- 1. Hiya, Frank. How are the wife and kids?
- 2. You know, for you, I'm considering
- 3. treasury bonds
and utility stocks. Smoke?
- 4. In the late '70s, banking wasn't a job
- 5. you went into
to make large sums of money.
- 6. It was a fucking snooze.
- 7. How about those Mats'?
- 8. Filled with losers.
Like selling insurance or
- 9. accounting.
- 10. And if banking was boring,
- 11. then the bond department at the bank
was straight-up comatose.
- 12. We all know about bonds.
- 13. You give them to your
snot-nosed kid when he turns 15.
- 14. Maybe when he's 30
he makes a hundred bucks.
- 15. Boring.
- 16. That is, until Lewis Ranieri
came on the scene
- 17. at Salomon Brothers.
- 18. You might not know who he is,
but he changed your life
- 19. more than Michael Jordan, the iPod
and YouTube put together.
- 20. All right, gentlemen!
Let's get some money in here!
- 21. Let's make some money!
What do you say?
- 22. You see, Lewis didn't know it yet,
- 23. but he had already
changed banking forever
- 24. with one simple idea.
- 25. The mortgage-backed security.
Or private-label MBS.
- 26. You've got your
average person's mortgage.
- 27. Fixed rate, 30 years.
- 28. Boring, safe, small payoff, right? But,
- 29. when you have thousands
of them all bundled together,
- 30. suddenly the yield goes up
but the risk is still small because,
- 31. well, they're mortgages!
- 32. And who the hell
doesn't pay their mortgage?
- 33. What exactly is the credit
rating on this bond?
- 34. This bond, gentlemen, is AAA-rated.
- 35. This is exactly what the Michigan state
pension fund has been looking for.
- 36. I'll buy $20 million.
- 37. - Oh, come on, live a little.
- $25 million.
- 38. The money came raining down,
- 39. and for the first time,
- 40. the banker went
from the country club to the strip club.
- 41. Pretty soon, stocks and savings
were almost inconsequential.
- 42. They were doing $50, $100, $200 billion
- 43. in mortgage bonds
and dozens of other securities a year.
- 44. And America barely noticed
as its number one industry
- 45. became boring old banking.
- 46. And then one day,
almost 30 years later, in 2008,
- 47. it all came crashing down.
- 48. March. Bear Stearns
was in a death spiral
- 49. and the Fed brokered its sale.
- 50. It's been called the worst financial crisis
in modern times.
- 51. Certainly the largest financial disaster
in decades in this country,
- 52. and perhaps the end of an era
in American business.
- 53. In the end, Lewis Ranieri's
- 54. mutated into a monstrosity that
collapsed the whole world economy.
- 55. And none of the experts
or leaders or talking heads
- 56. had a clue it was coming.
- 57. I'm guessing most of you
still don't really know what happened.
- 58. Yeah, you got a soundbite you repeat
so you don't sound dumb, but come on.
- 59. Our financial institutions are strong.
- 60. But there were some
who saw it coming.
- 61. While the whole world
was having a big old party,
- 62. a few outsiders and weirdos
saw what no one else could.
- 63. Not me. I'm not a weirdo.
I'm pretty fucking cool.
- 64. But we'll meet again later.
- 65. These outsiders saw the giant lie
at the heart of the economy.
- 66. And they saw it by doing something
- 67. the rest of the suckers
never thought to do.
- 68. They looked.
- 69. During the 1930s,
- 70. the housing market
- 71. by roughly 80%.
- 72. I mean, half of all mortgage debt
was in default.
- 73. And, I mean, there were very
- 74. specific identifiers,
- 75. I mean, for instance,
- 76. one of the hallmarks of mania
- 77. is the rapid rise
- 78. in complexity and the rates of fraud.
- 79. And did you know that they're going up?
- 80. I've always been
- 81. more comfortable alone.
- 82. I believe maybe
it's because of my glass eye.
- 83. I lost the eye in a childhood illness.
- 84. It separates me from people.
- 85. And did you know that they are going
- 86. Up?
- 87. The highest fraud rates since the 1930s.
- 88. Hey, hey, it's okay. It's okay.
- 89. No, I didn't know that.
- 90. In 1933, the fourth year
of the Great Depression.
- 91. Let's wash it off and put it back in.
- 92. You were playing so great, son.
- 93. I even heard the coach say it.
- 94. Can we just go home?
- 95. Most social interactions
are awkward for me and for the person.
- 96. Even when I try
to compliment someone,
- 97. it comes out wrong.
- 98. You have a very nice haircut.
Did you do it yourself?
- 99. What?
- 100. No. No, I...
- 101. I'm sorry. I'm just...
- 102. I'm going on and on.
- 103. My wife told me I need to share more.
- 104. - That seems healthy.
- 105. So do I get the job?
- 106. I really think I could help your fund.
- 107. Yeah.
- 108. Yeah, sure. Go on.
- 109. - You're...
- David. Great.
- 110. I guess I'll go find a desk.
- 111. Is there anything you want me
to work on for start...
- 112. Yeah.
- 113. You could let me know later.
I could come back.
- 114. Did you think it was strange when
- 115. the tech bubble burst in 2001
- 116. and the housing market in San Jose,
- 117. the tech capital of the world,
- 118. Went up?
- 119. - Wasn't that strange?
- 120. No, it's housing.
Housing is always stable.
- 121. Low risk. It's solid.
- 122. That's the idea, yeah.
- 123. I want you to get me
- 124. the top 20 selling mortgage bonds.
- 125. So you want to know what the top 20
selling mortgage bonds are?
- 126. No, no, no, I want to know
what mortgages are in each one.
- 127. Okay, aren't those
mortgages made up of...
- 128. Wait, aren't those bonds made up
- 129. of thousands and thousands
- 130. Yeah.
- 131. Right away, Dr. Burry.
- 132. I am a nice guy all day long.
- 133. Ask anyone, I'm a pleasure to work with.
- 134. But the second my son
screws up, lam...
- 135. yelling at him
just like my dad did to me.
- 136. I hear the words that are
coming out of my mouth and...
- 137. Sorry I'm late! No cabs.
- 138. So, get this.
- 139. I met with this retail banker yesterday.
- 140. I'm supposed to be getting him
to invest in a fund,
- 141. but instead
- 142. I start grilling him about
- 143. and how his bank will let
a customer write 10-12 checks
- 144. before they tell them they're overdrawn.
- 145. And this creep is making billions off
screwing over people this way.
- 146. And I'm getting madder and madder.
- 147. And I ask him,
I look him in the face and I say,
- 148. "How can you sleep at night
- 149. "knowing that you are
ripping off working people?"
- 150. And you know what he did? He left.
- 151. He just walks out of the lunch,
doesn't say a word.
- 152. What the fuck is that?
- 153. Who's fucked up in that scenario? Am I?
- 154. Or is this douche bag,
who leaves me hanging?
- 155. Is he the fucked up one?
- 156. We have talked about
this numerous times.
- 157. You can't come in late
and hijack the entire session.
- 158. What do you mean?
I didn't hijack the meeting.
- 159. - Did I hijack the session?
- 160. - What do you do?
- I'm in commodities.
- 161. Good luck with that.
- 162. Mark, I know
you suffered a terrible loss.
- 163. Maybe you want to talk about that.
- 164. I don't talk about that.
- 165. Hold on.
- 166. Hold on...
- 167. Shit, I have to take this. Sorry. Sorry.
- 168. No... I don't care, Porter.
- 169. This guy's whole business
is built on ripping people off.
- 170. How long can that last?
- 171. Bye, everybody!
- 172. 95...
- 173. That's 30 days late... Sixty days late...
- 174. They pay on time...
- 175. These FICO scores...
- 176. Late. And they caught up
on their payments...
- 177. Another 30 days late...
- 178. LTV, 95... LTV, 90...
They caught up on their payments...
- 179. Sixty days late? Jesus!
- 180. LTV, 110? I've never heard of that!
- 181. Thirty days late, rate adjusts...
- 182. In '07 rate adjusts...
- 183. In '06 rate adjusts...
- 184. 95".90". Jesus!
- 185. He hasn't moved all day.
- 186. He does this every few days.
- 187. He hasn't spoken to me
since he hired me.
- 188. Maybe the LTV's at... High-risk,
- 189. interest-only... I never heard
of that mortgage history,
- 190. I never heard of that... How?
- 191. Michael, how are you, guy?
- 192. Lawrence, I found
something really interesting.
- 193. Great, Michael. Whenever you
find something interesting,
- 194. we all tend to make money.
- 195. - What stock are you valuing?
- No, no, no, no. No stocks.
- 196. I want to short the housing market.
- 197. Really? But the housing market
is rock solid.
- 198. Greenspan just said
- 199. bubbles are regional, defaults are rare.
- 200. Tell them I'll be there in a minute.
- 201. - Say again?
- Look, look...
- 202. Greenspan's wrong.
- 203. I don't think you mean to do this,
but sometimes you sound very
- 204. dismissive and superior.
- 205. It's a fact. Greenspan's wrong.
- 206. I don't know
how else you want me to say...
- 207. Look, Michael.
- 208. Metro Capital backed you four years ago
- 209. when you were a doctor with a
- 210. dinky web page
and some inheritance money.
- 211. We've all done very well.
- 212. Why don't you just stick with stocks?
- 213. Look. You know me. I, I, I...
- 214. I look for value
wherever it can be found.
- 215. And the fact is
- 216. that these mortgage-backed
securities are filled
- 217. with extremely risky
sub prime adjustable-rate loans.
- 218. And when the majority
of the adjustable rates
- 219. kick in, in '07,
- 220. they will begin to fail.
- 221. And if they fail above 15%,
the whole bond is worthless.
- 222. Michael, just take a beat.
- 223. We'll talk about this later, okay?
- 224. Lawrence, please,
don't patronize me. Listen...
- 225. Mortgage-backed securities.
- 226. - It, it, it...
- Sub prime loans. Tranches.
- 227. It's pretty confusing, right?
- 228. Does it make you feel bored?
- 229. Well, it's supposed to.
- 230. Wall Street loves
to use confusing terms
- 231. to make you think only they
can do what they do.
- 232. Or, even better,
- 233. for you to just leave them
the fuck alone.
- 234. So here's Margot Robbie
in a bubble bath to explain.
- 235. Basically, Lewis Ranieri's
- 236. were amazingly profitable
for the big banks.
- 237. They made billions and billions
on their 2% fee
- 238. they got for selling each of these bonds.
- 239. But then they started
running out of mortgages
- 240. to put in them.
- 241. After all, there are only so many homes
- 242. and so many people
with good enough jobs
- 243. to buy them, right?
- 244. So the banks started filling these bonds
- 245. with riskier and riskier mortgages.
- 246. Thank you, Benter.
- 247. That way they can keep
that profit machine churning, right?
- 248. By the way, these risky
mortgages are called sub prime.
- 249. So whenever you hear "sub prime", think
- 250. "shit".
- 251. Our friend Michael Burry found out
that these mortgage bonds
- 252. that were supposedly 65% AAA
- 253. were actually just mostly full of shit.
- 254. So now he's going to "short" the bonds.
- 255. Which means to "bet against".
- 256. Got it?
- 257. Good.
- 258. Now fuck off.
- 259. It's only a matter of time before
someone else sees this investment.
- 260. We have to act now!
- 261. How do you know
the bonds are worthless?
- 262. Aren't they filled with fucking thousands
- 263. of pages of mortgages?
- 264. I read them.
- 265. - You read them?
- I read... Yes.
- 266. No one reads them. Only the lawyers
who put them together read them.
- 267. Look, I don't think that they even know
what they've made.
- 268. The housing market
is propped up on these
- 269. bad loans, and I'm...
- 270. It's a time bomb, and I want to short it.
- 271. Through what instrument, Michael?
- 272. There are no insurance contracts
or options for mortgage bonds.
- 273. - The bonds are too stable.
- 274. This is what I'm gonna do.
I am gonna get a bank
- 275. to make me one.
- 276. And then
- 277. I'm gonna buy it.
- 278. I don't want that kind of business.
- 279. Money is not money. That's bad money.
- 280. Hey! Excuse me!
- 281. Let me ask you this. What
company treats its customers
- 282. that shittily and succeeds?
- 283. Fine. Okay, Goldman. You're right.
- 284. Mark Baum had built his career
- 285. on never assuming anyone
or any company
- 286. was legit without proving it.
- 287. When he was a kid
he excelled at studying
- 288. the Talmud in Yeshiva. Whatever.
- 289. But one day his rabbi told his mom why.
- 290. Paul is a fine boy,
and Mark is an excellent student
- 291. of the Torah and the Talmud.
- 292. Then what's the problem, rabbi?
- 293. It's the reason Mark is studying so hard.
- 294. He's looking for inconsistencies
in the word of God!
- 295. So has he found any?
- 296. Later, Baum started
his own fund on Wall Street.
- 297. He had an amazing nose for bullshit.
- 298. And he wasn't afraid to let
anyone know when and where
- 299. the bull had gone number two.
- 300. But then a tragedy happened to Mark,
- 301. and it turned his world view dark
- 302. and ready to believe
the whole system was a lie.
- 303. Hold on.
- 304. It's Cynthia.
I'll be in the office in 20 minutes.
