THE BIG SHORT (2015)

December 24, 2015

big short Greetings again from the darkness. Since there are so few subjects more hilarious than the 2008 financial crisis, let’s get the writer/director of Anchorman and Step Brothers to adapt the Michael Lewis best-selling book. OK, so it’s improbable that was the thought process, but kudos to whomever was responsible for bringing Adam McKay to the project. Before you go assuming it’s a poor fit, it should be noted that McKay is also one of the creative minds behind “Funny or Die”, a site filled with political and social satire. It’s that satirical approach that makes this explanation of what went wrong so accessible to the masses. Make no mistake … this is entertaining and educational and thought-provoking and nauseating and infuriating and funny and disheartening.

If the film were described as a tutorial on MBS (Mortgage-backed Securities), CDO (Collateralized Debt Obligations), Credit Default Swaps, Tranches, Bond Ratings, and Sub-Prime ARMs, most people’s eyes would glaze over and they would keep skimming for showtimes of other new movie releases. In truth, it is those things – and so much more. This is the story of how the housing market collapsed leading the government to the massive bailout that saved some of our largest financial institutions … and how a small group of people recognized what was happening and literally bet against the U.S. economy. It follows the bread crumbs to re-assemble the slow process of spotting the fault in the analysis that lead to massive corruption that finally crossed over into systematic fraud … and does so by using creative presentation approaches like a Bond Rating game of Jenga, and celebrity snippets for definitions and examples.

Ryan Gosling stars as Jared Vennett (based on Greg Lippmann), a slick Deutsche Bank trader who acts as our guide through the muck of shorting securitized mortgages, while simultaneously working the system for his personal benefit. He works with Mark Baum (a character based on Steve Eisman, played by Steve Carell) who manages FrontPoint Partners, and Baum’s team played by Rafe Spall, Hamish Linklater and Jeremy Strong (whom you might remember as Lee Harvey Oswald in Parkland). While this is going on, there are two other similar story lines we are following. The first is Christian Bale playing hedge fund manager and savant analyst Dr. Michael Burry at Scion Hedge Fund. Burry is often cited as the first to recognize the impending collapse and invest against the market. Finally, we have the “garage band” investment company based on Cornwall Capital run by (names changed) Jamie Shipley (Finn Wittrock) and Charlie Gellar (John Magaro) with a big boost from former trader Ben Rickert (played by Brad Pitt in a role based on Ben Hockett). The stellar cast is rounded out by Marisa Tomei as Baum’s concerned wife, Tracy Letts as the head of Scion, Max Greenfield and Billy Magnussen who play cocky and clueless subprime mortgage brokers, and Melissa Leo who plays a Standard & Poor’s employee.

It’s difficult to tell this story without casting blame, and few escape the wrath of Lewis, McKay and co-writer Charles Randolph. Those absorbing shots to the bow include: the Federal Reserve, the SEC, Rating Agencies, big Banks and Investment firms, Fund Managers, Traders, Realtors, and Mortgage Brokers. Companies specifically named include JP Morgan Chase, Bank of America, Deutsche Bank, Barclays, Merrill Lynch, Goldman Sachs, WAMU, Option One, Lehman Brothers, Bear Stearns, and The Wall Street Journal. The point made is that the problem goes/went beyond greed, and is/was truly system-wide, with each segment protecting themselves and their turf. Somehow the name Barney Frank is not mentioned, and FNMA and FHLMC escape mostly unscathed, while CRA lending requirements are not discussed.  It’s not politically correct (and not mentioned here) to question why so many borrowers who couldn’t pay their rent regularly accepted loans that they knowingly couldn’t afford to repay. But that’s a topic for another time.

With full disclosure, I will admit to having been in the mortgage business for 18 years. Though I was never involved with subprime loans, I will always disagree with the stance that the industry and institutions were not aware of the risk and impending collapse. It was common knowledge that “no doc” loans were absurd, and the adjustable rate schedules and prepayment penalties for subprime (and some conventional) loans were beyond impractical and more like homicidal (from a lending perspective). In the film, Baum interviews an exotic dancer who owns multiple homes … all loans made with minimal documentation due to the cash basis of her business. The terms of the loans set her, and other similar borrowers, up for financial ruin … right along with the housing sector and economy. The subprime mortgage brokers portrayed by Max Greenfield and Billy Magnussen may seem cartoonish, but Baum’s confusion with their “confession” versus “bragging” is spot on. There were many just like these two clowns who considered themselves “rock stars”, when in fact, there were really “bartenders who now own a boat”.  These weren’t the type to question whether the loans made sense … only how many could they close to pad their 5 and 6 figure per month income levels.  Of course, in defense of these morons, it was the banks and lenders who designed the loan programs to “feed the machine” with more and by necessity, higher risk loans … to the point where it was no longer possible to spread the risk wide enough for protection. Hence, the collapse.

