Bloomberg’s Peggy Collins discusses comments made by Steve Eisman on markets and investing. She speaks with Bloomberg’s Alix Steel and David Westin on “Bloomberg Daybreak: Americas.” (Source: Bloomberg)
Eisman Warns Of Massive Losses In The Bond Markets
The Electron Global Fund was up 2% for September, bringing its third-quarter return to -1.7% and its year-to-date return to 8.5%. Meanwhile, the MSCI World Utilities Index was down 7.2% for September, 1.7% for the third quarter and 3.3% year to date. The S&P 500 was down 4.8% for September, up 0.2% for the third Read More
Let's go to Mr. Eisman of course is famous for The Big Short. We talked to him out in Las Vegas and he warned about possible massive losses for bonds if things went sideways in the U.S. economy.
I think the financial system of the United States is safe now. That doesn't mean that we won't have a recession and a recession. I think there'll be massive losses in the bond markets because there's a lack of liquidity but that'll be the problem with the people who invest in the bond markets.
So there's a bit of a warning to Mr. Reisman.
That's right. We have seen a number of investors really point to December in terms of a lot of the outflows from leveraged loan funds and that there's been an explosion in corporate credit. Investors like Howard Marks what you're going to see movement to the triple B market in terms of corporate debt as well as high yield. Interesting I thought he was saying that the corporate debt market was not necessarily going to cause the next recession but that's where the most pain would be. Well
fair point I think that there is a lawsuit and a leverage loan market that says it basically they should be treated as securities and with more transparency because there's the covenants are so light and there's so much money in it first and they won't have the kind of information you need to make better decisions.
Right. And as you said Alex well investors are starting to ask for more transparency around that I think because there are starting to become some warning signs and flags where people are saying oh I hope these bonds are going to hold up. If we have some issues in the in the broader economy.