If the mortgage-bonds that Michael burry discovered were the match... How much bigger is the market for insuring mortgage bonds than for actual mortgages?
About twenty times!
If the mortgage bonds were the match... Then the cdo's were the kerosene soaked rags.
Then the synthetic cdo was the atomic bomb with a drunk president holding his finger over the button it was at that moment in that dumb restaurant with that stupid look on his face that mark baum realized the whole world economy might collapse!
And I know what you're thinking!
What the f*** is a synthetic cdo?
Well, here's Dr. thaler, father of behavioral economics, and Selena Gomez to explain!
Ok, so here's how a synthetic cdo works!
Let's say I bet ten million o a black Jack hand.
Ten million, because this hand is to represent a single mortgage bond okay, Selena has a pretty good hand here!
Showing eighteen, dealer showing seven that's a really good hand for Selena!
Good odds, in fact her chances of winning this hand are eighty-seven percent so, my odds are good I'm on a winning streak everybody in this place wants to get in on the action how could I lose right?
Now this is a classic error in basketball it's called the hot-hand-fallacy a player makes a bunch of shots in a row people are sure they're gonna make the next one people think, whatever is happening now is gonna continue to happen into the future!
During the real-estate boom markets were going up and up!
And people thought they would never go down!
People who are watching and think that I won't lose will make a side-bet now this, is the first synthetic cdo I love Selena Gomez!
I'll bet you fifteen million, she wins!
And I'll give you 3-to-1 odds!
3-to-1 odds?
Okay, I'll take that bet!
Now!
Somebody else is gonna wanna make a bet on the outcome of their bet!
