Are We Back to 2008? With The Big Short's Steve Eisman

0:00I recently went on a quick beach trip with my husband for a little couple's time. and it was perfect. We sat in the sun, swam in the ocean and generally just tried to get to that place of deep relaxation where your shoulders actually drop a few inches. Do you know what else can give you that feeling? Co-hosting with Airbnb. Trust me on this one. Hosting your home on Airbnb while you're away from home is a great way to make some extra cash and make sure your home is working as hard as you do. But knowing where to start can feel overwhelming. That's where co-hosts come in. These are local experts who can help make hosting even easier by taking care of all the little details back home while you're off enjoying yourself.

0:40Co-hosts can handle everything from staging your space to communicating with guests to offering on-site support so nothing interferes with your time away from home. Whether you're living the digital nomad life or just taking a well-deserved reset, I love this for you. Looking to get started? Find a co-host at airbnb.com slash host. Your financial journey shouldn't be a solo mission. Am I right? I am. You need a banking partner who's genuinely invested in your success story. U.S. Bank gets it. They don't just show up for your account opening and then ghost you. If you're saving for that engagement ring, they're cheering you on.

1:17If you're buying your first home, they're right there with you. If you're planning for retirement, they're still your biggest supporter. It's about having a financial teammate who believes in your potential and backs it up with real tools and real people who actually care. See what genuine partnership looks like at usbank.com because together we're unstoppable. That's the power of us. Equal housing lender. Member FDIC. Trademark 2025 U.S. Bank. I once interviewed the CEO of a credit bureau and he confessed that his assistant has a better credit score than he does. Why? Because she's more organized.

1:52Yep, even the head of the credit bureau can use a little help in the credit score department. If you can too, then listen up because Chime has a card that can help you do just that. Chime turns everyday spending into real rewards and progress. Not like old school banks that charge you overdraft and monthly fees. Built for you, not the 1%. Imagine cash back and credit building with your own money finally on the same card. No annual fees, no interest, and no strings attached. And when you get qualifying direct deposits, you get 1.5 % cash back on eligible Chime card purchases. Chime is not just smarter banking.

2:27It is the most rewarding way to bank. Join the millions who are already banking fee-free today. It just takes a few minutes to sign up. Head to Chime.com slash MNN. That is Chime.com slash MNN. Chime is a financial technology company, not a bank. Banking services, a secured Chime Visa credit card, and MyPay line of credit provided by the Bancor Bank N.A. or Stride Bank N.A. MyPay eligibility requirements apply. And credit limit ranges$20 to$500. Optional services and products may have fees or charges. See Chime.com slash fees info. Advertised annual percentage yield with Chime Plus status only.

2:53Otherwise, 1.00 % APY applies. No min balance required. Chime card on-time payment history may have a positive impact on your credit score. Results may vary. See Chime.com for details and applicable terms. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

3:16Is 2008 repeating itself? That is the question I keep seeing in the headlines. and today I'm talking to the perfect person to answer that question. Steve Eisman doesn't need much of an introduction. He is the investor who famously saw what no one else saw in 2008 and bet against the market before the crash. He was immortalized in the movie The Big Short. He was portrayed by Steve Carell in that movie, so kind of a big deal. Now he's talking about what he's seeing in the current market on his podcast, The Eisman Playbook, and today right here on Money Rehab. So I ask him the big question, is this history repeating itself?

3:52And he answers that and a lot more. He tells me whether he thinks we're on track for a recession, where he sees opportunities in this market, what he thinks Trump is going to do next, and his advice for new investors. Steve Eisman, welcome to Money Rehab. Glad to be here. Damn, it's been a week. How are you doing? Did something happen this week? Yeah, no, I haven't looked at the news lately. Who do you think needs a hug right now? Who needs a hug? 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. Yeah, I need a hug.

