Escaping the Drift with John Gafford - From the Big Short to Tariffs: Steve Eisman on Trade Wars and Globalization

Episode Date: April 8, 2025

Wall Street legend Steve Eisman, famously depicted by Steve Carell in "The Big Short," joins us for a thought-provoking discussion on the shifting tides of the global economy. With his unique perspective on tariffs and trade wars, Steve dubs these issues a "theological problem," challenging the age-old teachings of free trade. We reflect on the historical impacts of NAFTA and China's WTO entry, contemplating their mixed blessings on GDP growth and job creation. This episode aims to cut through the noise, offering you a seat at the table for an expert analysis of today's complex economic landscape.   Our conversation explores the stark realities facing the American manufacturing sector amid globalization and trade policies. Together, Steve and I recount firsthand experiences from economically ravaged regions, discussing the potential impact of President Trump's tariffs. We consider the ripple effects on countries like China, Mexico, and Canada, pondering whether they can negotiate favorable trade deals. As companies like Apple and Nike adjust to new trade realities, we delve into how these policies might reshape supply chains and create unexpected opportunities.   Turning our attention to investments and future market conditions, we dissect the feasibility of rekindling U.S. manufacturing through tax incentives and organized labor's role. From emotional to rational decision-making, Steve sheds light on market dynamics and the potential for a full-blown trade war. We also explore the real estate market's current challenges, influenced by mortgage rate fluctuations, and the transformative role of AI in manufacturing and finance. As we wrap up, we reflect on the importance of interpreting information in a rapidly changing world, sharing insights from institutions like Wharton and Harvard on the art of data interpretation for market success.   CHAPTERS    (00:00) - Economic Trends (05:40) - Impact of Trade Policies on Manufacturing (12:47) - Implications of Trade War on Investments (18:56) - Real Estate Market Discussion and Insights (32:24) - Investors, AI, and Information Interpretation   💬 Did you enjoy this podcast episode? Tell us all about it in the comment section below!    ☑️  If you liked this video, consider subscribing to Escaping The Drift with John Gafford  ************* 💯 About John Gafford: After appearing on NBC's "The Apprentice", John relocated to the Las Vegas Valley and founded several successful companies in the real estate space.   ➡️ The Gafford Group at Simply Vegas, top 1% of all REALTORS nationwide in terms of production. Simply Vegas, a 500 agent brokerage with billions in annual sales Clear Title, a 7-figure full-service title and escrow company.   ➡️ Streamline Home Loans - An independent mortgage bank with more than 100 loan officers. The Simply Group, A national expansion vehicle partnering with large brokers across the country to vertically integrate their real estate brokerages.   *************   ✅ Follow John Gafford on social media:   Instagram ▶️ / thejohngafford   Facebook ▶️ / gafford2   🎧 Stream The Escaping The Drift Podcast with John Gafford Episode here: Listen On Spotify: https://open.spotify.com/show/7cWN80gtZ4m4wl3DqQoJmK?si=2d60fd72329d44a9 Listen On Apple: https://podcasts.apple.com/us/podcast/escaping-the-drift-with-john-gafford/id1582927283    *************   #escapingthedrift #steveeisman #wallstreet #globaleconomy #tariffs #tradewars #freetrade #nafta #china #wto #gdpgrowth #jobcreation #americanmanufacturing #presidenttrump #supplychains #apple #nike #taxincentives #organizedlabor #rationaldecisionmaking #marketdynamics #tradewar #realestatemarket #mortgagerates #ai #datainterpretation #wharton #harvard

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And now, escaping the drift. confidence from head to toe, try Mando. And now, escaping the drift. The United States only has 11% of its GDP coming from exports. That is the lowest number probably on planet Earth. China officially is at 20%, but that doesn't include all this stuff that they ship to Vietnam and Cambodia that eventually makes its way here. So China, and this just to guess, is probably at least 30%. Europe, every country in Europe is in excess of 30%, with the exception of Germany, which is over 40. And now Escaping the Drift, the show designed to get you from where you are to where you want to be. I'm John Gafford and I have a knack for getting extraordinary achievers to drop their secrets to help you on a path to greatness