By the end of the movie, you should expect to have a headache and feel quite cynical towards the system. Despite the humor interjected by quick-hit segments from Margot Robbie, Selena Gomez and Anthony Bourdoin, the seriousness of the topics is more than bubble baths, blackjack and fish stew. The film leaves us angry and nauseous from what happened in 2008, but more importantly questioning … Has anything changed? Have we learned anything? These answers are likely to cause a more sickening reaction than looking back seven years.

A recommended Economic Movie Marathon would include: Inside Job (2010 documentary from Charles Ferguson), Margin Call (2011, JC Chandor), The Big Short (2015, Adam McKay), and 99 Homes (2015, Ramin Bahrani)

watch the trailer:

 


MONEYBALL

September 15, 2011

 Greetings again from the darkness. While reading “Moneyball: The Art of Winning an Unfair Game” by Michael Lewis, I never once considered what it might look like as a movie.  And I am the kind of guy who looks at a mailbox and wonders if a movie about a mailman might be interesting (Costner proved me wrong).  If you are a baseball fan, you should see this movie. If you are not a baseball fan, the movie works very well as a metaphor for any business maverick who takes a risk and analyzes their company or industry from an entirely new perspective. The game of baseball was over a hundred years old when Oakland A’s GM Billy Beane and friends turned the institution on its ear.

Mr. Lewis spent most of the 2002 season with the Oakland team and had full access to GM Billy Beane, Asst GM Paul DePodesta, and their process in putting together a team that would contend for the American League title … all under the severe handicap of ridiculous salary constraints placed by team owners.

 In this movie, Brad Pitt is spot on as Beane – the cocky, tobacco spitting former jock trying desperately to put his stamp on the institution of baseball. Due to some lawsuit of which I know nothing, the DePodesta role is renamed Peter Brand and is played by Jonah Hill, who looks absolutely nothing like Mr. DePodesta (who played baseball at Harvard). Despite this, Mr. Hill does an terrific job of becoming the statistical whiz who can analyze data and place value on players … a skill he is obsessed with even 10 years later.

 Watching Beane trying to communicate the point of change to the old school scouts is simply priceless and painful. Years of scouting based on body type and girlfriend ranking is replaced by statistical data spit out by Brand’s computer. The real fun comes when the team’s field Manager, Art Howe (Philip Seymour Hoffman), flashes his bah-humbug attitude, bucks Beane’s system and continues coaching old school … from the gut. It’s not until Beane takes away all other options that Howe is forced to follow the new plan.

Baseball fans know that Bill James is the godfather of sabermetrics in baseball. I was happy to see him receive props in the movie.  For years his formulas and calculations were ignored and scoffed at by owners, managers and scouts. Thanks to the A’s success, ALL teams now utilize some form of sabermetrics combined with old fashioned scouting. Every measurable event in a game is tracked and results are analyzed. Many fans say it has sucked the joy out of the game. Others say it has provided opportunities for players previously ignored. I prefer to look at it as the same in any industry … everyone looks for a competitive advantage. Never ignore a tool or approach that can make your company more profitable or your team more competitive.

Being a long time Texas Ranger fan, I must mention some of the ties to this story. The Rangers current manager, Ron Washington (portrayed by Brent Jennings), was an infield coach on those Oakland A’s and gets a few scenes. Grady Fuson was the Head Scout for the A’s and later came to the Rangers as co-GM or Asst GM (depending who you ask) but had a very limited stay. Mike Venafro was a relief pitcher for the A’s who gets traded in 2002 so they can pick up a more valued reliever to take his spot (Rincon). It should also be noted that current Rangers GM Jon Daniels and his talented staff have a place for sabermetrics and their formula has worked.

The director of the movie is Bennett Miller, who was responsible for the excellent Capote, which also starred Phillip Seymour Hoffman. Bennett’s DP here is Wally Pfister, who works frequently with the great Christopher Nolan. Pfister’s camera work is superb. The amazing writing team of Steve Zaillian and Aaron Sorkin provide a script with sharp dialogue and just enough baseball lingo so that everyone can follow. Supporting actors include: Chris Pratt (“Parks & Recreation”) as Scott Hatteberg, poster child for sabermetrics; Robin Wright as Beane’s ex-wife; and fantastic writer/director Spike Jonze (came0) as Wright’s zenned-out new husband and the polar opposite of Beane.

 I need to make a point about the performance of Jonah Hill. His movies Superbad and Get Him to the Greek are not my type of movies so I was never a big fan. That changed when I saw Cyrus last year. During the Q&A after this screening, Mr. Hill pointed out that Cyrus was the bridge that allowed him to be cast in this movie … his bridge to drama. He went on to state that his acting heroes are Dustin Hoffman and Bill Murray because they have had successful careers in both comedy and drama. I can honestly say that it is easy to see Jonah Hill having a Bill Murray type career, especially since he has now lost so much weight – a significant weight loss after the filming of Moneyball. He is no longer the funny fat guy. He is a talented actor.

SEE THIS MOVIE IF: you are drawn to movies about visionaries OR you are a baseball fan and/or business person

SKIP THIS MOVIE IF: you are looking for over-the-top action sequences or a pure baseball flick

watch the trailer: