Michael Burry, who predicted the 2008 Mortgage Crisis, alerts about the index funds bubble

English Sep 24, 2019

According to Michael Burry, who was impersonated by Christian Bale in the movie The Big Short, passive investments like ETFs and index funds are artificially inflating the markets. And it won't last forever.

He was one of the first investors to predict the subprime mortgage crisis. Now, he claims passive investing has created a similar bubble. One of the biggest problem is that many of the stocks included in index funds are relatively lightly traded.

As an example, many of the stocks in the Russell 2000 trade at less than $5 million in value per day, this is nothing compared to the trillions of dollars in assets globally which are indexed to these stocks. If, or when, a sell off start there will not be liquidity to buy or sell these stocks, making the price plunge. “The theater keeps getting more crowded, but the exit door is the same as it always was."


Morel Hernandes

Writer passionate about politics, economics, blockchain and crypto-currencies.