Steer clear of these stocks where the economy is in trouble, says Steve Eisman of ‘Big Short’ fame

Investors and forecasters have been twisting themselves into knots this year trying to predict an economic pullback. Wall Street now seems to be shifting toward first quarter, as Jones has newly forecast.

It’s a mug’s game — predicting a recession, that is — Steve Eisman, portfolio manager at Neuberger Berman, told CNBC Tuesday on a “Fast Money” segment.

Eisman is another Wall Street legend, earning his stripes making lucrative bets against the U.S. housing market just before the 2008 collapse and global financial crisis. He got an extra shot at fame after being depicted by Steve Carell in the 2015 hit, “The Big Short,” based on the same-name Michael Lewis book about those bets.

In our call of the day, Eisman lays out where investors should be focusing their concerns right now, offering sectors and parts of the economy to avoid.

First up, “the consumer is fine, it’s fine,” he tells the broadcaster. “The consumer has savings, the consumers is employed, the consumer has income. So it’s not a data point, in terms of there being a recession, where I think you could be negative, it’s just that rates are a lot higher.”

So it’s more expensive to buy a house, or car and any part of the economy that requires the consumer needing finance to buy something will be problematic, he said. “That’s not an indictment of the consumer, that’s just a mathematical fact.”

Eisman said he wouldn’t own home builders right now. The SPDR S&P Homebuilders ETF
XHB
is up 27% this year, though down 9% from its late July peak.

While they’ve had a “great run,” builders have also been “subsidizing their customers with lower rates, but even that’s going to bite. I wouldn’t be involved with building products to any significant degree on the residential side. I don’t think you should buy…somebody who finances cars or used cars. Anything in that universe is just going to have trouble, just because of simple math,” he says.

And the housing market is “locked,” with people not buying or selling. That said, he doesn’t think the housing market is as important for the economy as it was in 2008. “I’m surprised as everyone else that the economy is a strong as it is, you have to respect it.”

So he thinks the consumer is not bad off, just not as able to buy the big ticket items as before, and that will continue as people try to rebuild savings. “You would have thought given what’s gone on with rates the economy would be in a recession. And not only are we not in a recession, we’re not even close to a recession.”

On that note, Eisman said “everyone should have a little humility at this point” about predicting recessions, noting lots of people have been wrong. The data currently shows no recession and so now investors just need to wait for that data point to say what is happening. he says.

Ahead of this week’s flood of bank results, Eisman says banks are “uninvestible,” and not worth buying just because they’re cheap. He added that he wouldn’t buy Bank of America
BAC,
+2.66%
because it has an “earnings problem,” not a capital issue or solvency problem. “It’s a question of what do you want to pay for a bank that has a net interest margin problem.” According to FactSet, Bank of America’s forecasted net interest margin is 5.4%, compared to over 7% at JPMorgan and over 8% at Citigroup.

The markets

Stock futures
ES00,
+0.28%

YM00,
+0.26%
are climbing, with bonds yields
BX:TMUBMUSD10Y
continuing to ease. Oil prices
CL.1,
-1.05%
are lower, and gold
GC00,
+0.53%
may be ready to notch a fourth day of wins. Asia stocks trading largely ended in the green.

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The buzz

Producer price data is coming at 8:30 a.m., with the minutes of the Fed’s September meeting at 2 p.m.

Exxon Mobil
XOM,
-0.42%
has confirmed a $59.5 billion all-stock deal to buy Pioneer Natural Resources
PXD,
+0.76%.
Shares of both are up modestly in premarket trading.

A trial success of Novo Nordisk’s
NOVO.B,
+4.49%
kidney failure drug is hitting dialysis services firms, with shares of DaVita
DVA,
+3.14%
and Baxter International
BAX,
+2.27%
down 14% and 18%, respectively.

German sandal maker Birkenstock
BIRK,

priced its initial public offering at $46 a share ahead of Wednesday’s New York debut.

Silk Road Medical shares
SILK,
-0.71%
tumbled 33% after a downbeat forecast from the medical device company, which said its CEO was retiring.

Walgreens Boots
WBA,
+0.49%
has named a new CEO — former head of Express Scripts , Tim Wentworth.

Dialysis companies including Fresenius Medical Care
FMS,
+0.92%
and DaVita
DVA,
+3.14%
slumped after a study on Ozempic versus kidney disease was ended early due to efficacy. Novo Nordisk
NVO,
+1.03%
shares rose.

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