- 305. Hi, honey.
- 306. The therapist called. You did it again.
- 307. There were no cabs.
What was I supposed to do?
- 308. I worry about you, Mark.
- 309. At least I went.
- 310. You're running around like
you have to right
- 311. - every wrong in the world.
- 312. You're so angry.
- 313. Fine. You know what?
- 314. I'm a mean guy and I'm pissed off.
- 315. But it is a shit storm out here, sweetie.
- 316. You have no idea
the kind of crap people are pulling.
- 317. And everyone's walking around
like they're in a goddamn Enya video.
- 318. They're all getting screwed, you know.
- 319. You know what they care about?
They care about the ballgame.
- 320. Or they care about
what actress just went into rehab.
- 321. I think you should try medication.
- 322. No, no. We agreed.
If it interfered with work.
- 323. You hate Wall Street.
Maybe it's time to quit.
- 324. - I love my job.
- You hate your job.
- 325. - I love my job.
- You're miserable.
- 326. I love my job. I love my job, honey.
- 327. Mark...
- 328. I am sad every day
about what happened.
- 329. I know you must feel the same,
but you never show it.
- 330. I know how close you were
to your brother.
- 331. Paul.
- 332. Where'd you go, Paul?
- 333. Paul!
- 334. Every day I think you're gonna
talk about it, but you never do.
- 335. Will you at least think about the idea
of making a change?
- 336. Fine. Fine. Honey, you know what?
I will consider it.
- 337. But, honestly, Cynthia.
I'm okay. I really am.
- 338. Hey, hey, hey! No, no.
- 339. My cab. That's my cab.
That's my cab. That is my cab.
- 340. - Schmuck. Fuck you.
- Fuck you.
- 341. - Fuck you.
- Fuck you.
- 342. I'll call you later.
- 343. I want to buy swaps
on mortgage bonds.
- 344. A credit default swap that will pay off
- 345. if the underlying bond fails.
- 346. You want to bet against
the housing market?
- 347. - Yes.
- 348. Those bonds only fail
- 349. if millions of Americans
don't pay their mortgages.
- 350. That's never happened in history.
- 351. If you'll excuse me, Dr. Burry,
it seems like a foolish investment.
- 352. Well, based on prevailing sentiment
- 353. of the market and banks
in popular culture,
- 354. yes, it's a foolish investment.
- 355. But... Everyone's wrong.
- 356. That's a good one.
- 357. This is Wall Street, Dr. Burry.
- 358. If you offer us free money,
we are going to take it.
- 359. My one concern is that
when the bonds fail,
- 360. I want to be certain of payment
- 361. in case of solvency issues
with your bank.
- 362. I'm sorry, are you for real?
- 363. You wanna bet against
the housing market
- 364. and you're worried we won't pay you?
- 365. Yes, that's correct.
- 366. unless the market crashes.
- 367. The market on housing's
never gonna crash
- 368. because it's so solid right now.
- 369. I mean, who doesn't pay
- 370. Dr. Burry,
- 371. we could work out
a pay-as-we-go structure
- 372. that would pay out if the bonds fail.
- 373. But it would also apply
to your payments
- 374. if the value of the
mortgage bond goes up.
- 375. You'd have to pay us monthly premiums.
- 376. Is that acceptable, Dr. Burry?
- 377. Yes. Yes.
- 378. I have prospectuses
on six mortgage-backed
- 379. securities I want to short.
- 380. Majority of the mortgages...
- 381. I don't see us losing
any money on these at all.
- 382. Dr. Burry, these should be fine.
- 383. Yeah. We're prepared
to sell you $5 million
- 384. in credit default swaps
on these mortgage bonds.
- 385. Can we make it $100 million?
- 386. Absolutely, we can make it $100 million.
- 387. We'll be in touch,
send some paperwork over.
- 388. I like these cups.
Can I take one for my son?
- 389. Have... Yes. Yes.
- 390. Thank you.
- 391. Have two.
- 392. Is there any way to do $200 million?
- 393. I mean, we can. But are you sure?
- 394. Absolutely. Absolutely, we can do that.
- 395. We do different projects.
We do gardening.
- 396. The bonds I'd like to bet against.
- 397. It's not bad seeing yourself
on the big screen.
- 398. It's very cool.
- 399. I ordered the 24-ounce T-bone,
which was choice.
- 400. - I went for volume...
- 401. rather than prime.
- 402. I went for sub prime, and the gist was...
- 403. Can I have like, lettuce,
tomato, no onions?
- 404. So, no onions. Lettuce,
tomato, Thousand Island okay?
- 405. Yeah.
- 406. Hey, Randall! What's with the Dom?
- 407. Bonuses aren't for three months.
- 408. We just sold $200 million
in credit swaps for mortgage bonds.
- 409. Some fund manager from California.
- 410. It's fucking crazy, right?
- 411. A whole new way to make money, Doug.
- 412. Wait, wait. I didn't know
there were swaps on mortgages.
- 413. There are now.
We made it for him.
- 414. He must have gone off
his Zoloft or something.
- 415. I don't know.
- 416. - Want to join? No?
- Just a second.
- 417. Hey, Jared.
- 418. Did you hear about the deal
that Randall just did
- 419. with some fund manager?
- 420. Randall? Bullshit.
- 421. He's a foot soldier.
I'm sure it's a shit deal.
- 422. No, it's for real.
- 423. I told you we'd meet later.
- 424. Unfortunately, it's in a place
like this which I would never be.
- 425. I never hung out with
these idiots after work, ever.
- 426. I had fashion friends.
- 427. Apparently, this guy wanted $200 mil
in credit default swaps.
- 428. Randall made the sale.
Can you believe it?
- 429. Somebody shorted $200 mil
on mortgage bonds?
- 430. That was just with Deutsche.
Word is he hit half the town.
- 431. How much in total?
- 432. $1.3 billion.
- 433. What? That's pretty
much all of Salon's liquidity.
- 434. Michael, this is highly distressing.
- 435. Lawrence, that is not
- 436. all of our liquidity.
- 437. And I'm not certain
- 438. that you really understand this trade.
- 439. This is a certainty.
- 440. Mike, I consider myself a mentor to you.
- 441. But our company is not comfortable
with this investment. Am I being clear?
- 442. Lawrence, I have full autonomy
- 443. when it comes to investment strategy.
- 444. You can read our agreement.
- 445. Do not throw our inception
agreement in my face, Michael.
- 446. We had an underlying
- 447. understanding you wouldn't
act like a goddamn crazy man.
- 448. This is not crazy.
- 449. It's all very logical.
- 450. So, now we pay up premiums
on these swaps
- 451. against the housing market
until the mortgages fail?
- 452. In other words, we lose millions
- 453. until something that's
never happened before happens?
- 454. That's correct.
- 455. Hello, Mark Baum.
- 456. Oh, hey, Kathy, you busted me.
- 457. - I had a personal thing this afternoon.
- I'm not your babysitter.
- 458. If FrontPoint makes money
for Morgan Stanley, I'm happy.
- 459. Okay. Hey, did I hear you're expecting?
- 460. We're expecting to be expecting.
- 461. IVF's are cleaning us out
but we're staying positive...
- 462. That's exciting!
- 463. lump on my ball.
And I go in for a scan.
- 464. Turns out that I have a very large thing
called an epididymis.
- 465. Which is a thing
that goes around the ball
- 466. and is like a sac underneath.
- 467. I have an extremely
- 468. - pronounced epididymis.
- I'm riveted...
- 469. I'm riveted by this.
Do you have any pictures?
- 470. It's almost as large as
another testicle unto itself.
- 471. So get this. Cynthia...
- 472. Guys. Cynthia wants me to quit
and open a B&B in Vermont.
- 473. That sounds great. I'd love to see
Mark Baum run a bed and breakfast.
- 474. Like, "Here's your steel-cut
- 475. Mark refused to kiss the ring
of the people with the checkbooks,
- 476. so he had to set up his fund
under Morgan Stanley's umbrella.
- 477. His small team reflected
his distrust of the system.
- 478. You guys are sick. You're sick.
- 479. She says this job
is making me unhappy.
- 480. But you're happy when you're unhappy.
- 481. I am happy when I'm unhappy.
- 482. Vinnie Daniel.
- 483. You know how to make a muffin?
- 484. - Mark's numbers guy.
- Do you even know 'now
- 485. - to do laundry? Make a bed?
- 486. Vinnie lost his father to a violent crime
when he was young.
- 487. Just like Mark, he didn't talk about it.
- 488. I don't talk about that.
- 489. Cynthia's no joke. She could actually
make him move to Vermont.
- 490. I mean, she made me
start wearing a seat belt.
- 491. - Hey, you want me to...
- Porter Collins.
- 492. Former Olympic rower
who went to Brown.
- 493. He worked with Baum at a previous firm
- 494. and couldn't figure out
why no one listened to Baum.
- 495. The guy with all the good ideas.
- 496. Sorry. I think you have
the wrong FrontPoint.
- 497. 'Cause there is another FrontPoint
in this same building that is bonds.
- 498. And Danny Moses.
The optimist of the bunch.
- 499. And a hell of a trader.
- 500. Which is the only reason they put up
with his bullshit optimism.
- 501. That was a weird call.
- 502. You take longer with a wrong number
than anybody else.
- 503. It was this guy from Deutsche
- 504. who was talking about
shorting housing bonds.
- 505. And then in the middle of the call
I realized he had the wrong FrontPoint.
- 506. And then... 'Cause he wanted
the one on the 8th floor.
- 507. He wanted to short housing bonds?
- 508. That happens like five times a day
- 509. that somebody gets
the wrong FrontPoint.
- 510. - We should change our name.
- Wait. Wait.
- 511. He wanted to short housing bonds?
- 512. Who bets against housing?
- 513. - What's the ABX at?
- What's ABX?
- 514. It tracks sub prime mortgage
bond value. Go back to sleep.
- 515. The ABX is at...
- 516. Wow, it's down! It's down
three points since last year.
- 517. That's weird. I haven't heard
a peep about that.
- 518. What was this guy's name?
- 519. Jared Vennett. Vennett.
- 520. That's right.
These lucky sons of bitches
- 521. caught wind of one of the best trades
in Wall Street history
- 522. from a wrong number.
- 523. They should have paid 10%
to my fuckstick assistant.
- 524. His name was Jared Vennett. Vennett.
- 525. Jared Vennett from Deutsche.
Sounded very sketchy.
- 526. Sounds like a douche bag.
- 527. Do you smell that?
- 528. Do you smell that?
- 529. I smell money.
- 530. This is your basic mortgage...
- 531. Okay, hi. How are you?
- 532. Have a seat.
- 533. Okay, Mr. Vennett from Deutsche Bank.
What do we have?
- 534. There you go.
- 535. So, how many people have you talked to
about this trade?
- 536. A few. There's definitely some interest.
- 537. - No!
- My boss would have my ass...
- 538. - N.O.!
- You crazy, Jared?
- 539. - Get lost.
- Fuck you.
- 540. Which is why you're here talking
to us, a wrong number.
- 541. Sounds like there's a lot of interest.
- 542. All right. A few people have invited us in
- 543. just to laugh at me on this deal.
Is that you?
- 544. Is that what this is?
- 545. That's not what this is.
- 546. That's just how Mark is.
- 547. - Let's see what you got.
- I'm sorry.
- 548. You smell that? What is that?
- 549. - What?
- What's that smell?
- 550. - Your cologne?
- 551. - Opportunity.
- No. Money.
- 552. Okay.
- 553. - I smell money.
- 554. - Chris, God damn it.
- 555. This is your basic mortgage bond.
- 556. All right? The originals were simple.
- 557. They were just thousands
of AAA mortgages bundled together,
- 558. guaranteed by the U.S. government.
- 559. The modern ones are different.
- 560. They're private. And they're
made up of layers of tranches.
- 561. The highest level, AAA,
is getting paid first.
- 562. The lowest rated, B, is getting paid last,
- 563. taking on defaults first.
- 564. Now, obviously, if you're buying B's,
you could make more money.
- 565. But they're a little risky.
- 566. Sometimes they fail.
- 567. Chris?
- 568. Somewhere along the line,
these B's and BB's
- 569. went from a little risky
- 570. to dog shit. Where's the trash?
- 571. It's right behind you.
- 572. I'm talking rock-bottom FICO scores.
- 573. No income verification.
- 574. Adjustable rates. Dog shit!
- 575. The default rates are already
up from 1% to 4%, fellas.
- 576. And if they rise to 8%, and they will,
- 577. a lot of these BBB's
are going to zero, too.
- 578. And that... You're too close.
- 579. - ... is an opportunity.
- 580. You're saying that at 8% the bonds fail
and we are already at 4%?
- 581. That's right.
- 582. If they go to 8%, it's Armageddon?
- 583. Yeah. That's right.
- 584. How come nobody's talking about this?
- 585. You're completely sure of the math?
- 586. Look at him. That's my quant.
- 587. Your what?
- 588. My quantitative!
- 589. My math specialist. Look at him.
- 590. You notice anything different
about him? Look at his face.
- 591. That's pretty racist.
- 592. Look at his eyes! I'll give you a hint.
- 593. His name's Yang!
- 594. He won a national
math competition in China!
- 595. He doesn't even speak English!
