Steve Eisman, the Neuberger Berman Group fund manager who featured in Michael Lewis's book "The Big Short," said he's concerned about the U.S. subprime-auto market, even though credit quality across the banking system has improved significantly.
"Banks make mistakes on credit quality and we are in an environment where credit quality has never been this good in anyone's lifetime, with the one exception of subprime auto," Eisman said in a Bloomberg TV interview on Friday. He added, though, that it's not a big enough asset class to cause problems for the financial system as a whole
Eisman, who joined Neuberger Berman after closing his hedge fund Emrys Partners in 2014, said that the banking sector will undergo gradual deregulation and become more leveraged over the next several years under U.S. President Donald Trump. He picked the technology industry as fertile hunting ground for stock pickers and singled out Motorola Solutions Inc. as a relatively cheap buy.
Subprime car debt is becoming the latest problem area in finance, with consumers falling behind on most of their loans, Morgan Stanley analysts said this week. Wall Street banks have become more willing to underwrite asset-backed securities packaging the loans as new regulations brought in after the financial crash make it harder for them to make a profit.
