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Kyle Bass On Hyperinflation, And Other Less Relevant Things
"The number one performing stock market in the last ten years has been Zimbabwe - in nominal terms" - that is the most memorable soundbite of Kyle Bass' presentation to David Faber at the Bearfoot Summit, because unfortunately, in real terms investors have lost all their money. In this series of key presentations in which Bass recaps not only all his previous positions on hyperinflation, but pretty much everything previously noted on the topic on Zero Hedge, Bass focuses on what is the most "convex" product to imminent hyperinflation. Spoiler alert: it is not stocks. In fact, Bass says to shun stocks by and large, as in real terms (note not nominal), stocks will underperform a hyperinflationary system. This confirms what we have been observing for the past months ever since the latest FOMC regime, when gold has benefited far more from "money deluge" expectations that risk assets. In other words, those who are betting on a rising tide emanating from the inkjets' liquidity spigot, will do far better to buy gold than stocks.
Must watch interview series with Kyle Bass
Part 1
Part 2
Part 3
»
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Kyle should have started the response with, "Yes, Grasshopper...."
“One of our clients grew up on a farm in Germany. Years ago he told us about what happened in 1921. His parents had a large mortgage on the farm. One day, at the peak of the hyperinflation, they took ten dozen eggs to market and sold them. With the proceeds they went to the bank and paid off the mortgage.” From http://www.investmentrarities.com/ , BEST OF JIM COOK, May 24, 2005, GOLD REDUX
Actually, I read that laws were introduced that automatically adjusted the nominal amounts of debts upwards with inflation.
Given how intertwined govt and banks are, and the fact that they make the rules, and change the rules as they see fit, I woundn't count on hyperinflation being a windfall for debtors.
Thank you for this input ... I never thought about this concept (indexed debt) but it makes perfect sense for TPTB to come of with this method of screwing the debtor class. I am sure that sovereign debt would not be similarly indexed.
I never read any fine print in my 30 year fixed mortgage papers that said "if there is hyperinflation your fixed rate mortgage turns into an adjustable rate mortgage tied to the rate of hyperinflation".
When the Treasury dumps the penny for the dollar coin. Then dumps the dollar FRN and issues a $1,000. FRN, it's game on. As Marc Faber said, "it took the FED a hundered years to devalue the dollar 97%, the next 97% devaluation won't take as long."
Cite, please. The original comment is correct according to what I read as well. The book When Money Dies does discuss the indexing of loans once hyperinflation took off, but it wasn't in respect to existing mortgages. Rather, loans were being procured to speculate in the FX markets. The savvy people (youngsters mostly) who realized that Pandora was out of the box were still able to play the Monopoly money to a profit.
Very important to keep this concept in mind. If that situation comes to pass (hyperinflation) how do we beat the indexing? Can we beat it with PM's will the ptb allow their chosen asset to remain outside the indexed classes?
I would like to see this topic expanded by the many smarter people than I present here..
The peak of the hyperinflation was not in 1921. It really got going in 1922-3.
Question is why didn't his parents wait another week because by then surely they'd only need to sell one egg to pay off the mortgage.
Hey Americans...take a moment out of your day to read and remember a fallen hero. SSG Robert J. Miller awarded the congressional medal of honor... posthumously unfortunately.
http://www.army.mil/medalofhonor/miller/narrative.html
Very humbling.
I thought that the Nuremberg Trials established that "just following orders" wasn't sufficient to absolve one of crimes. Current wars in the Middle East we undertaken illegally: not only wars of aggression, against international law, but also per the US Constitution (only Congress shall declare war).
I don't think illegal means what you think it means.
Dateline: 10/11/02
The U.S. Congress yesterday passed a resolution authorizing President Bush to use the Armed Forces of the United States against Iraq.
The House of Representatives on Oct. 10 passed the resolution (H.J. Res. 114) by a vote of 296-133. Senate approval came in a late-night vote of 77-23.
Resolution Authorizes Use of Military Forces in Iraq
Specifically, the resolution authorizes President Bush to:
(1) defend the national security of the United States against the continuing threat posed by Iraq; and
(2) enforce all relevant United Nations Security Council resolutions regarding Iraq.
The United States of America requires no one's permission to go to war.
He was the bravest goon the government ever had.
Sad but true.
The test of life is individual. He passed his with honor and valor.
How's your's going?
