u/Shapen361 ·
Reddit — r/investing
· May 25, 2026 at 02:31
· ⬆ 23 pts
· 💬 14 comments
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In the movie The Big Short, Michael Burry buys CDS against the housing market, betting against a market which historically has done very well. Okay, fine. But 1. The movie acts like Michael Burry invented the CDS, which... No he didn't, and 2. Because he was the first to do so he has to pay very high premiums. If Burry is betting against AAA MBS, shouldn't his premiums be low, not high? Also, the movie acts like for Burry to be right, the defaults have to occur. But being long CDS generates profit any time there's weakening in credit strength. The housing market doesn't have to break for Burry to profit, just bend.
TLDR; the movie The Big Short makes CDS on AAA MBS seem bonkers, but it shouldn't be. Am I missing something? Does the book frame things in a more realistic fashion? Is the reality dramatized for theatrical effect? It's probably that.