4:30I mean, for those who haven't listened to Steve's podcast yet, the Eisman Playbook, please run, don't walk, and listen. You and your team talk about the story of 08, where you guys met with the CEO of Wamuu, who knew you were short their stock. And as soon as you walked in, you said, you look like you need a hug. He did badly. And I hugged him. A lot of people need a hug these days. It goes a long way. I want to do some time travel back to 08, but I want to start with where we are right now. Sure. We're talking on Thursday, April 10th. And I preface this because every day is some big move. Every day?

5:04How about every hour? Every hour. You need Valium or a drink or I don't know, both. Or not look. That too. So is that what you suggest? I mean, this week the market dropped 10 % on Trump's tariffs, rallied 9%. We are back down 5%, I think, at the time we're talking. Is this a relief rally that we're going to settle into, or is this more of a bear market? What is going on? I don't know if it's a bear market yet. In normal times, markets have many variables. You know, P.E., earnings, you know, maybe there's some news about OPEC. it's multifaceted. Every now and then, 08, COVID, now, it all gets boiled down to one thing.

5:49And the one thing right now is what's going to happen with trade. And, you know, people are trading headlines because they're petrified there'll be a trade war and therefore a recession. And then when they have news that says maybe there won't be a trade war, they get euphoric. It's going to be like this for a while. So big swings. Volatility is here. I wish I could say make volatility your friend, because I personally don't really know how to do that. Some people do. It's here. You're just going to have to tolerate it for a while. Well, the VIX, the sort of fear index has been up for a while.

6:24P's have been high. Multiples have been high. There's been a lot of warning signs flashing across the market for a while now, even before all the tweets on tariffs and announcements on tariffs. Do you think even if we didn't have all this tariff drama, we were bound for a correction anyway? No, I don't think we were bound for a correction at all. I'm actually, generally speaking, pretty positive on the US economy. I think the US economy is more dynamic than it's been, certainly in my lifetime. And so the long term is very good. But this is certainly a wrinkle. I mean, historically, we've had a correction every couple of years anyway.

7:05So 10%. You know, every now and then you get somebody at some interview who says, you know, generally it's like Tommy Lee. He'll say something like on a day when the market goes down. Well, it's a correction. It's healthy. And my response to that is I don't need to be so healthy. I mean, do you think that the market was sick? No, I don't think it was sick before this at all. So you have said that you thought if tariffs continued, we'd be in a global recession. They have paused for 90 days now. Do you still think that? I think there's a lot more going on here than just, you know, terrorist trade war.

7:44And I think to understand that, you need to go back to the 90s. President Clinton, we had President Clinton. And President Clinton ushered in NAFTA, and he brought in China into the world trading system. And he did so, he made two arguments. His argument, number one, was that improving global trade along those lines would accelerate GDP growth and it would create jobs. And he was 100 percent right on the former and he was a thousand percent wrong on the latter. You know, if you after the big short movie, I got this really great speaking gig. I travel all over the country, different universities, places, conferences.

8:26You know, I saw parts of the country I really had never seen before. You know, if you go to a university town, generally flying to some airport and you have to drive for an hour, an hour and a half and you go to the towns of America. And what you see in the South, the Midwest is not only did people lose their jobs, they lost their communities. So I think what President Trump is arguing, and you can disagree or agree, I have great sympathy for it, is that we really screwed a whole half the country because of free trade. Now, it ushered in an enormous bull market with some fits and starts. But generally, since 1994, it's been a tremendous bull market where people like me and others of my socioeconomic class have made a lot of money.

9:16But the other half of the country got obliterated. And we didn't even retrain these people. We said, you're on your own. Go learn how to code. And they didn't learn how to code. So I think he's trying to achieve two things. He's trying to improve the terms of trade, and he's trying to bring back a lot of jobs to the United States. Now how do you do that? Oh, I'll tell you how you don't do that. The way you don't do that is convene meeting of the G7 and say, hey guys, the United States needs to change the terms of trade because it's not fair, will you help me out? They'll laugh at you. The only way to change the terms of trade is to put a bazooka to people's heads.

