<sod>In 2005, eccentric [[hedge fund]] manager [[Michael Burry]] discovers that the U.S. [[housing market]] is extremely unstable, being based on high-risk [[Subprime lending|subprime loans]]. Anticipating that the market will collapse during the second quarter of 2007, as interest rates would rise on many [[adjustable-rate mortgages]], he envisions an opportunity to profit. His plan is to create a [[credit default swap|credit-default swap]] market, allowing him to bet against the [[mortgage backed securities|mortgage-backed securities]] that are based on the housing market. He proposes his idea to several major investment and commercial banks. These firms, believing that the housing market is secure, readily accept his proposal. Burry's huge long-term bet, in excess of $1 billion, entails paying substantial "premiums" to the banks. This proviso incurs his clients' ire because they believe that he was wasting their capital. Many demand that he reverse course and sell his swaps, but Burry, confident in his analysis, refuses. When the rate-hike arrives and begins triggering heavy mortgage failures, however, the freefall he anticipates did not occur. As he later discovers, the banks collude with a major bond-rating company to maintain high ratings on bonds that were essentially worthless. This ploy allows the banks to sell off their losing positions before the true value of the bonds became known. Pressed by his investors, Burry restricts withdrawals from his fund, again angering his investors. Eventually, as [[Financial crisis of 2007–08|the housing market collapsed]] as he predicted, the value of his fund increases by a net of 489% with an overall profit of over $2.5 billon, but the backlash he received from his investors, coupled with his own sense of disgust for the industry, convinces him to close down his fund.<eod>
<sod>In 2005, eccentric [[hedge fund]] manager [[Michael Burry]] discovers that the U.S. [[housing market]] is extremely unstable, being based on high-risk [[Subprime lending|subprime loans]]. Anticipating that the market will collapse during the second quarter of 2007, as interest rates would rise on many [[adjustable-rate mortgages]], he envisions an opportunity to profit. His plan is to create a [[credit default swap|credit-default swap]] market, allowing him to bet against the [[mortgage backed securities|mortgage-backed securities]] that are based on the housing market. He proposes his idea to several major investment and commercial banks. These firms, believing that the housing market is secure, readily accept his proposal. Burry's huge long-term bet, in excess of $1 billion, entails paying substantial "premiums" to the banks. This proviso incurs his clients' ire because they believe that he was wasting their capital. Many demand that he reverse course and sell his swaps, but Burry, confident in his analysis, refuses. When the rate-hike arrives and begins triggering heavy mortgage failures, however, the freefall he anticipates did not occur. As he later discovers, the banks collude with a major bond-rating company to maintain high ratings on bonds that were essentially worthless. This ploy allows the banks to sell off their losing positions before the true value of the bonds became known. Pressed by his investors, Burry restricts withdrawals from his fund, again angering his investors. Eventually, as [[Financial crisis of 2007–08|the housing market collapsed]] as he predicted, the value of his fund increases by a net of 489% with an overall profit of over $2.5 billion, but the backlash he received from his investors, coupled with his own sense of disgust for the industry, convinces him to close down his fund.<eod>