Steve Eisman’s Market Calls: Middle East Conflict & a Trade War 6/17/25
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President Trump makes an abrupt departure from the G7 in Canada, citing the strikes between Israel and Iran as top priority. And Steve Eisman, the big short investor who famously bet against the housing market before the financial crisis...

He warns against the worst-case scenarios. People have been making those kind of predictions for 40 years. Why haven't they ever come even close to true? But defends his right to make prognostications. Sometimes I'm too early. And in our business, if you're one or two years too early, it's equivalent to being wrong. But the world can only end once. You just don't want to be late for that.

Then-former FDA Commissioner Dr. Scott Gottlieb on the future of the agency he used to run and the costs of cutting health funding. A lot of the cuts that they've made, they're going to have to figure out a way to either spend the money on the grants that it was allocated towards or find other ways to spend it. And so I think you could see a bolus in NIH spending towards the later half of this year.

Plus, reported drama between OpenAI and Microsoft, and a crypto billionaire headed to U.S. markets. It's Tuesday, June 17th. SquawkPod begins right now. Stand back, you buy in three, two, one, cue, please. Good morning, everybody. Welcome to SquawkBox right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan. Andrew is off today.

I'm looking for a ceasefire. I didn't say I was looking for a ceasefire. What specifically is better than a ceasefire? What are you looking for? An end. A real end, not a ceasefire. An end. So something that would be permanent? Or giving up entirely. Is that okay, too? They should have done the deal. I told them, do the deal. So I don't know. I'm not too much in a mood to negotiate now.

President Trump, as we said, arrived back in Washington just a short time ago. The conflict between Israel and Iran prompted him to leave a meeting of G7 leaders in Canada a day early. In comments made aboard Air Force One on the way back to the U.S., Trump said he was looking for something better than a ceasefire between Israel and Iran. He said in his words, "I'm not too much in the mood to negotiate with Iran.

The president is looking for a complete give up by the country. On Truth Social, shortly after landing, he said he has not reached out to Iran for peace talks and that if the country wants to talk, it knows how to reach him. This follows a post on Truth Social that got a lot of attention last night. The president wrote, Iran should have signed the deal.

I told him to sign. What a shame and a waste of human life. Simply stated, Iran cannot have a nuclear weapon. I said it over and over again. Everyone should immediately evacuate to Iran. I don't understand. Is this more pushing and pressure to try and get Iran to the table? Or is this basically...

signaling exactly what you're going to do ahead of time, which seems incredibly bizarre. If you actually have plans to do something. Bordeaux's not in Tehran, but that's the question. Macron said, OK, he's going back to continue on peace talks. And he said, no, I'm not. Macron doesn't know what he's talking about. There are supposedly Iran has reached out through many different channels.

which is probably not surprising given that they don't have maybe a lot of options at this point. I think the president realizes, and the United States wasn't directly involved, obviously, but it's clear that what Israel has been able to accomplish in the early part of this conflict. So I think President Trump thinks that

he and Israel are in a position to really finally squeeze some actual concessions that would have to be verifiable. If that's not going to be clear, I think, to Israel and President Trump, I think you could be looking at further escalation. If that's the case, why tell anybody? Because I think, I mean, in a perfect world, wouldn't the best thing be for...

special forces that take out Fordow and not... Sure, but you lose the element of surprise if you are basically messaging that that's what's coming. Well, I don't know what you're saying. To Iran, they're just saying, look, this is... It looks at this point like whatever Iran talks about conceding concessions, he says it's not going to be enough. He wants more than just a ceasefire. And you know, the way Iran has negotiated in the past...

Yeah, they have not been very forthright. They haven't followed these rules. A total give up. That's exactly what the IAEA just said. Can they do a total give up? I don't know if they're capable of a total give up of nuclear aspirations. Yeah, I don't know.

president trump and britain's prime minister keir starmer signing an agreement to formally lower some tariffs on imports to the u.s from the uk this was announced on the sidelines of the g7 summit in canada it does affirm quotas on british cars and gets rid of tariffs on the uk aerospace sector it doesn't resolve the issues surrounding steel and aluminum

And the agreement is short of a formal trade deal. Instead, it implements some of the general terms of the agreement that we heard about in principle that was announced between the two countries back in May.