- 596. Yeah, I'm sure of the math.
- 597. Actually, my name's Jiang
and I do speak English.
- 598. Jared likes to say I don't
because he thinks
- 599. it makes me seem more authentic.
- 600. And I got second in that
national math competition.
- 601. So you're offering us a chance to short
this pile of blocks? How?
- 602. With something called
a credit default swap.
- 603. It's like insurance on the bond,
and if it goes bust
- 604. you can make 10-to-1,
even 20-to-1 return.
- 605. And it's already slowly going bust!
- 606. 10-to-1? 20-to-1? No way.
- 607. And no one's paying attention.
- 608. No one is paying attention!
- 609. Because the banks are too busy
getting paid obscene fees
- 610. to sell these bonds.
- 611. But wait. You are the bank.
You work for the bank.
- 612. I bet your margins
are pretty nice and fat.
- 613. Let's not talk about
my margins, by the way.
- 614. Being nice and fat, that's a nice shirt.
Do they make it for men?
- 615. Aren't you the bank?
- 616. I work for the bank.
I don't think like a bank.
- 617. Big bank, small bank,
I like to make money. All right?
- 618. Let me put it this way. I'm standing
in front of a burning house...
- 619. And I'm offering you fire insurance on it.
- 620. How can these underlying bonds
be as bad as you say?
- 621. It wouldn't be legal.
- 622. Nobody knows what's in them.
- 623. Nobody knows what's in the bonds.
- 624. I've seen some that are 65% AAA-rated
- 625. that I know for a fact are filled with 95%
- 626. sub prime shit with FICOs below 550!
- 627. Get the fuck out of here.
- 628. You want me to really blow your mind?
- 629. When the market deems
a bond too risky to buy,
- 630. what do you think we do with it?
- 631. - Take a guess.
- I don't know. You tell me.
- 632. All right. You think we just
warehouse it on the books? No.
- 633. We just repackage it
with a bunch of other shit
- 634. that didn't sell and put it into a CDO.
- 635. - A CDO?
- Yes. A CDO.
- 636. - What is that?
- This is where we take a bunch of B's,
- 637. BB's and BBB's that haven't sold,
- 638. and we put them in a pile.
- 639. And when the pile gets large enough,
- 640. the whole thing is suddenly
- 641. and the whores at the rating agency
give it a 92%-93% AAA rating,
- 642. no questions asked.
- 643. Hold it. What? Say that again.
- 644. A collateralized debt obligation.
- 645. It's important to understand
because it's what allowed
- 646. a housing crisis to become a
nationwide economic disaster.
- 647. Here's world-famous chef
Anthony Bourdain to explain.
- 648. Okay, I'm a chef on a Sunday afternoon
setting the menu at a big restaurant.
- 649. I ordered my fish on Friday,
- 650. which is the mortgage bond
that Michael Burry shorted.
- 651. But some of the fresh fish doesn't sell.
- 652. I don't know why. Maybe it just came out
halibut has the intelligence of a dolphin.
- 653. So, what am I going to do?
- 654. Throw all this unsold fish,
which is the BBB level of the bond,
- 655. in the garbage and take the loss?
- 656. No way.
- 657. Being the crafty
and morally onerous chef that I am,
- 658. whatever crappy levels
of the bond I don't sell,
- 659. I throw into a seafood stew.
- 660. See, it's not old fish.
It's a whole new thing!
- 661. And the best part is
they're eating 3-day-old halibut.
- 662. That is a CDO.
- 663. I just need to know,
how could these possibly be collated?
- 664. Somehow you're like Dora the Explorer
- 665. and you're the first person
- 666. - who found this thing.
- Hold on. Hold on.
- 667. So mortgage bonds are dog shit,
- 668. CDOs are dog shit
wrapped in cat shit.
- 669. Yeah, that's right.
- 670. Institutions treat these CDOs
like they're as solid as treasury bonds,
- 671. and they're going to zero.
- 672. No. That can't be right.
There were $500 billion
- 673. in housing bonds sold last year alone.
- 674. The rating agencies, the banks,
the fucking government,
- 675. you're saying they're
all asleep at the wheel?
- 676. Yeah. My whole department's
long on this stuff.
- 677. They call me Chicken Little.
They call me Bubble Boy.
- 678. A's, zero. B's, zero.
- 679. BB's, zero. BBB's, zero.
- 680. And then that happens.
- 681. What is that?
- 682. That's America's housing market.
- 683. Thank you.
- 684. Fuckin' A, Jared.
- 685. Shut your fucking mouth.
- 686. - ... hang outwith you.
- Good. Okay.
- 687. Sack up, do the deal. Let's be friends.
- 688. We will see. Thank you.
- 689. - Don't bullshit me.
- All right.
- 690. You're gonna say no, aren't you?
- 691. No. No, I'm just evaluating right now.
- 692. Thank you. Thank you for coming in.
- 693. Bye, Jared.
- 694. I don't like it.
- 695. He's playing us.
- 696. He's playing us.
He's got too much skin in the game
- 697. and he's dumping his position.
- 698. What if he's right?
- 699. - You want him to be right.
- Yes, I do.
- 700. The banks have given us
25% interest rates on credit cards.
- 701. They have screwed us on student loans
that we can never get out from under.
- 702. Then this guy walks into
my office and says
- 703. those same banks got greedy,
they lost track of the market,
- 704. and I can profit off of their stupidity?
- 705. Fuck, yeah, I want him to be right!
- 706. How come you don't hate this guy?
- 707. He's everything
you taught us not to trust.
- 708. I can't hate him. He is so transparent
- 709. in his self-interest
that I kind of respect him.
- 710. Would I buy a car from him? No.
- 711. Is he right about the mortgage market?
- 712. - No.
- Let's find out. Let's find out.
- 713. Look. It's two very simple questions.
- 714. Is there a housing bubble?
- 715. And if there is,
how exposed are the banks?
- 716. Yeah. Okay.
- 717. Let's get on this quickly too.
- 718. Because if he's right,
- 719. every loser with a couple million bucks
and a fund is gonna be jumping on this.
- 720. Let's go.
- 721. Just that morning...
- 722. JPMorgan Chase. JPMorgan Chase.
- 723. Okay. Stop saying "JPMorgan Chase".
- 724. I got a good feeling about this.
- 725. It's just a meeting though, you know?
- 726. It's just a meeting. It's something like...
- 727. People have meetings
all the time. You know?
- 728. People drink their coffee,
they have a meeting.
- 729. - Brownfield Fund?
- 730. - Hey. Hello.
- 731. - Chris. I'm on Ted's desk.
- Chris. Okay.
- 732. - I'm Charlie, Charlie Geller.
- 733. - Jamie Shipley. Hi.
- 734. We're so excited to get set
up on your trading platform.
- 735. Cool.
- 736. Here, have a seat a second.
- 737. All right.
- 738. So, I... Ted had asked me
to do some meeting prep.
- 739. But I couldn't find any
marketing material on you guys.
- 740. We just moved here from Boulder.
- 741. - Yeah.
- Got it.
- 742. Could we see some
of your offering documents?
- 743. Well, Brownfield is its own money.
- 744. - It's our money.
- 745. Can you tell us how much you manage?
- 746. Of course. We're doing
$30 million right now.
- 747. But we started
- 748. - four years ago with $110,000.
- 749. So, as you can see,
that's pretty phenomenal returns.
- 750. We want to get an ISDA agreement
with JPMorgan so we can
- 751. deal in long-term options.
- 752. - That's really cool.
- 753. That is so cool.
- 754. Thank you.
- 755. But you guys are under
the capital requirements for an ISDA.
- 756. By how much?
- 757. One billion four hundred
seventy million, so...
- 758. a lot.
- 759. This makes us look bad, doesn't it,
- 760. that we didn't know
what the capital requirements were?
- 761. It's not great.
- 762. But
- 763. keep up those returns and give us a call
- 764. way down the line. You know.
- 765. Okay?
- 766. - Okay.
- Thanks, Chris.
- 767. - Have a good one, guys.
- Thank you, Chris.
- 768. Shit!
- 769. Who the fuck schedules a meeting
- 770. - at 4:50 in the afternoon?
- Oh, my, God.
- 771. That was so painful.
- 772. Dude, B of A and Bear
didn't even return our calls.
- 773. And even fucking Wachovia
- 774. - blew us off, man!
- I know.
- 775. Here's the prospectuses
of all the other losers
- 776. who didn't make it past the lobby.
- 777. I don't think I can do
this anymore. You know.
- 778. I'm young, yet.
I can still do something with my life.
- 779. I miss Colorado anyway.
The weed's better.
- 780. Gentlemen, I need you to leave.
- 781. Yep, yep, we're going. Let's go.
- 782. Look at this. Look at this.
- 783. This guy
- 784. says that the housing market's
a giant bubble.
- 785. Okay, so this part
isn't totally accurate, you know.
- 786. We didn't find Jared Vennett's
housing bubble pitch
- 787. in the lobby of a bank that rejected us.
- 788. The truth is
- 789. a friend had told Charlie about it,
and I read about it
- 790. 'm Grant's Interest Rate Observer.
- 791. This is crazy.
- 792. This is crazy stuff.
- 793. Shit, he's saying that there's
- 794. on credit default swaps
for mortgage-backed securities?
- 795. And the whole housing market
is about to collapse?
- 796. For Jamie and Charlie,
the housing market
- 797. doomsday prediction
was music to their ears.
- 798. They had started working
out of Jamie's garage
- 799. with $110,000 Jamie had saved
- 800. taking sailboats up and down
the East Coast.
- 801. Our investment strategy was simple.
- 802. People hate to think about
bad things happening,
- 803. so they always underestimate
- 804. Their strategy was simple and brilliant.
- 805. What he said.
- 806. Jamie and Charlie found markets
will sell options very cheaply
- 807. on things they think will never happen.
- 808. So when they were wrong,
they were wrong small,
- 809. but when they were right,
they were right big.
- 810. Within a few years they had turned
$110,000 into $30 million.
- 811. But then it was time
to go to New York City.
- 812. And so far, it wasn't going very well.
- 813. So what if it does
seem interesting. No...
- 814. No bank will give us our ISDA.
We're dead in the water.
- 815. These kind of trades
are totally out of the question.
- 816. We got to call Ben.
- 817. Let's call Ben!
- 818. Ben Rickert was
a former trader in Singapore
- 819. for Chase who quit
the whole game in disgust.
- 820. He happened to be Jamie's neighbor
when they were in Colorado
- 821. and they met walking dogs.
- 822. But Ben was dark.
- 823. He didn't just think
the whole system would fail.
- 824. He thought the whole world
was going down.
- 825. Every one of these vegetables
is fresh from my garden.
- 826. You guys should start your own garden.
- 827. What you got to do is get your
soil off the petrochemicals.
- 828. I used wood ash and urine
to help restore the soil.
- 829. It creates ammonium nitrate.
- 830. Seeds are gonna be the new currency.
- 831. And not those Franken-seeds
- 832. I'm talking about good,
healthy, organic seeds.
- 833. Make yourself a garden.
- 834. - Learn to live off the land.
- You're a fucking lunatic.
- 835. Ben had real experience in a big bank.
- 836. Jamie and Charlie had never even been
in a Manhattan bank bathroom.
- 837. But Ben was done
with the banking world.
- 838. He was very clear.
- 839. All right, let's crunch some numbers
- 840. and then maybe
we'll talk about calling Ben.
- 841. We're always crunching numbers.
- 842. When haven't we crunched
- 843. We're gonna crunch
the numbers like harder...
- 844. I need you out of here.
- 845. - Of course. One second.
- Yes, ma'am. We're going.
- 846. Oh, God. I hate this.
This is a total waste of time.
- 847. Oh, come on. Would you relax?
- 848. There's a housing development
45 minutes outside town.
- 849. Mark wants us to check that out first.
- 850. Well, I hope there are some
Cuban restaurants on the way there.
- 851. Because I heard the Cuban food
is amazing in Miami.
- 852. Please don't be chipper in the
face of me being miserable.
- 853. It really makes me hate you.
- 854. How is wanting to eat
good food being chipper?
- 855. Hello?
- 856. Hello?
- 857. What do these go for?
- 858. $425,000 each?
- 859. What's up, man? What do you want?
- 860. Hello. I'm surveying mortgage owners
who are over 90 days delinquent.
- 861. I'm looking for a Harvey Humpsey.
- 862. You want my landlord's dog?
- 863. Your landlord filled out
his mortgage application
- 864. using his dog's name?
- 865. I guess so.
- 866. Wait, has that asshole
not been paying his mortgage?
- 867. 'Cause I've been paying my rent.
- 868. Well, yeah, he is over
90 days delinquent.
- 869. Seriously, man,
- 870. am I gonna have to leave?
- 871. 'Cause my kid just got
settled in school, man.
- 872. Hey. How are ya?
- 873. - My name's Ken.
- You're Ken?
- 874. You should talk to your landlord
- 875. I'm sorry, I don't have
any more information.
- 876. But you...
- 877. You have a great day. See ya, Ken.
- 878. There's books everywhere!
- 879. Books everywhere?
- 880. Seriously, man,
is everything gonna be okay?
- 881. You should... You should call him.
- 882. You should give him a call.
- 883. It's not my fault, dude.
I've been paying...
