FILM REVIEW

Title: “THE BIG SHORT”

Section: 3fm4 Course: Security analysis 2 Name: TUNGOL, REMLY ROXETTE M.

Explain briefly the following Guide questions:

1 Write a very brief summary of the film. Why was the movie entitled as such?
The film revolves around the complexities of the financial downfall in the year 2008 in Wall Street that resulted to
unemployment and other economic issues and what triggered it. A collapse in the global economy occurred because
of a U.S mortgage that was a swindle and American financial professionals profited from the build up by gambling
against the housing market and offsetting losses on mortgage investments. Not only does it show the financial crisis
but also the multiple men who had conflict on their morality and predicted the crisis thoroughly in advance. The
movie was entitled as such since in the financial industry, the word “short” pertains to selling a stock or financial
instrument without ownership and buying them later at a lower price for the loan to be repaid. The characters were
also betting against loan which had entered the bond market and since the position they took over was to have a
gain when the financial market fails.
 
2 Relate the theme of the movie to the academic discussions in the course Security Analysis.
 The theme of the movie is about the short sightedness as well as being greedy and having overconfidence in the
market. It is shown in the movie that they believed the subprime mortgage bond market will not experience downfall.
I have learned in the course that such overconfidence is a major problem because one will not be able to recognize
when something is already going wrong. It leads to overlooking the problems with the bond market and will continue
to go on until a crash will happen just like what happened in 2008. Investors trade actively due to overconfidence and
in return they lose money since they cannot control events and undervalues risk.

 
3 The most important lesson/value related to Security Analysis that you acquired in the film (Choose one only)
 One important lesson or value that I have learned from the Big Short is that it is highly risky when shorting the
market that is why doing one’s homework on the market is important. It was shown in the movie that the characters
have made a gain or profit from shorting the market but in reality, it is actually difficult and riskier that what the
movie made it seem. It is difficult to make shorts in the market and go through with it consistently that is why one
must assess and understand the market first as well as the timing must be accurate. Since the market is always
changing and one cannot see the troubles If one does not have updated information. Assessment is needed if one
wants to take risks in shorting the market since success on betting is not guaranteed at all times.
 
 
4 What is the worst part/scene of the movie? Why?
 For me, the worst scene in the movie is the phone call where Mark Baum had a breakdown talking to Cynthia
explaining that the world is screwed and then brings up his brother’s suicide who is Paul. Cynthia told Mark that he
will make a lot of profit from the current crisis, but it is not very righteous and connects the financial crisis with the
terrible happenings of Paul’s death. Mark felt ashamed because when Paul told him about his struggles, Mark
immediately offered money to think that it will solve it. This shows that Mark is a banker who may be full of himself
and greedy. With this he felt guilt for his doings and since he is committed to the bets now and there’s no way out, he
tried to save the economy.
 
 
Explain an exact line/dialogue in the movie that you believe will have an impact in your future career as Finance
5 Professional. (verbatim)
 An exact line that I remember from the movie is Jared Vennett’s line that says, “While the whole world was having a
big old party, a few outsiders and weirdos saw the giant lie at the heart of the economy, and they saw it by doing
something the rest of the people never thought to do: They looked” As a future investor, it is also important to
foresee to gain profit from mortgage crisis and find securities which will be right. But again, this could result to
extreme downfall if not looked at properly since anytime the premiums that they were holding on derivatives in order
to gain the short are never an accurate thing for a market that is crashing. In the end, I may take advantage of these
crisis but still must be careful when investing on something since it may have negative returns.

 
Discuss at least two (2) finance terminologies cited in the field that are related to the course.
6

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  A finance terminology that was cited in the movie related to the course was Mortgage-Backed Securities. Mortgage-
Backed Securities are securities that are asset based which is a collection of mortgages that are secured. It is further
sold to individual investors since these kinds of mortgages are owned by commercial banks which are sold to
investors which combine them into MBS. MBS are known to have two types which are collateral debt obligations and
pass-through certificates. Another term that was mentioned in the movie are Credit Default Swaps pertaining to a
financial contract or derivative which enables an investor to swap with another investor his or her credit risk. In order
for the risk to be swapped, the lender purchases credit default swaps coming from another investor wherein he or
she agrees to reimburse the lender in case a default happens with the borrower. The seller of the credit risk who also
has the ownership with the underlying credit asset has to pay a periodical fee to the buyer of the risk.

7
Who among the characters in the movie can you relate most? Why?
The character I must say that I relate the most in the movie is Michael Burry. Michael Burry was part of the first to
recognize that by betting against the mortgage bond market, profits could be made. In real life, there are
circumstances wherein I can take advantage of since it will benefit me and when I have things that I am interested in I
usually have a high drive on accomplishing it just like Michael Burry. He was also good at foreseeing which firms will
be successful or fail soon which allowed him to run a hedge fund that is successful and raises a high price for his
investors. I can relate to him since I foresee things first before actually investing in it.

/adaltarejos