LA GRAN APUESTA: S3x0, Mentiras y la ESTAF4 del SIGLO

Four cunning investors try to take advantage of the economic crisis that the world began to suffer in 2008, but their risk investments end up leading them to the darkest side of the economy, where nothing or no one is what it seems to be. In the 1970s, the banking landscape was radically different from what we know today.

The bank was characterized by its monotony, generating scarce benefits, and the main attraction were the bonds. However, this situation gave a transcendental turn with the arrival of Luis Ranieri, who, with an innovative idea, transformed not only the banking sector, but also the world as we understand it today. His proposal consisted of creating a bond backed by mortgages, covering thousands of them. This new product was rated with a triple A risk note, since it was trusted that all the

The following is a story about a bank that was able to make a profit in 2008.

This collapse not only deeply affected the American economy, but had global repercussions. Although many did not anticipate the crisis, there were those who did, like Michael Burry. In early 2004, Michael Burry, CEO of Scion Capital, is in his office, like any other day. Although he is a professional surgeon, his true passion lies in the world of investments, a field to which he moved when he founded Scion Capital.

and focus on personal investments. Throughout his life, Michael has faced difficulties interacting with other people, he feels much more comfortable alone, and even his attempts to praise someone tend to go wrong. At this point, Michael shows himself unruly, with his feet on the table and scratching his feet. We observe how he is hiring a new employee. During the conversation, he mentions that in the 1930s the housing market collapsed throughout the country, reaching a fall close to 80%.

In that period, half of the mortgage debt was in purple and there were specific and easily recognizable indicators. For example, one of the characteristics of a bubble is the increase in both complexity and amount of fraud.

Michael asks the new worker if he is aware of the increase in these frauds, to which the employee responds by asking if he will be hired, since he could contribute to his fund. Michael sits down and asks him what he can start working on. Then he asks the worker if he does not find it strange that after the explosion of the technological bubble in 2001, the real estate market in San Jose, the technological capital of the world,

The worker replies that he does not consider it rare. For him, housing is always stable, with a low risk and is solid. Michael explains that this is precisely the generalized perception. Then he asks him to investigate the 20 most sold mortgage bonds. The employee asks if he wants to know what those bonds are, but Michael clarifies that his interest lies in knowing what mortgages each of them make up. The worker informs him that those bonds are made up of thousands of mortgages.

However, Michael does not care about this figure and continues to insist on carrying out that investigation. Michael looks for new opportunities in shares for his fund, but that day he receives a list of mortgage bonds that draws his attention. Intrigued, he dives for the first time into the mortgage market and is dedicated to learning as much as possible about how the lending and borrowing process works in America.

This new area of interest quickly becomes his obsession, although he decides not to share it with anyone, keeping it a secret. After devouring books, articles and financial prospects, Michael perfectly understands the functioning of the sector related to these curious bonuses. It is then when he begins to investigate his composition.

dado que están formados por cientos de hipotecas. Con minuciosidad, el inversor analiza cada hipoteca individualmente y estudia los prospectos exhaustivos de estos bonos, documentos que normalmente solo leían los abogados que los redactaban. Finalmente, un día, al conectar todas las piezas del rompecabezas, Michael entiende lo que tiene frente a sus ojos y pronuncia, va a explotar antes de que pueda invertir en contra.

At that moment, Barry just discovered the biggest financial bubble in history, the subprime mortgage crisis. In an evocative scene, Margot Robbie, submerged in a bubble bath, explains to us that, in essence, the mortgage bonds created by Ranieri were extremely profitable for banks, who obtained thousands of millions of dollars through their 2% interest for each bond sold. However, they soon faced the shortage of necessary mortgages to generate these financial instruments.

After all, there is a finite number of houses and therefore a limited number of people with jobs capable of acquiring them. In this situation, banks began to include more risky mortgages in the composition of the bonds. In this way, they managed to keep their utility generator in operation. Intentionally, these risky mortgages are called "no preferent". In this context, Barney decides to sell the bonds short, which implies betting on its future value.

