The Big Short

LOVE this movie; even better than the book by Michael Lewis (yes I read it) that debuted in Dec 2015. (link) I think I've seen this movie at least a dozen times... to the point where I can explain the mortgage collapse of 2008.  Here are my notes (mostly for me, but if you're interested please feel free to comment or share) from someone who knows NOTHING about this space:

• Prospectus on 6 mortgage backed securities he'd like to short. As said by Michael Burry (Christian Bale).  Goldman made him an instrument to short the MBS called a Credit Default Swap or CDS (this type of vehicle already existed for loan default or other credit event, but what Morgan Stanley did was specific to mortgage backed-securities that hadn't been done before).
• Dr. Burry went around town buying swaps on mortgages to the tune of $1.3B, focusing on MBS that had tranches of sub-prime loans. The movie shows him going to at least Goldman Sachs, Deutsche Bank, Countrywide, Bear Sterns & Credit Suisse.
• Jared Vannett (Ryan Gosling), who worked for Deutsche Bank and based on real-life Greg Lippman, was selling shorts on MBS via the CDS's to mark Baum (Steve Carell) who is based on real-life Steve Eisman.  Vannett was also pitching CDO's, which were collateralized debt obligations.  He explained CDOs' as the grouping of a bunch of BB & BBB bonds that once you had enough of them, they became "diversified" and as a package received a 80%+ AAA rating by Standards & Poor's or Moody's bond rating agencies. Now these CDOs could be purchased by pension funds etc that had strict low-risk investment requirements
• Geller & Shipley from Brownfield Funds were in the lobby of JPMorganChase looking for an ISDA. They were licking their wounds after not getting one when they came across the offering docs to short the housing market (which the movie said wasn't true).  In fact Shipley said he read about it Grants Interest Rate Observer, which is a journal of the financial markets published by James Grant.
• Brownfield Funds made money from $110,000 to $30m over a few years. Their investment philosophy was, the markets will sell options cheaply on things that'll never happen, so if they are wrong, they lose small, but if they are right they will win big.
• Michael Burry named his hedge fund Scion Capital after the book The Scions of Shannara.
• Finally, after researching the housing market in Florida and learning of no-doc loans, or Ninja loans, or loans in a dog's name, Baum agreed to have Vannet "make a market" and wanted to buy $20M of Garibaldi-4, Triple-B.
• At the American Securitization Forum in Las Vegas, we learn that Brownfield Fund had the idea to short the AA tranche that no one else has thought to do.
• Ben Rickert (based on real-life Ben Hocket) helps Brownfield Fund to unload Credit Suisse Credit Default Swaps.  Then gets on the phone and says he has 20 AA tranche of ABS CDOs with a face value of $25m, and wants to make a market for $100m.  Settled on $80m.
• Finally Baum's fund was a "Big Short refusing to sell" until the end when he agreed to sell their short positions.