The investor, on whose life the movie ‘Big Short’ was made, is not concerned about the USA’s financial system. It stated that it is sound with a low risk of undergoing a crisis again like the recession that happened over 10 years ago.
However, he voiced his concerns about the current protests in Hong Kong, which he said could hurt trade deals with China, hurting global markets. Eisman stated that Hong Kong was the only black swan at the moment. If events escalated there, the world economy would take a massive hit.
Thousands of citizens have staged rallies across Hong Kong, since June, opposing an extradition bill, which would have authorized the extradition of Hong Kong citizens to the Chinese mainland for legal judgments. These protests show how much discontent the citizens harbor against Hong Kong’s government. The bill has been suspended but it hasn’t been withdrawn yet. Citizens have been enraged about this and are demanding full democracy now.
Black Swans are usually tough to predict, which increases their damage to the world’s economy. The 2008 Great Recession was a result of one such event. Neuberger’s portfolio manager and managing director stated that Hong Kong’s protests were only escalating day-by-day.
Protestors aren’t backing down and neither is China’s government. Currently at a stalemate, Hong Kong’s political situation could turn very ugly if negotiations aren’t initiated immediately. Eisman predicted the Hong Kong issue to adversely impact the ongoing US-China trade war. Global markets everywhere would be hurt due to this, he said.
China and the US have been negotiating for more than a year now. China had reneged on trade deal terms in May, which set off a tit-for-tat tariff hike war between the two countries. A currency manipulation war has also been initiated by China, which has hurt markets greatly and dampened business and investor sentiment. Eisman stated that Hong Kong citizens were coming out in millions every week to fight for their rights. A violent retaliation could begin at any moment now. Eisman is famous for having predicted the 2008 Global Recession, which was later made into a book and a movie. He is currently holding a short position on Zillow.