THEY'RE JUST TRYING TO DO THE BUSINESSES THAT THEY HAVE BEEN TASKED TO DO. >> ALL RIGHT MEANTIME, OUR NEXT GUEST IS KNOWN FOR CALLING AND PROFITING FROM THE HOUSING CRISIS AND WHEN IT COMES TO THE LATEST UPHEAVAL ON WALL STREET, STEVE EISMAN IS TELLING INVESTORS, DON'T BE A HERO HE'S A SENIOR PORTFOLIO MANAGER AND JOINS US HERE ON SET WELCOME BACK TO "FAST MONEY. GREAT TO HAVE YOU ON A DAY LIKE TODAY. I THINK, YOU KNOW, YOU NAVIGATED PAST CRISES SO WELL. THE NUMBER ONE QUESTION HERE IS DO YOU SEE ANY SORT OF A BANKING CRISIS UNFOLDING HERE IN THE UNITED STATES AND/OR IN EUROPE >> YOU KNOW, MY PARTNERS AND I LOOKED AT THIS REALLY CAREFULLY. I WOULD SAY, NUMBER ONE, THE LARGE U.S. BANKS ARE BETTER CAPITALIZED AND HAVE LESS RISK THAN THEY EVER HAD IN ANYONE'S LIFETIME THE EUROPEAN BANKS, WHILE THEY'RE NOT AS WELL CAPITALIZED, THEY'RE BETTER CAPITALIZED THAN THEY ARE THAT ISN'T TO SAY IT WON'T BE PAIN IF CREDIT SUISSE GOES DOWN. IT IS NOT AN '08, THANKFULLY >> SO THE COUNTERPARTY RISK IN TERMS OF TRANSMISSION MECHANISM, THAT DOESN'T EXIST >> IT DOES EXIST IT JUST -- I MEAN, PEOPLE HAVE BEEN PULLING BACK FROM CREDIT SUISSE FOR A LONG TIME IF YOU HEAR THAT THE COMPANY GOES BANKRUPT, THERE WILL BE LOSSES IT IS NOT DEATH-DEFYING LOSSES BUT IT IS NOT GOING TO TAKE DOWN THE SYSTEM >> IN TERMS OF WHAT WE HAVE SEEN IN THE REACTION ACROSS THE EUROPEAN BANK SECTOR, I GUESS IT IS -- EVERYBODY WANTS TO GET OUT AND FIGURE OUT -- >> IT IS A LITTLE PIT OF WHAT I CALL PTSD FROM 2008. IT IS NOT A BAD STRATEGY BECAUSE THE NEWS IS PROBABLY GOING TO GET WORSE. THE NEWS THAT SWITZERLAND IS TRYING TO BAIL OUT THE COMPANY, TO GIVE YOU A PERSPECTIVE, I REMEMBER IN 2008, WHEN EVERYBODY WAS TRYING TO GET BAILED OUT, YOU KNOW, IF YOU LOOKED AT THE U.S., THE SIZE OF U.S. GDP WAS MANY MULTIPLES BIGGER THAN ALL THE BANK BALANCE SHEETS COMBINED WE LOOKED AT CREDIT SUISSE TODAY, CREDIT SUISSE BALANCE SHEET IS $500 BILLION. THE GDP OF SWITZERLAND IS $800 BILLION. SO, COULD SWITZERLAND DO SOMETHING? THEY COULD DO SOMETHING. IT IS NOT GOING TO BE EASY NOT EASY AT ALL. THE OTHER THING I SAY ABOUT SWITZERLAND, UNFORTUNATELY, IS THEY REALLY DON'T HAVE A LOST REGULATORS WHAT THEY ACTUALLY KNOW IS -- I DON'T THINK THEY KNOW A LOT. >> THAT'S FRIGHTENING. AND ALSO -- >> IN TERMS OF THE NUMBERS, IF YOU LOOK AT GERMANY, WHAT I HEARD IS IT IS LIKE 500 REGULATORS IN DEUTSCHE BANK. EVERY DAY. >> RIGHT >> I THINK THE NUMBER OF REGULATORS OF THE SWISS BANK IS LIKE 250 FOR THE WHOLE SECTOR. >> BUT THAT SAME IMPAIRED WITH THE NOTION THAT CREDIT SUISSE MIGHT BE TOO BIG TO SAVE IS SORT OF A FRIGHTENING -- >> IT IS FRIGHTENING AND NOT FRIGHTENING. IT IS UGLY CREDIT SUISSE, I'LL SAY EUPHEMISTICALLY HAS BEEN A PROBLEM CHILD IN THE BANKING INDUSTRY