“The Big Short” and Ontario government debt: A prediction for 2016

As I was sitting through Adam McKay’s brilliant film The Big Short for the third time, it suddenly hit me: Ontario is heading for a financial meltdown.

And thinking like the film’s fictional Mark Baum character (played by an excellent Steve Carell), I wondered: How can I profit from the stupidity and greed of the debt-ridden Wynne Liberal government?

To understand how The Big Short — a film about the 2008 collapse of the US housing and mortgage markets — relates to the Ontario of 2016 (the most heavily-indebted sub-national in the whole friggin’ world) a brief film review and analysis is required.

Unlike The Big Short, I cannot trot out naked actress Margot Robbie in a bubble bath to explain the film’s complexities, you will just have to bare — I mean, “bear” — with me.

The film, based upon the Michael Lewis book by the same name, was adapted and directed by former SNL writer Adam McKay.

McKay took on a complex, serious topic, riddled with arcane financial mumbo jumbo about “mortgage-backed securities” and “credit default swaps” and made these terms fun, sexy and even somewhat understandable using visual metaphors demonstrated by the likes of Anthony Bourdain and Selena Gomez.

McKay immediately establishes the context of the story — from the 1980s to the early 2000s — through a rapid fire montage of iconic political and pop culture imagery.

In other words: There was much going on in the world that average Americans (and even the experts) were blind to the fact that the booming economy was really just a house of cards built by greed, debt and more debt.

One who does understand all this is Christian Bale’s character, Dr. Michael Bury, an Asperger-affected neurosurgeon with a glass eye who becomes a hedge fund manager.

Bury foresaw the housing market collapse several years in advance, so he influenced Wall Street banks to create insurance contracts against the decline in value of mortgage bond portfolios, which Bury then bought. In betting against the housing and mortgage bond markets, Bury was betting against the American economy itself.

My other favorite character was the Mark Baum figure played by Steve Carell. I have never been a fan of Carell’s humour, but in this film, he nailed the role of the perpetually angry, distrustful but (believe it or not) principled hedge fund manager.

We learn that as a young man, Baum studied the Torah and Talmud, specifically trying to find internal contradictions in the words of God. This suspicious, inquisitive nature is in keeping with Baum’s later belief that banks were ripping off small and large businesses alike.

Given the opportunity to expose the bank’s stupidity, greed and malfeasance (and profiting from them at the same time), Baum bets against the banks and the crappy mortgage bond portfolios they’ve been selling to unsuspecting investors.

Baum and his wacky band of misfits are aided by Jared Vennett, played by Ryan Gosling as a spray-tanned, coiffed, douchey investment banker who wants to profit by selling Baum the same credit swap deals Bury had secured.

Gosling/Vennett often punctures the fourth wall to move the film along, explaining financial technicalities or offering comic asides about the businessmen he’s forced to deal with.

Underlying the craziness is a palpable sense of outrage and sadness. That’s fitting since, when the American economy inevitably went down the toilet, millions of average Americans lost their homes, savings and jobs.

And note — the warning signs we see in the film can also be seen in real life Ontario, right now:

Rising house and condo prices. Stagnant incomes. Rising mortgage rates. Rising personal debt. Rising provincial debt. Rising unemployment. Declining provincial revenues. And rating agencies paid by the province of Ontario to value its own government bonds. What rating agency is going to bite the hand that feeds it?

If I was a betting man, I would be “big short”-ing Ontario government bonds, because Ontario is in serious decline and heading for a major correction. Perhaps a financial bloodbath.

Is there a Dr. Bury in the house?

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