Eisman doesn’t golf the way most other people on Wall Street do. He doesn’t wear a collared shirt, and when he doesn’t like where his ball lands, he just picks it up and drops it somewhere else.
Eisman refuses to conform on the golf course—a place where business deals and networking often occur—just like he refuses to conform on Wall Street.
After golf, Eisman, Vinny and Danny go to a dinner hosted by Deutsche Bank—an idea suggested to them by Lippmann. Lippmann has arranged it so that investors who are shorting bonds will be seated at tables with investors who are long on bonds.
Eisman, Vinny, and Danny, are still skeptical of Lippmann at this point, but they want him to be telling the truth, since he could help them make a lot of money. Lippmann knows they’re skeptical and has arranged a meeting for that reason.
Eisman ends up at a table with an investor named Wing Chau, who is a CDO manager (meaning he is long on bonds). Chau is “newly, obviously rich” and keeps smirking the whole time. Vinny and Danny think Chau is a fool, but they worry that Eisman will talk too much and scare him out of holding his investments.
Though Wing Chau is a real person, he is also representative of a whole class of people who found success before the crash by investing in risky bonds. He is portrayed as oblivious, since his supposed wealth is built on a fragile foundation that will be wiped out in a few years during the subprime mortgage meltdown.
Eisman keeps asking Wing Chau to repeat statements, as he learns more about how a CDO works. Since AIG left the market, most CDOs are now bought by managers like Chau. Chau doesn’t worry about what’s in his CDOs—he passes the risk on to investors who have, theoretically, hired him to vet the bonds, and he takes money off the top and bottom of all deals.
Eisman has to play a careful game—he wants to get as much information about Wing Chau as possible, but he doesn’t want to give Chau too much information (because that might cause Chau to change his strategy).
Wing Chau tells Eisman, “I love guys like you who short my market. Without you I don’t have anything to buy.” Eisman finally gets it. As Lewis puts it: “The credit default swaps, filtered through the CDOs, were being used to replicate bonds backed by actual home loans.” In short, people like Chau need people like Eisman to keep the whole system running.
Chau’s dialogue shows that he thinks he’s smarter than Eisman. What Chau doesn’t realize is that the opposite is also true: that Eisman needs people like Chau in order to make his short positions lucrative.
The dinner seems to go well, but immediately afterwards, Eisman grabs Lippmann, points to Chau and says, “whatever that guy is buying, I want to short it.” Eisman isn’t joking, and he ends up buying credit default swaps specifically on Wing Chau’s CDOs.
Since Eisman isn’t known for being able to hold back his thoughts, this scene seems to emphasize that Chau is oblivious (since he didn’t figure out what Eisman was doing). Lippmann knew Eisman would distrust Chau’s judgement, and so this meeting helps build the relationship between Lippmann and Eisman.
Meanwhile, at a Las Vegas shooting range called The Gun Store, Charlie is the first to arrive for the Bear Stearns event. It later becomes clear to him that he was only invited so that the other Bear Stearns guys would have an excuse to spend some time at the range and expense it to their business accounts, but he doesn’t realize this at the time.
Lewis again shows the excesses of Wall Street culture. The Bear Stearns employees find a creative way to spend a lot of money on themselves then write it off as a business expense. (They can claim they were meeting with Charlie, even though that’s not their intention.)
The next morning, Ben and Charlie walk around in The Venetian, the hotel where the event is being held. They try to get information from the subprime mortgage bond buyers and sellers in attendance, without revealing much about themselves. None of the people they meet impress them. They still have a hard time getting Wall Street firms to take them seriously. At one point, a man from Wachovia gives a speech about how sound the subprime mortgage bond market is; Charlie ambushes him and says if he believes in the market so much, why not sell some credit default swaps?
As always, Ben and Charlie like to do hands-on research, and they are finally able to put a face to some of the people who are going long on subprime mortgage bonds. Ben asks to buy some credit default swaps from the Wachovia man in part to see whether he really believes what he’s saying, or if he’s being deliberately deceitful.
Eisman and his team are also at the Venetian hotel. They have no interest in the public speeches and so try to get meetings with industry insiders, but in order to do so, they have to pretend they are interested in buying bonds instead of shorting them. Deutsche Bank, who arranged the meetings, is keeping an eye on Eisman.
Lewis structures this section to show parallels between the FrontPoint Partners team and the Cornwall Capital team. The fact that they both showed up in Vegas for the same event to conduct similar research emphasizes that, despite working independently of each other, the two firms operated in similar ways.
Monitoring Eisman proves futile, however. He sees himself as a champion for underdogs. As his wife, Valerie puts it, “my husband thinks he and Spider-Man are living the same life.” Eisman starts causing trouble at speeches around the convention, asking pointed questions when it isn’t even Q&A time. Vinny and Danny agree with him but wish he would keep to himself, to avoid letting everyone else know what they’re thinking.
Though Eisman is intelligent, he sometimes works against his own best interests. Here, he risks giving out too much information about what FrontPoint is trying to do (which would allow others to copy it). The fact that nobody seems to take him seriously, however, suggests that the industry is still very conformist and stuck in denial.
Eventually, Eisman calms down and sets out to learn more. He figures that the ratings agencies, which theoretically wield a lot of power in the industry, are mostly staffed by largely incompetent people who don’t have the connections to make it on Wall Street. His opinions toward the bond market begin to solidify. Vinny describes this as the moment where the group realizes the whole market is basically a Ponzi scheme. They realize the people in Las Vegas don’t know anything they don’t know. Danny thinks they’re blinded by their own self-interest; Vinny thinks some are “morons,” but that the higher-ups are mostly “crooks.”
Lewis doesn’t take a clear side in the disagreement between Vinny and Danny (over whether most subprime mortgage bond traders are simply blinded by their own self-interest or actively trying to commit fraud) perhaps because it is something that’s very difficult to prove. Perhaps the point is that, from a distance, obliviousness and fraud look very similar, and the difference may not be meaningful—after all, the result (the market crash) was still the same.
After leaving Las Vegas, Eisman, Danny, and Vinny increase their subprime short position from $300 million to $550 million, overwhelming their portfolio of $500 million that they manage. They decide to look for even more deals against people like Wing Chau.
The trip to Vegas mostly just confirms what the Big Short traders already suspected, but it allows them to move ahead with increased confidence. What separates the Big Short traders from the subprime mortgage bond traders is that people like Eisman actually do the necessary research on their investments.