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Technology will not prevent next bubble, Eisman says


According to Market Intelligence, December 2022


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Technology will not prevent next bubble, Eisman says

A prominent investor credited as being one of the first to detect the financial crisis said that advancements in technology will not prevent the next bubble from forming.

Steven Eisman, a managing director at Neuberger Berman, said at an International Monetary Fund-World Bank Group Annual Meeting seminar that technology used to data mine financial information will not alone detect the next bubble that may lead to another financial crisis.

Eisman is one of several investors and money managers who were featured in the book and film The Big Short, which detailed the collapse of the U.S. subprime mortgage market and ensuing financial crisis.

"Can technology prevent future bubbles? I think the answer is clearly [that] it can't, because there's no such thing as naked facts," he said. Data mining and algorithms can provide tools for looking at the potential for new bubbles, but "they're just tools," he explained.

Currently, U.S. markets are on solid ground, Eisman said. Post-crisis reforms reoriented consumers, companies and regulators in a positive way, he said.

"I can say for the first time in [the] almost 30 years that I have covered the financial services sector [that] I think the financial system in the United States is actually safe," Eisman said. "I've never felt that way before."

When asked what one regulation he would change, he said he would make the Consumer Financial Protection Bureau a permanent entity.