Money Rehab with Nicole Lapin: "Are We Back to 2008? With The Big Short's Steve Eisman"
Release Date: April 11, 2025
Host: Nicole Lapin
Guest: Steve Eisman, Investor and Author of "The Big Short"
Introduction to Steve Eisman and Current Market Concerns
In this episode of Money Rehab, host Nicole Lapin welcomes Steve Eisman, renowned investor and the figure behind "The Big Short," to discuss the current state of the financial markets and whether we're witnessing a repeat of the 2008 financial crisis.
Nicole Lapin opens the conversation by highlighting the prevalent anxiety among investors:
"Is 2008 repeating itself? That is the question I keep seeing in the headlines." [02:54]
Steve Eisman acknowledges the emotional toll of the current market volatility:
"I think a lot of people need a hug. I don't know about you, but I think everybody's pretty emotionally exhausted from this week." [03:58]
Current Market Volatility and Potential Recession
Eisman delves into the factors driving today's market instability, primarily focusing on trade tensions and tariffs imposed by the Trump administration.
Nicole poses a critical question:
"The market dropped 10% on Trump's tariffs, rallied 9%. We are back down 5%. Is this a relief rally that we're going to settle into, or is this more of a bear market?" [04:48]
Eisman responds by highlighting the unique drivers of today's volatility:
"We're talking about trade. People are trading headlines because they're petrified there’ll be a trade war and therefore a recession." [05:09]
He further contrasts the current situation with historical market behavior:
"In normal times, markets have many variables. PE earnings, maybe some news about OPEC. It's multifaceted. Every now and then." [05:09]
Trade Wars, Tariffs, and Their Impact
A significant portion of the discussion centers on President Trump's aggressive trade policies and their implications for the U.S. economy.
Eisman reflects on the roots of the current trade issues:
"President Clinton ushered in NAFTA and brought China into the trading system. He was right about accelerating GDP growth but wrong about creating jobs. Trump is trying to rectify that imbalance." [07:17]
He emphasizes the challenges in changing trade terms without causing disruption:
"The only way to change the terms of trade is to put a bazooka to people's heads." [07:17]
"The United States is in the best possible position of any country to change the terms of trade because only 11% of our GDP comes from exports." [07:17]
Sovereign Debt, Bond Yields, and Economic Stability
Eisman addresses concerns related to sovereign debt and the stability of the U.S. economy amidst rising bond yields.
Nicole brings up Ray Dalio's warnings about a potential sovereign debt crisis:
"Do you buy that argument? What's the probability?" [17:02]
Eisman dismisses the likelihood of a U.S. debt crisis in the near future:
"I assign the probability of a U.S. debt crisis in the next five or ten years as zero. The global financial system runs on Treasuries, and there's no viable alternative." [17:11]
He elaborates on the fundamental role of U.S. Treasuries in global finance:
"Banks do overnight repos in Treasuries, sovereign wealth funds park their money in Treasuries. There is no alternative." [17:11]
Housing Market Dynamics
The conversation shifts to the current state of the housing market, examining how historically low interest rates have locked many homeowners into their mortgages.
Eisman explains the challenges faced by the housing sector:
"The issue with the housing market is that it's locked. During COVID, rates went to zero, and anyone with a pulse refinanced their mortgage at 3%. Now, buying a home means paying six and a half to seven percent." [29:43]
He assesses the future of the housing market:
"The only thing that's going to get the housing market really going again is either time or rates have to come down to around five percent." [30:52]
Investment Strategies Amid Uncertainty
Eisman offers pragmatic advice for investors navigating the current uncertain market landscape, emphasizing the importance of de-risking and holding cash reserves.
Nicole asks about strategies when rates aren't cooperating:
"You said looking at investing in assets that benefit from lower rates like homebuilders or real estate could be a move. How is that view complicated by rates not cooperating?" [15:09]
Eisman advises caution:
"Don't be a hero. Take a pause. If there's something in your portfolio that you've kept but you're not that crazy about, sell it." [16:18]
He underscores the importance of patience and waiting for market resolution:
"I'm waiting for resolution, certainty about which way this is going to go. If it resolves well, you're back to a bull market. If it resolves poorly, you'll be happy to have had some cash." [33:10]
Differences Between 2008 and Today
Eisman delineates the key distinctions between the financial landscape of 2008 and the present day, reassuring listeners that the current situation lacks some of the systemic risks that precipitated the 2008 crisis.
Nicole prompts a comparison:
"Predict the end of the world again. So you don't?" [22:56]
Eisman contrasts potential outcomes:
"If General Motors went bankrupt today, it might cause a recession, but it's not the end of everything. In 2008, if J.P. Morgan went down, people couldn't trade stocks, and the entire system would collapse." [23:03]
"We're facing a global trade war and a recession, but it's a whole other dimension, not the systemic collapse of 2008." [24:00]
Final Advice and Takeaways
As the episode concludes, Eisman shares personal insights and practical advice for listeners aiming to navigate the turbulent financial waters.
Eisman offers career advice relevant to the younger audience:
"Pursue your attributes. Figure out what you're naturally good at and choose a career that leverages those strengths." [34:16]
He reiterates investing principles during uncertain times:
"Have dry powder. De-risk your portfolio by holding cash or investing in money market funds, and wait for market clarity before making significant investments." [32:55]
Nicole Lapin wraps up by encouraging listeners to engage with the show and seek personalized financial advice:
"Email us your money questions at moneyrehab@moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me." [35:27]
Notable Quotes
-
Steve Eisman:
"The United States is in the best possible position of any country to change the terms of trade because only 11% of our GDP comes from exports." [07:17] -
Steve Eisman:
"The only way to change the terms of trade is to put a bazooka to people's heads." [07:17] -
Steve Eisman:
"I assign the probability of a U.S. debt crisis in the next five or ten years as zero." [17:11] -
Steve Eisman:
"Don't be a hero. Take a pause." [16:18] -
Steve Eisman:
"Pursue your attributes. Figure out what you're naturally good at and choose a career that leverages those strengths." [34:16]
Conclusion
In this insightful episode, Steve Eisman provides a nuanced analysis of the current financial landscape, drawing lessons from the 2008 crisis while highlighting the unique aspects of today's market. He emphasizes the importance of strategic de-risking, maintaining liquidity, and focusing on personal strengths both in career and investment decisions. For investors feeling uncertain, Eisman's pragmatic approach offers a roadmap for navigating potential trade wars, market volatility, and economic shifts with resilience and informed caution.