From where I'm standing, you just sound like a childish cretin. Good luck with that. May you get from life what you deserve.
+1,000 for my children and I
SPY's last three years (in GLD terms). Fading even in the lastest rally.
http://stockcharts.com/h-sc/ui?s=SPY:GLD&p=D&yr=3&mn=0&dy=0&id=p18169822754
Seems everyone but main street knows the payroll numbers this Friday will be ok. No selling after the big squirt yesterday. Zero risk in this market with the fed as a back stop. Every tiny little dip is met with bids and pulled offers.
Here is an article on hyper-inflation that contains a critique of a guest post previously posted here:
The Hyperinflation Debate
http://www.acting-man.com/?p=4987
I have a question. If the only thing of real value, in the end, is gold. And if "Goldman Sachs", "JPM", the Fed and the like are "TPTB", and if they are manipulating everything for their own benefit, and if they intend to "suck everyone dry like a vampire", then why is it that Goldman Sachs, JPM and the Fed not own a single gold coin?
Because when they need them they will just confiscate them off every american citizen!
OK. If that is true then you are wasting your time and money investing in gold as the TPTB will simply confiscate it. so what is the point?
That's where the whole invest in lead thing comes into play
Might I suggest steel core for those very large predators?
I guess you would have to check all the ships headed to homebase Israel. You know the 150 IQ glass experts B9K9 is so fond of.
Ah, what sort of code words are you using here? Care to speak English? (BTW- I should junk you, but I'll leave that to others to do)
What about Food, Shelter (of the non-McMansion variety) and Water? If one were stranded on an island alone I'd reckon that these would come first. And, yes, I realize that "value" is meant in the context of trade, but somewhere along the line we've got to get back to the real meaning and gound trade in what really matters.
If that is true, I'd imagine it's because gold is not interest bearing, and you don't make much fees from moving it around from place to place.
And you know this how?
I know this because I know this.
Very simple. Suppose you control a major bank. And suppose you are a greedy blood sucking parasite. But I repeat myself.
Now there are different kinds of money. Gold and silver are money. They are hard to get and you have to give something to get them. Paper is also money and you can print it up, or write checks, or make up stock certificates, bonds, etc. for practically nothing. You can spend the paper money just as if it was gold and silver, if you can convince the suckers to take it.
Therefore it pays you to boost the desirability of paper at every opportunity, and at the same time, run down gold and silver. Pump up the value of paper assets, and drive down gold and silver. Get it?
They don't much care which form of money they have as long as they have plenty of it. They can also buy land, businesses, and other valuable assets.
The big trick is to keep the power, and keep the assets, while converting out of the old paper when it becomes worthless, and into the new paper they come up with to replace it.
As long as they can keep gold and silver to the sidelines, they write the rules. If the public gets wise, and only accepts gold and silver, they have a much harder job fleecing the suckers.
Because when most people are ignorant enough to trade their priceless time/labor for pieces of paper, they're ignorant enough to do the same with Gold & Silver.
"Hey Americans...take a moment out of your day to read and remember a fallen hero. SSG Robert J. Miller awarded the congressional medal of honor... posthumously unfortunately." Papaswamp! duely noted.The members of our congress are not worthy of walking in his shadow.
Which Congress are you talking about? The one that abdicated its Constitutional duties and handed over war-making powers to the Executive, or the one that continues to fund illegal (based on US Constitution and international law) wars?
Wars of aggression are criminal enterprises. All involved in such enterprises are criminals. Period! And if you don't like that then I suggest you accept that what the Nazis did wasn't as the Nuremberg Trials claimed, war crimes?
TPTB continue to hang on to their power because people continue to bow to their praetorian guards...
I'll add this:
http://www.lewrockwell.com/orig11/vrabel1.1.1.html
Rockwell makes interesting points, except one. Isn't it the new GOP teabags who want to steal S.S. and privatize it. They are not shamed and boast it as a solution. Think about how great that would be for Blackrock, GS, MS, and all the honchos who can pump the markets just to crash it all again. Those trillions just don't go away. The elite win again.
Don't worry - they'll print every dollar you are owed. The premise is that the Government should never have started the Ponzi. How would you suggest to unwind it? Kicking the can is no longer on the menu.
I hate to tell you, but the Republicrats ALREADY stole every single penny of social security. There is no money. They are simply paying out the taxes they take in, and they are issuing extra Treasuries to cover the balance.
No Arab ever called me a teabagger.
