@oyaji said in The Big Short:
@Stu said in The Big Short:
I wonder how many houses had to be foreclosed on to cover the shorts.
That’s the thing: the shorts covered the derivative “bets” on house loans, and there were way more of those than there were houses.
Way more.
I forget how many more, but in 2008 I made a guess as to the hidden wealth that evaporated when the “game of musical chairs” ended and there weren’t enough “chairs” for everybody to “sit down”. Based on some number regarding leverage I had gleaned from what had been let slip in the news and on the Internet, I figured $250 trillion world-wide had disappeared. I figure a lot of that loss was just buried, and the true losses will never be admitted.
I had several conversations with an engineering professor friend of mine (department head he was, actually) who was invested heavily in banks from the time I first made his acquaintance in 2003. Since I had been a contrarian since 2000 and had been advising family, friends, and anyone who would listen that the economy was headed for a cliff and to not only take on no new debt but to hasten to retire all existing debt as quickly as they were able, we had some rather animated arguments on the subject. Our last such exchange was so animated that I haven’t seen him since 2009. The “I told you so” part in particular didn’t go over very well with him. :-/
Where I fell flat was not knowing it was possible to short sell Wall Street via credit default swaps. Had I known there was such a thing, and had such been available in the thousands of dollars purchase range (instead of what - the millions or tens of millions range?), I would have bought in for as much as I could afford. I saw that shitstorm coming years early, but not from an insider’s perspective at all, quite the opposite in fact.
Betting on the middle class over-extending its debt is like betting whether or not it will rain in Seattle this year. I should have put money into Visa or Mastercard stock a couple years ago and then in 5-10 years flip it to shorts for when people start to remember that credit cards aren’t free money.