Are Index funds the next sub-Prime CDOs?

After years of radio silence, Dr. Michael Burry - the small-time stockpicker who rose to fame for his bets against subprime mortgage bonds featured in the book (and later film) “the Big Short” - is once again doing the media rounds, talking about his latest equity plays and sharing his thoughts about the next big market blowups.

5 Likes

When I first started my career at BlackRock, the team had every year a left field prediction for the coming year and every year my two predictions are: Google will become the largest asset manger and ETFs blow up will be the next financial crisis. 7 years on neither happens :rofl:

Mismatch of liquidity in ETFs has always been the controversy. Lots of people buy into something that they can’t sell in the end fast enough as they want.

3 Likes

I do think indices will blow up, it just needs to have an event to get it started - a trigger point.

I don’t think google will become the biggest asset manager, Amazon is better positioned in my view.

1 Like

we have not yet seen an excess I’d say such as some sort of derivatives and leverage on ETF products. Most of the ETF products are quite conventionally by now

I think his point is that this trend has created value opportunities in small-cap stocks with low % passive ownership. His most recent 13F doesn’t appear to reflect this tilt:

https://www.rocketfinancial.com/Holdings.aspx?id=265206

4 Likes

So are we all piling into Japanese mid-cap semiconductor companies then? :wink:

1 Like