Everyone Should See “The Big Short,” But Probably Few Will

A few weeks ago I had the privilege of attending an early screening of the upcoming movie “The Big Short.”

I’m not a movie critic, and I don’t typically write reviews, but given how closely related the film’s contents are to the topics we have covered on this blog over the last ten years, I do want to share my thoughts and reactions to the movie.

When I started this site in 2005, I was a complete outsider to the world of real estate, finance, banking, and Wall Street. And yet, even I could immediately tell that something was incredibly wrong with the market and the overall economy that was building into an ever-increasing frenzy on the back of housing.

Given that I was starting from zero, it took me a few years to understand all of the underlying financial fraud that enabled everything to get so out of hand. In hindsight, I wish that I had made some big short bets in the years leading up to the collapse, but realistically I had neither the resources nor the knowledge to make a smart profit like that.

But there were some people who did.

Michael Lewis’ book “The Big Short: Inside the Doomsday Machine” tells the story of a handful of traders whose skeptical nature and financial intelligence allowed them to see behind the curtain and make huge bets on the inevitable collapse of the entire house of cards. Director Adam McKay has turned Lewis’ book into an engaging and interesting movie with some big-name stars driving each of the film’s three concurrent storylines.

I’m definitely not an expert in mortgage-backed securities and collateralized debt obligations, but I probably know more about the movie’s topic than 90 percent of the Americans. In order to make the confusing and convoluted subject more approachable, McKay intersperses the three narratives with amusing fourth-wall-breaking interludes from Margot Robbie in a bubble bath, Anthony Bourdain making fish stew, and Selena Gomez and Dr. Richard Thaler playing blackjack at a casino to attempt to explain things with plain language and metaphors.

I suspect that the style and the subject matter of this movie won’t play well with general audiences, but I loved this movie. It was hilarious, depressing, touching, and infuriating all at the same time. The performances from all of the major characters were believable and relatable, and the story was compelling throughout the movie’s 130-minute run-time even though I knew exactly how it would end.

I hope I am wrong and “The Big Short” is a huge success at the box office, because in my opinion everyone should see this movie.

Free Screening

The Big Short hits theaters on December 23rd, but you have one more chance to see it for free on me.

There will be another free screening of The Big Short at Regal Thornton Place (Northgate) on Tuesday, December 15th at 7:00 PM. I won’t be able to attend it myself, but I have a limited number of tickets to give away to Seattle Bubble readers. If you would like to attend and can commit to be there, drop a comment in this thread. Tickets will be first-come, first-served. Just use a valid email address in the comment form (only I can see it) so I can contact you with details.

Update: All the tickets are spoken for! Thank you!


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

84 comments:

  1. 1
    Walter says:

    Fantastic book.

    Please include me in the list for a ticket to the film.

  2. 2
    Todd says:

    I would love to see the movie. Thanks for the offer.

  3. 3
    sleepless says:

    The only difference between now and then is the bubble (or multi bubble, aka Real Estate, Car Loans, Student Debt, Junk bonds, etc) is bigger, much bigger, and the consequences of it is bursting will be more severe. One thing everyone can be sure happens – all bubbles burst. Got Gold?

  4. 4
    Yuji says:

    After reading the book I’m really looking forward to the movie! I would love two tickets if you still have some!

  5. 5
    GoHawks says:

    RE: sleepless @ 1 – sleepless, was gold in a bubble 3-4 years ago at $1,900 when one in ever three Fox News commercials was related to investing in Gold?

  6. 6
    sleepless says:

    RE: GoHawks @ 2 – Bubble? The prices of gold are set by Comex. When gold was at $1900/oz it was trading at Comex at 100/1 ratio, now it is $1070 and it is trading at 300/1 ratio, meaning for every 300 oz gold sold or purchased, they only have 1 oz of physical metal for delivery meaning gold is more rare today than it was 4 years ago. The price of gold is set by paper, not the real physical metal which is at the highest demand. When you are talking about gold bubble, you talk about the paper gold bubble, where as I am talking about holding the physical gold because the Comex bubble will burst too.

  7. 7
    kenmorem says:

    me please! 2 tix if you have them.

  8. 8
    sleepless says:

    RE: sleepless @ 6 – Also let alone the printed trillions by the Fed.

  9. 9
    MrSteve007 says:

    I’d love a pair of tickets!

  10. 10
    Tim McB says:

    I would love a pair of tickets if there’s any left.

    tim_mcbride@hotmail.com

  11. 11
    A says:

    RE: sleepless @ 6 – Are you referring to open interest divided by registered gold? Please correct me if I am wrong, but that looks in line with your provided ratios. If so, you are referencing a strange ratio, and drawing a random inference. Registered metal is literally just Comex eligible metal with an attached warrant. That’s all. It is not “physical metal for delivery”. Keep in mind that Comex is an exchange, not a gold retailer.

  12. 12
    Joe says:

    I’m a big Lewis fan. I’d like a pair of tickets, please.

  13. 13
    Lane says:

    Can I have 2?

