In March 2011, I held a pessimistic view about the Australian economy.  Teaming up with a few friends, we purchased a derivative that was “shorting” the ASX200 (Australia’s top 200 companies).  To sum it up in a sentence – the more the market went down, the more money we made.  Our hunch turned out to be correct.  The ASX200 dropped roughly 20% and we tripled our cash in the space of 5 months.

I’m not overly proud of my investment.  To make a profit, I was relying on bad economic data such as high unemployment and a sagging gross domestic product.  I made the small $1,000 investment to highlight that the world’s financial markets are flawed.  Analysts kept spruiking an economic recovery (and this was pushing stock prices up) but there was plenty of reliable data to suggest otherwise.  The experts aren’t always right.  A lack of regulation and numerous conflicts of interest can make them very difficult to trust.

Never was that more evident than during the global financial crisis (GFC).  In the preceding years, banks had been negligently/fraudulently (take your pick) lending money to property investors who were always going to struggle to meet the repayments.  Instead of wearing the risk themselves, the banks packaged thousands of mortgages and sold them to investors.  Ratings agencies gave them top marks.  The regulators had no concerns.  It all went pear shaped in mid-2007 when mortgage defaults skyrocketed and the housing market collapsed. 

The GFC has already been covered in two brilliant films.  Charles Ferguson’s Inside Job won the Oscar for best documentary feature and used a plethora of interviews to show the systemic corruption that led to the financial meltdown.  That was followed up a year later with J.C. Chandor’s Margin Call – a fictional drama about a bank trying to offload dodgy investments over a 36-hour period as the crisis began to unfold.  These movies left audiences shaking their heads but the startling fact still remains – only one person was ever jailed for their actions during the GFC.  It’s almost impossible to believe.

Director Adam McKay tackles the same subject matter in The Big Short but from a different perspective.  Based on the much acclaimed non-fiction book by Michael Lewis (Moneyball), it begins in 2005 and follows three groups of people who predicted the crisis and profited substantially from the demise of the U.S. housing market.  Framed as a dark comedy, it marks an exciting shift for McKay who is better known for his popular slapstick – Anchorman, Talladega Nights, Step Brothers and The Other Guys.  Brad Pitt’s own production company, Plan B Entertainment, put up the funding.

The major players in this broad ensemble are as follows.  Michael Burry (Bale) is an introverted, socially-awkward hedge fund manager who has done his homework and has invested a significant part of his portfolio against mortgage-backed securities.  Mark Haum (Carrell) is a pessimistic money manager who has teamed up with Jared Vennett (Gosling) to bet against the blind optimism of the big banks.  Charlie Geller (Magaro) and Jamie Shipley (Wittrock) are two young investors who literally started a hedge fund in their garage and now recognise that Wall Street underestimates the risk of catastrophes.

Knowing how it all pans out doesn’t make The Big Short any less compelling.  These guys are continually questioned and ridiculed but you know they’ll get the last laugh during the film’s final act.  The performances are superb with Steve Carell (Foxcatcher) the standout.  He gets the best of the one-liners including a scene where Gosling proclaims that he's “standing in front of a burning house and offering you fire insurance on it.”  There’s another great moment where he debates an investment bank CEO in front of curious onlookers.

Adding to the film’s entertaining allure is its self-awareness.  Characters break from the main narrative and start talking directly to the audience.  Celebrities pop out of nowhere to explain tricky financial concepts by using metaphors.  It’s a touch repetitive in places but I like the approach of McKay and co-writer Charles Randolph (The Interpreter).  They’re using comedy to get their message across.  The poignant final scenes will hopefully get people thinking about whether the financial services industry has learned from its mistakes.