In other trade news, President Trump says that he doesn't think the European Union is offering a fair trade deal. At least not yet. He made that comment overnight on Air Force One. Additionally, Pakistan saying that it held high-level tariff talks yesterday with Commerce Secretary Howard Luttnick and that both sides are resolved to finalize a trade deal, they say, at the earliest.

Similar comments from Thailand overnight. The country's finance minister saying that trade teams began trade negotiations virtually yesterday. He said that after the talks, Thailand will adjust its proposal and submit it officially within this week.

Some potential trouble for the Microsoft OpenAI partnership. In a new report, the Wall Street Journal details difficult negotiations between the two parties on OpenAI's push to convert to a for-profit company. The journal says that things have gotten so tense that OpenAI executives have considered accusing Microsoft of anti-competitive behavior. It's called the nuclear option on this, the thing that would...

probably blow up their relationship for forever. Another issue concerns Microsoft's access to OpenAI's technology. The report says that OpenAI doesn't want Microsoft to have access to the intellectual property of a coding company that it's buying called Windsurf. Of course, Microsoft has been a great long-term partner of OpenAI's. It's been one of the most closely watched and

best looked at relationships, but things have gotten quite a bit more tense in recent years. There are questions about how much Microsoft will own in this new company if it is converted to for-profit, but Microsoft has to sign off in order for it to do that. And this sign-off has to come before the end of the year in order for OpenAI to keep something like $20 billion of the money that it's raised from outside.

Now, there was a joint statement from OpenAI and Microsoft provided to CNBC that says, we have a long-term productive partnership that has delivered amazing AI tools for everyone. Talks are ongoing, and we are optimistic that we will continue to build together for years to come. ♪

Crypto billionaire Justin Sun is taking his Tron group public in the U.S. via a reverse merger with a small Nasdaq listed toy company called SRM Entertainment currently makes toys and souvenirs for theme parks like Smurfs water bottles.

As of yesterday, that company had a market cap of just $25 million. It's going to change its name to Tron. Justin Sun has been named an advisor and it has signed an agreement for a $100 million investment to be used to acquire Tron's TRX digital tokens.

Sun made news last month when he attended a gala dinner with President Trump for the largest holders of Trump's meme coin. In 2023, Sun was accused by the SEC of manipulating the market for the TRX tokens. In February, the SEC asked a court to pause that lawsuit as part of a broader rollback of crypto enforcement under the Trump administration. Tease will be next.

Still to come, investor Steve Eisman, why the Wall Street Watcher is optimistic about the state of conflict in the Middle East. If Iran had gotten nuclear weapons, that would have meant that Turkey would have wanted nuclear weapons, Saudi Arabia would have wanted nuclear weapons, the entire region would have armed, and that would have been a disaster. Eisman's market predictions and more when SquawkPod returns.

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This is SquawkPod. Stand by Joe. Here's Mike. Cue.

You're watching Squawk Box on CNBC. I'm Joe Kern along with Becky Quick. Joining us right now is Steve Eisman. He is the host of the Real Eisman Playbook podcast. He's also former senior portfolio manager at Neuberger Berman. And Steve, we always love having you in. Thank you for having me again. Thanks for coming in to talk today. We just teased that you are not worried at this point about the Fed. You're not really focused on the deficit at this point. What are you focused on? Two things. Tariffs and the potential for a trade war, I think, is...

really the only risk to the market right now. It's completely binary and I really have no way of handicapping it. And then, you know, what's going on in Iran right now, I think is actually potentially extremely positive for both markets and the globe. Okay. Talk about the positivity on Iran, because most people look at that and think, oh my gosh, potential for a wider war. What does that mean? So I'm

play it out as if nothing had happened you know iran as we all know was very cl was very close to getting a nuclear weapon and unfortunately iran is run by a government and the only way you could call it is a death cult and so if iran had gotten nuclear weapons that would have meant that turkey would have won nuclear weapons saudi arabia would have won nuclear weapons the entire region would have armed and that would have been a disaster so

Getting rid of a death cult anywhere on planet Earth, I think, is a very positive thing, especially when that death cult is close to getting nuclear weapons. Was the market kind of factoring that in before, or this is a known, not known, but the market was ignoring? I think the market was just not focused on it, and now it's focused on it, but I think potentially it's unbelievably positive.