Then we observe another investor named Mark who has a completely different profile. Mark feels a deep resentment for Wall Street. He is a born skeptic. Since his childhood, the rabbi even had to talk to his mother due to his intense dedication to studying inconsistencies in the existence of God.

Mark responds that he has no idea how many scams exist and that everyone seems to be walking around without a direction.

His wife suggests that he should consider the possibility of taking medication to ease his state, but he refuses, arguing that this would interfere with his work. She reminds him that he deeply hates Wall Street and advises him to quit his job. However, Mark insists that he enjoys what he does. She continues to argue that he is unhappy and expresses his sadness for what happened, suggesting that he should feel the same. At that moment, we are shown an shocking scene: Mark's brother about to jump from a building.

On the other hand, Michael goes to the bank and exposes his intention to acquire mortgage loan swaps, specifically a creditors' fee swap that he pays in case the underlying bond does not meet his obligations. One of the agents asks him if he is really betting on the housing market. Another of them points out that those bonds only fail if millions of people stop paying their mortgages, something that has never happened in history.

considering it, therefore, a little sensible investment. Michael responds that, based on the predominant opinion of the market and the perception of banks in popular culture, yes, it is nonsense. However, he claims that everyone is wrong and his only concern is to make sure that, when the bonds cannot meet their payments, he receives what is appropriate, especially in the event that the bank faces solvency problems. One of the agents asks him if he is serious and if he is really betting on the real estate sector.

In addition to showing concern for the possibility that the bank will not pay him, Michael sits down and confirms that yes, it is indeed correct. In this regard, the bank representatives offer him to sell him 5 million in cash. However, Michael proposes a more ambitious figure: 100 million. The bank agents accept and laugh at seeing Michael retire, as they consider it easy money for them. This same operation is carried out by several banks, and in all of them, the agents feel that there is no way that Michael manages to beat the system.

Despite this, everyone accepts the deal. In total, he buys more than $1,300 million in permits between all available banks. This situation generates a discussion with Lawrence, the president of the investment fund directorate where Michael works, who expresses his disagreement with the transactions made.

In a party, bankers celebrate with enthusiasm. Jared finds out what is happening and observes how the agents celebrate the juicy commissions they have obtained. During this event, he learns that they have carried out short-term operations against the main traders and funds of the city, including Deutsche Bank. Meanwhile, Michael shares with Lawrence that he has acquired $1.3 billion in permutations. Lawrence expresses his concern, pointing out that this sum represents the entire liquidity

Michael, however, assures him that that is not all liquidity, and questions whether he really understands the nature of that transaction. Lawrence presents himself as his mentor, but clarifies that the company does not approve of such an investment. In response, Michael reminds him that he has complete autonomy in terms of investment strategies and asks him to review the agreement. However, Lawrence argues that there is a tacit agreement that he should not act imprudently. Michael claims that what he has done is not madness, but a very logical decision.

Lawrence replies that he does not agree, he claims that they will lose millions until something that has never happened before happens. To this Michael sits down and confirms that this is correct.

Incredibly, the mortgages continue to increase, which leads Barry to have to pay the corresponding premiums. Thus, the first reactions of investors begin to manifest. Mark established his fund backed by Morgan Stanley. He was an exceptional professional, but it was practically impossible for him to collaborate with others, which led him to form a team of unconventional individuals who, surprisingly, adapted very well to his style.

In this context, they receive an intriguing call from Jared, who proposes the idea of ​​playing short against the housing market. Jared looks for an investor to participate in this strategy, similar to what Michael did, but all the potential interested had declined the offer. At this moment, a famous scene from the Jenga game is presented, where it is illustrated how the mortgage bonds are structured.

It is revealed that the structure of these bonds no longer complied with the regulation that required that more than 65% were classified as AAA. These bonds were organized in different sections, which allowed investors to choose and acquire AAA, BBB or B-class bonds, as with any financial product. At greater risk, greater profitability is required. However, this case was particular because the sections were not independent of each other.

This means that if the classified mortgages, like B, began to fail their payments, they would negatively impact all the other sections. Jared explains that the unpaid index had increased from 1 to 4% and that it could climb to 8%, a time when everything would collapse.

