Steve Eisman on the Three Big Macro Stories of Our Time

Tracy Alloway (0:03)

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Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:24)

And I'm Joe Weisenthal.

Tracy Alloway (0:26)

Joe, does it feel like we're at a turning point of some sort? I feel like that's always a dangerous question to ask on a podcast, because the tendency is to call turning points or say we're at the beginning of some new structural shift, because that's kind of what everyone wants to hear, right?

Joe Weisenthal (0:43)

You know what I've been thinking about that's like super meta and maybe beyond the scope of anything that we talk about on a podcast, but it's just since we're talking about big moments. When I was a kid, probably my parents thought that the future would look very different when I'm an adult.

But now I think that for my kids, the future will look so radically different that I just can't imagine 20 or 30 years from now, anything being remotely similar to it is today due to various things that we're seeing with tech and geopolitics and things like that, particularly AI.

Tracy Alloway (1:18)

I don't know, back to the future promised we'd have flying cars by now, and I'm still waiting.

Joe Weisenthal (1:22)

They did get video conferencing, totally right. So that's one thing, but yes, you're right.

Tracy Alloway (1:27)

All right. Well, there's obviously plenty that we could talk about when it comes to the future, like what is realistic and what is sort of pie in the sky thinking like flying cars. I suspect we are not gonna have those for a while because of various reasons.

But one person we do like to speak to when it comes to thinking big picture and kind of talking about these potential paradigm shifts is Steve Eisman, of course. He's been on the show a couple of times. He's the managing director at Neuberger Berman. And Steve, thank you so much for coming back on Odd Lots.

Steven Eisman (1:57)

Thanks for having me again.

Tracy Alloway (1:59)

So big picture thoughts. What are you thinking at the moment?

The last time we had you on, you were talking about a paradigm shift as interest rates got higher. And it seems like investors are starting to ratchet down their expectations for cuts right now. So we might actually get that higher interest rate environment for longer.

Steven Eisman (2:18)

Let's just start with the Fed. So we get that out of the way as quickly as possible. I have felt for a long time, the Fed is extremely insensitive to its own impact on markets.

Was it last week when Powell spoke?

Joe Weisenthal (2:33)

So we're recording this April 2nd, but he spoke on Good Friday.

Steven Eisman (2:37)

When he said that, he thought that because rates are higher, financial conditions are tight.

That was a little weird. I mean, credit spreads are extremely narrow. I've always felt, like I said, the Fed's insensitive to its own impact on the markets.

It's clear the Fed wants to cut rates. It seems to want to cut rates very, very badly. Why it wants to cut rates so badly, I don't understand in that they've engineered something that's really pretty fantastic. You know, not only is there no soft landing, there doesn't seem to be any landing. And as far as the data that I can see, there seems to be something of a reacceleration in the economy right now. So why would you cut rates? What's your rush? You know, the actual, what I would say, even though I think the Fed is going to cut rates, the fear that I think should be out there is that if they do cut rates, it'd be even more of a resurgence in the economy and there'd be a resurgence in inflation. So why would you rush to take that risk? I don't get it.

Joe Weisenthal (3:39)

It's funny you started off talking about financial conditions. Actually, I wrote about them a little bit more a little bit this morning. And the question that I have in my mind, measures of financial conditions are clearly loose, right? So the stock market is basically at all time highs and put into financial conditions.

As you mentioned, credit spreads are pretty tight. And then of course crypto, which maybe you have thoughts about going to the moon. So all kinds of measures of in liquid markets loosening. On the other hand, the IPO window still hasn't totally reopened.

It's not obvious that private investment is reaccelerating in some dramatic way.

Hiring intentions, the labor market continues to at least normalize. It's not falling apart by any stretch, but it's nowhere near where it was a couple of years ago. Are those tight credit spreads and high stock prices translating into the economic variables, employment and inflation that the Fed really cares about?