February 12, 2012

Kyle Bass Recommends Investing in Productive Assets

This is not a cyclical rebound from a crisis. You shouldn't be buying stocks because a low P/E ratio, because the E is wrong.  We’re going to see declines, and people don’t know how to position themselves for declines.

If you’re an individual you need to be much more conservative then you even think you need to be. Return of capital is much more important in the next few years than return on capital.

In the environment we’re talking about here, the U.S. dollar should be fine in the short to medium term, if we’re right about Europe and Japan. I think you should be more in cash, and hanging onto productive assets and less invested in financial assets (stocks, derivatives).

Productive assets like farmland, real estate could still experience losses but they should provide a better inflation hedge.

I took physical delivery of gold, and it had to do with the fractional reserve nature of the COMEX.

What’s going to happen in Europe is going to happen very soon.  The 30-year bond rate in the U.S. could go lower than 2% if money starts running to the U.S. during the upcoming European sovereign crisis.

I don’t get paid to be an optimist or a pessimist, I get paid to be a realist. Being a realist in this scenario is pretty negative.

Don’t believe these governments, when they tell you that everything is going to be fine….think about Mexico in 1994….if you remember the crisis, the day before the government devalued 60% they said they wouldn’t devalue. The government can never tell you what they are about to do….the key takeaway is develop your own opinion.

Source: BusinessInsider

Kyle Bass, an American hedge fund manager, is the Founder of Hayman Capital. He received extensive coverage in the financial press for profiting $590 million by short selling the sub-prime mortgage bond market, before that market crashed. In 2011, Bass initiated a huge position in Greek sovereign debt through CDSs. Media reports were that he could profit up to 650 times his investment should Greece default on its debt obligations.