This represented a significant opportunity. Mark points out that a bond fails when it reaches 8% and they are already at 4%. If it reaches 8%, it would be a real armageddon. Jared sits down confirming his statement. Intrigued, Mark asks why no one is discussing this matter.

At that moment, another member of Mark's group questions the certainty of the numbers presented. Jared points to one of the members of his team and says that he is his math quantifier and math specialist. Then he asks if they notice something different in his face. His name is Yang and he has won a math competition in China. He confidently confirms that he is completely sure of the numbers exposed. One of the members of Mark's team poses the possibility of selling that block tower in short and asks how this operation would be carried out.

Jared explains that they would do it through an instrument known as the Payment Failing App, which acts as a kind of insurance for the bond. In case an unpaid is made, they could get profits that range between 10 to 1 and up to 20 to 1 on their investment. And this is how the situation is. Slowly, everything is failing. However, no one seems to be paying attention to this issue, since banks receive honors for the sale of those bonds. Jared explains to them that he is the bank, works for himself, and undoubtedly has broad margins.

He then warns them not to talk about their margins, since although he collaborates with the bank, he does not think like him. Regardless of whether it is a large or small bank, his main goal is to make money. He shares an analogy with them: it is like being in front of a house on fire and offering insurance against fires. Jared is asked how it is possible that lower quality bonds are in such a disadvantageous situation. Wouldn't this be illegal? Jared replies that, in reality, no one knows for sure what those bonds contain.

He has observed some classified as AAA with a 65% percentage and he is aware that they are full of 95 assets of dubious quality, which have indices of solvency lower than 550. When the market identifies a bond as highly risky, they package it with other assets that have not been sold in a CDO .

They group values ​​of categories B, W and BBB that have not been successful in the market and pile them up. Once they manage to gather a considerable amount, they present it as diversified. The classification agencies grant this set a rating that ranges between 92 and 93% in the AAA category. Jarrett explains that this practice related to collateralized debt obligations was a determining factor that allowed the housing crisis to become a national disaster.

Next, we observe the famous chef Anthony Borden explaining his process. He mentions that it is Sunday and that he is preparing the menu for a restaurant. The previous Friday he requested his fish, which represents the bone that Burri sold in Cordo.

However, some of the fresh fish is not sold and he does not understand the reason. Perhaps they have discovered that the halibut is an intelligent fish similar to the dolphin. Faced with this situation, the question arises: Should I discard the fish that I could not sell, which corresponds to the triple B level of the bonus, and accept the loss? However, as a smart chef and with a questionable ethical approach,

opts to incorporate the less desirable levels of the bonus that were not sold in his seafood stew. It's not about fish in poor condition, it's something completely new. The most ironic thing is that they are tasting the Hollywood of three days ago, which metaphorically represents a CDO. Mark tells Jared that the mortgage bonuses are simply garbage, and that the CDOs are packaged garbage. Jared sits down and responds that indeed it is. Financial institutions treat CDOs as if they were treasured bonuses,

even though they are destined to reach zero. One of the members of Mark's team tells Jared that this is impossible, since last year 500,000 million were sold in bonuses. He wonders if everyone is asleep at the wheel.

Jared answers affirmatively, pointing out that his department has also invested in those values and that they even call it the bubble. What he tries to explain is that it is only a matter of time before the American housing market suffers a significant collapse. Mark's team is quite skeptical about the explanation Jared has provided them. Mark

He tells them that Jared has bet too much and is now liquidating his position in the game. However, he wonders: "What if Jared is right?" The banks have granted him credit cards with rates of 25% and have ruined them with unpaid student loans. In this context, an individual arrives at his office and warns them that the banks are greedy, that they are not alert and that they can take advantage of his lack of insight.

Mark sincerely wishes that Jared is right in this regard. One of the members of his team asks him why he does not feel aversion towards Jared, given that it is all that he distrusts. Mark responds that Jared's personal interest is so evident that he deserves respect. They decide to investigate whether Jared is right about the mortgages.

Charlie Geller and Jamie Shipley, these two investors who manage private funds, seem to be very competent.

