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New York

Are we approaching the next “Big Short”?

With the real estate market past its peak in the current cycle, cynical investing is on the rise

From the October issue: J. Kyle Bass is famous for predicting the U.S. housing crisis and making millions of dollars shorting subprime mortgage bonds in 2008. So when the hedge fund manager announced this February that he shorted the obscure residential real estate investment trust United Development Funding IV, its other investors apparently decided it was best to get out of the way.

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Within a day of Bass publishing an open letter announcing his short, the Dallas-based REIT’s share price had dropped by 30 percent. Within a week, those shares had fallen by 69 percent and then stopped trading entirely after the FBI raided the headquarters of its parent company. [more]

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