'Big Short' Investor Steve Eisman Holds Off On Bond Purchases — Says Fed's Powell 'Just As Confused' As Everyone Else On Economy

Big Short’ investor Steve Eisman has announced his decision to refrain from buying bonds, attributing his caution to the uncertain economic stance of Federal Reserve Chairman Jerome Powell.

What Happened: Eisman, who is widely recognized for his accurate prediction of the 2008 market crash, inferred that the ambiguity of Powell’s perspective on the economy may be the reason behind the Fed’s choice to keep the interest rates unchanged, reported Business Insider.

“I listened to Powell’s press conference and I think he’s just as confused by all the different data points as everybody else,” Eisman stated on CNBC. He suggested that this uncertainty could be why Powell is opting for a pause, as the next steps are unclear.

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Eisman pointed out that despite the strength in consumer spending, the rise in borrowing costs is creating a challenge for the demand for high-cost commodities like homes and cars.

Contrary to market speculation about the end of the Fed’s rate-hiking cycle, Eisman shut down any immediate rate-cut expectations. He emphasized that unless a serious recession hits, the Fed is likely to keep the current rates in order to skip the inflation spike seen in the 1980s.

In response to a query regarding bond purchases considering a possible rate drop, Eisman stated, “I think it’s way too early to be making that kind of prediction. I wouldn’t be doing that.”

Why It Matters: Eisman’s cautious stance is not without precedent. Recently, he voiced concerns over a potential commercial real estate crisis, comparing it to the 2008 crash, as covered by Benzinga.

He also maintains a bearish position on the financial sector, citing reasons such as excess deposits and regulatory pressure on banks in another Benzinga report. These instances reflect Eisman’s concerns about the current economic conditions and the potential risks they pose.

Photo via Shutterstock.

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