  14. 14
    David says:

    Put me down for two please!

  15. 15
    sleepless says:

    RE: A @ 11 – If the memory serves me correctly, the warrant has to be at least 5%, meaning the ratio of paper to phys exchange should be 20/1. Now it is closer to 300/1. You can buy and sell paper gold at whatever prices you want. The comex is full of speculators selling and buying naked shorts, this is why the daily trade of comex is equal the full year of physical gold supply. But geuss what, when the shit hits the fan and people run for exit, do you think anyone will need the paper? People will only accept physical delivery, guess what happens to the gold price then. Now everything is pretty much numbers on the computer, including comex gold as well as the stocks at your brokerage firm. Guess what happens if the brokerage goes down, can you get your stocks out? Do you even own the stocks, or you just lend them to the brokerage just like your money on your checking account (it is not really your money, as you lent them to the bank)

  16. 16
    Blurtman says:

    Hank Paulson was a US cabinet member, and there is a revolving door of criminals entering the government and returning to the private sector. Eric “Place” Holder could not even prosecute the HSBC drug money and terrorist money launderers. And the pundits are amazed that the voters seek candidates who are outside this corrupt system.

  17. 17
    Bill Fores says:

    will love to see the show! Thanks for your ongoing insights.

  18. 18
    Greg A says:

    I’d love to see this! 4 tickets if you can spare them, but 2 tickets would be enough for at least my wife and me. Thank you!

  19. 19
    Nhan duong says:

    I and my partner would love 2 tickets if there are any left.

  20. 20
    Tim McB says:

    Scratch that. My wife reminded me that our daughter’s Christmas Concert is that night. I still plan on going to see the movie though. I loved the book, Michael Lewis is an excellent writer.

  21. 21
    jana sheehan says:

    I was hoping to see The Big Short this weekend, only to discover i was completely wrong about the wide release date! Dec. 15 would be the next best thing if you still have tickets to give away! Could I have two, please? Thank you!!!

  22. 22
    Cathy says:

    I would love to attend with a friend if you still have tix! Thanks!

  23. 23
    Brendan says:

    My wife and I would love to go!

  24. 24
    Vermon says:

    I heard about this movie on NPR. Sounds like they explain enough about the terminology to get the gist. I’d like to see it.

  25. 25
    Jeff says:

    Would enjoy going if you had 2 tickets!

  26. 26

    Would love 2 tix if you still have any.

  27. 27
    JWS says:

    RE: sleepless @ 3

    Saying we’re in a bubble is the easy part and does nothing for the reader (it is stated again and again in the comments on this blog). The more interesting questions are:

    A. When do you estimate this crash will happen and what will the catalyst be?
    B. What are you doing to profit from the collapse if/when it happens?

    Answer those questions and we’ll have something interesting to read.

  28. 28

    Gee, my husband and I would LOVE two tickets!! This film, like most films, will never hit Kitsap County!
    – Kimberly King & Ken Grantham, Poulsbo

  29. 29
    whatsmyname says:

    RE: sleepless @ 12 – As a small investor, what can you actually do with physical gold? I mean besides spend money on storage and security.

  30. 30
    wreckingbull says:

    RE: Blurtman @ 13 No one was ever prosecuted for the MERS sh*tshow. I wonder why.

    Oh yeah, this is why:

    http://www.salon.com/2015/07/07/why_eric_holders_new_job_is_an_insult_to_the_american_public/

  31. 31
    Dave says:

    I’ve grown tired of all the dis-utopian fiction and try to focus on more interesting non-fiction.

    Here is my college friend Mike, [UCLA 1992], who is the real deal and I suspect the motivation for the book/movie. He explains his process and story in this 2012 UCLA Commencement address.

    https://www.youtube.com/watch?v=1CLhqjOzoyE

    He did see it, short it, and well, you’ll get the rest. Nice guy btw kinda like the Tim ;)

  32. 32
    The Tim says:

    RE: Dave @ 31 – Yup, Dr. Burry is played by Christian Bale in the movie. Smart guy. According to the book & movie anyway, he was the first one to see the short opportunity and take it.

  33. 33
    The Tim says:

    Hey everybody, thanks for all the responses! I got about twice as many responses as the number of tickets they said I could have. I’ll ask if there’s any way they can allot more. Either way, we’re definitely full up now.

    Thanks!

  34. 34
    Blurtman says:

    RE: wreckingbull @ 30 – It is right out there, in your face. A felon as US Treasury Secretary? Sure, why not? Al Capone as head of the Justice Department? Sure, why not? Americans are a defeated people.

  35. 35
    Blurtman says:

    Naked Capitalism covers the Big Short and the fraud that was CDO’s.

    Who was one of the largest issuers of this toxic deck? Goldman Sachs.

    Who was CEO of Goldman Sachs (glossed over on Wiki) when Goldman Sachs was issuing these fraudulent securities? Hank Paulson.

    Who became US Treasury Secretary? Hank Paulson.

