September 24, 2013

Kyle Bass and his macro views from the Alpha Hedge West Conference


Kyle Bass thinks that the first taper will be easy one. The real problem will be the fiscal drag of moving Fed Funds rate from 0% to 3%.

About China, Kyle says he is Not investing in China now. He thinks the country is "Univestible" due to banks and shadow banking systems. Same as Jim Rogers, he is also Staying away from India too. Branded luxury and quality did well post crisis. China has not adjusted from command and control yet. Kyle sees a restructuring.

On Argentina

Kyle Bass said he likes Argentina. He believes that people don't understand what is happening there. Lots of things there are fixable. Leadership is in active control and can fix "issues" :). Energy has been an issue, but recently there have been major energy findings that will change that. Two years from now, he thinks there will be a new President in October 2015 and pro-business people will be running things to take advantage of vast prairies of nature resources. Argentina's problems can be fixed in 2 years. He feels now is the time to start investing. Sees 50% upside in the sovereign debt.

Kyle Bass on Japan

US Recapped their banking system, while EU is 3.5x more leveraged than the US. At some point, debt will matter. Has always eventually mattered the last 2000 years. When debts are 24 times revenues you are finished, it is just a matter of when. Hopes he is wrong. More he looks, the more he thinks it will happen. Sees it happening the next few years. Avoid Europe. US is 4.5x debts to revs. Japan is 24.

When asked how mutual should funds feel about Macro risks?

Kyle says that If he was long only, he would not be able to sleep at night. A Japan crisis could not be contained. It would have huge impacts. During the Tequilla crisis, Mexican equities went down 90%.

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.