FOR AS LONG AS I CAN REMEMBER, ALWAYS HAD CULTURAL ISSUES BUT, YOU KNOW, IT WILL BE UNWOUND, IT WILL BE PAINFUL, ONLY PAINFUL FOR SWITZERLAND IF I -- YOU HEARD TODAY THERE MAY BE ONE, UBS TO TAKE IT OVER. TRUST ME, THEY DON'T WANT TO TAKE IT OVER, THAT'S FOR SURE. IS IT POSSIBLE THEY COULD SAVE THEM MAYBE. BUT THE CREDIT DEFAULT SWAPS LIKE 800 BASIS POINTS, YOU CAN'T FUND YOURSELVES. I HEARD THEY WERE OFFERING 6% TO 7% DEPOSIT RATES IN ASIA AND PEOPLE WERE STILL PULLING THEIR MONEY. AND NOBODY WILL BE A COUNTERPARTY ANYMORE THAT'S MORE THAN BAD THAT'S REALLY BAD. SO HOW WOULD SWITZERLAND WILL DEAL THIS IS ANYBODY'S GUESS I'M NOT IN THE ROOM. >> SO, LET'S SWITCH TO THE U.S. FOR A MINUTE WITH WHAT'S HAPPENED OVER THE LAST WEEK THAT HAS BEEN REVEALED AND WHO KNOWS WHAT HASN'T BEEN REVEALED YET, DO YOU SEE THAT WE'RE IN A NEW ERA NOW FOR REGIONAL BANKS FOR WHAT THE MODEL WILL BE AND HOW TO THINK ABOUT THE WHOLE BANKING STRUCTURE, THE WHOLE SORT OF BUSINESS OF BANKING? >> IT IS NOT A FIVE-MINUTE QUESTION YOU KNOW, LET'S SEE, WHERE CAN I START? LET ME START WITH, YOU KNOW, WHEN PRESIDENT TRUMP PASSED THAT BILL AND RAISED THE THRESHOLD FROM, I THINK IT WAS 50 TO 250, NOW I THINK THAT WAS BAD I THINK ELIZABETH WARREN HAS A REAL VALID POINT ABOUT IT. BUT I -- WE LOOKED AT THE STRESS TEST FOR LAST YEAR AND THE STRESS TEST FOR LAST YEAR HAD ABOUT A LINE IN IT ABOUT RISING RATES AND THE REST OF THE ENTIRE STRESS TEST WAS ABOUT CREDIT SO, EVEN IF SILICON VALLEY HAD BEEN IN THE STRESS TEST, GIVEN WHAT THE STRESS TEST SAYS, I DON'T THINK THE REGULATORS WOULD HAVE CAUGHT IT. >> THEY WOULD HAVE PASSED IT. >> AND THE STRESS TEST IS BASICALLY FIGHTING THE LAST BATTLE THAT BATTLE HAS BEEN WON IN THE LARGE BANKS. BETTER CAPITALIZED, THEIR RISK WITH THE CAPITAL IS MUCH NARROWER AS WARREN BUFFETT SAYS, WHEN THE TIDE GOES OUT, YOU SEE WHO IS NAKED. THIS IS NOT A TIDE THIS IS A TIDE OF A MISTAKE, WHICH IS SOME OF THE REGIONAL BANKS, ESPECIALLY THOSE WITH A LOT OF DEPOSITS ABOVE 250 BOUGHT LONG-TERM BONDS AT VERY, VERY LOW LEVELS AND HAVE MASSIVE MARK-TO-MARKET LOSSES. THAT'S WHY SILICON VALLEY FAILED THEY HAD A VERY CONCENTRATED TYPE OF DEPOSIT BASE, WHICH HAS A VERY BIG HERD MENTALITY. >> IT WOULD BE VERY HARD TO REGULATE I MEAN, IF YOU APPLY THE STRESS TEST TO A SILICON VALLEY THAT MAY NOT HAVE DETECTED THE -- >> THE STRESS TEST THEY HAD WOULD NOT HAVE DETECTED THEIR PROBLEMS. >> RIGHT BECAUSE NOBODY WAS LOOKING FOR AN INTEREST RATE RISK ON THE BALANCE SHEET. YOU'RE JUST LOOKING FOR LIQUIDITY. >> THAT'S WHAT THE STRESS TEST HAS BEEN FOR THE LAST TEN YEARS. >> IT IS HARD TO THINK OF A -- IN TRYING TO FIGURE OUT WHETHER OR NOT YOU INVEST IN REGIONAL BANKS, YOU FIGURE OUT WHAT CAN THEY REGULATE TO PREVENT