Wall Street veteran Steve Eisman of “The Big Short” fame notoriously called the cratering of the sub-prime mortgage market a decade ago, but he fails to see the point of cryptocurrencies.
Eisman, who today is managing a portfolio at Neuberger Berman, was one of a handful of hedge fund managers to predict the housing crisis. Now instead of capitalizing on the rising tide of digital currencies, he’s struggling to find “purpose” or “value” in the market, saying at a convention in Hong Kong that the rise of bitcoin is being fueled only by “speculation” and fraud, according to The Wall Street Journal.
“I don’t see the purpose of it. What value does cryptocurrency actually add? No one’s been able to answer that question for me.”
He’s joining the chorus of billionaire investor Warren Buffett, who has similarly railed against the cryptocurrency market. Meanwhile, Eisman has a history of agreeing with Buffett on topics like executive compensation.
Berman, however, does appear to keep tabs on cryptocurrency regulation, saying he “doesn’t understand” why the market isn’t regulated “more heavily.” The answer is that policymakers while eager to place controls on the market don’t want to craft laws that will stifle innovation in any given region. To quote former Fed Chairman Alan Greenspan, who Eisman once said was “the worst Chairman of the Fed in history”, it’s a “conundrum” that they’re working feverishly to solve.
Perhaps Eisman, whose career was a focal point in Michael Lewis’ bestseller The Big Short and who was portrayed as a hedge fund manager by Steve Carell on the big screen, has been looking in the wrong place for the answers.
For instance, he presciently forecast the US housing crisis following a $26 billion call on the mortgage market by Wachovia Corp a couple of years prior to the meltdown. He followed the signs, which led him to the famous “big short”. But when it comes to cryptocurrencies, Eisman admits he hasn’t taken the time to understand the mechanics of the market.
“I don’t touch it. I don’t know what I’m looking at…I have no interest,” said Eisman at the conference, adding that he avoids investing in any currencies, not just the crypto kind.
Meanwhile, if you were to ask him where the next “big short”, Eisman wouldn’t point to cryptocurrencies and like the Bank of England’s Mark Carney sees no systemic risk in the global economy. And unlike JPMorgan’s Jamie Dimon, who similarly has no interest in bitcoin, Carney is not bracing for another US recession.
Where is most concerned about is the Canadian housing market, where there is evidence of a bubble that’s getting ready to burst. As a result, he’s taken short positions in more than half-a-dozen related stocks.
Not surprisingly, Eisman owns no digital currencies.
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Last modified: March 4, 2021 5:07 PM