OK. Tariffs and trade. How do you figure that? Because we were just talking GDP estimates with Steve Leisman. Economists that CNBC surveyed think that it's going to hurt the GDP for the remaining quarters of this year. But they do think it kind of shrugs it off next year and the economy is back and growing at a normalized pace. Well, I think that's very true if there's no trade war.

That's why I say the situation is very binary. So look, if we reach deals with all these countries and there's no trade war, I'm very positive in the U.S. economy long term and I would be very positive on the markets. But if there's a trade war, chances are we go into a global recession. And, you know, it reminds me a little bit about all the books I've read in life about World War One. Nobody wanted World War One.

And yet, because of all the reciprocal treaties that existed between countries, they somehow ended up there. I don't think anybody wants a trade war, but it's certainly possible. And again, I have no way of handicapping it at all. Would it be with China or would it be with everybody? I think it could be with everybody, potentially. I mean, China is the one that gets the most press, but what I find somewhat a little bit more interesting is Europe. You know, one thing I've learned from some of my guests on my podcast is that

The EU has authority over tariffs and they already made an offer to the United States to reduce tariffs to zero and President Trump told them to take a hike.

because he's more interested in everything else. And it's the everything else that's more complicated. The non-tariff barriers. The regulations, the VAT. And each country apparently in Europe has, not legally, but an effective veto about any issue they care deeply about. So if we were to, let's say, try and negotiate to getting more agricultural products into Europe...

France would probably say no, and then it's just no. So I don't know how to handle it. Negotiating with Europe is like trying to hurt cats, given the way they're structured.

So it just has the potential to be a much bigger problem. It can be. Like I said, nobody wants a trade war, but we could still end up there anyway. I mean, the negotiations of trade are incredibly complicated with incredible special interests involved. It's complex. It takes time. Anything could happen. I just don't know how to handicap it all. It's not a risk that's quantifiable. If it were settled favorably, would it even be better than it was if we hadn't done anything before?

Maybe. I mean, potentially things would, you know, a lot of businesses would come back to the United States. And we have been a lot of the things that Europe does. I mean, it holds them back. It holds the world back. A lot of I mean, they don't know there's no innovation. I have great sympathy with with respect to our President Trump is trying to achieve. Right. But you can't handicap the outcome. It's impossible.

You know, Steve, the reason we like talking to you so much is because of some of the legendary calls you've made in the past. You saw the housing crisis coming before most people and you found a way to kind of bet against housing and profit greatly from that. There are a lot of people who are talking these days about the potential for huge change.

potential for seismic moves whether that be in the u_s_ treasury market and buyers disappearing whether that be the collapse of the u_s_ dollar as our you know the reserve currency i you put faith in the any of my that talk let's do a thought experiment okay let's go back let's say two thousand five and pete peterson comes on the show i don't know who's the host back then it was us it was you okay there you go uh...

2005, it was the two of us. At least us. Just like Zell. And he comes on and he says that the deficit's horrendous. It's going to crowd out investing in the United States. Interest rates are going to go higher. The dollar's going to lose its reserve currency. And your next guess is me. And a younger, less gray-haired, more arrogant Steve Eisman. And I come on and I say...

I love the deficit. With the reserve currency of the world, we could have more deficit. We're not going to lose our reserve status. Interest rates are going to go lower. There's going to be no crowding out. And 20 years from now, the US economy is going to be more dynamic than it's ever been in our lifetimes. And the reaction would be, that Pete Peterson, what a sage. And that Steve Eisbun, what a schmuck.

And who was right? You were right. I would have been right. Yeah. So I think the question people just don't have... So tell us now what you see. Is that same story go for 20 years? The question people don't ever really ask is, people have been making those kind of predictions for 40 years. Why haven't they ever come even close to true? And if you notice, the tenure has been in the same range for the last two to three years. So why hasn't it come true? And I think the answer is that...

We are more than just the reserve currency of the world. The entire financial system of planet Earth functions on treasuries, from overnight repos to sovereign wealth funds parking their money, and there is no alternative.