    Who engineered a bailout of Goldman Sachs busted CDO’s after the company brought down AIG? Hank Paulson.

    Who was paid face value for these busted CDO’s by the US taxpayers? Goldman Sachs.

    Who covered up the beneficiaries of this illegitimate payout? Tim Geithner.

    Who are in Wall Street’s pocket? Republicans and Democrats.

    Who are a bunch of defeated sheeple? American citizens.

    http://www.mcclatchydc.com/news/nation-world/national/economy/article24596200.html
    http://www.nakedcapitalism.com/2015/12/debunking-the-big-short-how-michael-lewis-turned-the-real-villains-of-the-crisis-into-heros.html

  36. 36
    ESS says:

    By JWS @ 27:

    RE: sleepless @ 3

    Saying we’re in a bubble is the easy part and does nothing for the reader (it is stated again and again in the comments on this blog). The more interesting questions are:

    A. When do you estimate this crash will happen and what will the catalyst be?
    B. What are you doing to profit from the collapse if/when it happens?

    Answer those questions and we’ll have something interesting to read.

    No one knows the answer to A, and most people screw up trying to finesse B

  37. 37
    boater says:

    I believe The Greatest Trade was another book on this subject. In that book they list a few other folks who noticed the problem earlier on but were busted out because they started too early.

    It’s much easier to make money on the way up than down.

  38. 38
    Justme says:

    The Naked Capitalism article mentioned by Blurtman @35 is highly critical of the book and the movie “The Big Short” (TBS). I agree with what Yves Smith wrote in that article.

    Basically, the “heroes” of TBS made the Great Recession of 2008 much worse by creating highly leveraged bets that could not be paid, bringing down the financial system when their bookmaker (AIG and other insurers) could not pay. And if that was not enough, on top of that they stuck the taxpayers with the bill for bailing out AIG.

    I think anyone contemplating the book or the movie also should read the article. Here is the link to the article again:

    http://www.nakedcapitalism.com/2015/12/debunking-the-big-short-how-michael-lewis-turned-the-real-villains-of-the-crisis-into-heros.html

  39. 39
    Blurtman says:

    By Justme @ 38:

    The Naked Capitalism article mentioned by Blurtman @35 is highly critical of the book and the movie “The Big Short” (TBS). I agree with what Yves Smith wrote in that article.

    Basically, the “heroes” of TBS made the Great Recession of 2008 much worse by creating highly leveraged bets that could not be paid, bringing down the financial system when their bookmaker (AIG and other insurers) could not pay. And if that was not enough, on top of that they stuck the taxpayers with the bill for bailing out AIG.

    I think anyone contemplating the book or the movie also should read the article. Here is the link to the article again:

    http://www.nakedcapitalism.com/2015/12/debunking-the-big-short-how-michael-lewis-turned-the-real-villains-of-the-crisis-into-heros.html

    Here is a nice read on the criminality of Hank Paulson during his reign at Goldman Sachs and thereafter as US Treasury Secretary. Hank created toxic sludge when he was at Goldman Sachs, sold it at great profit, and knowing that this crap was going to crash, took out insurance on it through AIG. And when AIG went along, as it was also selling the insurance contracts and making money, you had two eye-winking criminals in cahoots to become wealthy and stick the taxpayer with the bill, or at least, walkaway with the money and deny culpability. And the ratings companies were in on the caper, too, and are still in business, and in fact, during the last crisis, the top 2 criminal firms were the go-to firms used by the Fed and USG to rate sludge that we bought. So they knowingly rated garbage as AAA to make money, and when the crisis that they caused hits, they are hired to rate the garbage again.

    Hank all along knew that the taxpayer would get stuck with the bill, and as Treasury Secretary, made sure. And just to be sure, a goon from a blue-chip bank defending law firm is installed as head of the Justice Department. And the cherry on top – a new president who right from the get-go is on the stump saying the banks did nothing wrong. That is how to take over a country without firing a single shot.

    http://www.huffingtonpost.com/david-fiderer/the-cdos-that-destroyed-a_b_499875.html

  40. 40

    A Great Idea and Thoughtful too Tim!

    I’m retired now and follow all the “grey hairs” to the Auburn Valley on $5 Tuesdays [so see plenty of movies]….but thanks for the invite anyway!

  41. 41
    Gabe says:

    RE: Justme @ 38 – While we are on the topic, in the history book American Nations, Colin Woodward chronicles in detail how the Bank of Pennsylvania performed the first financially engineered looting of the American people. Founded in 1780, it was used as a financing vehicle for the war. US taxpayers purchased war bonds through this bank.

    Seeing opportunities, the issuers worked with insiders to spread panic and disinformation about the solvency of the bonds. This caused the holders of the bonds (common US people) to sell them for nearly nothing. Inside speculators who were friends of the bank, then bought the bonds at near nothing, and then were able to recoup the value of the war bonds for a mighty profit as both the bank and insiders knew there were no credit issues with the bonds. This left many of the original bond holders broke. So what I am getting at; the big short was nothing new. As they say “Speculation is as old as the hills”

    Expect this to happen to our grandkids.

