"Big Short" Inspiration Steve Eisman on 2008 vs. Today: Are We Heading for Another Financial Crisis?

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3:40That's what some people are actually, you know, predicting. Do you see parallels and, And are you bearish now the same way you were bearish then? Do I see some parallels? Sure, I see some parallels. Am I as bearish as I was then? Not even close. I mean, not even the same universe. So let me just elaborate a little bit about that. Do I think that there could be a global trade war? Sure, it's possible. It's also possible that there won't be a global trade war. Do I think that a trade war would cause a recession? Absolutely, I think a trade war would cause a recession. Do I think a recession that could happen because of the trade war would be a financial calamity on the same order as the great financial crisis of 2008?

4:33Not even close. Not even in the same universe. you know what happened in 2008 i mean if you if you could boil down the financial crisis of 2008 into a paragraph it would be great financial crisis happened for four reasons large financial institutions had way too much leverage a big asset class subprime mortgages blew up

5:03those same large financial institutions owned a lot of subprime mortgages and derivatives in particular credit default swaps which is a very technical financial instrument tied the balance sheets of large financial institutions all over the globe into a spider web that was so complicated nobody knew where it began and where it ended that's the that's the cause of it. The reason why that was such a calamity is, look, if General Motors, God forbid, went bankrupt, let's just say, and the government didn't bail it out, and it was liquidated, that would obviously be terrible for General Motors, it would be terrible for all the employees who got laid off.

5:50And all the companies that supply stuff to General Motors, maybe some of them would go bankrupt. They would certainly have problems. Maybe that would cause a recession in the United States. Possible. But that's all that would happen. But if you can't get your money out of the bank, if the large financial institutions go down, planet Earth burns. That's the end. So where are we today? Post Dodd-Frank, the leverage of large banks is literally less than half of what it was it's probably almost two-thirds less that's enormous you know so for example citigroup which used to be levered officially 35 to 1 but if you added up all the stuff that it that didn't officially show up on its balance sheet but they were responsible for it was 40 to 1.

6:43today it's 12 to 1. yeah that's like the distance between mercury and pluto you know to blow up a bank that's levered 40 to 1, if I could use an analogy, takes a pebble. To blow up a bank that's levered 12 to 1 takes a meteor. So do I think that whatever President Trump is doing could potentially cause a global recession? Sure, it's possible. Do I think that would cause a financial crisis that would cause the banks to go down? Not at all. looking at the the state of the economy now right did we look at global trade did it need to be changed yes did it need to be blown up i mean there's there's plenty of skeptics on that i wonder when as you look at it what do you think would have been the most effective way to get some some of these trade uh solutions from country to country or from a global standpoint

7:42this may be a little bit controversial i i don't completely disagree with what president trump has done in terms of imposing tariffs to get the ball rolling because i think if you went to any country and said look we don't like the terms of trade let's talk they'd laugh at you they'd say go away so the only way you're going to get people to change the terms of trade is to put a bazooka to their heads. What I don't like is the chaos. We're in and we're out. We're out and we're in. Here's our tariffs and then there's our tariffs. We're taking it away. We're putting it back. That causes too much chaos.

8:20That's not my strategy. President Trump loves chaos, but most people in the world don't. So that's where I would disagree. If you were building your Big Short portfolio today, what's the one trade that looks almost inevitable to you that will pan out over the next four or five years? I have no trade that I think would pan out within the next year. Okay. What about four to five? Four to five, I still think that most of the technology trades that people have, whether it's NVIDIA or Microsoft, any of the well-known will be great. because I think we are still in the very, very early innings of AI.

9:04Very early innings. We're like inning one. Yeah. So, you know, between now and inning nine, it's going to be a bit of an adventure, but I think if you stick it out, you'll make a lot of money. What's going to happen within the next six months because of all the trade negotiations? I wouldn't have a clue. And I just would say you need to keep your risk lower. I would not try and be a hero right now. I don't think, you know, some people would argue that, you know, the markets come down a lot, so valuations are better. And, well, of course, the markets lower, the valuations look better. That's the tautology.

9:41The problem is that if you go into a global recession, all the earnings estimates are going to come lower, so then it doesn't look so cheap. On the other hand, if most of the countries settle with the United States and then everything is fine, it'll have been a great time to buy. But I can't handicap that. how much risk are you keeping on the table? If I may follow up in my own personal portfolio, I have about 15 % cash right now. Okay. Which is a lot for me. I'm very long-term. What I have done is I've gone through my personal portfolio and any stocks where I said, do I really love this? Why do I really own this?