And until the, if there was an alternative, I would say we have to deal with the deficit now because then we have the potential for losing our reserve currency. But there is no alternative. And until there is an alternative,

I mean, I think we should deal with the deficit, but I don't panic about the deficit because nothing's going to change. And 20 years from now, you would make that you would say that we'll still be in the same. If there is no old if 20 years from now, there's no alternative to U.S. Treasuries. We'd be happy. We will literally be having the same discussion word for word. David Walker, I think, was in charge. Yeah, he was. And I remember it went off camera. I used to give him grief as the deficit would go up every year and say,

With you there, it's just getting worse and worse. You suck at this. And I say the same thing to Arthur Brooks, who is supposedly in charge of happiness for all of us. And he's been doing that for five years. And look what's happened to this country and bringing us all together. It's like, Arthur, you're making it worse. You're bad at your job. You're bad at your job. But I think a lot of this is like Malthus. The deficit clock is here like half a block away. Remember Malthus?

I mean, how many? David Malthus was wrong. About everything. The people who make these Armageddon claims about the deficit have been making these claims for 40 years. Now, one criticism of me sometimes that I lodge against myself as an investor has been sometimes I'm too early. And in our business, if you're one or two years too early, it's equivalent of being wrong.

but i'm not 40 years too early if you if you're making an argument for 40 years and it's been wrong the whole time you probably should take a step back and ask yourself why am i wrong but the world can only end once you just don't want to be late for that i agree i'm just saying that as long as as long as as long as treasury uses it as long as treasuries remain the financial system of the world there's no reach to panic we should we should deal with the issue but but

Having the Armageddon claim just as silly at this point. Maybe the panic is the only thing that works in Washington, though. You can't get anybody to do anything. Well, I've been making that argument for 40 years. It hasn't worked. Steve, I hope you come back soon because I wanted to ask you about three or four other things. We're out of time right now, but come back. I like these thought experiments. I like going down this path. And thank you for reminding us what you said 20 years ago. What was it? It's bye when the missiles are flying because...

If they really do come, the trades won't settle. It doesn't matter. They won't go through. The trades won't settle. They should be dead.

Next on Squawk Pod, former FDA Commissioner Dr. Scott Gottlieb on the recent cuts to health and science funding. And where does he think innovation goes from here under the watch of a new political appointee at the FDA? If a Senate director starts getting involved in these regulatory decisions in sort of an arbitrary way that's unpredictable, is it creates unpredictability in the development space and people don't know where to allocate capital. They don't know what the agency's decision-making process is going to be.

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Start your free trial at maintainintheletterx.com. Welcome back. You're listening to Squawk Pod from CNBC today with Joe Kernan and Becky Quick. All right, welcome back, everybody. The Trump administration has cut health research funding to $2.8 billion in May. That's down 28% from April. That's according to data from the Treasury Department. Joining us right now to discuss the implications is former FDA Commissioner Dr. Scott

Gottlieb, he's a board member with Pfizer and Illumina, also a CNBC contributor. Dr. Gottlieb, thanks for being here today. First of all, describe what happened. Why was the funding cut and where was it impacted?

Well, there's a proposed cut in the president's budget for 2026. It's quite substantial, I think, on the order of 17 billion dollars. But for this year, the NIH is very far behind their spending goals. And so they're about two point three billion dollars right now behind where they would normally be if they were spending the budget that was allocated for 2025. And this is going to set up a difficult situation towards the end of the year. Either NIH is going to have to spend that money at most.

money, which means they're going to have to shovel out a lot of money to fund grants towards the back half of the year, or they're going to set up a showdown with the courts about impounding that money. I think a lot of people in the administration, especially the Office of Management and Budget, have wanted to test the president's authority to impound funds. This relates back to a statute in 1974, the Impoundment Act, also a Supreme Court case in 1975, where Nixon tried to impound funds that were

that were earmarked for the EPA. I think there's a lot of people in the administration who believe that the president has authority to impound funds. They're going to probably try to do that at some point and test the legality of both that statute and the ability for the president to exercise discretion in how money gets spent. I don't think that they're going to use NIH as a test case for that, though. They're probably going to find some more absurd form of government spending

and impound that money and then go to court to test the president's authority. I also don't think they're going to do it right now when they're working with appropriators to try to pass the reconciliation bill. But at some point this year, I would expect them to do that, not with NIH money, would be my guess. And that means they're going to have to spend that $2.3 billion and whatever else they're holding on to right now towards the back half of the year. So I don't think there's going to be actually NIH cuts this year. I think there's probably going to be some haphazard spending towards the back half of the year.