  42. 42
    Dave says:

    I agree with Gabe@41 and Blurtman@39 with the caveat that our clever friend Mike Burry, the non-fiction inspiration for the screenplay, holds the moral high ground AND correctly identified the crash then shorted it before it fell. The scumbags at Goldman and the Oval office are another matter entirely so please don’t confuse them. Mike really is an ok guy.

  43. 43
    DrRick says:

    I read the book and would enjoy seeing the movie, although it will probably p-o me again.

  44. 44

    RE: DrRick @ 43 – You might be surprised. I wasn’t expecting much out of The Smartest Man in the Room movie, but watching that movie I learned Governor Davis wasn’t as stupid as I thought–it was the people around him.

  45. 45
    whatsmyname says:

    RE: Dave @ 42
    Let’s say Mike does business with an electrician for a property management firm. He finds that the company is engaged in some dodgy rewiring scheme allowing them to sell the “excess” copper they can then pull out of the building. He knows this will ultimately cause a fire which will seriously hurt many people. He could try to surface this information, but he chooses instead to buy an insurance policy on the building from the sort of characters that sell insurance to people who don’t own the building. Is he really an OK guy?

  46. 46
    Blurtman says:

    RE: whatsmyname @ 45 – Hank Paulson was the head of the company that was building homes that would burn down. Banana republic full of sheeple.

  47. 47
    whatsmyname says:

    RE: Blurtman @ 46 – I’m not sticking up for Hank Paulson. But I don’t buy that a guy is not a douche just because you can find a bigger douche. Of course, maybe I mistook your meaning.

  48. 48
    Blurtman says:

    RE: whatsmyname @ 47 – Paulson should be in jail, but instead in the banana republic of the USA, he is confirmed as Treasury Secretary by Dems and Repubs. I am not lauding the behavior of the shorters at all. But it is a crime to intentionally misrepresent the risk of securities that you sell, and this is exactly what GS did with Hank in charge. While the shorters may not have been heroes, I am unaware if they broke the law.

  49. 49
    whatsmyname says:

    RE: Blurtman @ 48 – I don’t think we are so much in disagreement to the big picture.

    The undeveloped case against Paulson is so far circumstantial, but looks like it could be (have been) developed. I was almost shocked at the audacity of willful blindness by the regulators, but it was the clear and well announced vision of the Republican administration. Aiming the bailouts at the welfare of insider shareholders (of certain financial companies only) versus more partial relief at the retail level made this problem worse and more expensive by magnitudes. So much so, I really couldn’t believe it would go down that way. However, it was consistent with the tenets of Koch/Cheneyism so I will confess to being the fool there.

    The shorters did not appear to break the law – so far as depraved indifference seems confined to murder cases only, But I never claimed that they did. I was saying that the guy is not an “OK guy”. This is a value judgement. Other people have different values. I understand that; I just like to clarify what those are when I notice them.

  50. 50
    Blurtman says:

    By whatsmyname @ 49:

    RE: Blurtman @ 48 – I don’t think we are so much in disagreement to the big picture.

    The undeveloped case against Paulson is so far circumstantial, but looks like it could be (have been) developed. I was almost shocked at the audacity of willful blindness by the regulators, but it was the clear and well announced vision of the Republican administration. Aiming the bailouts at the welfare of insider shareholders (of certain financial companies only) versus more partial relief at the retail level made this problem worse and more expensive by magnitudes. So much so, I really couldn’t believe it would go down that way. However, it was consistent with the tenets of Koch/Cheneyism so I will confess to being the fool there.

    The shorters did not appear to break the law – so far as depraved indifference seems confined to murder cases only, But I never claimed that they did. I was saying that the guy is not an “OK guy”. This is a value judgement. Other people have different values. I understand that; I just like to clarify what those are when I notice them.

    GS paid civil penalties for fraud committed under Hank’s reign. Ken Lay said he didn’t know what was going on as he pocketed his Enron winnings. Robert Rubin, Hillary’s pal, was told about Citi fraud by Richard Bowen, senior VP and chief underwriter of financial services at Citi. No investigation, nothing to see here, move along and pay up, taxpayer sheeple. Weak tea to hide behind the circumstantial dodge.

    “Four years after receiving more bailout dollars than any other U.S. bank during the financial crisis, Citi defrauded the Federal Housing Administration. Citi admitted to breaking FHA rules, certifying thousands of unqualified mortgages for FHA insurance, and paid a $158.3 million settlement after CitiMortgage whistle-blower Sherry Hunt filed a false claims suit. One month after the 2012 settlement, CitiMortgage’s CEO was asked why Hunt’s concerns were not resolved inside the company. She had alerted her supervisor. She had gone to CitiMortgage HR. Filing a lawsuit had been a last resort. “Did you ask her if she spoke to me?” he responded to the Bloomberg journalist.”
    http://insight.kellogg.northwestern.edu/article/how-citibanks-culture-allowed-corruption-to-thrive

  51. 51
    whatsmyname says:

    No hiding going on here. My point was always about the traders. I’m OK if you want to piggyback Hank, GS, CITI, Justice, the Clintons; it is just not a refutation of my point. In fact, I thought that I had inferred a general corruption – and a mechanism by which it became possible, or at least much worse. If you object to the term “circumstantial”, in terms of a criminal conviction for Paulson specifically, you are welcome to present something that is more than circumstantial.

