Taps Coogan – September 26th, 2023
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Steve Eisman, fund manager at Neuberger Berman and investing legend from the Subprime Crisis and 2008 Recession, recently spoke with CNBC to reiterate his view that he doesn’t see an imminent recession but that he views US banks as “uninvestable” due to compressing net interest margins and a worsening regulatory landscape:
Steve Eisman on the economy:
“It’s not that scary… I’m sort of amused at people’s reactions to the Fed. At every meeting the Fed says rates are going to be (higher for longer) and this time they finally believed them? …At this point everyone’s basically been wrong about the economy. People who were negative are positive. People who were positive are negative… At this point there is no evidence that there is a recession coming at all, maybe there is, but so what? Everyone should relax… I’m not so hysterical…”
Steve Eisman on banks:
“I don’t like banks, that’s for sure. It’s not so much credit issues. …Not from a trading perspective, but I happen to think the whole banking system is uninvestable. One, even though deposits are down year-over-year about 6%…, the deposits in the banking industry are still $2 trillion above trend. It’s still going to come out. If rates go higher it’s going to come out faster. So, the idea that net interest margins are going to bottom anytime soon, I think is just wrong.”
“The other thing is that the new regulations that have come out increase the amount of capital that the banks have which I actually think is the wrong thing that regulators are doing…”
Steve Eisman is no permabull. To the contrary, he is famous for being one of the primary voices warning of, and then profiting from, the subprime crisis in the US in 2007. While claiming that there is “no evidence” pointing to a recession may overstate his case, we’ve been expressing skepticism that a severe recession was imminent for a couple years and assume that the economy can remain in this ‘purgatory‘ of worse-than-mediocre-but-not-quite-recessionary performance for yet more time.
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