So stop drifting along escape the drift and it's time to start right now back again back again for another Episode of like it says in the opening man the show that gets you from where you are to where you want to be and today We got something special something special for you guys, because obviously there's a lot going on in the world today. And we wanted to kind of, I'm sick of scrolling through social media and seeing all of these pocket economists that, you know, class of Wednesday

that know exactly what's going on in the world, because they happen to vote one way or another. And I decided to maybe bring you some good information today. So what I did was I went out and we scored a Wall Street legend. I mean, this is a guy who saw it coming when nobody else did. You may know him as the real life inspiration for Steve Correll's character in the big short, and he famously bet against Wall Street in the 2008 housing crash and won massive.

But he's more than that. He's a brutally honest guy in finance. It calls it like he is whether it's good or bad. And today we're going to talk about the good and bad of terrorists. Ladies and gentlemen, welcome to the show. This is Steve Iseman. Steve, how are you? Pretty good.

Little poor, but little poor today. Well, thanks so much for taking time out of your day. And I'm sure you've been busy commenting on all that's happening in the world today. And I do want to talk later a little bit about your experience with the big short, but obviously let's talk about the news of the day starting out.

So let's jump right into it. What is your perspective on what's going on and where we're going to land? I think to use a term that probably no one has applied to this, what we have is a theological problem. And what I mean by that is everybody like you, like me in the markets went to college and we all of least took econ 101 and econ 101 they taught you that free trade is good, tariffs are bad, trade wars are terrible and think about

economics is it's very persuasive because there's a lot of math, there are a lot of graphs, there are a lot of tables, and all that math, tables and graphs can't be wrong because they have all that math, graphs and tables. And everybody walks out of, when you walked out of Econ 101, you thought, I really learned something. So we have been living in a world of economics now for a long time. And I think part of the problem is you have to go back to the 90s. In the 90s, President Clinton sold NAFTA and China entering the WTO with two arguments. And those arguments were, this will increase GDP and it will create a lot of jobs.

And he was 100% right about the former and he was terribly wrong about the latter. After the movie, I got a great speaking gig and I've made speeches all over this country. Let's say I go to university in the middle of Indiana or something. You drive from the airport through towns that have been obliterated, literally obliterated. Half of Main Street is closed. No new home has been built in a generation. You have to remember the GDP is just an aggregate number, but it doesn't tell you that maybe half the country has suffered terribly from what happened. So I think what President Trump is trying to do, and I have to say great sympathy for

this, is he's trying to right a wrong. Because after the 90eties we we allowed our manufacturing base to go overseas. Okay. But we didn't retrain our people. We left them. We said, it's your problem. You go go deal. Go learn to code. Go learn to code. I think was the code at an age of 50. Yeah, there you go. So I think what he's trying to do is two things. He's trying to level the trading playing field because we are the only ones who seem to play fair.

We've had very low tariffs, very low barriers. Everybody else has tariffs and barriers. And he's also trying to bring a lot of jobs back to the United States. And you could think about President Trump whatever you want. Some people like him, some people hate him. But one thing that I find admirable, regardless of whether you agree with his policies or not, is he's one of the few politicians in our lifetimes who actually does what he says he's going to do.

And nobody believed this tariff stuff because it's so against what everybody learned in college they didn't take it seriously. He's just fulfilling his campaign promise. Now, the people who voted for President Trump, his biggest followers, are not big investors in the market. They're the ones who live in these towns. So I think there's a reset about what's happening and it's extremely jarring because he's not playing by the playbook that everybody

learned in college. That's part of it. What I think is also clear is that this is going to take time. And thankfully, and I really mean this thankfully, the United States is in the best position in the world to deal with this. I know that a lot of naysayers say, well, why wouldn't he not negotiate before? Oh, that's ridiculous. Well, I think the best quote I saw was a Kissinger quote who said, you negotiate once the tanks are rolling. Exactly. The tyrants are the tanks. Yeah, you have to show power prior to anything happening.