  52. 52

    The Big Picture Now is $34/bbl Oil

    A $300K new home built with $250K of materials [that are now worth $125K with lower oil] mean were getting screwed for new housing materials.

    I see cars along the same line about a 30% reduction for all 2015 MSRP prices…..if you bought this year you just got shammed. Even financial analysts are reluctantly agreeing with me now.

  53. 53
    Blurtman says:

    RE: whatsmyname @ 51 – GS admitted to fraud that occurred under Hank, and paid civil penalties. Do you expect me to access their e-mails and conduct my own interviews? I think that is something the Justice Department would do. OK, maybe Hank preferred to not know. Possible. But folks did know. No indictments. And Richard Bowen, senior VP and chief underwriter of financial services at Citi, did notify Rubin who was an advisor to the company at the time, and on their payroll.

  54. 54
    Erik says:

    King County Inventory is below 2000!!!!!!

    This is a big win for King County home owners.

  55. 55
    Blake says:

    The Big Short was a fun book and I am glad they made it into an entertaining movie that might been seen by many… even with it’s shortcomings – as pointed out by Yves at naked capitalism. To me the definitive book about the ’08 financial crisis is Michael W. Hudson’s “Monster.” The author is a former Wall St Journal investigative reporter and also – like Michael Lewis – a very good writer. Many of the real estate professionals on this site would enjoy his inside account…
    “Starting at ground zero of the scandal—Orange County, California (“Con men hate snow,” one Wall Street Journal reporter put it) — Hudson runs his exposé through its principal players: big-time lenders, juiced-up salespeople, Wall Street brokerage houses that supercharged the loans, politicians who weakened once-tough lending laws, and finally, most tragically, the victims themselves.”

    “The Monster reads like chilling and compelling fiction. But the facts are true and the story is all too real. Millions of Americans were ripped off by devious people in pursuit of ever more profit, but that is not the biggest scandal. Amazingly, we have still not fixed the underlying problems of incentives, attitudes, and beliefs in our financial system. If we continue to shy away from real reform, American families are doomed to run repeatedly through some version of this awful cycle.” ―Simon Johnson, coauthor of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown

    http://www.amazon.com/Monster-Predatory-Lenders-Bankers-America–/dp/031261053X/ref=la_B003A4W9KC_1_1?s=books&ie=UTF8&qid=1450806285&sr=1-1

    As the economist Simon Johnson and others have pointed out: Since deregulation took hold in the 90s each financial crisis has been bigger then the previous crisis… ’97… ’01… ’08… and ???!

    If you read US history, you will know that Thomas Jefferson, Abe Lincoln, Teddy Roosevelt and many other great leaders spoke out repeatedly about the dangers the banks, “joint stock” companies, and concentrated wealth and power posed to our country. FDR had to fight with all his might to save capitalism from itself in the 30s and 40s, but his work has been almost completely undone by now. Idiocy…

    Oh well! How many times do things have to fail and collapse before we decide to change? Perhaps the political-economic system is so locked up and corrupt that reform is truly not possible? … but it will get ugly.
    Happy Holidaze! ;-)

  56. 56

    RE: Blake @ 55
    Going Into 2016 With a Negative YOY Loss in the Mutual Stock Market?

    It appears so at this point, DOW was up as high as 18200 last May….its around 17300 7 months later. Zombie 0.5% Money Markets did better.

    No one guessed the oil conundrum would stay this long and the world must depress stock dividends and unit prices [where a flat % profit is calculated] too. The banksters will be more reluctant to trickle down their take to the bottom 99%, cash will be worth more soon? Loans are a noose? Let’s hope this shamflation ends soon, the poor can’t afford to eat now.

  57. 57

    RE: Erik @ 54
    How About Low End Mortgage Sales of Existing Homes?

    Sounds like the big bad banks are tightening the credit requirements recently. Snippet:

    “…The National Association of Realtors (NAR) reports that the seasonally adjusted annual rate of existing home sales in November fell 10.5% to a seasonally adjusted annual rate of 4.76 million from a downwardly revised total of 5.32 million in October.
    Related Stories

    [$$] U.S. Existing Home Sales Plunge in November The Wall Street Journal
    Home sales drop sharply in November as closing process lengthens USA TODAY
    U.S. home sales tank in November Los Angeles Times
    Ahead of the Bell: US home sales Associated Press
    Southern California home sales edge up in November Los Angeles Times
    Big Savings on the Verizon Ellipsis® 10. Shop Now. Verizon Wireless Sponsored 

    November sales mark the first time since September of 2014 that existing home sales have fallen compared with year-ago sales in the same month. Sales are now 3.8% lower than in November 2014.