So what does that mean in terms of the research that's being done right now? How does that impact what's actually happening on the ground?

Well, look, you're seeing cuts to research. Some are political decisions that the administration is making to cut certain institutions or cut certain funding. We saw a court case in Boston yesterday where a judge said that they couldn't cut grants from the NIH that were earmarked towards so-called DEI programs, that it was too overtly political and discriminatory. So that court case is going to have to wind through.

But I think the reality is that a lot of the cuts that they've made or the money that they've held back, the grants that they've canceled, they're going to have to figure out a way to either spend the money on the grants that it was allocated towards or find other ways to spend it. And so I think you could see a bolus in NIH spending towards the later half of this year. I think a lot of people are anticipating that all that money will be sort of sequestered or impounded. I don't think they're going to have the authority to do that. They may ultimately get the authority to do that by going through the courts.

But I don't think NIH is going to be a test case. And so what I would expect is a lot of that money to get spent, probably not on the way it was originally programmed, but spent nonetheless. Scott, let me ask you about where things are on some of this cutting edge research that's taking place. Yesterday, we got this news from Sarepta that a second patient had died of liver failure after a gene editing experiment.

medicine had been given to this patient. There was a lot of concern around this because the FDA kind of gave the fast track approval to this. It's for a drug that helps with Duchenne's muscular dystrophy. That's a disease that kills boys and young men usually by the time they're in their 20s. So a lot of questions about this. It was kind of fast tracked by Dr. Peter Marks at the FDA over some objections of the staff.

There's a new leader at the FDA who's going to be watching over some of these very issues. But for anybody who's thinking, okay, we're making a ton of progress with gene therapy, there's a lot of potential for this, that news in conjunction with the changes at the FDA have people wondering if this is going to put a freeze on what's happening there. What are your thoughts?

Yeah, look, I don't think it's going to put a freeze on what the agency is doing. I think I've heard that Vinay Prasad, the new head of CBER, who is a political appointee in that position, which is unusual in and of itself to see someone politically appointed to those roles as opposed to someone who rises up through the ranks of the career staff. He's expressed interest in some of these past approvals. I've heard he's also been taking a look at some of the pending CAR-T approvals.

I think what happens if a Senate director starts getting involved in these regulatory decisions in sort of an arbitrary way that's unpredictable is it creates unpredictability in the development space. And people don't know where to allocate capital. They don't know what the agency's decision-making process is going to be.

On this Erector issue, I would expect that they're going to review that now. Now, I don't think there was anything wrong with the way that went through the agency originally. There are occasionally these exceptional cases where you do have center directors taking an active interest in these new approvals that really establish new paradigms. And the gene therapy approvals, the early ones, were such cases. They were such products. And so the center director was involved in that approval. But this has become a bugaboo, if you will.

of a lot of people who have argued that the agency in the past was too lax on some of these approvals, too permissive when it came to these gene therapy technologies and other technologies as well. There's sort of a handful of these cases that everyone seems to point to and rally around. And Vinay has done that with this approval in the past. He's written about it and talked about it. So I don't expect him to step away from that past dialogue. And I think that's why you saw the reaction in the stock yesterday from this particular company saying,

These are very important products. You've seen a lot of gene therapies. Yeah, you've seen a lot of gene therapies approved that have been really transformative for a lot of patients curing or treating certain forms of blindness, other rare metabolic diseases, inherited diseases of childhood. This one particular approval has attracted an outsized amount of scrutiny in the past, and I think that's why it's going to get reviewed.

I mean, just to look at the approval process, it was originally approved for four to five year olds who were still walking. Dr. Marks allowed it with the broader approval so that it could go to older patients, teenagers and beyond who were no longer walking. And maybe that's where some of the questions come in with this. But it's probably fair to point out that this is a disease that kills people usually before their 20s.

