Nearly 18 months after Hayman Capital’s Kyle Bass declared that he intended to stand by his massive offshore yuan short even as his fund moved deep into the red (unlike all of those other “tourist China bears” who had jumped ship at the first stirrings of dollar weakness), the Dallas hedge fund manager revealed that he had finally broken even after his fund sunk 20% last year, according to Reuters.
Which means now is the perfect time to double down…
Bass, who has long argued that the yuan will slide 30% against the dollar as the country’s credit bubble bursts, told his audience that he has added to his currency short as the currency hovers just above the big round 7-to-the-dollar level. He also praised President Trump’s trade policies, which he said would be “100% healthy for the next 10 years”, though he clarified that he was “not a Trump voter” and that he would jump at the opportunity to throw his support behind Michael Bloomberg.
“Tariffs come and go,” Bass said.
“But how do you negotiate with someone…with the hopes that they would liberalize their economy and do the things they said they would do, and especially don’t do the things they said they wouldn’t do, and yet they’ve done everything exactly as they always have?”
Trump’s shortcomings, Bass said, include his tweeting and other means by which he communicates his message.
“‘Trade wars are good,’ that was an insane comment to say,” Bass said of Trump. “What he should have said is, ‘We’re going to reciprocate with China, where they’re going to let us into their markets, we’re going to let them into ours…’ His actions were proper, but his comments were improper.”
As corporate defaults soar, Bass believes that China is headed for a “reset” that he expects to arrive during “the next couple of years.”
He projected that China could lose more than $2.5 trillion of equity, more than triple the size of the U.S bank bailout during the 2008 financial crisis, and would have to print more than $25 trillion of renmimbi to counteract the impact of slowing economic growth and declining credit on its banks.
“It’s insane how levered this market has become,” Bass said.
“You’re starting to see bankruptcies across the board in China that are hard to hide, if you look at the corporate default rate, the bankruptcy rate, M1 and M2 (money supply), the slowest money growth in over four decades.”
“We’ll have a reset in China, and I think it will happen in the next couple of years,” Bass concluded.
Chinese companies are already feeling the impact of its slowing credit impulse…
…As defaults soar…
…And small- and medium-sized companies resort to ‘imaginative’ strategies for paying down their debt – including striking an agreement with creditors for a ‘payment in kind’ of ham.
Years back, I remember Kyle Bass predicting a similar collapse of the Japanese economy and the Yen.
I thought he laid down big money shorting that market, too.
It’s a catastrophe on the horizon, but at present, is still standing.
In which case he will be proven right, but his timing was wrong.
Curious.
Anyone out there in the audience know enough about how that worked out for him, and able to report?
Casey has wise words about predicting.
The studious might be able to accurately predict WHAT will happen, but the WHEN is the risky part, if betting on it.
Another sage authored a quote along the lines of:
The market can stay irrational long after short sellers become insolvent.
Conversely, but with similar doubt,
recent buyers of Ag and Au for the long haul have seen their bets stagnate, at best.
But, that’s money, REAL money that is still in play, and shouldn’t lose value. Shouldn’t, but may.
Time will tell if that strategy is a fool’s game, or if they’ll emerge from the ashes as survivor-genius.
Smokey was a real fan of Kyle Bass
Kind of funny to see one of the bigshots caught in a bind because he underestimated the ability of a huge government to prop up a market/currency/economy on money conjured out of thin air. China, like the US can print trillions of currency units to defeat the market indefinitely. I lost tens of thousands over the last few years betting the US government couldn’t keep debasing the currency and running ungodly deficits for much longer. Here we are in late 2018 and the charade’s still going. Warnings that the end is near are legion just as they were last year, the year before . . . Sooner or later it’ll come crashing down, but the government’s ability to stave off what’s coming is beggars belief. As I’ve said before, my expectations have been proven wrong for so long, I’ll be as shocked as the sheep who’ve slept through it all when the economy crashes.
Word!
“‘Trade wars are good,’ that was an insane comment to say,” Bass said of Trump. “What he should have said is, ‘We’re going to reciprocate with China, where they’re going to let us into their markets, we’re going to let them into ours…’ His actions were proper, but his comments were improper.”
Come on…so Trump the wild card verbose brawler makes the right move but doesn’t use Marquess of Queensberry Rules of verbal etiquette???
Phtttt..so what…don’t worry about what Trump or any politician says…WATCH WHAT THEY DO!
Oh he is a Bloomberg boy…I can’t wait for Nanny State Bloomberg to become president banning big gulps and french fries and all those evil guns…the 4th Turning will shift into high gear with a vengeance when you take American’s big gulps and french fries away! That will trigger the Fort Sumter of Civil War 2!
Hmmm…nothing like a smug arrogant Billionaire who figures he will push past God:
“So, you know, when I get to heaven, I’m not sure I’m going to stand for an interview. I’m going right in,” Bloomberg says with a laugh.”
Bloomberg on 60 Minutes 2017
I think there might be some wailing and gnashing of expensive dentures in Nanny State Mikey’s gate interview if he turns out to have never been known…just saying.
Phtttt..so what…don’t worry about what Trump or any politician says…WATCH WHAT THEY DO!
Words of wisdom that you can apply to any human, and are so true!……
Kyle Bass has the worst hair of all time.
Skullet = mental instability.