So you knew he was going to flex a little bit and get this done. Now I think that of a lot of the people that are making the most noise, who was the most susceptible to fall first in this show of power for the United States? Which countries do you think get in line the fastest? Ah, okay. So let's, let me quote some statistics. Okay, perfect. The internet is a great thing

for researchers. We know I can talk to 10 seconds. Okay. So the United States only has 11% of its GDP coming from exports. That is the lowest number probably on planet earth. China officially is a 20%, but that doesn't include all the stuff that they ship to Vietnam and Cambodia that eventually makes its way here. So China, and this is just a guess, is probably at least 30%. Europe, every country in Europe is in excess of 30%, with the exception of Germany, which is over 40. Mexico and Canada are each 35% of their GDP comes from exports and is the kicker. 25 points of that 35% is exports to the United States. So if we are working under the assumption, and believe me, it's a big assumption,

that everyone is going to act rationally. Everybody would come to the United States cap in hand and say, okay, listen, all the stuff that we've been doing, jiggering the trade in our favor, games up. Let's try and negotiate as good a deal as we can. That says everybody's rational. Now everybody's not necessarily rational. You know, politicians want to get re-elected. They might be a poster. They could have, they might be afraid that if they if they cut any deal with President Trump they're not going to get re-elected. So I can't handicap that. I can only say that if they're rational

deals will be worked out. I do know, because I have a very good friend who runs a hotel in DC, that the hotels apparently in DC are filled with ambassadors from all over the world. Let's talk to negotiate. So I thought that was pretty nice information that I got this weekend. But I don't know how it's going to play out. My guess is most countries will cut a deal. It may take a few months to cut those deals, but most countries will cut those deals. China may not cut a deal. China may say, you know, this is just a form of war and I will deal that I can't

handicap at all. Yeah. Well, it's, it's, I think it's of all of them out there. The Chinese are probably the hardest to predict what they will do of everybody. I would say completely. I think Mexico and Canada have to have just resolved this as quickly as possible. Cause they're, they're going to feel it quickly. And like I said, 25% of your GDP is exports to the United States. You're not exactly holding a lot of cards. You can't swallow that.

Now, my next question is is Today, I guess it was Apple and Nike announced. They're already starting to increase prices based on the tariffs So is there any way their supply chains are already being interrupted based on inventory on hands to do this? Or do you see these major corporations never never wasting a good crisis to try and increase profits? What do you see happening there? Oh never wasting a good crisis to try and increase profits. What do you see happening there? Oh, I think they're probably increasing their prices because they have to, because these tariffs are very punitive for them. I don't actually know that one.

You think it's happened this quick though? You think it's happened this quick? That I don't know. I can't answer that question. I don't have enough information to know that one way or the other. I think Nike and Apple are going to have, look, you can't rejigger your supply chain

from Vietnam and China to the United States overnight. It doesn't work that way. Factories, unfortunately, can't be built overnight. That's just not how it happens. So does that mean that there are gonna be higher prices for certain goods in the near term? Probably. This is not gonna be a seamless transition.

Well, let me ask you this. One of the seemingly, like you said, And I think that's a great question. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible.

I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible.

I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it's feasible. I think it is for the United States to really move mass manufacturing back to the states? How feasible is that? That's a great question. I think it's feasible. It's going to take time. I think one of the things that will, I'm guessing will help is, you know, right now in Congress, they're horn swaddling on about taxes. And I think one of the things that will be proposed is if you build a factory in the United States And I think it'll be backdated to the beginning of the year

So if you build a factory in the United States, you get a hundred percent write-off. I Think that's pretty that's pretty yeah It is it is but don't you think that some of the reason that manufacturing left in the first place was organized labor in this country just put such a choke hold on manufacturing with the making the cost of labor so expensive that it forced this or was it really just about corporate bottom line? Some combination of both, you know, but unions are much weaker at this point. Do you think they're going to have to make concessions to get, to get manufacturing back?

I think companies will probably choose states that don't have strong unions is my guess. So if I had to take a guess, you know, which states do I think are going to benefit the most, you'll see them in the south and the Midwest outside of union strongholds. That's just a guess. I know it's just, it's so funny to think that all of this kind of comes down to handful of people acting rationally as they should. There's just no guarantee. That's part of the problem with economics is, is when you peel it back, you realize that one of the major assumptions about economics is that people act rationally. And one thing I know from watching my screens every single day on Tuts of Stocks is the

last thing people do on most days is act rationally. They act emotionally. What do you think the best case scenario is for timeline for this to somewhat get resolved and the worst case scenario is what would you say? The best case scenario I think is two to three months. Two to three months. Yeah. What do you think? is two to three months. Two to three months. Yeah. That's pretty quick.

