Steve Eisman: beware Canada's property bubble

published 18 May 2018

896_MW_P14_strategy_guru — Steve Eisman,managing director of Neuberger Berman

Digital currencies have boomed for two reasons, neither of them sound foundations for future investment: speculation and money laundering. So says Steve Eisman, the Neuberger Berman money manager famous for betting against US subprime mortgages before the 2008 financial crisis, reports The Wall Street Journal. "What value does cryptocurrency actually add? No one's been able to answer that question for me," he told the audience at the annual CFA Institute conference in Hong Kong.

Yet despite his scepticism about cryptocurrencies, he's not as worried about the global economy as he was prior to 2008. "I see risks but I don't see systemic risks," he said. Although he is still short-selling US bank Wells Fargo (a position he has had for several months), overall, he says, "I can honestly say the financial system in the US is safe". Instead, his main concern is Canadian property. "There's a housing bubble in Canada, which is starting to break." As a result, he is shorting several Canadian financial stocks.

Eisman is also gloomy about prospects for German bank Deutsche Bank, which has seen its shares slump by almost 34% in the past year. The German lender is "a problem bank", he tells Bloomberg. It has "profitability issues", which make it likely that it will have to raise capital next year, reckons Eisman. The new CEO, Christian Sewing, is slimming down its corporate finance business in the US and Asia, and will review its global equities business, notes Bloomberg. The measures will lead to a "significant reduction" in the workforce this year.

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Alice grew up in Stockholm and studied at the University of the Arts London, where she gained a first-class BA in Journalism. She has written for several publications in Stockholm and London, and joined MoneyWeek in 2017.