However, they are in a somewhat complicated situation, since being rejected to invest because their funds are still insufficient, they unexpectedly run into a report at the reception of JP Morgan. Although these young people lack a broad experience in the financial field, they have the

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Florida Florida

Lawrence visits Michael in the office and tells him that they do not trust his ability to identify macroeconomic tendencies. Michael replies that anyone can observe the existence of a bubble in the real estate market. Lawrence replies that precisely no one can detect a bubble, that is why it is a bubble. Michael considers this statement as nonsense, arguing that there are always indicators. He points out that mortgage fraud has been quintupled since 2000, while the average salary has not increased.

and yet the prices of houses have gone up. He assures that houses are debt, not assets. Lawrence's assistant interrupts and comments that, according to his opinion, Michael Burry of San Jose, a guy with a simple haircut and who doesn't wear shoes, how can you know more than Alan Greenspan and Hank Paulson?

Michael sits down and claims that he actually knows more. Lawrence asks him if he is being sarcastic, to which Michael responds that he has no idea how to be sarcastic, or funny, or manipulate people. His only ability is to interpret numbers. Lawrence investigates the magnitude of his short-term sales position, and Michael reveals that he is up to $1.3 billion.

In the face of the question about what they will do with the cousins, Michael explains that they will pay between 80 and 90 million a year. Although he recognizes that it is a considerable sum, he clarifies that he was the first to carry out that transaction and is convinced that it will yield results. Maybe he was a little ahead, but he is not wrong.

Lawrence wants Michael to sell the swaps to avoid major losses, but Michael refuses. He explains that what they are paying in premiums is $90 million a year, which implies that their investors lose that amount due to his strategy. Michael reminds them that he has sent several emails to his investors informing them that in the second quarter of 2007 their positions will begin to give results. It has been clear about it.

Lawrence warns him that people could withdraw their money, to which Michael responds that that would be a great stupidity. If the fund's capital decreases too much, swap contracts are invalidated and banks are left with collateral. Investigations in Florida continue in progress. Investigators talk to mortgage brokers, who comment on the significant increase in house prices. However, they also mention that despite this increase, many want to sell their properties.

Credit was granted without any rigorous evaluation. In fact, in many cases, that section of the requests was left blank, and so all banks accepted these applications without questioning. It was such a simple process that even strippers were granted credits without requiring any type of income check. Some of these women even owned five houses. Mark and his team leave Florida convinced that there is an real estate bubble. They communicate with Jared to confirm that they will proceed with the purchase.

On the other hand, Charlie and Jamie contact Ben, to whom they send the relevant information. Apparently, the report is correct and effectively a bubble is identified. Ben recommends making a short-term investment against the CDOs, considering it the safest bet in this situation. Finally, Ben offers them his support so that they can obtain their license and be able to carry out their operations in short with success.

It is January 11, 2007, and mortgage payments reach alarming levels. The market offers clear signs of warning. However, the prices of bonds do not decrease and the market continues its course as if nothing were happening.

Mark, Michael, Charlie and Jamie face significant losses, as they must cover the monthly premiums to the banks where they made their bets in Cordoba. Despite the situation, the bonuses continue to be rated as AAA, something that, in normal and legal conditions, would be unthinkable. The market is clinging to its stability at any cost. The first responsible entities that are visible are the risk rating agencies. Mark,

Mark answers that this is precisely his perception.

are convinced that the underlying mortgages are solid. However, the team member points out that they are granting loans to anyone who has a pulse. Mark discovers that the agencies are aware of what is happening. However, those who pay them for their assessments are precisely the bonus holders, which represents a clear conflict of interest. If they are not granted the AAA qualification, they will be forced to resort to the competition, where they will surely receive the desired qualification.

The Mark and Jamie's team heads to Las Vegas, where a congress will be held at the American Value Forum. This event is presented as the best opportunity to obtain information about the current market situation. All the characters of the sector will be present, bond sellers, lenders and runners, as well as those involved in the corruption scandals that have shaken the industry.