What do you think about that? That is quick. Yeah, that's fast. And the worst case scenario is a full-blown trade war. How far, so if it goes two to three months, do you think your average American is gonna experience pain? Will we have time to experience pain there?

Or will it just kind of resolve before we got to massive interruptions in supply chain? I don't know. That's about my pay grade, man. You're the smartest guy in the room. That is way above my pay grade. You know what? In your defense, that's how you maintain the reputation as one of the smartest guys in the room, is you don't talk about things you don't necessarily know. I answer this. I don't know. I really don't know. I don't know. All right. Well, as a sharp investor, right? As someone that invests, obviously you're a Wall Street legend is somebody that is a sharp investor.

How are you looking to take this situation and make it a positive for investors? So what I would say to people right now is this is not the time to be a hero. First of all, any analysis, on my own podcast, the Eisenman Playbook, I had my old partners on last week, which we just posted. And we were talking about, if we were all still together running our hedge fund, what would we do? And I think we all concluded that we would not press shorts.

We would just take the book down on both sides. We would just de-risk and sit and wait. And the reason is that when, you know, in normal times, there are a lot of different variables that move markets and move stocks. And right now that whole world is out the window. There's one variable that matters and his name is President Donald Trump.

And that means volatility. So what I would say to people is, if you feel, if you're literally having a conniption fit every single day, you can't sleep, and Lord knows you need to sleep, sell some things in your portfolio. Sell positions that are not your favorite positions. Maybe even on some of your favorite positions, sell a little, you'll feel better.

Yeah. And wait, just wait. You don't have to be there for the first uptick if things get resolved, because if things get resolved, it'll be uptick for a very long time. You know, the downside risk here from, from a tent. I mean, I think the risk of a trade war is less than 50%. How much less than 50%? I don't know yet, but that's not infinitesimal. So if there's a full blown trade war, the market would go considerably lower. I can't handicap for you right now. If everybody, if everybody settles except for China, would we still consider that a trade war? No, I would not consider that a trade war.

Did you conclude that China becomes an outlier to the problem? The outlier to the problem. I think that's dealable. That can be dealt with. Okay. All right. Fair. Cause I think it seems like everybody puts so much emphasis on China's reaction to what happens here. They certainly did that on Friday. Yeah. Yeah, they did. But down 10% was a, their market, which was sort of weird. You know, I mean, what did you expect?

Did you actually seriously think that China was not going to retaliate at all? Of course they were going to tell. They had to, yeah, they had to save face. Well, let's get back to the retail investors here, because obviously, when traditionally speaking, when when the market falls like this, the money runs to bonds, which then drop the yields on bonds. And for what I do, obviously, real estate, we're so intimately tied to that 10 year treasury bond, which fell under 4%, but then bounced yesterday back over 4%, which I thought was really strange. Um, what's your thought there?

I didn't actually didn't understand that move other than people were trying to buy stocks and so they were selling bonds. Um, otherwise it made no sense to me. I would just pass if things stay hairy for a while yields will go back down. Okay. Because obviously for what we want to do, and you, this is where your kind of crossover of knowledge becomes so interesting to me. How do you think this affects the real estate market? Where are we going from here?

Well, if we're talking about residential real estate, as we all know, the residential real estate market is locked right now and it's locked because of COVID. And the reason why it's locked because of COVID is that everybody with a pulse refinance their mortgage 3%. And today if you take out a mortgage, I mean, what's the latest rate? Six, six and a half. No, well, that's the thing with the bond yield going down on Friday, we got to six and a half, but as soon as it came back, we bounced back up to six, seven, five. Okay. So call it six and a half.

