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Big Short Investor Steve Eisman Declares Bank Sector as 'Uninvestable'

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Investor Steve Eisman Warns Against Bank Stocks, Sees Opportunities in Infrastructure

Steve Eisman, the investor renowned for predicting and profiting from the subprime mortgage crisis, expressed caution towards bank stocks due to squeezed margins and stricter regulations. Eisman, senior portfolio manager at Neuberger Berman, stated that he considers the entire bank sector as "uninvestable" during an appearance on CNBC's "Squawk Box."

Deposit Outflows and Margin Concerns

Eisman's bearish thesis on banks stems from continuous deposit outflows, triggered by the uncertainty surrounding the collapse of Silicon Valley Bank earlier this year. He highlighted that the banking industry still has $2 trillion more in deposits than the trend, and he expects this excess to be withdrawn at an accelerated pace. Eisman dismissed the notion that interest margins would bottom out soon, pointing out that short-term rates surpassing long-term rates have negatively impacted bank margins. The persistence of an inverted yield curve, despite the Federal Reserve's efforts, has added to the challenges faced by banks.

Regulatory Impact on Debt Levels

Eisman also criticized the new regulations aimed at increasing debt levels in banks. Recent plans unveiled by regulators require American banks with at least $100 billion in assets to issue debt and strengthen their "living wills" to protect the public in the event of further failures. Eisman disagreed with this approach, stating that regulators should focus on raising liquidity requirements for mid-cap and small-cap banks instead.

Investment Focus: Infrastructure

Known for his successful bet against subprime mortgage loans, as depicted in Michael Lewis' "The Big Short" and its subsequent film adaptation, Eisman revealed his current investment focus on infrastructure companies. He sees potential in these companies due to increased government spending, particularly in areas such as road building, factory construction, automation, and reshoring. In conclusion, Steve Eisman's cautious stance on bank stocks and his preference for infrastructure investments reflect his assessment of the current market conditions. While he sees risks and challenges in the banking sector, he identifies opportunities in infrastructure companies benefiting from government initiatives. As always, investors should carefully consider these insights and conduct thorough research before making any investment decisions.

Steve Eisman's Investment Perspective: Implications for New Businesses

Steve Eisman, a renowned investor, has expressed caution towards bank stocks, citing squeezed margins and stricter regulations. His stance could have significant implications for new businesses considering investments in the banking sector.

Banking Sector: A Risky Proposition

Eisman's bearish outlook on banks is rooted in continuous deposit outflows and margin concerns. The banking industry, according to him, is grappling with $2 trillion more in deposits than the trend, and he anticipates an accelerated withdrawal of this excess. This scenario, coupled with the persistence of an inverted yield curve, poses challenges for banks and potential investors.

Regulatory Changes and Their Impact

Eisman's criticism of new regulations aimed at increasing debt levels in banks further underscores the risks in the banking sector. He argues that regulators should focus on raising liquidity requirements for mid-cap and small-cap banks instead of increasing debt levels. This viewpoint highlights the complexities new businesses must navigate when considering investments in the banking industry.

Infrastructure: A Promising Alternative

Despite his caution towards bank stocks, Eisman sees potential in infrastructure companies. He believes these companies, particularly those involved in road building, factory construction, automation, and reshoring, could benefit from increased government spending. This perspective could guide new businesses looking for investment opportunities in sectors with promising growth prospects. In essence, Steve Eisman's investment perspective provides valuable insights for new businesses. While the banking sector appears fraught with challenges, infrastructure presents potential opportunities. As always, these insights should be considered as part of a comprehensive investment strategy.
Story First Published at: https://www.cnbc.com/2023/09/21/big-short-investor-steve-eisman-says-the-whole-bank-sector-is-uninvestable.html
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