
5 жыл бұрын
how dare you cut the clip before the best part
@ndantona92
6 жыл бұрын
Why does Vinnie have a picture of Sally Draper
@pbhoutx
5 жыл бұрын
Although he knew they were making the right move, he sighs and mutters, "f**k you too" after he hangs up
@iorekby
5 жыл бұрын
In fairness, it was a risk. No one else seemed to realise what was going on, and nothing is ever a 100% sure thing. So far as Vinny knew FrontPoint had just thrown a lot of their fund down a well. In hindsight it paid off big time, but I can understand his trepidation!
@cosborne06
Жыл бұрын
Great scene!
@lookdoug1516
5 ай бұрын
Me after paying $22 for a chipotle bowl
@davidwalsh9807
Жыл бұрын
“There’s a bubble” Mark Baum Followed by “it’s time to call bull 💩 “ 😂😂😂
@alcaholik6435
6 жыл бұрын
Until i saw this movie i didn't know about the housing crisis....guess i was lucky
@chopsuey--
6 жыл бұрын
Al Caholik No. You were ignorant.
@azngabex1376
6 жыл бұрын
Or too young. This happened 10 years ago 😂
@chopsuey--
6 жыл бұрын
93MrJohnny Maybe he lived in a country which wasn't that much effected by the crisis. I do.
@alcaholik6435
6 жыл бұрын
93MrJohnny nope i live in new england. My sister has a 100k salary job and 400k house she doesnt even know about this til i showed her
@chopsuey--
6 жыл бұрын
Al Caholik Now that's just sad
@vincentkosik403
5 ай бұрын
Best scene ever...
@hydroxyflutamide
6 жыл бұрын
start to watch this movie again when the market is seemingly bubbling ...hahahahah
@mattiasolsson4517
3 жыл бұрын
I love that Americas angriest hedge fund actually says "thank you".
@ASJacob
5 жыл бұрын
What's that smell....?
@maxmilbredes897
Жыл бұрын
they know and yet they didnt alarm anyone.
@yoyocherio
3 ай бұрын
? Didn’t you notice how nobody wanted to listen
@garylawrence7547
6 ай бұрын
If you have ever gone short on any kind of investment you know, like I do, how risky it is.
@olipalli1
7 жыл бұрын
song?
@crangel2183
6 жыл бұрын
Morgan Stanley JP. Morgan Chase Goldman Sachs Bank of America These are all banks
@hikeskool
10 ай бұрын
💦😎
@alexchancock
5 жыл бұрын
Good film. Quite ridiculous the way in which phone calls are made as if life itself depended on being able to speak to someone "right now". Sad thing is the idiots involved in this world act just like this. Not smart enough for academia and totally unable to handle adrenaline. They are gonna kill us all and fist pump when they do.
@cupofjoe.88
4 жыл бұрын
I've met plenty of mediocre academics. Having a PHD doesn't mean you're smart, it just means you're diligent and hard working.
@w.o.jackson8432
Жыл бұрын
@@cupofjoe.88 Maybe in a fake disclipine, lmao. A PhD in underwater basketweaving means nothing, it means you worked hard on contributing nothing to society. PhDs in hard sciences are very legit and DO mean the person is smart.
@gabemartinez2558
23 сағат бұрын
And now nobody can buy a house
@petelowson5481
3 жыл бұрын
What I don’t get is that they buy $50m of swaps and yet at the end of the film Jarred Bennett’s bonus on the sale is £47m and Mark Baum’s guys earn $200m. Doesn’t stack up. 😐
@prashanthraghavendran2628
3 жыл бұрын
It was even more than that. Mark Baum's personal take was $200M. All the Frontpoint guys collectively made $1B in total. They also bought more than $50M of swaps - they shorted that Vegas fund manager's stuff too. The reason for their immense profit is that while it was Vennet's proposition, FrontPoint provided all the financial muscle. As a result it was fair that the lion's share of the profit went to FP since they assumed almost 100% of the risk. This is what Vennet referred to as the "sundae" while he gets the "cherry"- a small $47M commission for giving them the idea.
@slewone4905
2 жыл бұрын
that was the initial. They but a billion in the end i think, and besides the swaps value went up.
@chrisle360bludgeon
6 жыл бұрын
Doesn’t anybody or every body see that RIGHT THERE in the movie a lot of stock is moving for the downturn anyways. Here, right here, these guys are buying stock left and right and selling it all left and right. what’s left for the poor man?
@tyson8585
6 жыл бұрын
because high risk equals high reward? buying stock doesnt equal easy money
@loucrisp9301
6 жыл бұрын
These guys didn't cause the housing market to collapse, it was already happening because the banks we're giving out easy credit to schmucks. Also they didn't buy stocks, they bought something called a CDS (credit default swap) which is insurance on homes. The 'poor man' wouldn't have access to these derivatives or have the will and knowledge to do the research and bet $50MM anyways.
@iorekby
3 жыл бұрын
Just a further point on what I appreciate is an older comment but to help clear this up: Vinny clearly states these are a "dark market", which means the sale of the CDS' here won't go through any of the main exchanges or have the same level of scrutiny or visibility. Basically, no one would see the CDS' were being bought beyond FrontPoint and Vennett's bank because they were a dark market.
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