- 884. Hello!
- 885. Looks like the Mary Celeste.
- 886. Look. All they took was the TV.
- 887. It's weird.
- 888. They didn't even clean out the cat litter.
- 889. Oh, God.
- 890. It's like Chernobyl.
- 891. There's like a hundred houses.
There can't be four people living here.
- 892. - Oh, fuck that!
- 893. He's been in there for seven hours.
Where does he go to the bathroom?
- 894. I heard he had a breakdown.
- 895. He's letting the fund tank.
- 896. My buddy in Manhattan said...
- 897. Dr. Burry's office.
- 898. No, he actually prefers
that you email him.
- 899. Excuse me.
- 900. Mr. Fields, Mr...
- 901. - Hi, Lawrence.
- Holy shit!
- 902. We have no confidence
in your ability to identify
- 903. macroeconomic trends.
- 904. You flew here to tell me that? Why?
- 905. Anyone can see that
there is a real estate bubble.
- 906. Actually, no one can see a bubble.
- 907. That's what makes it a bubble.
- 908. That's dumb, Lawrence.
- 909. There's always markers.
- 910. Mortgage fraud has
- 911. quintupled since 2000
- 912. and the average take-home pay is flat,
- 913. but home prices are soaring.
- 914. That means the homes
are debt, not assets.
- 915. So Mike Burry of San Jose, a guy who
- 916. gets his hair cut at Supercuts
and doesn't wear shoes,
- 917. knows more than Alan Greenspan
and Hank Paulson.
- 918. Well...
- 919. Dr. Mike Burry, yes, he does.
- 920. That's cute. That's cute.
- 921. Are you being sarcastic with us, Mike?
- 922. Lawrence,
- 923. I don't know how to be sarcastic.
- 924. I don't know how to be funny.
I don't know how to
- 925. work people.
- 926. L.-
- 927. I just know how to read numbers.
- 928. How big is your short position
- 929. Just $1.3 billion.
- 930. - And the premiums?
- Well, we pay
- 931. roughly $80 to 90 million
- 932. each year, which is high,
- 933. but I was the first to do this trade.
- 934. Watch. It will pay. I may have
been early, but I'm not wrong.
- 935. It's the same thing.
It's the same thing, Mike!
- 936. You're managing a fund of,
what, $555 million?
- 937. In six years, it'll all be gone.
- 938. On one bet.
- 939. No, the second quarter of '07
is when the adjustable rates kick in.
- 940. The defaults will skyrocket.
- 941. Yeah. Says you.
- 942. How much is eligible
for withdrawal before they do?
- 943. Say, in the next two quarters.
- 944. If your investors panic.
- 945. $302 million?
- 946. My God, Mike.
- 947. No one will pull out.
That would be suicide.
- 948. I mean, I'm down 17% for the year.
- 949. But if they trust me,
and they trust me, because...
- 950. No one trusts you! No one!
- 951. I sent several emails to my investors
- 952. letting them know that the...
- 953. the second quarter of '07 is when our
housing positions show returns and...
- 954. I've been very clear.
- 955. People will withdraw their money.
- 956. Lawrence, that would be so stupid.
I mean, the...
- 957. If the fund's capitals drop too much,
- 958. then the swaps contracts are voided.
- 959. And then the banks get to keep
all of the collateral.
- 960. - Wait a minute. Wait.
- All of it.
- 961. The contracts are voided?
- 962. The contracts are voided?
- 963. Holy shit!
- 964. Oh, motherfucker!
- 965. Michael?
- 966. Give me my money back.
- 967. Michael, do you hear me?
I want my money back.
- 968. Give me my fucking money back...
- 969. you motherfucker.
- 970. The market's in an itsy-bitsy
little gully right now.
- 971. It's like everybody said,
"Okay, that was crazy.
- 972. "Let's just all calm down."
- 973. I sold that house for $350,000
the year it was built.
- 974. Two years later, $480,000.
- 975. Then $585,000 maybe 18 months ago.
- 976. This couple bought it
for $650,000 last year.
- 977. He'd let it go for that.
- 978. Hi, John.
- 979. No, no, no.
- 980. It will break his heart, but he'll let it go.
- 981. Why is he selling?
- 982. Neither one's working right now.
- 983. Marlene, you'd say
they're motivated, right?
- 984. As motivated as one can be
in this neighborhood.
- 985. This house on the left, I would say
they're probably motivated.
- 986. Wow, a lot of people
seem very motivated.
- 987. Oh, it's just the gully.
- 988. That's all. Just...
- 989. Just nerves.
- 990. So where do we stand?
- 991. I need to talk to my wife.
- 992. This market won't last.
- 993. Actually, could I talk
to a mortgage broker?
- 994. Anybody you recommend?
Anybody you like.
- 995. Yes, yes, I have someone. Absolutely.
- 996. Yeah, bitch better like me.
- 997. Sent her ass to Cabo.
- 998. So is Morgan Stanley
recruiting us? Is that it?
- 999. Oh, no. No.
The bank owns our hedge fund,
- 1000. but we're not really part of it.
- 1001. We invest in financial
- 1002. and we're trying to understand
the residential mortgage business.
- 1003. How many loans
do you write each month?
- 1004. - About 60.
- 1005. What was it four years ago?
- 1006. Ten...
- 1007. Maybe 15.
- 1008. Yeah, I was a bartender.
Now I own a boat.
- 1009. You own a...
- 1010. So how many of these are
- 1011. - Well, most.
- Oh, yeah.
- 1012. Yeah, I'd say about 90%.
- 1013. The bonuses on those
skyrocketed a few years ago.
- 1014. Adjustable's our bread and honey.
- 1015. So do applicants ever get rejected?
- 1016. Seriously?
- 1017. Look, if they get rejected,
I suck at my job.
- 1018. Even if they have no money?
- 1019. Well, my firm offers NINJA loans.
- 1020. - Okay.
- "No Income, No Job."
- 1021. I just leave the income section blank
if I want.
- 1022. Corporate doesn't care.
- 1023. These people just want homes.
And they go with the flow.
- 1024. - Good for you.
- Your companies don't verify?
- 1025. If I write a loan on Friday afternoon,
- 1026. a big bank will buy it by Monday lunch.
- 1027. Yeah. Same here.
- 1028. - Could you hold on a second?
- 1029. I don't get it. Why are they confessing?
- 1030. They're not confessing.
- 1031. They're bragging.
- 1032. Do people have any idea
what they are buying?
- 1033. I focus on the immigrants, you know.
- 1034. Once they find out
they're getting a home,
- 1035. they sign where you tell them to sign.
- 1036. Don't ask questions.
Don't understand the rates.
- 1037. - Fucking idiots.
- 1038. And you target immigrants, too?
- 1039. Well, their credit actually
isn't bad enough for him.
- 1040. Look, I'm a yield guy.
- 1041. Okay...
- 1042. I make $2,000 on a fixed-rate
prime loan, right?
- 1043. But I can make $10,000
on a sub prime adjustable.
- 1044. Trust me, I'm not driving
a 7 Series without strippers.
- 1045. No one on the pole has good credit
and they're all cash rich.
- 1046. I think I read Warren Buffett
say something like that.
- 1047. What? Who's Warren Buffett?
- 1048. Okay, so strippers. Like exotic dancers?
- 1049. Yeah, yeah, yeah.
- 1050. Nude, you know, topless.
- 1051. - Strippers.
- 1052. Can you introduce us?
- 1053. Yes! Yes.
- 1054. I always get option-pay adjustables.
I'm a private contractor.
- 1055. What? I can't hear you. I'm sorry.
- 1056. I always get option-pay adjustables.
- 1057. I'm a private contractor.
I need flexibility.
- 1058. And you tell the mortgage
company what you do?
- 1059. I write "therapist".
- 1060. - You can touch me.
- 1061. Only in V.I.P.
- 1062. No, no, no, you say
you always do adjustables.
- 1063. And you have more than
one loan on a property?
- 1064. Everybody does. At least down here.
- 1065. I'm sorry, what?
- 1066. Everybody does. At least down here.
- 1067. That way you only put down, like, 5%.
- 1068. Prices have leveled off, though, right?
- 1069. Yeah. There's a gully.
- 1070. Would you mind not moving anymore?
I'll still pay you.
- 1071. Sorry. We're not alone.
- 1072. Okay, look. If home prices don't go up,
- 1073. you are not going to be able
- 1074. And you'll be stuck paying
whatever your monthly payment is
- 1075. once it jumps up
after your teaser rate expires.
- 1076. Your monthlies
could go up 200%-300%.
- 1077. James says I can always refinance.
- 1078. Well, he's a liar.
- 1079. Actually, in this particular case,
James probably is wrong.
- 1080. 200 percent? On all my loans?
- 1081. What do you mean "all" your loans?
- 1082. We're talking about two loans
on one house, right?
- 1083. I have five houses.
- 1084. And a condo.
- 1085. Hey, there's a bubble.
- 1086. How do you know?
- 1087. Trust me. Call Vennett,
buy $50 million in swaps on the MBS.
- 1088. What do we got? Garibaldi IV, BBB.
- 1089. Mark, are you sure?
- 1090. Yeah. Yeah, it's time to call bullshit.
- 1091. - Bullshit on what?
- Every fucking thing.
- 1092. FrontPoint! FrontPoint!
- 1093. Is this America's angriest hedge fund?
- 1094. All right, listen.
I got one last question for you.
- 1095. How are you fucking us?
- 1096. There's a nicer way to say that, Vinnie.
- 1097. I'm serious.
- 1098. We'll buy your swaps, but only if you say
how you're fucking us.
- 1099. I'm not fucking you, Vinnie.
I'm kissing you.
- 1100. I'm looking deep into your eyes
as I make love to you, Vinnie.
- 1101. I'm handing you the deal of the century
on a fucking platter.
- 1102. What do I get out of it? Easy.
- 1103. I got a $20-million-a-month
- 1104. I got bosses trying to pull the plug
- 1105. because they think I'm out
of my fucking mind.
- 1106. All right?
- 1107. We make this trade,
- 1108. those problems aren't so big anymore.
- 1109. And sure, swaps are a dark market,
so I set the price.
- 1110. Whatever price I want.
- 1111. And when you come for the payday,
- 1112. I'm gonna rip your eyes out,
I'm gonna make a fortune.
- 1113. But the good news is, Vinnie,
you're not gonna care
- 1114. because you're gonna make
so much fucking money.
- 1115. That's what I get out of it.
- 1116. Want to know what you get out of it?
- 1117. You get the ice cream, the hot fudge,
the banana, and the nuts.
- 1118. Right now, I get
the sprinkles, and, yeah,
- 1119. if this goes through, I get the cherry.
- 1120. But you get the sundae, Vinnie.
- 1121. You get the sundae.
- 1122. All right, I buy that. Thank you.
- 1123. So what do you say?
- 1124. - You want me to make you a market?
- 1125. We'll take $50 million,
Garibaldi IV, BBB.
- 1126. Sharpen your pencils.
I'll get the paperwork ready.
- 1127. Fuck you, too.
- 1128. Yes!
- 1129. That's right.
- 1130. Oh, man.
- 1131. He has so many numbers,
and I always forget
- 1132. which one he prefers,
because he's very specific.
- 1133. Start with the first one.
- 1134. I don't know if it's the first one.
- 1135. Just try it.
- 1136. Okay. I... Okay.
- 1137. - Ben Rickert.
- Hey, Ben. It's Jamie.
- 1138. Jamie, you know you're not
supposed to use this line.
- 1139. Told you.
- 1140. Okay, let's try number two out of 14.
- 1141. Ben Rickert.
- 1142. Ben, why do you do that, man? I mean...
- 1143. You're a retired trader, okay?
No one is listening to your calls.
- 1144. The NSA has a $52 billion
budget and the ability
- 1145. to monitor tens
of millions of calls a second.
- 1146. You think they're not using it?
- 1147. Hey, I promise I will refrain from saying
- 1148. "Ben Rickert" and "dirty bomb"
in the same sent...
- 1149. - Jesus fucking Christ.
- I'm sorry, dude.
- 1150. Ben Rickert.
- 1151. Did you get a chance to look
at what we sent you, Ben?
- 1152. It's Charlie. I'm here, too.
- 1153. Hi, Charlie. Yeah, I did. Hold on.
- 1154. - Ben, you still there?
- 1155. I'll be honest, gentlemen.
- 1156. It scared the shit out of me.
- 1157. But that's a good thing, right?
- 1158. That means this Vennett guy's
- 1159. No, he's not.
- 1160. Cool.
- 1161. Tell me more about these CDOs.
- 1162. Yeah, yeah. Okay, so, you know,
Vennett mentions the CDOs,
- 1163. but actually, we took a look
- 1164. and they're way worse
than even he realizes.
- 1165. These things don't make any sense!
- 1166. We can't even model them.
- 1167. These are 100 times bigger
than the MBS.
- 1168. And 90% AAA-rated.
- 1169. - Yes! Exactly!
- Over 90%.
- 1170. It's incredible.
- 1171. I took a good hard look
at the CDOs you want to short.
- 1172. They're brilliant. Worthless. Total crap.
- 1173. Jamie. Very good.
- 1174. What can I say? I'm good at finding shit.
