Comments by "Fox" (@tomlxyz) on "Explaining Celebrity Explanations in The Big Short" video.

  1. I think that part was an oversimplification in the movie. Just having a binary win/loose scenario doesn't make sense to have synthetic CDOs building on other synthetic CDOs and not on the first CDO directly
    12
  2.  @Grosbolt  because that's basically the same as taking out a loan and then investing it. Sure the long term gain is bigger than the loan interest. However if the stock market makes a dip once putting you in the red on paper the one giving you the loan will force you to sell your investments to prevent further losses which realizes your losses and you'll end up having nothing. Depending on your leverage the dip doesn't even need to go far down. That's what happened in the 1930s. If you don't pay your mortgage and instead invest the money and you end up in a real estate crash again you might get foreclosure and then your investments will be seized to cover the loss. Loan basically gives you leverage both ways. Small gains make big gains, small losses can make you bankrupt.
    9
  3. I can't believe that the practice of ballooning payments in later years and using that on large scale wasn't seen as problematic by the one who actually know what they were doing. I feel like they just played along because they knew that for now they'd profit and long term they'd get out of it before it crumples.
    2
  4. How good is an explanation of a layman if it requires a long explanation itself
    1