THIS, THIS IS A VERY SPECIFIC SITUATION OF INTEREST RATE RISK WHICH MAY NOT COME UP AGAIN FOR A LONG TIME. >> WE HAVE IT NOW. AND WHAT I WOULD SAY TO THAT IS, SO, OVER THE WEEKEND, WE WERE THINKING, OKAY, SO, LET'S SAY THE GOVERNMENT DOESN'T BAIL ANYBODY OUT. SO, CLEARLY JPMORGAN AND BANK OF AMERICA BENEFIT. AND IT TURNSED OUT EVEN THOUGH THEY GOT BAILED OUT, JPMORGAN AND BANK OF AMERICA BENEFITED. OUR FIRST THOUGHT WAS, MAYBE WE SHOULD BUY JARGPMORGAN AND BANK AMERICA AND THEN THEY THOUGHT MAYBE NOT. BECAUSE GIVEN WHAT JUST HAPPENED, ALL THE REGULATIONS ARE PROBABLY GOING TO GET MUCH MORE STRINGENT, MAKING THE BANKS MUCH LESS PROFITABLE, AND THAT'S NOT GOING TO BE CLEAR FOR MANY, MANY MONTHS, SO WHY BE A HERO? BECAUSE YOU HAVE ABSOLUTELY NO IDEA WHAT IS GOING TO HAPPEN. >> WOULD YOU SAY THE BANKING SECTOR NOW WITH THE UNCERTAINTY GIVEN WHAT WILL HAPPEN ON A REGULATION FRONT THAT FINANCIALS ARE ARE UNINVESTABLE RIGHT NOW >> I WOULD SAY NO, WE WERE LOOKING AS A TEAM AT EVERY SINGLE BANK. I WOULD SAY GIVEN THE CHANGE IN THE REGULATIONS, THE BEST YOU CAN SAY IS YOU DON'T KNOW. AND IF YOU DON'T KNOW, YOU SHOULDN'T PLAY >> WOW SO THEN WHAT DO YOU DO LET'S SAY YOU DON'T KNOW, WE DON'T WANT TO PLAY IN THIS POOL, WHAT POOL DO YOU GO TO >> THAT'S NOT AN EASY QUESTION >> BUT, I MEAN -- >> I THINK WHAT'S HAPPENING IS WE'RE MOVING FROM ONE PARADIGM TO ANOTHER PARADIGM. SO THE PARADIGM OF THE LAST SEVERAL YEARS HAS BEEN RATES ARE VERY LOW, YOU'RE PAID TO TAKE RISKS, AND YOU'RE ACTUALLY PAYING TO TAKE A LOT OF RISK SO, YOU KNOW, WHAT DID THE BEST OF THE LAST TEN YEARS, HIGH GROWTH TECH STOCKS AND WHAT DID THE BEST WITHIN THE HIGH GROWTH TECH STOCKS? SUPER HIGH GROWTH REVENUE STOCKS WITH NEGATIVE EARNINGS OKAY SO WHAT DID THE WORSE LAST YEAR? SUPER HIGH GROWTH STOCKS WITH NEGATIVE EARNINGS. ARE PEOPLE GOING TO GO BACK TO THAT I DON'T THIS I SO, NK SO IF RAT UP WHAT IS COMING IS TINA IS DEAD NUMBER ONE, I THINK YOU'LL HAVE A MUCH MORE DIVERSIFIED PORTFOLIO. YOU CAN LEAVE MONEY IN YOUR MONEY MARKET FUND BECAUSE IT IS OVER 4%. I'M NOT SURE IF IT IS OVER 4% TOMORROW BUT IT IS STILL AROUND 4%, WHICH IS FINE. I THINK OVER TIME YOU'LL BE ABLE TO BUY SOME TREASURIES AND BUY SOME BONDS AND THEY'RE GOING TO BE A LOT MORE THEMES THAN JUST TECH, INFRASTRUCTURE, BRINGING THE SUPPLY CHAIN BACK TO THE UNITED STATES AND YOU'RE GOING TO NEED TO MANAGE RISK A LOT MORE THAN PEOPLE HAVE. SO, PEOPLE WHO HAVE -- WHO OUTPERFORMED OVER THE LAST TEN YEARS? TECH INVESTORS THE GROUP IS NOW SO VOLATILE, I THINK EVERYBODY SHOULD TAKE THEIR EXPOSURES DOWN NOT THAT YOU SHOULD INVEST IN TECH AT ALL, BUT YOU SHOULD DIVERSIFY MORTE OF YOUR PORTFOLIO, TAKE DOWN YOUR RISK, MANAGE YOUR RISK, ONE SIZE DOES NOT FIT ALL. AND GIVEN THE FACT