And then we'll go to the next one. So we'll go to the next one. So we'll go to the next one. So we'll go to the next one. So we'll go to the next one. So we'll go to the next one. So, well, that's the thing. With the bond yield going down on Friday, we got to six and a half, but as soon as it came back, we bounced back up to six, seven, five. Okay, so call it six, seven, five. So one thing I learned very early in school is that six, seven, five is more than three.

Three. In fact, it's more than twice as much. And mathematically, that's a problem. My guess is mortgage rates would have to go, mortgage rates would have to go below six to get the residential market unlock it. My magic number for that is five five. I think when it hits five five,

there's an onslaught of pent up demand for people that needed to do something that wouldn't, you know, they're not gonna swallow seven from three, but you'll swallow five, five, especially if the pain in your current living situation is great enough, you'll, you'll swallow that and make them. I mean, if your kids are climbing the walls and they've got no place to sleep, you're going to, you're going to, not to say, not to five, five.

So with this going on, if you had to look back at the housing market now, is this a bet you would make for it or against it going into the spring, which is traditionally our busiest time? I think there are just so many variables I wouldn't be making any bets at this point. It's just too hard. Too many variables to make a guess. It's all down to one variable. It's one variable.

It's all one variable. Markets are very, very difficult. If you go back to 08, the variable was the balance sheets of the large banks and what I need everybody was trying to do detective work on What what they had it turned out they had a lot of bad stuff and that was that was a bad variable Today the variable is the president United States and I'm not an arm and he hasn't called me It's like I can't give you any insights. Yeah, he fired me on television once, but he hasn't called me recently either. So there you go. Um, you know, I get kind of what he's trying to do. And I understand that could go very

quickly. So how long do you think if there's no, you think that if there can't be movement here, let's say it's a stalemate, and we really start to sting here, do you think knowing what you know about him and seeing what you've seen that he starts to back off this? No way. He's all in on this. This is all. He's bet his presidency on this.

This is it. This is it. This is it. You can't put all your chips into the poker table and then say, sorry, I take them back. Then you look like a fool. Is there one of the players that's out there that we're currently negotiating with you think if they fall, all of them fall? Cause like the EU,

I think pretty strongly came to the table this week, if I'm not mistaken. Yeah, but I take time. I really do think they're all going to come to the table. I think they don't have a choice. This is the most important. Our consumer is by far the most important entity in terms of economics in the world. You have to be here. You can't be Mercedes Benz and not sell cars in the United States of America. The company doesn't function.

So like I said, I feel pretty good that people will be rational enough that they'll try and work out as good a deal as they can. That's going to take time. This is complicated. I mean you're talking about tariff, VAT, and any other kind of regulatory restriction stuff that I don't really even know enough about. I just know it exists. Yeah. Well, they prohibit Ford you know, Ford motor company from selling their cars in certain parts of the world. Right. Yeah. We import cars. So we import everybody.

Everybody's ready to come here. Yeah. It makes no sense. Let's talk about the big short. Let's talk about that for a little bit. So let's go back in time. Obviously, that was I lived through that. I've been in this business back in time. Obviously that was, I lived through that. I've been in this business a long time. Las Vegas was ground zero for the financial crisis.

And I have my- There's some good scenes in the movie in Vegas. Yeah, yeah, there were inaccurate scenes. I mean, literally every stripper in this town owned three houses. Just kind of how it was. I wouldn't know anything about that. Well, I have a question.

Let's talk about the semantics of the movie first before we talk about the actual situation. So what is it like when you're sitting there and they're like, okay, Steve Carell is gonna play you. What's that like? Well, it's actually a bit more complicated than that. So more and more amusing. So I think in the fall of 2014, Michael Lewis called me

because the rights to his book were sold I think in the fall of 2014, Michael Lewis called me. Because the rights to his book were sold right after he published it, which was something like 2010. And then nothing happened. So I figured that is never gonna happen. So then in 2014, I think it was like October, he called me and he said that the movie was going to get made and Adam McKay, who had been, who was this writer, et cetera, had written the script and was going to direct and was going to call me.

And I go, yeah, sure. Michael, nice talking to you. And, and sure enough, a week later I get a phone call from Madame McKay. And it was kind of a funny conversation. He says to me, you know, he's written the script, he's gonna be in New York, he wanted to come have dinner with me. And I said, sure.