That's right. And look, when you have these gene therapies that look like they could be transformative for some of these patients, if you hold on to them, you don't approve them until you can get the results of randomized outcome studies that look at things like the accumulation of disability. In the preceding years, a lot of patients are going to become disabled. And so the agency has made an effort over many years to try to get these products, when they determine their baseline safety, out to patients specifically.

sooner and then try to fully evaluate the benefits in a real world setting. And I don't think anyone argues with that doctrine. I don't think the current leadership does. I mean, Marty Macri, the FDA commissioner, has talked about trying to broaden the scope of those policies to try to enable rare disease drugs to get to patients more quickly. This particular drug, though, has attracted scrutiny in the past because of the process that it went through. It's

you know, been sort of written about and maligned. So I think this is a sort of test case for the scope of how much they want to intervene in the approval process around sort of discrete decisions. And we, you know, re-decide past decisions, re-litigate past decisions. I think past decisions should be settled in the absence of new information. Obviously, the death is tragic and is new information. That's why I think it will prompt a re-evaluation of this.

But your overall stance about where innovation is, where the push forward for some of these things, are you optimistic or not? Look, I'm very optimistic about the pace of the innovation that we're seeing. You look across not just gene therapy, but also CAR T therapy. You look at some of the immunotherapies and oncology, some of the personalized what they call cancer vaccines where they're using mRNA to try to instigate an immune response to cancers. We're seeing dramatic results in small series of patients in glioblastoma, pancreatic cancer.

cancer, really hard to treat cancers. I think we're seeing really wonderful things right now in the pipeline. There's a lot of CAR-T development underway. I think you're going to see more products coming before the agency. And I made a prediction that we would be on a run rate to approve 15 to 20 gene therapies a year by 2026, 2027. And the FDA is fully on that run rate. So this is really transformative, a transformative paradigm. I don't think this one

drug and the tragedy surrounding this particular patient is going to derail the pace of that progress. I don't think it's going to throw the FDA off of its desire to try to find new ways to get these treatments to patients more quickly. I think this is really a unique case. There is a policy underway at FDA right now that they've been working on. They were working on it before the current leadership came in to try to create a new approval paradigm for gene therapies where you can approve a gene therapy based on what we call a platform approach. So you approve a gene therapy construct

that can modify cells within a certain organ system. So consider the liver, for example, you can get an approval for the ability to modify cells within the liver

And then when you want to apply for approval for different diseases that all stem from different genetic deformities, if you will, that arise from liver dysfunction, you can just submit basically a supplement, almost like a medical device approval where you have special controls for each clinical application, but you get an underlying approval for the basic construct of modifying liver cells. And that would greatly improve

accelerate what we call the CMC portion of the review, the chemistry manufacturing controls, so you can get a broad approval and then just submit supplemental clinical information for each subsequent indication that you want to use that gene therapy construct. And if they advance that, I think that's going to also open up opportunities to get more of these products to patients more quickly.

Scott, just put my mind to rest. I was watching a competing network yesterday. I'm able to buy something that may get rid of the spike proteins I have left over from my vaccine. Are there is there any science that indicates that spike proteins can can last for four months and or even years? Is any work been done on that?

Look, I certainly haven't seen it. And there's been this is one of the most studied vaccines in modern times in terms of the hundreds of thousands, millions of patients that we've evaluated both in clinical trials and

and real world evidence. I'm on the board of Pfizer, as you know, which makes one of these vaccines. We do see patients that become chronically infected with SARS-CoV-2. And there is a lot of belief that patients who can't clear the virus adequately are the ones who go on to develop long COVID. Right. Well, how long? And there's other viruses also. Yeah. How long does the messenger RNA, there's no way the half-life of that is...

Very fast, isn't it? I mean, that's not still around. Yeah, go ahead. Right. That gets transcribed to whatever gets transcribed into protein gets transcribed very quickly. That breaks down very quickly. And you understand that as a scientist that that's not going to hang around. It's not going to integrate. So I don't have to get that. So I can just stick with the relief factor, the balance of nature, and the relaxium from Ambassador Huckabee from Washington.

Okay, so I don't need a fourth thing from, no? Don't you get all those? I don't think so, Joe. I don't need all those? Okay. All right. Damn. Thank you, Scott Gottlieb. Thanks a lot.

And that is the pod for today. Thanks, as always, for tuning in. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Please tune in weekday mornings on CNBC at 6 Eastern and get the smartest takes and analysis from our TV show right into your ears when you follow Squawk Pod wherever you like to get your podcasts. Have a great Tuesday, and we'll meet you right back here tomorrow. All right, clear. Thanks, guys.

Bring it on.