For the first time in forever, to coin a phrase, an original film about finance could claim the Best Picture Oscar this coming Sunday. Much of the field looks eerily similar to us – there’s Leonardo di Caprio showing gritty resolve despite betrayal and wilderness conditions (The Revenant), Matt Damon showing gritty resolve despite abandonment and Martian conditions (The Martian), and Tom Hardy showing gritty resolve despite cruelty and post-apocalyptic conditions (Mad Max).
But The Big Short walks a far more innovative path, largely by assuming its audience actually wants to understand key financial concepts. To do so, it enlists celebrities to explain critical concepts in riveting parables, like when chef Anthony Bourdain depicts collateralized debt obligations via day-old seafood stew, which is no longer “old fish” but transformed into “a whole new thing.” Meanwhile, over at the poker table, Selena Gomez and Richard Thaler explain synthetic CDOs. We love the democratization of financial knowledge, but it’s The Big Short’s commanding performances, dark humor, and stern critique of a broken system that may just win the day at the Academy.
Of course, while Oscar prognostications oft go awry, there is one movie prediction that often holds: if it grosses more than $100 million, there will be a sequel. Whether because of studio executives’ demands to cling to proven formulas or a fundamental dearth of creativity, Hollywood loves to return again and again to the same characters. Just last December, when going to the movies with a friend, we had to choose between the seventh Star Wars, the seventh Rocky, or the fourth Hunger Games! So how could Hollywood resist creating a sequel to The Big Short, since it showcased acting mega-talents, made nine figures, and could land a coveted Oscar?
Since we at Chatham love finance and film, we decided to help give the sequel legs by scripting five celebrity cutaways for Hollywood execs to consider. We look forward to their thoughts, and yours as well, on The Big Short 2: Going Negative.
Scene 1: (Helen Mirren – sitting at high tea)
“Did you know what they’re considering at the jolly old Bank of England, and even the Americans at the Fed? Negative rates! You see, rather than being paid to place money on deposit at the local bank, depositors are going to have to pay to do so. There’s been far too much saving, you see, far too much indeed. But as soon as depositors have to pay to put money in the banks, why, they’ll spend it I say.”
Scene 2: (Hilary Swank – lacing up boxing gloves)
“You know me as the one who tried to punch the lights out of anyone who stepped into the ring with me. But now the ones feeling the body blow-uppercut punches are pension funds, watching their future obligations increase in present value terms, their safe bond investments disappear, and the equity markets sell off.”
Scene 3a: (George Clooney – walking into a safe)
“Usually when I climb inside a safe, I am trying to rob the casino, but not this time – this time I’m here as a spokesperson for the Sturdy Co. Safe Company. Ever since retail banks actually permitted themselves to charge depositors more than de minimis amounts, they’ve experienced significant withdrawals. For most people, stuffing the old mattress is not a suitable option, so Sturdy Co. is selling more safes than they ever have in history …”
Scene 3b: (Don Cheadle – walking out of the safe)
“.. people know me from helping George rob casinos, and from my work on the film Hotel Rwanda. Did you know that in Rwanda’s western neighbor, Tanzania, more than 5 million people subscribe to M-Pesa, the mobile-phone based payment system? The system obviates the need for cash completely, preventing a lot of corruption and reducing security risks. Many believe that negative deposit rates in traditional banks could spur broad adoption of mobile-phone based payment systems in developed economies as well! That or bitcoin.”
Scene 4: (Antonio Banderas/Salma Hayek – on the run)
“It’s been roughly twenty years since we were desperados together on the run. At this point, desperado just means a reckless outlaw, but in Old Spanish it used to mean desperate. Speaking of which, a number of major market participants believe central banks dropping negative rates still further is a desperate measure, a sign that there’s nothing else left to try!”
Scene 5: (Josh Hartnett – inside a Blackhawk helicopter)
“Last time I took to a Blackhawk helicopter, I was trying to bring food and humanitarian relief into Somalia. This time, I’m bringing a different kind of relief – helicopter money. Fed Chair Janet Yellen has asked us to fly above major US cities throwing actual cash out to the populace below. This is only because negative rates have not prompted an increase in borrowing; instead, households are saving for a rainy day rather than using the ultra-cheap funds to spend and stimulate the economy. So we’re throwing money out the window of this helicopter on the theory that windfall money – that’s money that literally falls into your hands through the wind – gets spent more readily. Let’s see how it works!”
Negativity is cropping up all over the world – in fact, according to CNBC, almost one quarter of the world’s total GDP comes from countries with negative interest rates! The impacts are far-reaching: the sub-zero rates roil currency markets, eat into banks’ net interest margin, and can drive lenders to trim costs and scale back lending rather than increasing it. To discuss how your firm might be impacted, please give us a call.