And then he says, he said, you know, we're trying to cast it. And at this point, it's quite possible that Brad Pitt's gonna play you. Oh, God. And I said, I said, listen, let me just interject here. I said, the only thing that Brad Pitt and I have in common

is really good hair, and that's it. Yeah. And I do have very good hair, I have to say, but that was all we had in common. And there's a chance your wife loves you both. There's a chance. And there is a chance that my wife will leave me for the guy who's gonna play me wife loves you both. There's a chance. And there is a chance that my wife will leave me for the guy who's going to play me.

So then it turned out that he couldn't do it. He had scheduling conflict. He took a much smaller role in the movie and then Steve Carell played me. And I met him like twice. That was it. That was that. So the scene in that movie, I think probably your character's most famous scene, and I think it was based on a real event, is when Ryan Gosling's talking about

you coming to Vegas to the mortgage bankers convention, you raise your hand and ask a question. That really happened. Did that really, well, walk us through the real scenario of what that. So A, that really happened. It was a little bit different in that the way the movie depicted it, it was like a massive meeting and it was actually not a massive meeting. It was a medium sized meeting that was hosted by option one, which back then was the subprime mortgage lender that was owned by H&R Block. And I was sitting in the audience with my partner, Danny Moses, and the scene about where he goes, zero probability. I did that because I was that obnoxious and rude back then. And, and, and as soon as I say it, my phone rings and I look at it and it's my wife. And I

turned it in and go, I got to take this, I got to get out of here. And I, and I picked up my wife and I walked out and that that is what happened. So, I mean, by the way, Danny, Danny literally crawled like under the chair. Oh, I can imagine you would have. I can imagine you would have when that was going on. Let's let's talk about the moment in that moment. When you saw that potentially happening, what did you see in

the markets at the time that you thought this might become something? And has there been any parallel since in the real estate market? So let me go back a little bit because I have a very, very long history with the subprime mortgage industry. In fact, I was a sell-side analyst at Oppenheimer in the 90s, and I covered a whole bunch of different financial services companies. And one of the subsectors that I covered was

Generation One, I like to call it, 1.0 subprime mortgages. Companies like, if you remember, like the Money Store. Remember Phil Rizzuto for the money store. Oh, sure, yeah. So that was one of the companies that I covered. I was run by a guy who was the son of the founder, I think his name was Mark Turtletow. And in 1998, for various, very, very complicated reasons, most of the sector pretty much went

bankrupt. And I lived that. And that was a very searing experience for me. And the irony was that across the hall for me was Henry Blodgett, who was a young analyst at Oppenheimer. And he was getting on the call talking about how the internet was going to take over the world. And this is a direct quote, dynastic levels of wealth were being, were going to be created. It's one of the greatest predictions in history. Dynastic levels, dynastic levels of wealth were going to be created. It's one of the greatest predictions in history. Dynastic levels. Dynastic levels of wealth were going to be created.

And he was right from the internet. And he said this in 1998. And so here's Henry Bodger talking about dynastic levels of wealth. And I have a sub sector that went to dust. So after I left Oppenheimer, I went to a hedge fund and then in 2000, and I started at from point in 2004 but in 2002

Subprime mortgage 2.0 went public and the funny thing about subprime mortgage 2.0 Was that it was run by the same CEOs around 1.0. They just changed the names. So as early as 2002 I Said to myself, this is a I've seen this play. It's a play in three acts. People don't change. It's a play in three acts. Act three is going to be a tragedy. I'm just going to be there when it happens. When that will be, I don't know. Now, what I didn't foresee in 2002, that the industry would literally be 10 times bigger in 2006 than it was in 1998.

I think in 2002, the subprime mortgage industry originated like 50 billion and in 2006 it originated 500 billion. Well, didn't Clinton also incentivize banks to do this? There's some policy that was made? Was it him that did that? It doesn't ring a bell. They didn't need an incentive. They made in tons of money without any government incentives, believe me.