9:59And once you put a bazooka to people's heads, people start negotiating. And the other thing that I think is often missing from conversations that you see on podcasts and television is that the United States is in the best possible position of any country to change the terms of trade. Hard stop. Because the percentage of U.S. GDP that comes from exports is only 11%. That's about the lowest number in the world. And if you look at a region by region, country by country, if you were to Google China and say, yes, Google or Perplexity or Gemini and ask what percentage of China's GDP comes from export, you'd get 19%.

10:39And that number is not right because so much of China's exports get routed to Vietnam and Cambodia, et cetera, and then come overseas. My guess is that number is probably closer to 30%. percent. Europe, every significant country in Europe is in excess of 30 percent, with the exception of Germany, which is over 40. Mexico and Canada are both 35 percent of their GDP is from exports. And of that 35 percent, 25 of that 35 is pure exports to the United States. so my hope is simply that the u.s in terms of who's in the best position to negotiate the u.s is in the best possible position so if everybody's so low because the number is so low and everybody else's number is so high and they all need they all need x or x they all need access to our consumer i mean mercedes-benz you think mercedes-benz can survive by not selling any cards in the United States.

11:40I don't think so. So if everybody's rational, and believe me, that is a big if, people will come to the United States and they'll negotiate. Now, I have a very good friend who runs a hotel in DC. And by chance, I was speaking to him this weekend. And he said, what he's hearing from all the other managers of hotels, because they all know each other, is that the hotels of D.C. are packed with people from countries looking to negotiate with the Trump administration, as we speak. So like I said, if everybody's rational, everybody will try and cut as good a deal as they possibly can. Now, not everybody is always rational, as we know.

12:23Is China rational? We're going to come to that in a second. But, you know, politicians have to get reelected. They may feel like if they cut too good a deal, they'll get thrown out of office. So I can't handicap this. China, I think, is a different animal. I'm not sure what the administration's motivation here is. I think perhaps they would take it either way. If they could negotiate a good deal with China, they would. And if they have to leave the tariffs on and basically cut China off from the United States, they'll do that too. So you may have a situation where everybody but China cuts the deal.

13:00That's possible. and in that case are we still going to be okay you said on cnbc i think we will be okay i mean you were short everything in 08 you said you're long only now how long is long in other words how long do you think this bear market vibe session could last is gonna last A couple of months. That's it? Well, they'll negotiate. You know, they'll either negotiate or they won't negotiate. It's not going to take, I think, more than a couple of months to be very clear of what direction this is going in. Okay, let's talk about an underlying issue here that you've talked about before it was cool.

13:42I did an episode this week about the theory that tariffs weren't about a trade war. They were about a yield war, that a crash in the market would mean people would essentially flock to bonds and yields would drop and that would help the government refinance the nine trillion dollars of debt over the next year. It's a good conspiracy theory. Do you think it's a conspiracy theory or do you think that's what's going on? Because yields haven't dropped. Yields haven't dropped. So it's weird. What's going on? You know, every now and then you get into an environment where people in the bond market start to question the reserve status of the dollar.

14:16And so you get these short-term periods where either the dollar sells off or yields go up because people are selling the bonds, which is basically the same thing. And I think we're in a little bit of that right now. And that's why I think yields haven't dropped. I don't think that's a long-term problem, though. So you think yields will go down with the - Well, if we have a recession, it will definitely go down. Do you think it's also potentially people are covering the losses from the market by selling bonds? I mean, I don't know where hedge funds stand right now. Yesterday was so crazy. Clearly, there were a lot of people over their skis and they were just covering like crazy.

14:59But I can't answer that question. I don't know. So rates will go down. Sounds like that's inevitable. We don't know when. The president thinks he controls the Fed. He does not. But he can sort of force the hand and put pressure on it. You said on your podcast that if the goal is for rates to go down, then perhaps 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? I think the rate story is more short term. So eventually they'll come down. The problem with making a bet on homebuilders, and I have a little bit of a bet myself, but But the problem with making a bigger bet is that if, let's say, tomorrow, hypothetically, every country reaches a deal and, you know, the economy is fine again, you know, rates aren't going to go down.