    The consensus estimate called for sales to reach 5.32 million, according to a survey of economists polled by Bloomberg.

    The sharp decline could be the result of implementation of a new “Know Before You Owe”….”

    http://finance.yahoo.com/news/existing-home-sales-tumble-loan-171553520.html

    This is for the whole nation, but bank rules are national.

  58. 58
    Blurtman says:

    Taxpayers might again ask why the Federal Reserve was so eager to bail out all of AIG’s deals (credit default swaps) linked to problematic CDOs at 100 cents on the dollar. The largest beneficiary of that largesse was Goldman Sachs, whose former officers rose to influential positions in the U.S. Treasury and Federal Reserve Bank and were at Goldman’s helm when these deals were created.

    The taxpayer funded bailout of AIG very likely helped Goldman Sachs to avoid potential lawsuits, among other lucrative benefits. (See “Goldman Sachs: Bullies on the Block,” September 13, 2010.)

    http://www.huffingtonpost.com/2014/08/22/goldman-sachs-fhfa-settlement_n_5701510.html

    Then Treasury Secretary Henry Paulson was CEO of Goldman Sachs at the time it put on these trades with AIG.

    An analysis of the previously secret details shows that at the time of the November 2008 buyout, some CDOs had implied prices of around 60 cents on the dollar. Others had implied prices of around 20 cents on the dollar.

    http://www.huffingtonpost.com/janet-tavakoli/congress-exposes-potentia_b_440361.html

  59. 59
    Blake says:

    RE: softwarengineer @ 57
    It’s ugly out there SWE!

    US home prices nationwide have finally topped the old record high set in March 2007.
    http://www.ourbroker.com/news/real-estate-prices-record-high-122215/

    … But of course that is in nominal dollars! So in “real” terms we are still well below the peak in ’07.

    Existing home sales are about 30-40% below where they were ’03-’07… while new home sales recently reached the level they were at during the BOTTOM of the recessions in the 80s and 90s! Amazing… and we have almost 20 million more people! US auto sales have only recently reached the level they were at 10 years ago…

    But the government is trying it’s best to draw in more foreign money… because Americans don’t have rising paychecks to pay off debts, much less move into a better house!
    http://www.bloomberg.com/news/articles/2015-12-18/u-s-poised-to-lift-35-year-old-real-estate-tax-on-foreigners

    President Barack Obama signed into law a measure easing a 35-year-old tax on foreign investment in U.S. real estate, potentially opening the door to greater purchases by overseas investors, a major source of capital since the financial crisis…. The provision waives the tax imposed on such investors under the 1980 Foreign Investment in Real Property Tax Act, known as FIRPTA… Foreigners have made 16% of U.S. property purchases in 2015.

    (As things keep teetering on the edge of the abyss and the with central banks out of bullets, in the back rooms they are discussing radical proposals for negative interest rates (penalizing savings… they need to outlaw cash!) and even old “helicopter” Ben Benanke’s idea to drop thousands of dollars to everyone to spend! Of course they can’t do that if they outlaw cash first!)

  60. 60
    Shoeguy says:

    Look at the bright side: If you miss the movie, you can always watch it in a couple of years and just pretend like the movie took place back in 2016.

  61. 61

    On the topic of financial irresponsibility, it’s somewhat ironic that a star in this film is #6 of Forbes list of most overpaid actors. http://www.forbes.com/pictures/emjl45edmfk/6-christian-bale/

    (Although their return is apparently much better than Johnny Depp’s!)

  62. 62
    Blurtman says:

    RE: Kary L. Krismer @ 61 – He wouldn’t make the sums he does for no reason. And it is a true injustice that Pee Wee Herman isn’t in the top 5.

  63. 63
    S-Crow says:

    Just saw the movie tonight. While I overlooked some shortcomings, it was superb and it was very funny. The part where Steve Carell interviewed the loan officers and the banker in Las Vegas, that’s when I laughed the most. I couldn’t help but think of all the folks at local Merit Financial – poof; WAMU – poof; MILA Investments – poof , local offices of Countrywide, etc….. so many brokered loans to New Century in Irvine, CA – poof. The darkness of the economic fallout in the US and abroad was very real. Numerous people in the business we worked with divorced, lost homes, lost businesses, lost developments, went BK. In my opinion, even my own banker at Banner Bank was clueless and I’ve been fortunate to set aside some dough to help pay for my kids college as a result of their stock going down, then up. Frontier Bank had no clue what type of financing was buying the inventory their builders had on the market. Particularly in Snohomish, Skagit and Whatcom counties where their bread and butter was.

    ARM’S are back. Lots of today’s first timers were probably in early college in 2006,7,8 and heard about the bubble and are part of today’s real estate new “churn”.

