Steve Eisman, the investor made famous by his bet against the US housing market ahead of the 2008 financial crisis, says retail traders have not been this aggressively bullish since they were stuck at home with stimulus checks five years ago.
In a new episode of The Eisman Playbook, Eisman says the data behind the retail enthusiasm is specific and alarming.
“Retail traders are buying calls in CBOE’s MAG10 stocks, which are the big seven, plus AMD, Palantir, and Broadcom, at the heaviest 10-day clip since 2021, according to a report from The Exchange. Of new positions opened, 52% were call buying and 17% were call selling.”
Looking at the broader market assumptions driving the rally, Eisman says one in particular concerns him.
“Part of the rally is an assumption by the market that the war is over. And I’m just not sure that is right.”
While Eisman says he is not calling for a recession, he notes that the current market dynamics are difficult to ignore.
“Making market calls is notoriously difficult. I am not calling for a recession because there is no evidence that one is on the horizon. But I have to admit, I am nervous about the sustainability of this melt-up.”
On what he is actually doing with his own portfolio in response, Eisman says he has already made a move.
“This week, I lightened up, especially on my high flyers, because this market is feeling bubbly. And that makes me nervous.”
Photo by Joshua Mayo on Unsplash
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