- 1175. So, Ben, we shorted
the BB's and the BBB's,
- 1176. and the risk is relatively low.
- 1177. - Payoff is, like, 25-to-1.
- 1178. Okay, so, why are you calling me?
I don't do this anymore.
- 1179. Look, Ben?
- 1180. We need you to help us get the ISDA.
- 1181. If we get a hunting license,
we can short this crap.
- 1182. And we know you hate Wall Street.
We're not asking you to do the trading.
- 1183. We're simply asking you
to help us get a seat
- 1184. at the fucking table.
- 1185. It's a pretty ugly table, guys.
- 1186. Look, Ben, the system fucked up
in a big, big way here, okay?
- 1187. And somehow
- 1188. we know before anyone else.
- 1189. You know? This is a
- 1190. I'm thinking.
- 1191. Okay. I'll call Deutsche Bank.
- 1192. Thank you, Ben. Thank you.
- 1193. And Bear. What about Bear?
They have some reprehensible product.
- 1194. Okay. Bear will trade with anybody.
- 1195. All right. I'll see if I can push it through.
- 1196. Thank you, Noah.
And thank Jared for us.
- 1197. - Couldn't we go inside?
- Yeah, me, too.
- 1198. Hi. It's Mark. I need to talk
to Vinnie right now.
- 1199. We're just asking you to explain to us
- 1200. just how it is that you are fucking us,
- 1201. because what we are seeing...
- 1202. Morgan Stanley building, fast.
- 1203. Are we hooked up
to the same computer screen?
- 1204. It doesn't make any sense.
- 1205. Vinnie, you there?
- 1206. - Mark, you there?
- Yeah, did you hear?
- 1207. Mortgage defaults have gone
through the roof.
- 1208. Is anybody jumping off of buildings yet?
- 1209. Why would they?
Sub prime mortgage bond prices are up.
- 1210. What?
- 1211. Vennett wants $1.9 million
more in collateral by close.
- 1212. Vennett's asking us to post collateral.
- 1213. What the hell is going on?
- 1214. We don't know, but Deutsche's
on the phone demanding payment.
- 1215. Call Vennett. Call that little shit.
- 1216. Call Vennett.
Tell him to get his ass down here.
- 1217. So sub prime loans go bad,
- 1218. but sub prime bonds, which are made up
of sub prime loans, are more valuable?
- 1219. I know. They want another
$1.9 million by market close.
- 1220. What about the ratings agencies?
- 1221. Are they downgrading the CDOs
and mortgage bonds?
- 1222. Where are the ratings agencies at?
- 1223. - They're the fucking same.
- No, they're all still AAA.
- 1224. What the hell?
Are you fucking kidding me?
- 1225. Those fuckers! Those motherfuckers!
- 1226. They go public, and all they care about
is their bottom line and their shit.
- 1227. Hey, Mark, that's not all.
- 1228. The Morgan Stanley risk guys are here.
- 1229. They called in Kathy Tao.
- 1230. They're trying to convince her
to make us sell our swaps.
- 1231. Apparently, tying up six years
of insurance payments
- 1232. in hopes of a housing Armageddon
- 1233. - is not prudent in vesting.
- What did Kathy say?
- 1234. Nothing yet. She keeps asking if
this is one of your crusades.
- 1235. Okay, I want you to walk back in there
- 1236. and very calmly, very politely,
tell the risk assessors to fuck off.
- 1237. And then meet me over
at Standard & Poor's.
- 1238. We're gonna talk to Georgia.
- 1239. All right. Okay.
- 1240. Get that fuck Jared Vennett
in this office.
- 1241. I'm gonna bash his fucking head in.
- 1242. Gentlemen?
- 1243. I spoke with Mark Baum.
He says to fuck off.
- 1244. I can't see a damn thing.
- 1245. My eye doctor's always busy.
- 1246. I end up taking
any appointment they'll give me,
- 1247. and then the whole morning
gets shot to hell!
- 1248. So...
- 1249. All righty,
- 1250. FrontPoint Partners,
- 1251. how can Standard & Poor's help you?
- 1252. Well, we don't understand why
- 1253. the ratings agencies haven't
downgraded sub prime bonds
- 1254. since the underlying loans
are clearly deteriorating.
- 1255. Well, the delinquency rates
do have people worried,
- 1256. but they're actually within our models.
- 1257. - So. ...
- Says you.
- 1258. you're convinced
the underlying mortgages
- 1259. in these bonds are solid loans.
- 1260. That is our opinion, yes.
- 1261. Have you looked at the loan-level data?
- 1262. I mean, they're giving these loans
- 1263. to anybody
with a credit score and a pulse.
- 1264. Excuse me, sir. What do you
think we do here all day?
- 1265. We're not sure. That's why we're here.
- 1266. Here's what I don't understand...
- 1267. We check, recheck, recheck again.
- 1268. If these mortgage bonds are so stable...
- 1269. Perhaps you could check your friend.
- 1270. have you ever refused to rate...
- 1271. Ma'am, that's delusional.
- 1272. We stand behind them.
- 1273. Georgia, have you ever refused to rate
- 1274. any of these bonds
upper tranches AAA?
- 1275. Can we see the paperwork
on those deals?
- 1276. I am under no obligation
to share that information
- 1277. with you, whoever you might be.
- 1278. Just answer the question, Georgia.
- 1279. Can you name one time in the past year
- 1280. where you checked the tape
- 1281. and you didn't give the banks
the AAA percentage they wanted?
- 1282. If we don't give them the ratings,
- 1283. they'll go to Moody's,
right down the block.
- 1284. If we don't work with them,
they will go to our competitors.
- 1285. Not our fault.
Simply the way the world works.
- 1286. - Holy shit.
- Yes, now you see.
- 1287. And I never said that.
- 1288. They're selling ratings for fees.
- 1289. A ratings shop.
- 1290. You can afford to make less. Make less.
- 1291. Nobody said that.
- 1292. And it is not my decision.
I have a boss.
- 1293. - Are you kidding me?
- No, I am not "kidding you".
- 1294. How'd your boss do on the IPO?
- 1295. Is that the angle you're taking?
- 1296. So, now, anyone who has a boss
can't be held responsible
- 1297. for doing shitty and illegal things.
- 1298. What are you, four?
- 1299. No, lam not four, Mr. Baum.
I am not, no.
- 1300. And I wonder
what your incentives might be.
- 1301. Is it maybe in your best interest
- 1302. to have the ratings change?
Is it, perhaps?
- 1303. How many credit default swaps
do you own?
- 1304. It doesn't make me wrong.
- 1305. No.
- 1306. It just makes you a hypocrite.
- 1307. Fuck!
- 1308. Mortgage delinquencies went up
- 1309. and the CDOs got more
- 1310. - Unbelievable.
- We know. It's completely backwards.
- 1311. I just called an old friend at Bear.
- 1312. He didn't even know what a CDO is.
- 1313. Yeah, I just had to wire
Bear and Deutsche $70,000.
- 1314. It's like two plus two equals
- 1315. fish.
- 1316. It's rigged.
We bought into a rigged game.
- 1317. We're gonna lose everything.
- 1318. I'm gonna have to move back
in with my mom.
- 1319. Can't do that.
- 1320. All right. Well, I got
a colonic appointment.
- 1321. Wait a minute. Hold on, Ben.
- 1322. Ben, look.
- 1323. Either the banks are clueless
- 1324. and they don't know
how to value these CDOs,
- 1325. or they're such crooks that
the CDOs are worth shit
- 1326. and they're hiding it.
- 1327. I think we should buy more swaps.
- 1328. What?
- 1329. Suck it up and pay up, fellas.
We made a deal.
- 1330. No way! No!
- 1331. Are you fucking kidding me?
- 1332. Are you serious?
You think this is a game?
- 1333. - No.No.No.No.No.
- Yeah. Yeah.
- 1334. No! No! No!
- 1335. No, seriously, a colonic once a year.
- 1336. Ass!
- 1337. And you got a matching little butler boy,
- 1338. - Are you done?
- I think so, yeah.
- 1339. God! I pulled a muscle
in my back from yelling.
- 1340. Mortgage defaults
have done nothing but go up.
- 1341. Yet you quote us
a higher price on the bonds.
- 1342. Please explain that to me.
There's no way that makes sense.
- 1343. There's no way you're marking
these swaps appropriately.
- 1344. Why shouldn't we back out
of this trade right now?
- 1345. Didn't I say when we made this deal
that the ratings agencies, the SEC
- 1346. and the big banks were clueless?
Didn't I say that?
- 1347. - Yes.
- Didn't I say it?
- 1348. Yes, you did. You did.
- 1349. Shut up.
- 1350. Now their foot's on fire, they think
- 1351. their steak is done,
and you're surprised?
- 1352. That's not stupidity. That's fraud.
- 1353. Tell me the difference
between stupid and illegal,
- 1354. and I'll have my wife's brother arrested.
- 1355. That was funny.
- 1356. I guess you just don't realize
how clueless the system really is.
- 1357. Yes, there's some shady shit
- 1358. but trust me, it's fueled by stupidity!
- 1359. Look at yourselves.
- 1360. You know, you pass yourself off
as cynical people
- 1361. but you still have some faith
in the system, don't you?
- 1362. I don't.
- 1363. Well, except for Vinnie.
And who gives a shit?
- 1364. - No way!
- 1365. Either we're right or we're wrong
in a giant, giant way.
- 1366. And if we're wrong,
then we got to find someone
- 1367. to help us get out of this trade.
- 1368. I'm not feeling remotely
confident that we're right.
- 1369. And if we're wrong,
who's gonna tell us?
- 1370. Who understands this stuff?
It makes no sense!
- 1371. I think we need to go to Vegas.
- 1372. - What's in Vegas?
- 1373. What the hell's in Las Vegas?
- 1374. The American Securitization
Forum is there next week.
- 1375. Every bond and CDO salesman,
- 1376. and swap trader is gonna be there.
- 1377. I'm telling you,
your bet is against dumb money.
- 1378. It's about time you find out
just how dumb that money really is.
- 1379. God, I hate Vegas.
- 1380. I hear the food has gotten
really good in Vegas.
- 1381. They have a Nobu now.
- 1382. Would you fucking stop it?
- 1383. Any sense?
- 1384. And if a bond is "rich" it is...
- 1385. - I don't know, loaded with assets?
- "Rich" just means overpriced.
- 1386. I can't sleep on planes,
so I did my homework.
- 1387. Okay, let's focus. What's our goal?
- 1388. To figure out if this
is a deal of a lifetime
- 1389. or if everyone here knows
something we don't
- 1390. and we're gonna get royally screwed.
- 1391. Right. Remember that when you
meet with the guys from Bear.
- 1392. I set you up with a face-to-face.
- 1393. - Awesome.
- Where is that?
- 1394. Holy shit. Five years ago,
Securitization was a loser convention.
- 1395. 100, maybe 200 people would show.
- 1396. $500 billion a year later, you get this.
- 1397. There's a lot of smug-looking
people in here, huh?
- 1398. It's like someone hit a pinata
filled with white people who suck at golf.
- 1399. I mean, who are all these clowns?
- 1400. Come on. I think it looks fun.
- 1401. Certainly. Vennett says these
are the people we're betting against.
- 1402. - Yeah, here we go. Here we go.
- There he is.
- 1403. Chris, on my left. Chris, on my left.
- 1404. Gentlemen.
- 1405. When do we get a chance to face time
with some of these lovely folks?
- 1406. Chris, give him the key cards.
- 1407. Do you even know which
key cards you're giving out?
- 1408. - You're just giving them out?
- Thank you.
- 1409. First of all, how was your travel?
How are you? Uneventful?
- 1410. - Uneventful.
- 1411. I've been here for six hours.
I've already been to the gym,
- 1412. I had two poached eggs
- 1413. and I played blackjack
with Harry Dean Stanton.
- 1414. Thank you for your diary.
- 1415. Face time. I'd like some face time.
- 1416. Just remember.
We're here to gather information.
- 1417. We're gathering information, okay?
- 1418. We're not advertising
our short position. All right?
- 1419. We don't want to spook
everybody. Can you do that?
- 1420. I know you got a big mouth,
you like to run it.
- 1421. Can you just keep it shut
for a few days?
- 1422. Okay. Okay.
- 1423. Yeah, don't worry. We'll play nice.
- 1424. Ladies and gentlemen.
- 1425. Business is good.
- 1426. Profits are strong
- 1427. and the mortgage continues
to be the bedrock
- 1428. on which this economy is built.
- 1429. And, yes, we had to take some losses
- 1430. in our subprime department
last year, but those losses
- 1431. will be contained at only 5%.
- 1432. Now, in our residential sector...
- 1433. Mark, it's not a Q and A.
- 1434. our roll out of those
variable rate packages
- 1435. were gobbled up by the consumers!
- 1436. I have a question, please.
- 1437. Sir, the Q and A is after my statements.
- 1438. But you know what? You seem anxious.
How can I help you?
- 1439. - Thank you. How are you?
- Fine, thank you.
- 1440. Would you say that it is a possibility
- 1441. or a probability that
subprime losses stop at 5%?
- 1442. Thank you.
- 1443. I would say it is a very
strong probability, indeed.
- 1444. So back to the residential sector.
- 1445. When we rolled out the new
variable rates package...