Al iniciar la convención, los oradores afirman que todo marcha bien y que el mercado hipotecario es sólido. Sin embargo, Mark no puede contenerse más y levanta la mano para preguntar si existe la posibilidad de que las pérdidas superen el 5%. El expositor responde que no es así. Ante esta afirmación, Mark vuelve a levantar la mano y sostiene que las posibilidades de que las pérdidas se limiten a ese 5% son nulas.

At that moment, he decides to answer a call and leaves the convention. Michael's fund losses reach an alarming 19.7%. He decides not to visit Las Vegas, since he doesn't get along with people, and he is also aware that his presence is not essential.

He intuits that something is happening in the market and is convinced that it will eventually collapse. Meanwhile, Charlie and Jamie are sure that even the bonuses classified as AA will suffer falls. Therefore, they decide to bet against these bonuses as well. This strategy is uncommon among their colleagues. Neither Mark nor Michael have opted for it. Betting against AA bonuses is a decision that any bank or experienced trader would consider risky. But they are willing to take on the challenge.

When Charlie and Jamie go out to celebrate, they do it with the certainty that the business they have established is exceptionally profitable. However, Ben asks them about the nature of their celebration and reminds them that they have bet against the American economy. If their bet is right, many people will be affected.

Mark

This manager receives funding, CDOs and bank clients, and supposedly represents those investors. During the talk, the manager explains to Mark how CDOs work. These are made up of mortgages. What they do is structure different products on this basis. For example, they can combine two or three CDOs to create a new one, which is called CDO squared.

From there, they continue to generate more and more products. Thus, from a group of real mortgages that add up to 50 million dollars, it is possible to create products that reach up to 1 billion. To illustrate the situation, 1 billion are backed by only 50 million in underlying assets, which are considered low quality. This dynamic suggests that there is no way to stop the imminent collapse. Faced with this revelation, Mark decides to continue betting against the CDOs. Although the situation advances slowly, significant events begin to arise.

There is a remarkable interest in acquiring the swaps that Michael, Mark, Charlie and Jamie had previously acquired. The first signs of liquidity problems begin to manifest, and there is no system or corruption that can hide this reality. On the other hand, it is revealed that Morgan Stanley could face losses of up to $15 billion due to this fall.

Mark is aware that if Morgan Stanley breaks, they will also be affected. However, he decides not to sell the swaps and opt for waiting, since his ethics drives him more than the desire to gain profits. He is convinced that what is about to happen will be a significant lesson for the market.

At this point, the dilemma no longer lies in whether they will gain profits or not, but in whether there will be enough liquidity in the market to receive the corresponding payments. Faced with this uncertainty, Michael, Charly and Jamie begin to sell their positions. As a result of their strategic decisions, Michael manages to obtain a personal profit of $489 million. It is March 13, 2008.

and the only one who has not yet sold his positions is Mark. He has been invited to participate in a debate against one of the optimists who still hold the belief that the market will not suffer a fall. During the discussion, Mark expresses his opinion on mortgage bonds. He recognizes that the initial idea was promising, but points out that Wall Street has transformed it into a real atomic bomb, full of fraud and reckless decisions, heading towards the destruction of the world economy.

While Mark exposes his argument, messages begin to arrive to the cell phones of the present. At that precise moment, all the liquidity indicators burst drastically. Faced with this alarming situation, the assistants leave the room in a hurry. The collapse has begun. Charlie and Jamie manage to enter Lehman Brothers in a critical moment.

while all employees are sent to their homes. The scenario is devastating. A company that once was the fourth most important investment bank in the United States, managing assets for a total of $640 billion, is now worth nothing. Michael, on the other hand, obtains an impressive gain of 489% and decides to close his investment fund. However, the personal and emotional cost of this decision is extremely high.

The total amount accumulated by the fund reaches the figure of 2.69 billion dollars. Mark is the last to sell his positions. The fund will achieve a profit of 1 billion dollars and he will receive 200 million. However, he feels uncomfortable when carrying out this action.

as it fears to become another part of the system that has contributed to this crisis. At the end of this chaotic situation, only in the United States are reported losses of 5 billion dollars in pensions, while 8 million people are unemployed and 6 million lose their homes.