In the real estate industry, there is still hardly a day that goes by when someone will not refer to the downturn, how it was before the crash, or the subsequent recovery. Despite the collapse of Lehman Brothers now being more than seven years ago, the economic disasters of the past decade still resonate.
The Big Short, based on the 2010 New York Times bestseller of the same name by Michael Lewis, is a timely reminder of the incompetence, corruption and greed that shaped the world in which we live and work today.
Property is the topic that underpins it. While the focus is on the spreadsheet ninjas and bankers that escalated the problem, the trading of sub-prime residential mortgages in the US was the lethal weapon that they were playing with.
At its heart, the film is a dark comedy, which leaves you laughing and shaking your head in disbelief while looking through your fingers in despair. It is a mixture of the hilarious and depressing that stylishly highlights the economic insanity that took place, played out by a stellar cast led by Steve Carell, Ryan Gosling, Christian Bale and Brad Pitt.
The complex financial products central to the film are illustrated by celebrities doing quirky pieces to camera that are separate from the main narrative. They use neat analogies, such as the repackaging and regrading of low-grade bonds into new high-grade structures explained by celebrity chef Anthony Bourdain, who takes his three-day-old unsold fish to produce a brand new stew. This makes the film accessible and engaging rather than testing.
The Big Short follows the intertwining journeys of four factions that come to believe the supposedly unbelievable – that the rock-solid US mortgage market, the most reliable in world, is about to fall off a cliff.
Gosling plays the suave and confident Jared Vennett, a trader at Deutsche Bank who is the laughing stock of the office for peddling the theory. Carrell is the manic and intense Mark Baum, who runs a contrarian, splinter hedge fund under the Morgan Stanley umbrella and buys into Vennett’s theory following a misdirected call to the bank.
Bale plays heavy metal obsessive Michael Burry, whose hedge fund Scion Capital was the biggest shorter of the US mortgage market, and Pitt is Ben Rickert, a retired star banker who helps two young bucks operating from a garage to play big.
Vennett develops a product that ultimately allows the others to short the fortunes of the mortgage market. However, they invest years before the crash and, during the ensuing time, have to pay massive premiums as the market rallies, driving them close to going out of business and their backers to doubt them.
When the market begins to turn, the corruption of the banks and the ratings agencies comes to the fore, with those organisations that stand to lose from the shorters’ calls doing everything they can to crystalise the losses that loom.
The situation soon becomes untenable and as some of the world’s financial giants begin to topple, the investors’ next worry is whether they will get paid out.
Despite ultimately making it rich, the outcome is bittersweet as the investors realise that real people will run into financial ruin and poverty as a direct result of the phenomenon that has lined their pockets.
The Big Short has been nominated for five Oscars, including best picture, and it is easy to see why. An amusing and engaging examination of one of the most important and complex events of our lifetimes
With the market once again reaching its peak and the stock market at its shakiest for years, it is a timely reminder of the foundations of sand on which the last cycle was built.
The EG verdict
4.5 stars out of 5
Invest in a ticket for a humorous and engaging examination of the behaviours that brought the global real estate market to its knees.
The Big Short is in cinemas nationwide now.