- 1446. Excuse me.
- 1447. Yes, sir.
- 1448. Zero! Zero!
- 1449. There is a 0% chance
- 1450. that your subprime losses
will stop at 5%.
- 1451. Zero.
- 1452. Excuse me.
- 1453. I have to take this.
- 1454. He must be from Bank of America.
- 1455. - Our subprime department is fine.
- No, I'm not doing anything right now.
- 1456. As I was saying,
our residential department...
- 1457. How are the kids?
- 1458. consumers reacted to our packages...
- 1459. Mark Baum really did that.
- 1460. When we were in Vegas, he did that.
- 1461. He said that, he took the call.
- 1462. Now you see what I had to deal with?
- 1463. Yeah, the Beretta... Meh.
- 1464. But this Uzi is fucking awesome!
- 1465. I need this CDO machine
to run for another two years.
- 1466. And then I'm rich as fuck
and I got my house in Aspen.
- 1467. But do you have any concerns
about the performance
- 1468. of the underlying securitizations?
- 1469. It's easy to see that delinquencies
- 1470. and default rates
are on the rise right now.
- 1471. Could you please stop
being such a buzzkill, dude?
- 1472. We didn't bring you out here
to talk about work, bro.
- 1473. Why did you bring us out here?
- 1474. Because we need to be able to
expense the ammo to a client.
- 1475. I'm gonna go shoot some terrorists.
Watch how it's done, boys!
- 1476. - These guys are morons.
- Fucking tool.
- 1477. These guys are morons.
- 1478. - Fuck, yes! Boom!
- Yeah, man!
- 1479. We need to be buying up every swap
we can get our hands on here.
- 1480. Just hold on, okay? Hold on.
- 1481. My brother's ex-girlfriend
works for the SEC.
- 1482. She just told me she's in town, okay?
- 1483. So, if we're missing something,
maybe she can tell me.
- 1484. You know, give me some insight.
- 1485. In the meantime,
you go to the main floor
- 1486. and price some swaps.
- 1487. Well, actually, we're about to invest
in housing bonds, and...
- 1488. I was wondering if the SEC
is worried about them at all.
- 1489. I know you're not allowed
to tell me specifics, but just generally.
- 1490. We don't investigate mortgage bonds.
- 1491. Truth is, since we got our budget cut,
we don't investigate much.
- 1492. - Then why are you here? I thought...
- I'm not here for the SEC.
- 1493. I'm here on my own dime.
- 1494. I'm floating my resume
to some big banks.
- 1495. How's your brother, by the way?
- 1496. How are you floating
your resume to big banks?
- 1497. I mean, you're supposed to be the ones,
you know, policing the big banks.
- 1498. Grow up, Jamie.
- 1499. There must be some kind of law
against working for a financial institution
- 1500. right after you've been working
in financial regulation, right?
- 1501. No. No.
- 1502. Hey! Dougie!
- 1503. Hey! Come over here.
What are you doing at Caesars?
- 1504. He's at Goldman.
- 1505. See you.
- 1506. We can do BBB-level swaps
at 500 basis points. Maybe.
- 1507. You're pricing the swaps
like the bond is gonna collapse
- 1508. even though the bond value's
going up? Really?
- 1509. Sign of the times.
- 1510. What the hell is going on?
- 1511. Lewis, can you come in
early tomorrow, please?
- 1512. I need to unload the
AIG and Countrywide
- 1513. and Freddie Mac positions
- 1514. so that we can afford
the premiums on the...
- 1515. core mortgage shorts on the swaps.
- 1516. No problem, Dr. Burry.
- 1517. Dr. Burry?
- 1518. If the investors withdraw,
- 1519. what's going to happen here?
Are we done?
- 1520. Honestly, I don't know.
- 1521. The bonds aren't going down.
- 1522. They won't move. It's possible
- 1523. that we are in a completely
- 1524. Or... You're wrong.
- 1525. Sure.
- 1526. It's possible I'm wrong.
I just don't know how.
- 1527. I guess when someone's wrong,
- 1528. They never know how.
- 1529. - See you in the morning.
- 1530. Even Bear upped their prices.
- 1531. And they keep calling us Brownhole.
- 1532. You just don't have the money
or the reputation.
- 1533. Don't take it personally.
- 1534. I don't think I have
the strip club in me tonight.
- 1535. I'm just gonna get some ginger ale
and watch some pay-per-view.
- 1536. I'll book us some flights out
for the morning.
- 1537. A deal. We need a deal, right? A deal.
- 1538. We need a deal we can afford.
- 1539. We need a deal
that they're not gonna refuse.
- 1540. So... What can we do?
- 1541. The AA tranches. What if we
bet against the AA tranches?
- 1542. Who's not gonna take that bet?
- 1543. We know they say
they're 95% AAA-rated,
- 1544. but in reality they're more like 25%.
- 1545. Some of them are 0%!
- 1546. We also know that if the
bottom tranches fail at over 8%,
- 1547. the upper tranches are affected.
- 1548. They go to zero.
- 1549. I'll bet you right now
that those AA's are actually like B's.
- 1550. I rarely ever say these words,
but I think Charlie's right.
- 1551. Look, Ben.
- 1552. The payoff
- 1553. is 200 to 1.
- 1554. But they're all taking
the ratings at face value.
- 1555. So they're charging pennies
on the dollar a bet against the AA's.
- 1556. Just when I start thinking
you guys are clowns...
- 1557. No one on the planet's
betting against AA's.
- 1558. The banks will think we're either high
or having a stroke.
- 1559. They'll take every dime we have to offer.
- 1560. Kinda brilliant.
- 1561. This is what we did
that no one else thought of.
- 1562. Not even Baum or Burry
thought to short the AA's.
- 1563. But we did.
- 1564. Little Brownhole Capital.
- 1565. We're interested in shorting
some of the AA tranche of CDOs.
- 1566. Come on, guys, what's the angle?
- 1567. Oh, got no angle. We're new to this.
We're just excited.
- 1568. We want to do $15 million
in swaps on the AA tranche.
- 1569. I don't understand.
- 1570. You can buy as much AA tranche
as you want.
- 1571. $40 million against the AA.
- 1572. Brother, I will sell you
as much as you want.
- 1573. You understand perfectly, Bob.
You want the deal?
- 1574. That's cool. That's all right with me.
- 1575. Pleasure.
- 1576. Don't do that. Stop. Stop.
- 1577. - Stop that.
- 1578. Stop it! Stop.
- 1579. What?
- 1580. Do you have any idea what you just did?
- 1581. Come on. We just made
the deal of our lifetimes!
- 1582. We should celebrate.
- 1583. You just bet against
the American economy.
- 1584. Fuck, yeah, we did!
- 1585. - Fuck, yeah!
- Which means...
- 1586. Which means if we're right...
- 1587. If we're right, people lose homes.
People lose jobs.
- 1588. People lose retirement savings.
People lose pensions.
- 1589. You know what I hate
about fucking banking?
- 1590. It reduces people to numbers.
Here's a number.
- 1591. Every 1% unemployment goes up,
40,000 people die. Did you know that?
- 1592. - No.
- Did you know that?
- 1593. No, I didn't know that.
- 1594. We were just excited.
- 1595. Just don't fucking dance.
- 1596. - All right.
- Where are you going?
- 1597. Whoa, I just got really scared.
- 1598. First of all, great show today.
- 1599. - You were terrific.
- Thank you.
- 1600. Your big mouth was a revelation.
- 1601. I appreciate that.
- 1602. You worried you and your swaps
are getting played?
- 1603. Well, this is an opportunity for you
to meet who you're betting against.
- 1604. Try not to get too righteous
and listen a little.
- 1605. Okay, fine. Who is this guy?
- 1606. A real solid-gold asshole.
- 1607. - I'm a CDO manager.
- A "CDO manager"?
- 1608. Yeah, at Harding Advisors.
- 1609. I didn't realize that there was
anything to manage with CDOs.
- 1610. We select the securities
that go into the CDO portfolio
- 1611. and monitor the assets.
- 1612. I do most of Merrill Lynch's CDOs.
- 1613. Do you represent the investors
or Merrill Lynch?
- 1614. - The investors.
- You do.
- 1615. - Yeah.
- 1616. Merrill Lynch isn't gonna send you
- 1617. unless you put Merrill Lynch's bonds
in your CDO.
- 1618. Good question. Let's just say
Merrill and I have...
- 1619. We have a good relationship.
- 1620. You have a good relationship
with Merrill Lynch.
- 1621. We've been doing business
together for a long time.
- 1622. And so the CDOs that you create
- 1623. are of the highest quality
and the highest value.
- 1624. - Absolutely. Yep.
- 1625. Are you at all concerned
about the rising default rates?
- 1626. I assume no risk for these
products myself, Mark.
- 1627. Okay.
- 1628. So let me get this straight.
The bank calls you up.
- 1629. They give you the bonds
they want to sell.
- 1630. They give you clients,
- 1631. they give you money to run
- 1632. Give you fat fees for doing so.
- 1633. But you represent the investors?
- 1634. - Is that right?
- 1635. But we're not
in the Merrill Lynch building.
- 1636. - Okay. Where are you?
- We're in New Jersey.
- 1637. You're 20 minutes away.
- 1638. Well, five if you use a helicopter.
- 1639. - That's funny, huh?
- That's hilarious.
- 1640. Oh, boy.
- 1641. Your boss is about to explode.
- 1642. No, he's too curious to explode.
- 1643. Hold on. Say that again.
- 1644. CDO "A" has parts of CDO
- 1645. And CDO "B" has parts of CDO
- 1646. But then they both
get put inside CDO
- 1647. Yeah, that one's called CDO squared.
- 1648. A CDO of a CDO.
- 1649. All right?
- 1650. And then there's CDOs made up
of the opposite side
- 1651. of the bet you made with your swaps.
- 1652. We call them synthetic CDOs.
- 1653. What did you say? Synthetic CDOs.
- 1654. - That is fucking crazy.
- It's not. It's awesome.
- 1655. His face is starting to boil.
He looks like the bad guy from Dune.
- 1656. All right, let's say
- 1657. you have a pool of $50 million
in subprime loans.
- 1658. How much money could be
out there betting on it,
- 1659. in your synthetic CDOs and swaps
- 1660. right now, tonight?
- 1661. Let's see, $50 million...
- 1662. - A billion dollars.
- 1663. If the mortgage bonds
that Michael Burry discovered
- 1664. were the match...
- 1665. How much bigger is the market
for insuring mortgage bonds
- 1666. than actual mortgages?
- 1667. About 20 times.
- 1668. If the mortgage bonds were the match
- 1669. and the CDOs were
the kerosene-soaked rags,
- 1670. then the synthetic CDO
was the atomic bomb
- 1671. with the drunk President
holding his finger
- 1672. over the button.
- 1673. It was at that moment
in that dumb restaurant
- 1674. with that stupid look on his face
that Mark Baum realized
- 1675. that the whole world economy
- 1676. And I know what you're thinking.
- 1677. "What the fuck is a synthetic CDO?"
- 1678. Well, here's Dr. Richard Thaler,
father of behavioral economics
- 1679. and Selena Gomez to explain.
- 1680. Okay. So here's how
a synthetic CDO works.
- 1681. Let's say I bet $10 million
on a blackjack hand.
- 1682. $10 million because this hand
is meant to represent
- 1683. a single mortgage bond.
- 1684. Okay, Selena has a pretty good
hand here, showing 18.
- 1685. Dealer showing seven.
- 1686. That's a really good hand for Selena.
- 1687. Good odds. In fact,
her chances of winning
- 1688. this hand are 87%.
- 1689. So, my odds are good.
I'm on a winning streak.
- 1690. Everybody in this place
wants to get in on the action.
- 1691. How could I lose, right?
- 1692. Now, this is a classic error.
- 1693. In basketball it's called
the Hot Hand Fallacy.
- 1694. A player makes a bunch
of shots in a row.
- 1695. People are sure they're gonna
make the next one.
- 1696. People think that whatever's
- 1697. is gonna continue to happen
into the future.
- 1698. During the real estate boom,
markets were going up and up
- 1699. and people thought
they would never go down.
- 1700. So people who are watching
and think that I won't lose
- 1701. will make a side bet.
- 1702. Now, this is the first synthetic CDO.
- 1703. I love Selena Gomez.
- 1704. I bet you $50 million she wins.
- 1705. And I'll give you 3-to-1 odds.
- 1706. 3-to-1 odds? Okay, I'll take that bet.
- 1707. Now, somebody else
is gonna want to make a bet
- 1708. - on the outcome of their bet.
- Bet you 50 million she wins.
- 1709. That will lead to synthetic
CDO number two.
- 1710. Hey, I bet you $200 million
that lady in the glasses
- 1711. wins that bet.
- 1712. She probably will win.
So I want a great payoff.
- 1713. - How about 20-to-1?
- 1714. And this will go on and on
with more and more synthetic CDOs.
- 1715. And we can transform an original
$10 million investment
- 1716. into billions of dollars.
- 1717. You Okay?
- 1718. No.
- 1719. I actually feel pretty sick.
- 1720. So I'm going to leave.
- 1721. You think I'm a parasite,
don't you, Mr. Baum?
- 1722. But, apparently, society values me
- 1723. In fact, let's do this.