Fair. I was waiting. When you're waiting for something to happen, you look for evidence that it will happen. And what I saw was that in 2000, by the summer of 2006, we had access to Moody's securitization data. All the securitizations report all their credit data every single month. By late spring, early summer 2006, it was very clear to us that there was something was wrong, that delinquency levels in these new pools were going bad very, very rapidly.

That's when we started to investigate the shorting subprime paper. And then there's that scene where Ryan Gosling shows up in our office, that happened. That was a guy named Greg Lippett. With the Jenga Tower? Yeah, all that stuff happened. I mean, it was a great way to definitely talk about what was going to happen there.

Do you see any parallels between that time and any of the real estate markets since? I actually don't. Yeah. The first thing I would say is, I don't think a subprime mortgage has been made in the United States since 2008. Not, at least not that I'm aware of.

And the other thing that I would say is that, after Dodd-Frank was passed, a new position in the Fed was created called Vice Chair of Financial Supervision. And that's a fancy name for Chief Bank Regulator of the United States. I mean, it's a crazy thing to say that the United States never had a Chief Bank Regulator until 2011. And that position was occupied by Fed Governor Daniel Turullo, who's truly one of the unsung heroes of the last 15 years because he really did an amazing job. He de-risked the banks, he de-levered the banks. So, you know, I worry about a lot of things. I don't worry about the health of the U.S. financial system anymore.

You know, the reason I asked that, it was kind of a loaded question. I figured you were going to say no, because being in the business that we're in, in real estate, you know, you're constantly talking to people that are pocket prognoid. You know, I'm just waiting for the market to crash. It's not going to happen again, because I try to explain to people, equity doesn't go to foreclosure. Somebody steps in to take that. Yeah, somebody comes in to save that deal way before it to foreclosure. Somebody steps in to take that. Yeah, somebody, somebody comes in to save that deal way before it hits foreclosure.

It just equity never goes to the steps. And for some reason, people still in the residential world can't buy that. Um, and I don't get it. So let me ask you this. If you were somebody right now, and again, self-serving for me, you're, you're great. Understanding of the markets. If would you hold off on were somebody right now, and again, self-serving for me, you're great, understater of the markets. If would you hold

off on buying anything right now? What would you do? I mean, I'm done, but I can only tell you what I'm doing. Okay, perfect. I sold a few things. They didn't have great confidence in and I'm sitting on my hands. That's what I'm so so where do you think all this cash is? Because there's a lot of investors doing the same thing. Are there just absolute war chests being built up by hedge funds?

I've had hedge funds, I guarantee you have de-risked and they're waiting. And so there's a lot of cash on the sidelines, but that cash is not gonna get deployed until this clarity. They're sure. All right, well, I wanna ask about one more thing that has nothing to do with anything you might know about, but I just wonder if you have an opinion,

which is this. Now in the last couple of weeks, it seems like Elon Musk in the Doze Department wants to take aim at our elected officials for how does somebody that makes a couple hundred thousand dollars a year become worth tens of millions of dollars? It's a good question. And is that something that you feel needs to be looked into?

Where are you with politicians that somehow become overnight millionaires in the stock market and they're the best traders on the street? Well, do I think it should be investigated? Sure. Any type of corruption should be investigated. Do I think that's going to move markets? I don't think that's going to move markets. No. Do you think that what do you think, how much would our government change if we took the ability to trade out of our legislators

hands? I don't know. I honestly don't know. I that's a good question. I've actually thought about it. I'll think about it. I'll get back to you. See, this is the podcast that makes you think Steve, that's what I'm trying to do.

I'm gonna think about that one, which which is good. Um, let me ask you this, because with the rise of AI, I just talked to Ari Maizel not too long ago, we're talking about AI, and I actually asked him if, do you think maybe there's some thinking within the White House about bringing manufacturing back to this country, where AI is replacing low level workers at just a an alarming rate? Do you think they're trying to bring manufacturing back in anticipation of having sort of a job shortage?

I don't think so. I mean, it certainly may give them more impetus, but I think Trump has been thinking about this for a very long time, way before there was AI. Well. That was the issue. So even in your industry, how is AI trading? How is AI changing what you guys do?

