- Danny Moses compared the hype around meme stocks to the dot-com bubble.
- "The Big Short" investor called for the Fed to pump less money into markets.
- Moses said investors can capitalize on the current volatility to score big returns.
- See more stories on Insider's business page.
Veteran investor Danny Moses compared the stock-market boom to the dot-com bubble, underscored the dangers of excessive leverage and liquidity, and called for the Federal Reserve to temper its stimulus efforts in a recent RealVision interview.
Moses is best known as Steve Eisman's former head trader at FrontPoint Partners. He was profiled in "The Big Short," author Michael Lewis' book about the mid-2000s housing bubble and the contrarians who saw the crash coming. Eisman was portrayed by Steve Carell in the movie adaptation.
Moses now runs an investment fund called Moses Ventures, and co-hosts a podcast called "On The Tape." His latest warnings echo those of Michael Burry, another investor featured in "The Big Short."
Here are Moses' 16 best quotes, lightly edited and condensed for clarity:
1. "When I dig into the plumbing of a company, I never believe anything that a CEO says. They may be 99% telling the truth, but we always take it with a little bit of a grain of salt and then dig a little deeper."
2. "This market really reminds me of 1999-2000 and the meme stocks back then. There's really no difference between Yahoo chatrooms and Wall Street Bets and Reddit. It's really very similar - adding a dotcom back then or saying you're in crypto now."
3. "We're in a bull market, but it does not feel that way when you see all the underlying volatility in individual stocks."
4. "No one ever asks questions when a stock's going up." - commenting on ViacomCBS's stock price surging from under $12 to over $100 within 12 months as Bill Hwang's Archegos Capitalplowed billions of dollars into it.
5. "The average age of a Robinhood trader is 31 years old. They were 17 during the financial crisis, which means they've only known the Fed having their back. This is a liquidity-driven market, period. Money is still looking for a home, and it will find its way into whatever is the flavor of the day. That's a very dangerous, unsustainable model over the long term."
6. "I think the old-school ways - reading the 10-Ks and 10-Qs, the bottom-up analysis to take advantage of near-term displacement in stocks or near-term volatility that may be misinterpreted over the long haul - are how you really make your money over time. Even with the market as high as it is, this is the most potential alpha I have seen, both on the long and particularly on the short side here."
7. "Money's free right now. Risk-taking is at an all-time high. That's always going to come with problems over time. You're seeing pockets of blowups, whether it's Greensill, Archegos, whatever it might be. You're going to see a lot more of these things keep happening because this is what the Fed wanted. Their objective is to get everybody out on the risk curve, and out there lending, and out there buying, and doing those things."
8. "We're starting to see very, very loose underwriting in the consumer area because banks are freeing up the cash they were hoarding in anticipation of bad loans. Consumer credit is going to look the greatest it ever has in history. We're still in this euphoric phase where no one's going to worry about it yet. Whether there's going to be a CDO-esque product that blows up over time or something related to mortgages, I'm sure we'll get there eventually. But this is just the Wild, Wild West."
9. "We're going to see companies, we're going to see banks, we're going to see things fail that are outside of the control of the Fed. They came about because of the ability to leverage, and what people believe is that the Fed always has your back. Things will revert to the mean, and that's going to be painful. I just don't know when that's going to be."
10. "It's the leverage that kills the system. If things weren't levered, there would never be a systemic issue in the marketplace. People would never have a problem losing more than what they have put up. It's all related to liquidity. When there's this much liquidity, crazy things can happen."
11. "You couldn't justify a home in Orange County going from $200,000 to $600,000 from 2003 to 2005, because you know that's not sustainable over time. But I hear people talking about stocks now and creating the narrative or the story that somehow matches the valuation. 'Oh no, they're going to spin out this. Oh no, they're getting into bitcoin. They're mining, they're doing this, they're doing that.' As soon as that story ends, where do you buy it? Where do you buy an EV company that SPAC'd that promises to have revenue in 2025? You're starting to see disenchantment in the market now on the retail side."
12. "Maybe if WeWork had made it public, it would be a $200 billion company. Because people are like, 'Wow, I get it. This story is so interesting.' But at the time, logic tells if you were looking at WeWork's market cap, it was bigger than all of the REITs of the office-property companies put together. It's almost like you say to yourself, 'Oh, that was obvious that WeWork would blow up.'"
13. "Those type of things happen when money is free, no one's watching, regulations are pulled back, and people give them a rope. Look what they can do to themselves, it's really scary." - discussing the Credit Suisse and Greensill Capital fiasco.
14. "What's really bothering me right now is the Fed's inability to wean off of $120 billion a month in purchases - $80 billion in treasuries and $40 billion in mortgage-backed securities. What are we so afraid of? How dangerous is it right now that you can't even start to even indicate that you're going to stop that? You look at our debt approaching $30 trillion, and we're trying to put together an infrastructure bill that needs funding, and you're going to have higher taxes. Somewhere along the line, we're going to pay the piper for all this stuff we're doing."
15. "It's scary, because every time we've seen the Fed try to pull back, even indicate anything, we've seen rates move higher, which widens credit spreads, which sends stocks lower, and then there's backtracking. 'No, no, we're kidding. We didn't mean that.'"
16. "There's so many programs going on right now - forget about stimmy checks and that stuff, that's fine. But come on, the Fed, it's time to pull back a little bit. It's too much. At some point, they might lose control."