Is there a passive investment bubble?

Steve Sosnick, Interactive Brokers’ chief strategist, examines the risk of a massive passive investment bubble.

Michael Burry, one of the managers portrayed in the movie “The Big Short” who predicted the 2008 financial crisis, recently said that passive investing products could be the next speculative bubble to explode.

According to Burry,  exchange-traded and index funds are inflating stock and bond prices much like collateralized debt obligations did for subprime mortgages in the mid-2000s.

Steve doesn’t go quite that far, but does examine how market liquidity could be impacted by passive investments during the next downturn.

Check out this video to learn more.

Photo Credit: Mac.Else von Berlin via Flickr Creative Commons