15:54And then there goes your home builder trade. So everything is just so binary related to the macro that, you know, the only thing I would tell people, and this is what I've done myself, is you should de-risk. you should sell you don't go crazy because if you sell everything you're paying taxes but if there's something in your portfolio that you've kept but you're not that crazy about sell it if you think you can afford to pay taxes and lighten up so you'll have some cash so you can sleep at night do that but I wouldn't do anything draconian sell it at a loss sell it at a gain you say pay taxes if you can afford to pay the taxes you should sell some and just pay the taxes.

16:38But I wouldn't do anything big. Well, you said you're long for a few months, presumably when we get more clarity on tariffs. And then what happens after that? Are you sure? Well, I have some cash and hopefully things get better and I'll buy some stuff. But wouldn't you buy stuff when things are not better? When they're... Well, like I said, it's so binary. You know, the tariff situation could go the wrong way. And then everything you'll have bought will go down. So, you know, this is such a binary, one-dimensional market. It's very difficult to handicap. What I'm telling people is don't be a hero.

17:12So take a pause. I mean, when any cuckoo crazy stuff goes on, it's better to take a pause. Go through a breakup, have a market issue, and nobody regrets a pause. Right. Ray Dalio warning about a sovereign debt crisis in the midst of all this. Do you buy that argument? Not even a little bit. I just don't. I think the entire deficit is too big, the de-dollarization, everybody's going to sell their treasuries. It's Armageddon. Cats and dogs are going to lie down together. It's the end of the world. Story has been told on and off by people for 40 years. What I think people miss when they talk about sovereign debt crisis stuff is that the entire global financial system runs on treasuries.

18:06Period. Banks do overnight repos, which is where they lend to each other overnight. They do it in treasuries. Sovereign wealth funds park the money. They do it in treasuries. There is no alternative. And the reason why there is no alternative is there's no other asset class that is anywhere close to as liquid or as safe. So if the Chinese bond market was a much bigger and better market or crypto was 1 ,000 times bigger than it is today, we could have a discussion. Until then, it's just short-term generations as far as I'm concerned. So the probability you'd assign to a U.S. debt crisis in the next five or 10 years is zero?

18:49I don't know, about zero. A lot of things can happen in five to ten years. But right, as low as, it's not something I worry about. I just don't worry about it. So do you think Ray needs a hug? I think he needs a hug. He does. He needs a little bit of a hug. I mean, when we talk about this number, though, Steve, $9 trillion in treasuries is a lot to finance. Is that scary? The economy is a lot bigger. You know, they were saying the same thing when it was$1 trillion. It's just a number. I just don't think it's an issue. So that number doesn't scare you more than subprime mortgages did in 07? No, subprime mortgages scared me to death.

19:29This does not scare me that much. Does anything scare you right now? Yeah, what scares me is the potential for a trade war. That scares me. I wouldn't put that as a zero probability. President Trump is playing high stakes poker right now. do you think he's just gonna say psych just kidding that's what's no i don't think he's gonna say psych just kidding i mean one you could like president trump you could dislike president trump i'm not making a political pitch here but i think one thing that is extremely admirable about him is that he's one of the few politicians i've ever seen where he actually goes out and does what he told you he was going to do he campaigned on this this is what he you Everybody's shocked by he told you he was going to do it, and he did it.

20:16And everybody's like, I can't believe he did it. I said, what do you mean? This is not like when President Bush got elected the second time, or was the first time I can't remember which one it was, and they immediately tried to change Social Security. And everybody said, what do you mean you're trying to change Social Security? You didn't mention this on the campaign. This was front and center throughout the campaign. So I don't understand why people are shocked. I guess they just, you know, I think part of the issue that people have is everybody that we know took Econ 101. And in Econ 101, they all taught you that free trade is good, tariffs are bad, trade wars are terrible.