10:23Let's trim a little. Is there any thesis creep? Get rid of it. So that was the first thing I did. Then I took a lot of things just lower. But like I said, on the long term, the problem with, like, let's say, liquidating your portfolio if you wanted to go to an extreme is you got to pay over 35 % capital gains taxes. So do I think the market's going to go down 35 %? I mean, it could. I mean, if we have a global recession, it's not impossible. But it's a lot. so I'd rather just trim some risk and just sit on the sidelines and sit and wait until it's and look if things get better if you miss the first 5 % move so what if all the trade stuff gets settled one way or another it'll be a bull market again for years so who cares if you miss the first week the dollar is I think it hit a three year low is that something that's concerning to you You know, let's do the doomsday scenario that some people like to paint.

11:33So the doomsday scenario would be like the U.S. deficit is too big.

11:41People are not going to see U.S. bonds as the safety vehicles that they once were. So they're going to sell the U.S. bonds. And that, of course, causes a dollar to go down. and something else will replace the dollar as a reserve currency. And there goes the United States as a great empire and it's Armageddon and cats and dogs are lying together and whatever else happens in Armageddon, depending upon your religion. But I think what people don't, and by the way, that thesis has only been around for 40 years. So I remember in the 90s, Pete Peterson, who had been one of the founders, I think, of KKR, was talking about how the deficit's way too big and it's a disaster and God help us, et cetera.

12:28And that was in the 90s. And here we are, 2025, we're all still pretty healthy. See, what I think people miss, and by the way, I can't talk, what happens short-term to the dollar, what happens short-term to people trading in bonds is not something that particularly interests me. So the fact that the dollar has sold off has, I think, got a lot more to do with hedge funds repositioning, de-risking, looking for safe havens. But long term, what I think most people don't recognize is that the financial system of planet Earth runs on treasuries. Banks, for example, lend to one another overnight in what's called the repo market.

13:12And the repo market is only trillions. And it's all at overnight treasuries. So to make an argument that the dollar is going to lose its reserve status, I think you have to make an argument that there's going to be some sort of substitute for treasuries, especially short-term treasuries. And right now, there's no substitute for short-term treasuries. I mean, banks are not going to park their money in Chinese bonds. There's no euro bond of any real significance. There's no alternative. So as long as there's no alternative, it's not something I particularly worry about all that much, even though people like to talk about it on CNBC and paint doom and gloom.

13:59Listen, I predicted doom and gloom once. Once was enough. I'm not interested in predicting doom and gloom again unless I really, really seriously thought it was possible. An illegal alien from Guatemala charged with raping a child in Massachusetts. An MS-13 gang member from El Salvador accused of murdering a Texas man. A Venezuelan charged with filming and selling child pornography in Michigan. These are just some of the heinous migrant criminals caught because of President Donald J. Trump's leadership. I'm Kristi Noem, the United States Secretary of Homeland Security. Under President Trump, attempted illegal border crossings are at the lowest levels ever recorded, and over 100 ,000 illegal aliens have been arrested.

14:44If you are here illegally, you're next. You will be fined nearly$1 ,000 a day, imprisoned and deported. You will never return. But if you register using our CBP Home app and leave now, you could be allowed to return legally. Do what's right. Leave now. Now, under President Trump, America's laws, border, and families will be protected. Sponsored by the United States Department of Homeland Security. Hey, it's Joel. And Matt. From HowToMoney. If your New Year's resolution is to finally get your finances in shape, we've got your back. Prices, they're still high, and the economy is all over the place.

15:20But 2026 is the year for you to get intentional and make real progress. That's right. Yeah, each week we break down what's happening with your money, the most important issues to focus on, and the small moves that make a big difference. Kick off the year with confidence. Listen to How to Money on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. What if mind control is real? If you could control the behavior of anybody around you, what kind of life would you have? Can you hypnotically persuade someone to buy a car? When you look at your car, you're going to become overwhelmed with such good feelings.

15:53Can you hypnotize someone into sleeping with you? I gave her some suggestions to be sexually aroused. Can you get someone to join your cult? NLP was used on me to access my subconscious. Mind Games, a new podcast exploring NLP, a.k.a. neurolinguistic programming. Is it a self-help miracle, a shady hypnosis scam, or both? Listen to Mind Games on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. This is Dr. Jessie Mills, host of the Mailroom Podcast. Each January, men promise to get stronger, work harder, and fix what's broken. But what if the real work isn't physical at all?

16:31I sat down with psychologist Dr. Steve Poulter to unpack shame, anxiety, and the emotional pain men were never taught how to name. Part of the way through the valley of despair is realizing this has happened, and you have to make a choice whether you're going to stay in it or move forward. Our two-part conversation is available now. Listen to The Mailroom on the iHeartRadio app, Apple Podcasts, or wherever you get your favorite shows. This is an iHeart Podcast. Guaranteed human.