    Low inventory is also probably a function of homeowners with existing very low interest rates reluctant to sell into escalating price environment. When NAR and industry insiders starts blaming appraisers for holding up sales…..as I have read lately…..that’s the same bubble rhetoric we’ve heard before.

  64. 64

    By S-Crow @ 63:

    Low inventory is also probably a function of homeowners with existing very low interest rates reluctant to sell into escalating price environment.

    I attribute people not selling (as opposed to low inventory) more to it being tough to find a place to buy (and it being crazy to sell before your find a place to buy). If you’re moving from one house to another in the same local area, future price appreciation is pretty much irrelevant, because your new place will also appreciate. But if you can’t find a new place to buy it’s hard to sell.

    Before 2007 you could decide to buy first or sell first. It didn’t matter that much. After 2007 it became risky to buy first. In early 2012 it became safe to buy first and then sell. Now it’s almost required, depending on what you want to buy and/or your ability to pay cash.

    As to future appreciation causing people not to sell, that’s possible, but anyone buying back into the same local area would be getting similar appreciation at their new place. So that really shouldn’t be a huge factor, except for people planning on moving out of the area (or maybe downsizing).

    As to low inventory, that’s simple. It’s more people buying than selling. ;-)

  65. 65

    RE: Kary L. Krismer @ 64

    Or….Another Explanation for Low Inventory

    Almost no one has high home price loan qualification in the normal income “buyer pool”….no one to sell to. The rich cash bag investment customers are hoarding their cash and almost all the Seattle area high incomes already slipped the home mortgage noose over their heads a long time ago….they aren’t in the market either.

    That only leaves the uninformed foreigners to fool and sham….and the Chinese ones are on a HORRIFYING income slide too.

  66. 66
    GoHawks says:

    RE: softwarengineer @ 65 – 80% of Seattle area buyers are getting a mortgage. The umber of institutional buyers and cash buyers continues to decrease.

  67. 67
    Blurtman says:

    California cash sales surge while total sales volume plunges: Cash sales made up 30 percent of total sales last month.

    Cash sales jumped up significantly again last month thanks in large part to foreign money flowing in from China. While cash sales jumped up, this is still a small portion of the market. Most other crap shack wannabe buyers were unable to buy based on their pathetic income growth and the ridiculous sized mortgage they would need to take to purchase one of these cardboard boxes. 2015 looks like it will end with a wet towel thrown over the market. Price gains have hit the expected wall.

    First, it should be noted that cash sales were never a big part of the market. In more “typical” years before housing turned into a speculative investment vehicle, cash sales made up about 10 to 15 percent of all sales. Last month cash sales cracked the 30 percent mark of total sales for the first time since 2012:

    http://www.doctorhousingbubble.com/california-cash-sales-surge-all-cash-purchases-china-buyers-money-foreign-investors/

  68. 68

    RE: GoHawks @ 66
    Interesting Statistics, Thanx

    I’d add too, the pool of qualified buyers for Seattle homes with mortgages is decreasing? So do listings?

    We do know this:

    http://www3.forbes.com/business/americas-most-overpriced-cities-in-2015/11/

    We’ve been made one of the most over priced cities in the nation.

  69. 69

    RE: Blurtman @ 67 – I just skimmed that, but it appears they are saying cash sales surged as a percentage, mainly due to declining total sales.

  70. 70
    GoHawks says:

    RE: softwarengineer @ 68 – how do we know that the pool of qualified buyers is decreasing? What stats back that up? Yes, Seattle is getting more unaffordable, but King County is adding nearly 60,000 residents a year. Clearly some of them can afford it. Especially given the cash percentage continues to decline. When net inflow of residents stop, then we will know that you are right.

  71. 71
    Jacob Singer says:

    Okay, but where is The Tim? Has this been the longest gap between posts? And we have new Case-Shiller data too…

  72. 72
    Dave says:

    I saw the movie and wow, as someone who met Mike Burry, Christian Bale managed to capture the guy perfectly. Who knew Batman could act? I was slightly disappointed that the origin point of the financial crisis was not a larger part of the movie though. (Glass-Steagall) Mike would have brought it up.

    http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis

    Still recommending everyone see this movie. Great work.

  73. 73

    RE: GoHawks @ 70
    I’m Fairly Sure the MSM Won’t Touch That Question With a Ten Foot Pole, Since the Net Household Incomes for Real Estate Sales are All Meshed Together

    With those already in the market. Rather than separating the new buyers renting with a new avg per capita pay recently…..”$10.92/hr, 28 hr weeks with most jobs not offering medical benefits”. This group clearly can’t afford the rent, let alone our mortgages. Out here they must rent in multiple incomes [bunk buddies] or stay with mom and dad until they’re dead. They don’t qualify.

    Even the good jobs like Boeing [MSFT too?] are down grading wages and eliminating pensions. When you stop meshing avg incomes all together the picture completely changes.

