The Big Short: Inside the Doomsday Machine

As early as 2003, Michael Burry predicts the looming disaster now being warned against by Eisner and Grant. Over the next three years, much of his Scion investment fund grows heavy with credit default swaps and other bets against the teetering subprime mortgage market.

Burry learns that his young son has Asperger’s Syndrome. Burry reads a list of the symptoms and realizes that he, too, has the syndrome. His glass eye isn’t, after all, the cause of his alienation. Burry reckons, on the other hand, that his intense focus and mental abilities, characteristic of Asperger’s, serve him well in his investment work.

Scion’s 2005 investments won’t pan out until mortgages signed that year begin to go sour in 2007, when interest rates will suddenly shoot up and the latest borrowers begin to default. By late 2006, however, his fund is losing money and investors lose patience, lining up to get their money back: “More alarmingly, his credit default swap contracts contained a provision that allowed the big Wall Street firms to cancel their bets with Scion if Scion’s assets fell below a certain level” (188). Thus, if Burry returns the investors’ money, the fund may drop too far, and his default swaps will become worthless.