According to Kyle Bass of Hayman Capital, Japan is the next in line to face a sovereign debt crisis and very soon the markets’ focus will turn on it. He expects deflation that will lead to a correction in equity prices because such economic shock will spread to the world economy and if he proves to right, economic growth might go to minus 3 – 4%. That will lead to a stock market correction of 40-50% and that will be a time when investors need to have cash to buy cheap stocks. He believes that it will be the best time to buy equities, right after these big restructurings. He mentions that Japan is next after Europe but it is still unclear to us whether the European debt crisis is finished or not. We believe it is not and before we move to Japan, we will have more problems in Europe and probably more restructurings.
According to Kyle Bass, it depends on Japan and Europe, how long time USA has until a debt crisis. In his opinion it is 3-5 years away. If he proves to be right, it might be wise to hold significant cash portfolio weighing.
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.
Kyle Bass of Hayman Capital prefers to make investments in situations that could earn the hedge fund extraordinary profits. He looks for asymmetric bets where the risk-adjusted-return is out of norm. For example by predicting in 2009 that Greece will restructure, he bought cheap CDS and that resulted in a bet where the risk/return is 1/500… It seems that today Kyle Bass is having similar bet but on Japan. He believes that the focus will soon be on Japan and the country will face a debt crisis within 2-3 years. According to unofficial information, Hayman Capital betted on Japan problems by CDS, swaptions, puts on Yen as well as options on JGB. It’s hard to predict the risk/return here but we believe it’s between 1/15 – 1/100. Kyle Bass has expressed his pessimism about the yen many times on different TV programs. His target is 120 USDJPY which is about 45% from current levels.
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.
This is a transcript from an interview with Kyle Bass of Hayman Capital. He explains why he's so bullish on gold, with CNBC's Bob Pisani
Bob: Are you still bullish on gold?
Kyle Bass: I think that the pattern is set. The pattern is set that we are going to continue to monetize fiscal deficits by expanding central bank balance sheets. Call it how you wanna call it, LTRO, QE any kind of acronym that the powers want it to be called but I call it money creating out of thin air and that is why gold has a further to go.
Bob: aks what will happen to the price of gold if China and India economies slowdown:
Kyle Bass: When you think about the way that India is now... they have significant inflation, if they have stagflation we will continue to see gold going higher.
Bob: Can you explain the decision to buy physical gold?
Kyle Bass: It costs you certain amount of money to roll the contract. As far as I know it costs 19 basis points per year and the holding and insurance to keep physical gold is cheaper than that. From a Fiduciary perspective physical gold is a must. Kyle store and insure gold at HSBC.
Gold is currently taxed as collectable at 28%, should there be some change to that?
Kyle Bass: Gold must be taxed as every other asset that you own. It is just a simple asset. Piece of art work, collectibale-gold coin, equity must be taxed the same especially if held long-term.
There is so much talk about gold these days. Should we go back to a gold-standard?
Kyle Bass: I don't think so. I'm not an advocate of such. Ting an enourmas economy to one metal coming out of the ground would probably be a bad idea but ting it to a basket of goods and services might be a good idea. Because we need to limit the amount of capital created in the system.
I just don't understand the logic behind it.
I think that the people who are deemed to be gold bugs, you know, are talking to a portfolio to a certain, yes I own some but when I tire our whole economic future as a nation to that idea, if you think about rationality it's a bad idea.
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.
