Steve Eisman Warns Of Massive Losses In Credit Markets

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)

Losses In The Bond Markets

Image source: Bloomberg Video Screenshot

Eisman Warns Of Massive Losses In The Bond Markets

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Transcript

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.



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Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver