Steve Eisman saw the crisis in the US housing market before most. Now he believes the wave of rate hikes from the Federal Reserve could dampen the appetite for shares and trigger price falls, especially for growth-oriented shares.
– I think the days where you beat the market just by investing in tech are over, and we are moving towards a new paradigm, says Eisman, who is currently a senior portfolio manager at Neuberger Berman, to CNBC Monday.
– The paradigm that has existed for the past ten years is that interest rates have been zero, and people have been paid to take risks. So they’ve invested in tech stocks and hyper-growth stocks, which means high top-line growth, no earnings—and that they haven’t cared about valuation. I think the days of investing in companies that have no earnings and have multiples of 200 times are over, he continues.
– Be selective
Interest rates on short-term US government bonds have risen to their highest since the financial crisis, and those with six-month and one-year maturities have passed 5 percent for the first time since 2007.
– I’m not saying you should stop buying tech. I think you have to be selective when you talk about companies that have high top-line growth and negative earnings, Eisman continues to tell the channel.
The manager claims to CNBC that the US economy is facing a recession, but will not say anything about how deep it may be.
Eisman previously ran a hedge fund at FrontPoint Partners, and shorted US “subprime” mortgages before the financial crisis in 2008, as described by Michael Lewis in the book “The Big Short” – a book that laid the foundation for the subsequent Oscar-winning film of the same name .
