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Bram de Haas
Bram de Haas
Articles (390)  | Author's Website |

Eisman: Short Zillow and Deutsche Bank

'The Big Short' investor shares his view on market risks, shorts and trade war dynamics

September 12, 2019 | About:

Steven Eisman, of "The Big Short" fame, went on Bloomberg on Monday to talk about the economy, China and two of his positions.

Industrial slowdown

There is no question that we are in a massive industrial global slowdown, he said. purchasing managers indexes are below 50 everywhere. He is not going to cash, though and does not think the world is coming to an end. The question is whether this is becoming a recession. But even if it becomes a recession, that doesn't necessarily mean it will turn into a systemic crisis, he said.

China won't back down

The industrial slowdown was taking place before the trade war really heated up, he said. Eisman has his doubts about a deal materializing, but doesn't think he has an edge predicting either way.

His view is that China isn't backing down in the trade war and that Trump will need to give in. He doesn't know whether Trump actually will, though.

He has his doubts about whether lowering interest rates is all that meaningful. Money is so cheap, and everything that needed free money has been done. There is overcapacity of investment capital, and it is very doubtful whether pushing in more will solve anything, he said.

About a month ago, Eisman also pointed out that there is too much corporate debt. But he didn't view as a threat to the system. A danger to the system is when banks are overleveraged. Eisman has always been a specialist in financials. There is no such risk in the U.S., he said. For the first time in 30 years the U.S. financial system is safe, according to Eisman.

Short Zillow

Zillow (NASDAQ:Z) had a great business model, but growth has slowed to zero, Eisman said. It is experimenting with its business in terms of pricing, which is problematic.

It is also buying homes and flipping them. It doesn't seem to understand that real estate is not a huge market but consists of thousands of local mini-markets, he said. For example, in Dallas, many homes have cracked foundations. Its investor base has no clue what this business is all about, he said.

Deutsche Bank

The problem with Deutsche Bank (NYSE:DB) is that the reasonable plan it presented several months ago is about five years too late. It is possible the plan will solve the bank's problems, but it isn't likely, he said. One of the hardest things for a bank today is to shrink itself to profitability. That's what Deutsche Bank is trying to do, he said. He doesn't see a bankruptcy but believes it is likely its earnings continue to deteriorate slowly.

Watch the interview below:

Disclosure: No positions.

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About the author:

Bram de Haas
Bram de Haas is managing editor of The Special Situations Report and Founder of Starshot Capital B.V.

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