Eisman, Vinny, and Danny are in Vegas. After playing some golf, they go to a big dinner planned by Lippmann.
Lippmann is nervous because subprime bonds are still retaining their value, despite the underlying mortgages going bad like crazy. That's costing him—and his clients—a lot of money.
To ease Eisman's mind, Lippmann seats him next to a guy named Wing Chau, a professional "CDO manager" (6.5). In other words, he deals exclusively in subprime mortgage bonds.
Eisman learns a lot from Wing Chau. Since AIG FP stopped selling CDOs and mortgage bonds, a bunch of people like Chau have entered the market to pick up the slack.
Chau is making a ton of money, but he's clearly an uninformed fool. He tells Eisman that he loves people who short his market because otherwise he wouldn't "have anything to buy" (6.14).
Suddenly, Eisman realizes that the banks are so eager to sell credit default swaps because they're using those credit default swaps to create new bonds, which are known as synthetic CDOs. That's like making a bet against another person's bet, as the film adaptation of The Big Short illustrates beautifully.
Because of this, the fallout from a subprime mortgage crisis would be even more massive than Eisman expected. A single $100 million mortgage bond could cause billions of dollars in debt.
After dinner, Eisman focuses exclusively on buying credit default swaps on CDOs sold by Wing Chau.
Elsewhere in Vegas, Charles Ledley is shooting an Uzi with his Bear Stearns bros. No one discusses business the whole time.
The next day, Ledley hits the convention floor. Most people think he's a fool, but one subprime expert named John Devaney gives an improvised speech about how the market is failing.
This lights an even bigger fire under Ledley's butt, prompting him to buy as many credit default swaps as he possibly can.
As for Eisman, dude is tripping out. He's perplexed as to how this market that had been so tiny just a few years ago is now booming like crazy.
Although Deutsche Bank tries to keep a tight leash on Eisman, he's unrelenting in his open criticism of the subprime market. On some level, he sees himself as Spider-Man, "a champion of the underdog," which is a connection he's felt his whole life (6.36).
Eisman is shocked by how cruddy the employees at S&P and Moody's are when he meets them. They have no idea what they're doing.
Once they get back to New York, FrontPoint buys $250 million more in credit default swaps and buys shorts on Moody's stocks.