This is an ironic scene in "Big Air Drop", and it also proves how the layers of packaging on Wall Street are at the bottom. The foundation of a building is constructed by loans with low credit ratings such as B, BB and BBB, and the top floor is high-quality loans with AAA credit rating. Once the supply failure rate rises, the foundation of this building will collapse first, and the whole building will be overturned with it.
Bear is definitely a brain-burning financial film. Three people found loopholes in real estate credit, and some made decisive moves, such as Mike Barry; Some people hesitate to do detailed research, such as Mark; Some people, such as Charlie and Jimmy, stumbled upon jared's plan, and asked an expert, Ben Hockto, to help them judge and gain access to the market.
Explaining the subprime mortgage crisis in simple terms is a very challenging job. The visualization of this work was completed by De jared in the film. He asked his assistant to build a real estate credit model. Of course, this model can't be rigorous and unrealistic, but the problematic part of real estate credit it reflects is very convincing. Of course, not all the cornerstones of real estate credit are B, BB and BBB, but the problematic parts are these types of credit, and the biscuit and desertification of these problematic credits will lead to the sinking of the foundation or the collapse of the bottom, leading to the failure of a higher level of credit, and then the whole real estate credit will collapse.
Who will not pay the loan? This problem is also raised in the film, but it is ignored by people in the financial system as common sense, because most people repay their loans on time, and only a few people can't afford it. It is considered by the financial circle to be within the controllable range, and even optimistically believes that as long as more than 80% is controllable, the mortgage market will be very stable. Shorting the mortgage market, in the eyes of banks and investment banks, is simply a joke and an extremely stupid act. So when Mike Barry went to Goldman Sachs to bet that the mortgage market would collapse, he was considered to be sending money to banks and investment banks.
However, according to more detailed calculations, as long as the mortgage default rate reaches 8%, the mortgage market will collapse, which is a geometric derivative variable. Although the development process of things has been tortuous, the mortgage market finally began to collapse. Although the right bet is worth celebrating and rejoicing, the crisis will lead to the closure of many enterprises, the displacement of millions of people and the panic of globalization, and European countries such as Iceland, Greece and Spain will suffer greatly.
The subprime mortgage crisis, like an elephant in the room, is so big that everyone can see it, but they all turn a blind eye and reach a conspiracy silence. Moreover, in order to attract customers and their own private interests, rating companies such as Standard & Poor's and Moody's gave false ratings against objective facts, resulting in many AAA-rated assets being overvalued, so that the whole mortgage market is littered with rubbish and difficult to identify.
Therefore, we should always be alert to the profit-seeking nature of capital, run like a runaway wild horse, calm down, then calm down, look at the fundamentals, return to common sense, and make a correct judgment that is unique.