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The Big Short’s Michael Burry Explains Why Index Funds Are Like Subprime CDOs

Reed Stevenson - Oct 31, 2019


The investor from ‘The Big Short’ is worried about passive funds. The recent flood of money into index funds has parallels with the pre-2008 bubble in collateralize debt obligations, the complex securities that almost destroyed the global financial system. Index fund inflows are now distorting prices for stocks and bonds in much the same way that CDO purchases did for subprime mortgages more than a decade ago. Like most bubbles, the longer it goes on, the worse the crash will be.

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