THAT, YOU KNOW, MY TEAM AND MY PARTNERS AND I, WE GO BACK EVERY SINGLE DAY, IS THERE A RECESSION, IS THERE NOT A RECESSION? I WATCH YOUR SHOW, YOU HAD PEOPLE COME ON AND SAY THERE IS A RECESSION AND THEN A MONTH LATER, IT IS NOT A RECESSION IT IS A VERY URN CNCERTAIN TIME BECAUSE WE NEVER HAD THE CONFLUENCE OF STUFF WE HAVE TODAY. THAT ARGUES FOR TAKING LESS RISK. >> RIGHT >> BUT, STEVE. >> IF WE HAVEN'T HAD RECESSION YET, AND THE S&P NEVER BOUNCED, IN TERMS OF MARKET SEQUENCING AND WE HAVE SEEN CREDIT REVERBERATIONS AND BUBBLES JUST START, HOW DO YOU SEE THIS PLAYING OUT, BOTH IN TERMS OF YOU DOECN'T NEED TO GIVE US THE CRYSTAL BALL >> THE GOOD NEWS IS GOOD, THE BAD NEWS IS BAD. IN FEBRUARY, GOOD NEWS WAS BAD AND BAD NEWS WAS GOOD. LET'S TALK ABOUT NEXT WEEK 50 BASIS POINTS IS OFF THE TABLE. EITHER THEY'RE GOING TO DO 25 BASIS POINTS OR NOTHING. SO LET ST'S START WITH THE NOTH. I GOT CALLS FROM TODAY THAT -- BECAUSE OF CREDIT SUISSE, MAYBE THE FED WILL DO NOTHING AND THAT'S REALLY POSITIVE AND MY RESPONSE WAS, REALLY? YOU'RE ROOTING FOR A FINANCIAL CRISIS SO THAT THE FED WON'T RAISE RATES? THE FED DOESN'T RAISE RATES, MAYBE IT WILL BE POSITIVE FOR A COUPLE OF HOURS OR WEEKS, BUT THE FED WON'T BE RAISING RATES BECAUSE IT IS SCARED WELL, IF THE FED IS SCARED, YOU SHOULD BE SCARED ON THE OTHER HAND, IF THE FED RAISES RATES, EVEN IN THE FACE OF THIS BY 25 BASIS POINTS AND SAYS WE STILL COULD RAISE MORE, THEN THAT'S, LIKE, WAIT A MINUTE, YOU'RE CAUGHT BETWEEN A ROCK AND A HARD PLACE. FINANCIAL CONDITIONS HAVE REALLY TIGHTENED, YOU STILL HAVE INFLATION, NOT CLEAR -- IT IS NOT CLEAR EITHER MOVE IS GOOD. >> BACK BE TO THE RAMIFICATIONS OF THE REGIONAL BANK FALLOUT YOU SAID YOU WOULDN'T WANT TO PLAY GIVEN THE UNCERTAINTY THERE, BUT DOES THAT ALSO MEAN YOU WOULDN'T SHORT ANYTHING AND DOES THAT MEAN YOU'RE NOT ALSO LOOKING AT SOME OF THE RIPPLE EFFECTS PERHAPS MAYBE ON COMMERCIAL REAL ESTATE IF THEY HAVE LESS ACCESS TO CAPITAL BECAUSE OF -- >> I DON'T WANT TO TALK ABOUT INDIVIDUAL SHORTS. >> OKAY. >> DO I THINK THE BANKING SECTOR IS STILL A SHORT IT IS IMPLODED SO, I MEAN, WOULD YOU WANT A SHORT SOME OF THE BANK STOCKS AFTER SOME OF THEM ARE DOWN 60%, 70%? I MEAN, GOT TO HAVE A LOT OF PROBABLY BETTER TO MOSTLY STAY AWAY DO I THINK COMMERCIAL REAL ESTATE, NOT COMMERCIAL REAL ESTATE, OFFICE REAL ESTATE IS GOING TO BE A PROBLEM? YEAH, WE DO. WE THINK OFFICE REAL ESTATE -- BUT, YOU KNOW, THE WAY THE THINGS UNFOLD, IT TAKES A LONG TIME I THINK WHAT THE CATALYST WILL BE, IT DEPENDS ON EACH COMPANY, WHEN THEIR DEBT ROLLS OVER IF SOMEBODY BOUGHT THAT BUILDING, TWO YEARS AGO, WITH LONG-TERM DEBT AT 3%, AND LET'S SAY IT IS FIVE-YEAR PAPER AND IN FIVE YEARS, IT IS GOING TO ROLL OVER AND IT IS GOING TO BE