- 1724. I'll tell you how much I'm worth.
- 1725. You tell me how much you're worth.
- 1726. God, you are an incredibly
big piece of shit.
- 1727. Short everything that guy has touched.
- 1728. I want half a billion more in swaps.
- 1729. You sure about that?
The collateral calls could bankrupt you.
- 1730. - Yeah. Yeah.
- Where are you going?
- 1731. I am going to try to find
- 1732. at the roulette table.
- 1733. Hey, hey, hey!
- 1734. Things are worse than I thought.
- 1735. I honestly think
the economy might collapse.
- 1736. But you've been saying
- 1737. that the system's broken
for years, Mark. So...
- 1738. Why are you so shocked?
- 1739. It's more twisted
than I could have imagined.
- 1740. You love to be the virtuous one.
- 1741. I'm a banker. I'm a part of it.
- 1742. You always have, Mark.
Like you're untainted.
- 1743. It changed me.
It changed me into a person
- 1744. who is not able to reach out
- 1745. He was in pain.
My brother was in real pain.
- 1746. There's no perfect way to help.
- 1747. It's sad. It's scary.
- 1748. So stop trying to fix the world.
- 1749. He told me...
- 1750. You're not a saint.
- 1751. Saints don't live on Park Avenue.
- 1752. that he was having bad thoughts.
- 1753. Just feel the feelings like the rest of us.
- 1754. My first response
was to offer him some money.
- 1755. I offered him fucking money!
- 1756. His face was so smashed.
- 1757. That's right.
- 1758. Michael?
- 1759. - Michael?
- Yes. Yes.
- 1760. - Is everything okay?
- Yes, honey.
- 1761. - You sure?
- Yeah, baby.
- 1762. I'm fine.
- 1763. To all investors.
- 1764. As you may know,
- 1765. our agreement allows me
to take extraordinary measures
- 1766. when markets
aren't functioning properly.
- 1767. I currently have reason to believe
the mortgage bond market
- 1768. is fraudulent.
- 1769. So, in order to protect investors
from this fraudulent market,
- 1770. I've decided to restrict
- 1771. until further notice.
- 1772. Sincerely, Dr. Michael J. Burry.
- 1773. I never would have guessed my life
- 1774. could change as much as it
has since I moved to L.A.
- 1775. It's not just, like, that easy
to, like, not see you.
- 1776. He lashed out at rumors
he used performance enhancing drugs.
- 1777. This record is not tainted.
- 1778. Oh, my God, dude.
- 1779. Will you please stop changing
- 1780. - You're driving me crazy.
- All right.
- 1781. - Fine.
- Just put the business news on.
- 1782. - ... and the S&P picked up three points.
- 1783. Mortgage meltdown continued today.
- 1784. Subprime mortgage lender
New Century Financial,
- 1785. once the industry leader, by the way,
filed for bankruptcy.
- 1786. - The company immediately...
- Whoa, whoa, whoa.
- 1787. Good time for my voice to go...
- 1788. Fired 3,200 workers.
- 1789. The manufacturing index also
fell in the month of March...
- 1790. It's starting.
- 1791. a warning that economic
growth could slow.
- 1792. The Institute of Supply Management
also reported a rise in prices...
- 1793. I'm gonna call my mom.
- 1794. The principal source of the slowdown
in economic growth...
- 1795. Time and time and time again,
- 1796. I have gone to bat for you, Mark!
- 1797. We've known each other
for seven years...
- 1798. She's got some lungs on her.
- 1799. I can't help but enjoy it.
- 1800. There's no fucking way.
There's no fucking way
- 1801. that the big banks are that stupid.
- 1802. Bye, Kathy!
- 1803. Well?
- 1804. Kathy thinks that it would be a good idea
if we sold our shorts.
- 1805. What else is new?
- 1806. And she said that
Morgan Stanley will buy them.
- 1807. Holy shit!
- 1808. What did you say?
- 1809. I told her we're not selling shit.
- 1810. If you need the files for 2005...
- 1811. Mr. Fields' suit is very specific
to files from the past year.
- 1812. Good. Then get out.
Say hi to Lawrence for me.
- 1813. Will do.
- 1814. You can't call me back for a week?
- 1815. I am so sorry, Mike.
- 1816. Goldman had a systems failure.
I lost a ton of messages.
- 1817. Yeah, B of A
said they had a power outage,
- 1818. and Morgan Stanley
said their server crashed.
- 1819. That's weird.
- 1820. Well, I would call it improbable.
- 1821. So where do you have
our position marked?
- 1822. I think it's the same, Mike.
- 1823. What? Can you explain
that to me, please,
- 1824. because how can the value
of an insurance contract
- 1825. not be affected by the demise
of the very thing it insures?
- 1826. They're independent markets.
They're not always correlated.
- 1827. I know it sounds odd,
- 1828. but these
are very complicated products.
- 1829. They are correlated.
- 1830. They're gonna lose their houses,
they're gonna lose their jobs,
- 1831. they're gonna lose their...
- 1832. Will you listen to me?
- 1833. This is like the end of capitalism.
- 1834. This is like the Dark Ages all over again.
- 1835. I don't want to talk to Dad.
- 1836. Okay, I love you, too. Save your money.
- 1837. She says I need to be on Xanax
and double my dose of Zoloft.
- 1838. I asked Bear Stearns to price our shorts.
- 1839. They tell me the CDOs
still haven't moved.
- 1840. This is fucking insane!
- 1841. You realize that?
These people are crooks
- 1842. and they should be in prison.
- 1843. Look at the TABX.
- 1844. You can see that the CDOs
are worth zero!
- 1845. So you know what they're doing, huh?
You know what they're doing, right?
- 1846. Yeah. They're unloading them.
- 1847. They're selling their dog shit CDOs,
then they go to another bank
- 1848. and short the shit they just fucking sold!
- 1849. Let's go to the press, man!
- 1850. This is a massive story.
Who wouldn't publish it?
- 1851. Robert Redford!
- 1852. No, you don't understand!
- 1853. I got it, guys. I got it.
- 1854. What am I supposed to do?
- 1855. Do you want me to write a piece
called "We're All Fucked"?
- 1856. Yes! That's a perfect title!
- 1857. Casey, right now every bank in town
is unloading these shit bonds
- 1858. onto unsuspecting customers.
- 1859. And they won't devalue them
until they get them off their books.
- 1860. This level of criminality
- 1861. even on fucking Wall Street.
- 1862. Jamie... And this is me
being honest here, okay?
- 1863. It took me years to build my
relationships on Wall Street.
- 1864. No bank or ratings agency
is going to confirm a story like this
- 1865. just because
it comes from two guys in a...
- 1866. Sorry, garage band hedge fund
that thinks it's the apocalypse.
- 1867. Wow.
- 1868. I thought you were for real, Casey.
You know, I'll have to say I really did.
- 1869. Really?
- 1870. Yeah, Jamie, you try being
for real with a three-year-old
- 1871. and a wife getting her master's degree.
- 1872. I'm not gonna burn my reputation
on your wild hunch.
- 1873. Wow.
- 1874. Wow.
- 1875. Thanks for coming, guys.
- 1876. Totally fucking awesome to see you.
- 1877. Yeah, Casey. I've always hated you,
because you were a prick in college
- 1878. and you are a prick today!
- 1879. Thanks, Charlie.
Still living with your mom?
- 1880. Charlie, come on!
- 1881. Mark Baum again. Call me.
- 1882. Subprime bonds fell off a cliff.
- 1883. Rumor has it the default
numbers are huge.
- 1884. Who got the remittance data early?
I bet it's Goldman.
- 1885. Yeah, fuck you very much.
- 1886. Jared, it's chaos down here.
Where are we?
- 1887. "And Caesar wept, for there were
no more worlds to conquer."
- 1888. Shane?
- 1889. Shane?
- 1890. Well, nobody's buying CDO
or mortgage bonds anymore
- 1891. and everybody wants swaps.
- 1892. Swaps are now the most popular
product on the street.
- 1893. - That's good for us.
- Yes and no.
- 1894. I heard from somebody
who heard from somebody...
- 1895. No, Alex, no. Sorry.
- 1896. Bennie Cleager over at
Morgan is taking on
- 1897. some heavy losses
in the bond department.
- 1898. Your ship might be taking on water.
- 1899. It might be time to get
our life jacket and get out.
- 1900. I'm jacked.
- 1901. I'm jacked! I'm jacked to the tits!
- 1902. Good.
- 1903. - Do you feel it?
- 1904. What'd you hear, Tommy?
- 1905. It's happening-
- 1906. Everybody wants our swaps.
- 1907. Kathy's office is looking for you.
- 1908. They're singing a different tune now,
- 1909. That's not good.
- 1910. Maybe later. Not now.
- 1911. This is a joke. Never.
- 1912. Listening.
- 1913. - Dr. Burry?
- 1914. Deeb Winston, Goldman Sachs.
- 1915. Listen, I've been reviewing
- 1916. I wanted to discuss your marks
and make sure they're fair.
- 1917. Yeah, I think you mean that you've
secured a net short position yourselves.
- 1918. So you're free to mark my
swaps accurately for once
- 1919. because it's now
in your interest to do so.
- 1920. I'm not sure what you want me to say.
- 1921. I think that...
- 1922. I think that you've already said it.
- 1923. You tell Jeff at Goldman
that I'm not transferring funds.
- 1924. This is bullshit!
- 1925. Okay, we'll talk later.
- 1926. Thank you.
- 1927. Thanks for coming so quickly, Mark.
- 1928. Yeah.
- 1929. I know you've been hearing rumblings
- 1930. about some losses
Morgan has suffered.
- 1931. - Congratulations.
- On what?
- 1932. Thanks.
- 1933. Having fun?
- 1934. Yes.
- 1935. Tons.
- 1936. I just wanted you to know that...
- 1937. That, yes, Morgan has suffered
- 1938. but our liquidity is strong
and there's no cause for concern.
- 1939. Would Bennie Cleager be concerned?
- 1940. Because word on the street
- 1941. is that he took some
pretty heavy losses.
- 1942. Kathy, come on. We know each other.
- 1943. What's going on?
- 1944. How bad is this?
- 1945. Okay.
- 1946. Two years ago, Bennie Cleager
in Morgan's bond department
- 1947. also started shorting subprime housing,
$2 billion in BBBs.
- 1948. Bennie is smarter than I thought.
- 1949. No, he's not smart at all.
- 1950. The premiums on the swap
ate into his desk's profit.
- 1951. To cover his BBB shorts,
- 1952. he sold a lot of A
and AA swaps as protection.
- 1953. A lot.
- 1954. He believed that there was no way
that they could be affected.
- 1955. Tell me Morgan Stanley doesn't hold
the contracts on these swaps.
- 1956. Holy shit.
- 1957. All this time I've been trying to figure out
who I'm betting against,
- 1958. and it's Morgan Stanley.
- 1959. Which is me.
- 1960. What's your exposure? $3 billion?
- 1961. Please, don't tell me it's more than four.
- 1962. I can't answer that. I can't answer that.
- 1963. Yes, you can answer that,
because I walk in here
- 1964. and people are crying in your hallway.
- 1965. Kathy,
- 1966. you bring me in to tell me
- 1967. and everything's not fine.
- 1968. What, what is happening?
- 1969. The long exposure is...
- 1970. "$19 billion.
- 1971. Jesus!
- 1972. He kept saying defaults
over 8% were impossible.
- 1973. Oh, my God.
- 1974. That there would be a million homeless!
- 1975. Yeah, but we have nothing
to do with Morgan Stanley.
- 1976. Yeah...
- 1977. Tell the bankruptcy court.
- 1978. Morgan fails, all our accounts
go on their balance sheet.
- 1979. It's just crazy.
- 1980. Morgan makes the sucker's bet
- 1981. and we pay their fucking gambling debt?
- 1982. Short the bank stocks. Then we wait.
- 1983. Or we sell our swaps
when the market opens.
- 1984. We get our bonuses,
our investors get their profits, we get...
- 1985. What, 30 cents on the dollar?
It's not bad.
- 1986. We're three times that.
- 1987. Not if there's no market left
to sell them in.
- 1988. Forget it. We're not giving
out any lifeboats.
- 1989. If Morgan goes under,
we end up with nothing.
- 1990. Vinnie.
- 1991. Jesus, come on. I say when we sell.
- 1992. Look, I get that this is personal for you,
but we have a fiduciary responsibility.
- 1993. No. No, we don't.
- 1994. Nobody's acting responsible.
- 1995. Fuck responsibility. Are you kidding me?
- 1996. The assholes at the big banks
- 1997. You boys want any appetizers?
- 1998. We're talking, please!
- 1999. - Excuse us.
- 2000. We are going to wait,
and we are going to wait,
- 2001. and we are going to wait
- 2002. until they feel the pain,
until they start to bleed.
- 2003. - That is what I want.
- But what about our clients
- 2004. who've entrusted us with their savings...
- 2005. I say when we sell.
- 2006. This isn't about you.
- 2007. This isn't about you
and your Upper East Side
- 2008. - mahogany soapbox.
- Hey! Hey!
- 2009. I say when we sell!
- 2010. Whatever you say, Mark.
- 2011. Dude, did you hear the news?
