The Big Short Overview
The Big Short is a movie that every investor and trader should watch. The big short is about the housing bubble in 2008 which costed the American tax payers and estimated trillion dollars. This movie is about the financial crisis that followed the unethical subprime mortgage lending practices of the 2000’s. The big short is about a small group of traders that successfully predicted what was going to happen. Do you need to learn about a short selling? Follow that link and we break it down.
The Big Short has many trading lessons that we can all learn. That is why we wanted you to watch this movie. Everyone can gain some trading insight on the way Wall Street, Big Banks, and Rating Agencies Work. Anyone with a Netflix account can stream this movie today. If you don’t have a Netflix account, borrow your mothers account and watch this movie. You will be happy that you did.
Lessons Learned From This Movie
Go Against The Herd
The Big Short shows how much pressure is put on traders when they want to go ageist the herd. In this movie, everyone thought the hedge funds had lost their minds. There where some big bankers that said we will take your easy money. This is an example of the term group think. In any management class, there will be a phenomenon talked about where large groups of people all think alike and no one is objective. In a group thinking situation everyone conforms their beliefs to what is popular.
In this particular example, the group thought that mortgages could never fail. This made the hedge fund managers outsiders. This shows how powerful group think is on Wall Street. As a result, no one except for a small group of hedge funds saw what was about to happen near the end of 2007. The lesson is to avoid group thought within Wall Street. Do your own research into your trades and investments.
Markets Aren’t Perfect
Business professors will tell you that the markets are efficient based on a few criteria’s. After watching this film, it is hard to believe that any market is completely perfect. A market is only as perfect as the market makers will allow it to be. One condition is that people in a perfect market are informed. If the rating agencies hide information and have a bias, are markets perfect?
The Big short shows that our markets in the United States won’t ever be perfect. Everyone on Wall Street has a bias that suits their own narrative. There where parts of this film that explicitly showed this. They show you who the people at the S&P rating agencies, big banks, and the government actually work for. There loyalty won’t ever be to the retail trader.
Short’s Have a Sole
There are many people that think shorting securities is unethical. A short sale means that the trader is betting on something to decrease in value. This practice is legal in the United States, but has been outlawed in some other countries. What was the result of their bans? Many of the bans on short selling stock have been lifted because they don’t work. As and Author of the Wall Street journal said, shorts don’t have enough impact on a market to make a big difference.
The big short shows the impact on the traders when the make bets against the economy. Often times the traders felt sick about what was going to happen if they where right. The most important point is that short sellers didn’t cause the problem. The media will often times blame shorts for stocks performing poorly. The traders themselves can’t create a sell off in most markets.
Opportunities During Economic Crisis
There was a Forex trader that said I like crisis because that means there is more opportunity for us as traders. This was demonstrated in The Big Short. We all know from the title of the movie that these traders made their money off a short position. You didn’t need to take a position as risky as the hedge funds. Most people couldn’t sleep at night if they attempted the trade that was shown. What about after the collapse? The collapse created an opportunity for you to get into the stock-market. We all had the opportunity to buy quality stocks at a discount price.
Know What Your Ageist
One thing that is apparent, is that fraud and greed can happen in any marketplace. We really wish that everyone learned their lesson in 2008. Unfortunately there is going to be greed and fraud that effect every marketplace. This is further proof that doing independent research is important. Learn about your investments to keep your portfolio safe.