I want to buy swaps on mortgage bonds, credit default swaps that will pay off if the underlying bond fails, betting against the housing market.

Those bonds only fail if millions of Americans don't pay their mortgages; it's never happened in history. Excuse me, Dr. Burry, it seems like a foolish investment based on prevailing sentiment of the market, banks, and popular culture.

Yes, it's a foolish investment, but everyone's wrong.

This is Wall Street, Dr. Burry. If you offer us free money, we are going to take it. My one concern is that when the bonds fail, I want to be certain of payment in case of solvency issues with your bank.

You want to bet against the housing market and you're worried we won't pay you? Yes, that's right, Dr. Burry. We could work out a pay-as-you- go structure that would pay out if the bonds fail, but it would also apply to your payments.

If the value of the mortgage bond goes up, you'd have to pay us monthly premiums.

Is that acceptable, Dr. Burry? I have prospectuses on six mortgage-backed securities; I'm not sure if any should be fine.

Yeah, we're prepared to sell you five million in credit default swaps on these mortgage bonds. Make it 100 million. Absolutely, we can make it 100 million.

I like these cups. Could I take one for my son? Yes, I have two video projects; we do gardening, we do the bonds. I'd like to, but it's not bad seeing yourself up there on the big screen.

Big Short - Credit Default Swaps

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