- 2012. Okay. So, not only do
two mortgage hedge funds
- 2013. backed by Bear Stearns go belly up,
- 2014. but now there's a class-action lawsuit
- 2015. Holy shit!
- 2016. Let's go! Push! Push!
- 2017. So, what? Bear could
really collapse here.
- 2018. - This is a risk we really shouldn't take.
- Then what?
- 2019. We bought 80% of our swaps at Bear.
- 2020. - We 'd lose everything.
- So what?
- 2021. - Hey, sir?
- One second!
- 2022. That's my opinion.
- 2023. We bought these fucking things.
We have no clue how to sell them.
- 2024. I know. We have to get Ben to do it.
- 2025. I've been trying to call him and
he won't get back to me.
- 2026. No. He's on vacation
with his wife's family.
- 2027. They're in England.
- 2028. What?
- 2029. - Hello, Ben. Hey.
- 2030. Yeah, we're here. Can you hear us?
- 2031. - Guys'?
- Yeah, we got you.
- 2032. Yeah. I hardly got
cell phone or Wi-Fi service.
- 2033. I'm trying to sell $200 million
worth of securities.
- 2034. In a pub. It smells like sheep.
- 2035. You can do this.
- 2036. I don't want to pressure you, Ben
- 2037. but if you don't pull this off,
we lose everything.
- 2038. All right. Let's see what
Credit Suisse's appetite is.
- 2039. This is Brownfield Fund.
- 2040. I want to unload
my credit default swaps.
- 2041. All right. What you got?
- 2042. Twenty AA tranches of A.B.S. CDOs.
- 2043. A.B.S.?
Are these... These are pretty bad?
- 2044. Absolutely. They're complete shit.
- 2045. What's your notional value?
- 2046. Face value is 205 million. Dollars.
- 2047. All right, we could, we could go to forty.
- 2048. No. We want at least 100 million.
- 2049. 100 million? Who are you,
a drug dealer or a banker?
- 2050. 'Cause if you're a banker,
you can fuck right off!
- 2051. I don't know if we can make a market.
- 2052. Just give me your best price?
- 2053. Yeah. Chuck 100 million
in for me, mate.
- 2054. I think we're far apart.
- 2055. Look, if you don't want the deal,
you can just hang up.
- 2056. That's what I thought.
- 2057. - 90 million.
- 2058. 85.
- 2059. 78.
- 2060. 78.
- 2061. It's Dr. Burry.
- 2062. Looks like the collapse of the
financial sector is imminent.
- 2063. Let's start to sell my position.
- 2064. It's $1.3 billion.
- 2065. Sure, I'll hold.
- 2066. So, I was right.
- 2067. I took a rash of shit for two years, but
- 2068. I was right.
- 2069. And everyone was wrong.
- 2070. And, yeah, I got a bonus check
for it. Sue me.
- 2071. You know?
- 2072. It's a lot of money. I get it.
I can feel you judging me.
- 2073. That's palpable.
- 2074. But, hey, I never said
I was the hero of this story.
- 2075. Hey, Ben. How are we looking?
- 2076. Eight... on...
- 2077. Sorry?
- 2078. No. Eighty million.
- 2079. $80 million, $80 million,
that's good, right?
- 2080. - Eighty is great.
- Is that good?
- 2081. - Eighty is great, Ben.
- 2082. Thank you. Thank you so much.
- 2083. Most of it went to UBS.
- 2084. You're very lucky. The largest bank
- 2085. in France froze customer's
money market accounts today.
- 2086. This thing's hitting Europe.
- 2087. Greece and Iceland are finished.
- 2088. Spain is teetering.
- 2089. Are you serious? Fuck.
- 2090. Ben, call us when you get home.
- 2091. But, hey, before you go,
- 2092. I'm just wondering...
- 2093. Why did you do this with us?
- 2094. You didn't have to.
- 2095. Thank you. But, why?
- 2096. You guys said you wanted to get rich.
Now you're rich.
- 2097. Goal!
- 2098. Pamplona puts themselves
on the scoreboard.
- 2099. As the housing markets and banks
continued to hemorrhage,
- 2100. only one of the big shorts
refused to sell.
- 2101. Mark Baum.
- 2102. So it was beyond perfect
when he was asked to speak
- 2103. at a conference opposite Bruce Miller,
- 2104. the famous bullish investor.
- 2105. After he and Mark had their debate,
- 2106. one of the architects of the whole crisis
was scheduled to speak.
- 2107. Everyone in Mark's office showed up,
he even invited friends.
- 2108. This was the Ali vs. Foreman
of the financial world.
- 2109. The realist versus the fools.
- 2110. And if it seems almost too perfect,
- 2111. trust me, this happened.
- 2112. Welcome, everyone.
Please give a generous welcome to
- 2113. Mr. Bruce Miller and Mark Baum.
- 2114. Strap yourself in.
- 2115. So as some of you may know,
- 2116. has just received
a loan from JP Morgan.
- 2117. Of course, we're gonna have to
wait and see how the markets react,
- 2118. but that should lay to rest any concerns
about the bank's health.
- 2119. Now, I take it you have no plans to sell
your $200 million in Bear stock?
- 2120. No. As a matter of fact,
when we're done here,
- 2121. I'll probably go out and buy some more.
- 2122. For the opposing view, Mr. Baum.
- 2123. I got to stand for this.
- 2124. Okay, hi.
- 2125. My firm's thesis is pretty simple.
- 2126. Wall Street took a good idea,
- 2127. Lewis Ranieri's mortgage bond,
- 2128. and turned it into an atomic bomb
- 2129. of fraud and stupidity
- 2130. that's on its way to
decimating the world economy.
- 2131. How do you really feel?
- 2132. I'm glad you still have a sense of humor.
- 2133. I wouldn't if I were you.
- 2134. Now, anyone who knows me knows that
- 2135. I have no problem telling
someone they're wrong.
- 2136. Bear Stearns is denying
rumors of liquidity problems.
- 2137. Holy fuck, it's 39 now!
- 2138. We live in an era of fraud in America.
- 2139. Not just in banking, but in government,
- 2140. education, religion, food,
- 2141. even baseball.
- 2142. What bothers me isn't that
- 2143. fraud is not nice or that fraud is mean.
- 2144. It's that for 15,000 years
- 2145. fraud and short-sighted thinking
- 2146. have never, ever worked.
- 2147. - Jesus, Bear at 37...
- Not once.
- 2148. Eventually, people get caught,
things go south.
- 2149. It's fucking plummeting, man.
- 2150. When the hell did we forget all that?
- 2151. I thought we were better than this.
I really did.
- 2152. And the fact that we're not
- 2153. doesn't make me feel
all right and superior.
- 2154. It makes me feel... Sad.
- 2155. Every time I fucking hit
"refresh" it's dropping, man.
- 2156. And as fun as it is to watch
- 2157. pompous, dumb Wall Streeters
be wildly wrong,
- 2158. and you are wrong, sir,
- 2159. I just know, that at the end of the day
- 2160. average people are going to be the ones
- 2161. that are gonna have to pay for all this.
- 2162. Because they always, always do.
- 2163. It's 32.
- 2164. It's fucking tanked, man.
- 2165. That's my two cents. Thank you.
- 2166. Let me drop a deuce at Deutsche.
- 2167. Does our bull have a response?
- 2168. Only that, in the entire
history of Wall Street,
- 2169. no investment bank has ever failed
unless caught in criminal activities.
- 2170. So, yes, I stand by
my Bear Stearns optimism.
- 2171. Mr. Miller, I'm sorry. Quick question.
- 2172. From the time you guys started talking,
- 2173. Bear Stearns stock has
fallen more than 38%.
- 2174. Would you still buy more?
- 2175. Yeah, sure, of course
I'd buy more. Why not?
- 2176. Boom.
- 2177. Jesus Christ!
- 2178. That concludes the first part
of our presentation.
- 2179. Up next, we have the legendary
former chairman of the Fed,
- 2180. Alan Greenspan.
- 2181. Folks?
- 2182. employees of Lehman Brothers today,
- 2183. as the Wall Street giant's
stock went to zero.
- 2184. The collapse of the venerable
New York bank
- 2185. follows a tumultuous few
months of market volatility
- 2186. and fear in the world economy.
- 2187. I got to see inside.
- 2188. How?
- 2189. Come on.
- 2190. I left my phone in the office.
I threw my pass out already.
- 2191. Do you mind if I take your pass?
- 2192. I don't give a shit anymore.
You can do what you want.
- 2193. Go directly to your transportation.
- 2194. Do not talk to the press.
- 2195. After 18 years, I just leave?
That's just fucking great!
- 2196. I'll talk to whoever the hell I want!
- 2197. Do not talk to the press.
- 2198. Go directly to your transportation.
- 2199. Do not talk to...
- 2200. Hey, look, you wanna get a bite tonight?
- 2201. There's this new Cuban place
- 2202. just opened on the Lower East Side.
It's supposed to be good.
- 2203. - Really?
- 2204. You and I?
- 2205. Yeah, or other people.
- 2206. - That sounds nice. I would like that.
- 2207. Finally.
- 2208. Mark, hey.
- 2209. It's a bloodbath up here.
- 2210. Morgan stock has lost half its value.
- 2211. It's down to 23.10. It's in free fall.
- 2212. Clients want to talk to you
about pulling their money.
- 2213. It's now or never, Mark. We got to sell.
- 2214. Mark.
- 2215. Mark, you hear me?
- 2216. Mailbox one.
- 2217. You have 15 messages.
- 2218. Mike, I can't seem to get a hold of you.
- 2219. Will you please call me
at your earliest convenience.
- 2220. It's Jack. You're buying stocks?
- 2221. The market's at an all-time low.
This is crazy!
- 2222. My profile said,
- 2223. "I am a medical student
with only one eye,
- 2224. "an awkward social manner,
- 2225. "and $145,000 in student loans."
- 2226. She wrote back,
- 2227. "You're just what I've been looking for."
- 2228. She meant honest.
- 2229. So let me be honest.
- 2230. The housing crisis represents
the greatest financial opportunity of...
- 2231. Making money is not like
I thought it would be.
- 2232. This business kills the part
of life that is essential.
- 2233. The part that has
nothing to do with business.
- 2234. For the past two years, my insides
- 2235. have felt like they're eating themselves.
- 2236. All the people I respected
- 2237. won't talk to me anymore
- 2238. except through lawyers.
- 2239. People
- 2240. want an authority to tell them
how to value things...
- 2241. but they choose this authority
not based on facts or results.
- 2242. They choose it because it seems
authoritative and familiar.
- 2243. And I am not
- 2244. and never have been "familiar".
- 2245. So...
- 2246. So, I've come to the sullen realization
- 2247. that I must close down the fund.
- 2248. Sincerely, Michael J. Burry, M.D.
- 2249. This isn't how I pictured it.
- 2250. What did you think we'd find?
- 2251. I don't know.
- 2252. Grownups.
- 2253. Mark, you there?
- 2254. Mark?
- 2255. Paulson and Bernanke
just left the White House.
- 2256. There's going to be a bailout.
- 2257. Well, they had to. Right?
- 2258. Paper markets would've collapsed.
- 2259. They knew.
- 2260. Cash would've stopped
coming out of ATMs.
- 2261. They had to backstop this.
- 2262. They knew the taxpayers
would bail them out.
- 2263. They weren't being stupid.
They just didn't care.
- 2264. Yeah. 'Cause they're fucking crooks.
- 2265. But at least we're going to
see some of them go to jail.
- 2266. Right? I mean, they're gonna
have to break up the banks.
- 2267. I mean, the party's over.
- 2268. I don't know. I don't know, Vinnie.
- 2269. I have a feeling
- 2270. that in a few years people
are gonna be doing
- 2271. what they always do
when the economy tanks.
- 2272. They will be blaming
immigrants and poor people.
- 2273. But Mark was wrong.
- 2274. In the years that followed,
hundreds of bankers
- 2275. and rating agencies executives
went to jail.
- 2276. The SEC was completely overhauled.
- 2277. And Congress had no choice
but to break up the big banks
- 2278. and regulate the mortgage
and derivatives industries.
- 2279. Just kidding.
- 2280. The banks took the money
the American people gave them
- 2281. and used it to pay themselves
- 2282. and lobby Congress to kill big reform.
- 2283. And then they blamed
immigrants and poor people.
- 2284. And this time, even teachers.
- 2285. And when all was said and done,
only one single banker went to jail.
- 2286. This poor schmuck.
- 2287. Kareem Serageldin from Credit Suisse.
- 2288. He hid a few billion
in mortgage bond losses,
- 2289. something most of the big banks did
on a good day during the crisis.
- 2290. Mark, can we sell now?
- 2291. The fund will make almost $1 billion.
- 2292. You'll clear $200 mil, Mark.
- 2293. You know, once we sell,
- 2294. we'll be just like the rest of them.
- 2295. You know that.
- 2296. No, we're not.
We're not the bad guys here.
- 2297. We didn't defraud the American people
and prey on their dreams
- 2298. of owning a home.
- 2299. They did.
- 2300. And now we get to kick them
in the teeth.
- 2301. A billion dollars.
- 2302. That's right.
- 2303. But we got to close out our
position or it could be zero.
- 2304. I mean, it's now or never, Mark.
- 2305. Okay.
- 2306. Sell it all.