    Also…..the big rattle snake tossed in the chicken pen is INSANELY CHEAP oil that’s remained stable for about a year now and could likely stay at this level [or decrease further] throughout 2016 until the world wages increase. Let’s be honest, with oil cut by 60-70% why are we paying the old $110/bbl price for new housing materials, food and new cars too….they should plummet about 30% IMO….immediately. This Shamflation can’t last forever to please old investments…..its like that Kenny Rogers song, “The Gambler”….”ya gotta know when to fold ’em”. The timing is never guaranteed to make you money, only you can buy and sell at the right time when you’re sitting at the poker table.

  74. 74

    I saw the movie on NY Eve and the theater was packed. I did not fully understand what was going on when the bonds ratings were not going down. The traders who shorted the bonds understood that the ratings agencies had been bought by the banks and lenders. That kind of fraud should have been punished. Did anyone go to jail for that?

    Also, after the movie was over, there is absolutely no doubt in my mind that we needed to pass The Dodd Frank Wall St Reform Act. Only 3 sections of The Act are directed at the mortgage industry…the rest of The Act is directed at Wall Street.

    And who is the real life person played by Christian Bale? We need to find out what he thinks of today’s housing market.

  75. 75
    Blurtman says:

    By Jillayne Schlicke @ 73:

    I saw the movie on NY Eve and the theater was packed. I did not fully understand what was going on when the bonds ratings were not going down. The traders who shorted the bonds understood that the ratings agencies had been bought by the banks and lenders. That kind of fraud should have been punished. Did anyone go to jail for that?

    – No. In fact Bernanke used the very same criminal ratings agencies to assign ratings to the dreck that the taxpayers bought at face value during the bailout. You have to understand that the government is controlled by the banks. There are people doing time for the crime of money laundering, but not the HSBC bankers, in spite of laundering massive amounts of drug money for the cartels and money for terrorists. There is a two-tiered justice system in the USA. See 35 and 39 above. Most Americans are sleepwalking and need to wake up.

  76. 76

    RE: Jillayne Schlicke @ 73 – One thing you need to remember is that this is a documentary, and in 2016 that in no way means it’s factual. I’m not familiar with the specific event that you mention, but I’d look for some reliable information that it occurred before forming an opinion.

    On the topic of documentaries, I’d suggest watching Netflix’s Making a Murderer. Undoubtedly also a biased piece of work, but there are things in that movie that just cannot be explained, and the prior conviction of Steven Avery is pretty cut and dried a police frame up. Well worth the [10 hour binge] watch.

  77. 77
    ronp says:

    Just watched the movie up here in B.C. – theater was full and everyone seemed to enjoy it. I thought it was really great, the book was excellent.

    I am not sure Hank Paulson should be bashed too much since I think GS was doing a lot more than just the mortgage market, he may have not known. Politicians panicked and just did whatever seemed to work, I don’t think it was a capitalist conspiracy.

    I do hate Hank Paulson for giving his son Merritt money to buy the evil Portland Timbers soccer team though! Spoiled brat. Wish I could buy a pro sports team. :)

  78. 78

    Happy New Year!!!

    Well its the first business day of 2016 and guess what? World stock values are PLUMMETING today and it looks worse than that…..did anyone say $18/bbl oil?

    https://finance.yahoo.com/news/oil-may-hit-18-amid-113708873.html

    The retirees and the middle incomes [not high income Middle Class BTW] renting in Seattle smile at that likely possibility of DEFLATION. Why is deflation always branded evil. To most of us in America its a blessing.

  79. 79

    You Don’t Need to Be an American Citizen to Get a Wash St Divers License

    You also won’t be able to board a commercial airplane with a Wash St drivers license it appears so far for 2016.

    https://www.yahoo.com/autos/licenses-5-states-won-t-valid-board-flight-180043015.html

    Did anyone sat Real ID? LOL

  80. 80

    RE: softwarengineer @ 78 – Washington’s Enhanced DL will work.

  81. 81
    boater says:

    By softwarengineer @ 77:

    Why is deflation always branded evil. To most of us in America its a blessing.

    Deflation destroys the desire to invest, killing jobs. No jobs = no ability to pay retirement benefits. Why invest and risk lose when you can hold cash and make a positive return?

  82. 82
  83. 83

    RE: boater @ 81
    Who Really Wins?

    A small top salary minority of home owners or the working majority that make the average puny pay and can’t afford Seattle housing or food?

  84. 84
    Blurtman says:

    By ronp @ 77:

    I am not sure Hank Paulson should be bashed too much since I think GS was doing a lot more than just the mortgage market, he may have not known.

    The Ken Lay defense didn’t work in the past. Just research the fraud settlements GS reached with the USG regarding fraud that occurred under Hank’s watch. Pay me large sums, but somehow, I don’t know what is going on. Sorry, that does not wash at all.

    And look at Paulson’s activities once he was installed as US Treasury Secretary. A fellow whose firm admitted to committing fraud during his term, is now a cabinet official who then engineers a bail out of his former firm, so that folks can continue to get paid on fraudulent bets, and not have to take a hit when the bookie went bust. Sad times for the USA. It will be more of the same under Hillary or The Donald.

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