The Big Short Is Back

Shah Gilani|December 14, 2023

Real estate is the single greatest wealth creator in the history of mankind.

But it’s not about just buying and holding or buying and flipping.

The most money is actually made – and in the least time – when real estate prices crash.

And they do so in perpetual cycles. In the past 15 years, there’ve been three booms and two busts… and we’re nearing the third bust now.

The first boom and bust was portrayed in the 2015 film The Big Short. It told the true story of a handful of traders who collectively made billions of dollars betting against subprime mortgages in 2008.

Today, we’re going to cover the lessons learned from the second boom and bust. It’s a story that will no doubt be familiar to you.

I call it the “Big Short 2.0.” And just like with the first boom and bust… investors who played it smartly made a lot of money.

Pay attention… because their methods tell you what you should be doing with your money today.

Here’s the true story of how the “Big Short 2.0” came about…

Who profited from it…

And, most importantly, how its sequel is being written now. And everyday investors will be able to profit from the “Next Big Short“… if they know how to trade it.

A Gutsy Move

The ability to make a fortune on the first “Big Short” was predicated on several things…

• Understanding the residential housing bubble
• Recognizing how leveraged everything and everyone was
• Knowing when to take action
• Knowing what to trade.

The big winners saw what was coming… as did a lot of other traders and investors. But the winners took action when the time was right.

And that took a lot of guts.

In the case of the “Big Short 2.0,” which was all about the decline of shopping malls, traders had less time to set up their moves, but they still had crumbs to follow.

“Big Short 2.0” traders, who raked in their gigantic profits in the late spring of 2020, saw clearly that e-commerce was hurting malls.

Foot traffic was slowing, and big anchor stores were suffering sales declines because online platforms were selling everything at better prices. After all, the online platforms didn’t have the physical footprints or overhead expenses that brick-and-mortar stores had.

That was obvious coming out of the 2019 holiday shopping period… when, for the first time in history, online sales exceeded sales at traditional retail outlets.

That’s when “Big Short 2.0” traders added to their bets against shopping malls.

Then something horrible happened – not to the shorts, but to the world.

The Global Panic

When the pandemic began, everything got shut down – and that of course included shopping malls.

What would have been a good short became an epic trade – literally overnight.

MP Securitized Credit Partners, an outfit that shorted CMBX 6 – a pool of commercial real estate-backed securities loaded with already-stressed mall mortgages – turned a 119% profit on a $100 million bet in less than four months.

MP Partners portfolio manager Daniel McNamara, the architect of the firm’s winning bet, dubbed the trade the “Big Short 2.0.”

Billionaire investor Carl Icahn made $1.3 billion on the trade. When asked about his gains, he said, “We periodically do shorts, and this is one of the best I’ve ever seen.”

The New York Times reported that Apollo Global Management made $100 million on the trade.

Mudrick Capital and Deer Park Capital reportedly made about $100 million each on the same trade.

But that was just the beginning.

The push to work-from-home and the resulting increase in vacancy rates and commercial mortgage refinancing woes have created ripe opportunities to trade the ongoing downfall of commercial real estate.

It all has led McNamara to start another hedge fund, Polpo Capital.

Polpo expects to profit – or “capitalize,” as McNamara says – from the distress in commercial real estate as forbearance agreements expire, landlords’ reserves dwindle to nothing, and loans reach maturity and need to be refinanced at higher rates.

In other words, he and a lot of successful traders are already setting up trades to profit on what I’m calling the “Next Big Short.”

And now… everyday investors can capitalize on teetering commercial real estate.

That’s because this time mom-and-pop retail traders – who never could have shorted subprime mortgage-backed securities, bought credit default swaps or shorted CMBX 6 – can position themselves by buying cheap positions… sometimes for pennies on the dollar.

I’ve put together an urgent presentation on just how bad things are in commercial real estate and how to make money on the “Next Big Short.”

All the details are right here.

Crisis means opportunity. Anytime an earthquake hits the real estate market, there are fortunes to be made. Don’t miss out.