The Big Short (2015)

Trader's Film Library #31 · The 2008 crisis. The best film about the 2008 crisis and about being right alone, against the market.

Original title: The Big Short · Type: film · Created by: Adam McKay · Usefulness for traders: ★★★★★

What it's about

A few market outsiders (including a character based on Michael Burry and the team of Mark Baum, based on Steve Eisman) see before anyone else that the US mortgage market is a bubble. They bet against it, and for many months the market tells them they're wrong. Based on Michael Lewis's book; Oscar for Best Adapted Screenplay.

What it has to do with markets

The film explains the mechanics of the 2008 crisis: subprime loans, mortgage bonds, CDOs and credit default swaps (CDS). The most valuable lesson for a trader: being right isn't enough – you have to survive until the market admits it. Burry bore the cost of carrying the position and endured pressure from his investors.

Lessons for traders

• analysis from first principles instead of repeating opinions (herding, Atlas of biases #31)
• the market can stay wrong longer than you can stay solvent
• a contrarian position needs a survival plan
• people with “the best knowledge” make mistakes too (authority bias, Atlas of biases #30)

What to watch out for

The film mixes fact with dramatisation and changes some names. Even so, it explains the mechanics of the crisis well.

The book

I review the book this title is based on in the Trader's Library: 📚 Library #075 · The Big Short (Michael Lewis).

Discussion

The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →

Navigation

← #30 Assault on Wall Street · Film Library index · #32 Inside Job →

The description outlines the plot without revealing the ending where possible (true stories have a known outcome). Educational content, not investment advice.