By VW Staff. Originally published at ValueWalk.
ABS East: Steve Eisman Brings Down The House (Again) cia Allison Bisbey, Asset Securitization Report
Eisman hadn’t attended a securitization conference since 2007, as portrayed in the movie, The Big Short but he did last week and it was a fun speech below are some excerpts
Also see Steve Eisman on bank regulation
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Steve Eisman
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Quantitative Easing
“QE is no more than monetary policy for rich people,” the money manager quipped.
He said that central banks “use QE to go out the risk curve, so people invest in the stock market, but it does not impact the economy. Most people do not invest in the stock market, they invest in banks [they are saving more] and banks don’t pay interest on their money.”
From a corporate perspective, GDP is lower than pre-crisis, if you buy back stock you get a return on your investment that’s fairly certain, or build a new factory, where the return is uncertain. In a zero interest rate environment, you’ll choose the more certain reward. Very low interest rates have a negative signaling effect. A lot of people think something has to be wrong.
GSE Market Share
“I’m about as left-wing as they come. Obamacare does not bother me. GSE dominance [of the mortgage market] does.”
“The reason that Fannie Mae and Freddie Mac continue to dominate the mortgage market is the federal government decided not to put people in jail. Instead it fined banks. Banks don’t want to get fined, so they don’t make [nonconforming] mortgages.”
The Big Short
So what did it feel like to prove everybody wrong?
“In 2007, I’m so happy I can’t stand it. But in 2008, it was planet earth [in trouble]. I told someone I felt like Noah … do you think Noah was happy?”
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Then he relented, saying, “The only big short out there is when the world loses confidence in QE.” But he did not offer any ideas on how to profit.
More from RTRS
I don’t think regulation has gone too far,” he told conference attendees on Sunday. “The banking industry should just shut up on this topic.”
Asked if he thought that new regulation to prevent another crash was fair, because it targets bonds that were not part of the crisis, Eisman drew laughs from the audience with his reply.
And Bloomberg
The central problem is that these lending startups, their founders and backers in particular, don’t have a lot of experience making loans to consumers, and some of them approach loan-making as they would retail sales, Eisman said in opening remarks at a conference of investment bankers and investors in Miami Beach, Florida, on Sunday.
“When you go to Amazon and buy a book, you buy it and the transaction is over,” he said. “But when you take out a loan, that is just the beginning of the transaction — it’s like a relationship.”
“Silicon Valley, I think, is clueless” to this, Eisman said.
More on Steve Eisman from our archives here
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