20:56And they showed it to you with graphs and tables and pictures. And it's all very, very convincing and mostly right. Except what they didn't tell you is that free trade can obliterate industries. When you took Econ 101, they made it sound like if you divide the world between guns and butter, one country should produce all guns and the other country should produce all butter and everybody would be better off. And what was never discussed was, yeah, but what happens to all the people who are making butter who lose their jobs? They make it sound like they're all going to get a job making guns. That's not how it works.

21:36you know all these people lost their jobs and they're on a lot of them are on welfare and nobody ever offered them an opportunity to retrain so it got very it's gotten very got very ugly well i'm glad that you mentioned that he did campaign on this we knew this this wasn't a surprise i think the the thing people are most concerned about is the extent with which he did it right this wasn't a scalpel this was a hatchet there's a bazooka bazooka yeah people thought there would be tariffs just not this aggressive is that fair i think it's this yes i agree but i think if you take a step back again and ask yourself if you want to change the terms of trade how are you going to do that you can't be nice you got to be mean you got to be tough and then given the fact that only 11 % of our GDP is from exports, that's tall.

22:34You don't have much to lose. It's not that you don't have much to lose. You have something to lose. You have less to lose than everybody else.

22:45Hold on to your wallets. Money Rehab will be right back. And now for some more Money Rehab.

22:58So we opened the door, Steve, up to a little 2008 discussion. Some reporters are out there. I'm sure you've seen them all. You're all calling me. They're basically saying, please, predict the end of the world again. And I'm like, dude, I've been there before. I'm not predicting again if I don't believe it. So you don't? I don't. So in what ways do you think that this moment is similar or dissimilar to 08? The difference between then and now is now you have a, let's make a worst case scenario. There's a trade war of some undetermined dimension and it causes a global recession. That to me is the worst case scenario for here.

23:50The worst case scenario in 08 was the end of everything. is a big difference. Let's take an example. If General Motors tomorrow went bankrupt, let's just say hypothetically, what would happen? Everybody who works at General Motors would lose their jobs, and the government did not bail them out, let's say. Worst case scenario for GM, got liquidated. General Motors goes bankrupt, its employees lose their jobs, A lot of the companies who supply things to General Motors would have to lay people off. Some of them would go out of business. For that part of the industry, of the economy, that would be very bad.

24:36And how much impact it would have on the entire economy of the United States, I can't dimension it, but it maybe would cause a recession. Maybe. I don't know. When J.P. Morgan goes down, planet Earth burns. Hard stop. stop it's the end people can't get their money but nobody trades stocks things stop you know I had a in after a way I had a talking to a friend of mine who ran a small chemical company in New Jersey and I said to him like when it was over I said what was 08 like for you and he said well he said the first nine months of 08 were good and then things stopped I said you mean like things slowed down.

25:19He said, no, things stopped. Nothing moved. And that's because people were worried about the money they had in the bank. When you're worried about the money that you have in the bank, things stop. When there's a global trade war, there's a recession. It's a whole other dimension. Yeah, you're mourning paper losses in this case. And back then, you were worried about getting anything out. Anything. Right. You were worried that things were going to go to zero. Now we're just like, oh, well, my portfolio isn't up 20%. I've lost money. Down 10%. Right. Which sucks. David Portnoy, for example, was upset over the weekend, I think, that he was down$7 million.

26:04He was down$7 million from$100 million. Nobody likes to come down. But there's a difference between going from$100 million to$93 million versus going to$100 million and worrying that your$100 million is gone. Yeah, but I don't even know if Dave's$7 million was some paper gain that he rejoiced and he thought he had. Did he actually lose money? The most important gains in the market are the days you buy and sell. You look at your portfolio and it's lower and you feel bad. That's how we all react. Yeah, but mourning paper losses, rejoicing paper gains is a tricky business to be in. Absolutely. So in 08, the crash was about excessive leverage, systemic risk, hiding in plain sight.