OCTA: Things Are Melting Up Quietly 
“Big Short” investor Steve Eisman, who predicted the 2008 housing crisis, believes that the Fed will not cut rates this year as many expect.
In a new interview on CNBC’s Fast Money, the Neuberger Berman senior portfolio manager says that major US banks could suffer if the Fed remains hawkish in 2024.
“Let’s pick on one bank, and I have no position in this bank and I have nothing against the company, Bank of America. So Bank of America is a very well-run bank. It has a very good CEO. That doesn’t mean they haven’t made mistakes. They bought a hell of a lot of long-term bonds at the wrong point in the cycle. It’s not a balance sheet problem. It’s more of an earnings problem.
So the earnings if you look are basically flattish for the last few years up and down by just a little bit percentage. So how are you going to make money in Bank of America? You’re going to need really two things. You’re going to need the Fed to cut rates. So that’ll help people’s perception of the balance sheet. And you need no recession, so benign credit. Could that happen? Sure.”
However, Eisman says he believes the Fed won’t start cutting rates this year over continued concerns about rising inflation.
“The market seems to think the Fed’s going to cut rates at least three times this year. I, at this point, don’t have that view. I think the Fed is still petrified of making the mistake that [Paul] Volcker made in the early 80s when he stopped raising rates and inflation got out of control again. So I’m not that bullish on the Fed cutting rates.
And if that’s correct, I think it’s going to be hard to make money in the major money center banks. Now that’s not a company-specific call. That’s a real macro-y call. It’s hard to make a long-term investment case for the banks when you have to deal with so many macro factors like that.”
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