It helps research. It helps. I mean, the access to information, you know, you ask AI a question, you know, if you want to find out certain information that was more difficult to research in the past, boom, you got an answer now. Is it making your job harder because the speed of information is so much faster? There I would say no. I think I'm going to say something a little radical.

Information is overrated. And let me explain what I mean by that. You know, people think, you know, when they talk about what my partners and I did in 2007 and 2008, that somehow we had access to information that other people did not have. And that actually is not true. You know, the most important, the apps, I mean, there was a lot of different types of information. It was anecdotal information that we did a lot of, but the most important information out there was the securitization data that came out every

single month. And all you had to do to get that information was pay Moody's about $15,000 a year. I think that's what we paid. Well, I think whatever it was, but, but, but, but the, but you know what? The entire fixed income world had that information. They just didn't understand how to look at it. No, no, they understood how to look at it better than we did because they've been doing

that for years. We just interpreted it differently. They had made money for so long in this paper that they came up with all these psychological excuses. Well, yeah, that is came up with all these psychological excuses. Well, yeah, that is bad, but it'll get better. And so my view is that information is important, but it's the interpretation of the information that's even more important. Well, you know, it's funny because I was just talking about this with somebody else,

where you were talking about how Wharton has become, which don't get me wrong, I'm not a Wharton grad, but we're talking about how Wharton has become this school for great operators and more CEOs come out of Harvard than come out of Wharton. And I said, why do you think that is? And they said, because I think Wharton's school of business is very linear thinking. It's very, this must equal this. Whereas they felt that at Harvard it taught more open mindedness in a way to interpret the data. It's because this person was saying,

there's science in the numbers, there's science in the math, but there's also gotta be art and nuance to the interpretation, which is what makes big moves in the market, big moves in business. Is that something that you- Yeah, is that something that you-

Is that something that you guys would say was- I have something great to say about the University of Pennsylvania. I went there, I got a lot of problems with the score. I was I was not aware there was a war between you and the University of Pennsylvania when we started that question. That's public knowledge.

I was not aware. Is it public knowledge? That's public information. Yeah. All right. Well, chat dbt did not return that for us to hear war. So you might need to update your model But now I'm gonna go look it up. I'm gonna go find it. You should look it up. I'm gonna do that Well, Steve, thanks so much if they want to find you if they want to connect more with you. How do they find you? Just go to the eyes been played book comm that's our podcast website We'll have we'll soon have another website, which will be broader. It'll be Steve eismann calm, but it's not up yet

Okay, and I'll be droppingveisman.com, but it's not up yet. And I'll be dropping a podcast pretty much once a week. Perfect. We look forward to listening to that. And let me ask you one more question before we go on. Because I think this is one of the biggest problems with the world right now. And I want to know your process for this. How do you decide where you get your information?

Because there's so much of it out there. How do you decide this person's qualified, not qualified, this is a good source, that's a bad source. I mean, I'll tell you what I read, and then I'll tell you who I focus on. Okay. I read the newspapers every single morning. I come in, I turn on my Bloomberg and I look at the news.

And then what I do is I read a lot of sell-side research. And what I have found over the years is that, and there are exceptions to this, but generally speaking, the boutique firms, you know, little firms that most people haven't heard of, you know, not the Goldman Sachs's and Morgan Stanley's of the world, they're good analysts there too.

Tend to produce research. It's a lot, sometimes you could say unbiased, but I would say deeper dives into what's happening. And I tend to learn a lot more from those people. Cool. All right. Well, thanks so much. All right, guys.

Man, I hope that helped you today. And you actually have some information when you're sitting around the dining table with your mother who knows more about it than you do. You have some quality information from the man that probably knows more than all of us. But remember, man, I think if anything else, be careful where you get your information

because if you just start repeating something that's nonsense, it makes you look like nonsensical as well. We'll see you next week. What's up everybody. Thanks for joining us for another episode of escaping the drift. Hope you got a bunch out of it, or at least as much as I did out of it.

Anyway, if you want to learn more about the show, you can always go over to escapingthedrift.com. You can join our mailing list, but do me a favor. If you wouldn't mind, throw up that five star review, give us a share, do something, man. We're here for you. Hopefully, you'll be here for us. But anyway, in the meantime, we will see you at the next episode.