No, they'd just hang you for being one.
Stupid should hurt.
How cute you have a political "side" - stupid fits you well.
Dancing on the grave of a brave individual is not the way to engender sympathy to you political viewpoint.
More of a collectivist than an individual.
He was the bravest goon the government ever had for a lap dog.
But would you love him if he voted for Obama LOL
remember when we used to debate about whether or not "hyperinflation" will hit? Now we debate about what it will look like.
is that a good sign?
And the F up part, the only price component that remains stable or heads down is the average hourly wage. TY big bro, TY.
Fed wants inflation at risk of creating hyperinflation.
Since the Fed doesn't know exactly what they're doing and making it up as they go along, Murphy's Law applies.
From Jesse's....
http://4.bp.blogspot.com/_H2DePAZe2gA/TKvRpOnbDeI/AAAAAAAAOzA/dv_kmxsxBB...
Rice marks or douche marks, take your pick.
One thing that would be interesting to know about Zimbabwe's nominal outperformance: whether anybody operating using massive leverage would have been able to keep in front of the hyperinflation.
Let's say that the index underperforms the inflation rate (for foreign investors, substitute 'rate of depreciation of the Zim dollar'); so long as the ratio of return to inflation rate is less than the leverage ratio of those who are long the market, they will get out in front on a purchasing-power equivalent basis.
So if you were leveraged 20:1 and the Zim market went from 70,000 to 53,000,000 (as it did in 2007/08 - handily outperforming 'official' inflation), you would have plenty of room to cope with the tribulations of converting your $ZIM to any other currency... so long as you exited.
Now... think about the Vampire Squid, who is among those who gets the new money before it oozes out into Main Street: GS et al put money to work early (while there can still be 'money fooling') and with leverage above 30:1. See how it works?
Back in December 2008 I mentioned that the US was following Mugabe's lead in "Putrid Under the Skirts" ( http://www.marketmentat.com/?p=1140 )
to wit:
And not to put too fine a point on it, I was also writing about Fed Open market operations being used to goose stocks... I actually DROPPED the daily discussion of the Fed Repo Pump in 2009 because TOMO became insignificant in the face of the rampant spigot-opening by Professor Helicopter, the essay-writing numptie.
Cheerio
GT
http://thirtylettersinmyname.blogspot.com/2008/07/starving-billionaire.html
I assume you are referring to this system: http://ragingdebate.com/politics/feeling-upset-because-the-american-population-wont-wake-up-as-the-us-falls-apart and the transition of the 3D pyramid of mankinds management structure in how it builds organizations and the ongoing transition to 5D assymetric. Yes, this transition period will be very bad if you if your not paying attention.
Housing Industry: "We need the government to stay out of the housing industry"
1 year earlier (or later for that mater)
Housing Industry: "We need government help"
Um ... I thought that gold came from the ground?
The system is failing because it is fundamentally based upon the continuous increase of consumer spending. For a while, this was achieved by the illusion of wage growth. So long as wages increased at the rate of inflation, people saw themselves as becoming richer - and when you are richer (and your job appears secure), you tend to spend a larger proportion of your income into the future, because you believe that your income will continue to rise relative to the cost of long term obligations (houses, cars, consumer goods, etc.) and businesses of course expand to meet this increased demand by taking on debt themselves that they expect increased demand to easily meet.
When wages exactly meet the inflation rate, this creates an unfunded liability for any expenditures beyond this rate. People find themselves "through no fault of their own" (though of course it is) increasingly coming up short from month to month. Consumer spending slows (the second derivate of money declines) and the overall shortfall increases. People are forced to save, which takes even more money out of the system, and the deflationary spiral begins.
Most secular recessions are caused by an excess of supply over demand, which causes localized shortfalls in the economy in those sectors affected. In time, excess supply is eventually consumed and becomes scarcer, at which point demand increases. Secular recessions are actually a critical part of the economy, because they often destroy inefficient markets (and wipe out badly performing debts) while promoting more efficient ones.
A structural recession (aka a depression) is a longer term phenomenon, and is effectively a situation where the overhang of liabilities exceeds the ability of the society overall to grow out of it. You can have expanding growth within a depression - it happened in the 1930s, and it happened from Spring 2009 to Spring 2010.
Personally, I suspect that current depression that we're in started in the 1970s once the US ceased being a net oil exporter, was forestalled somewhat with the growth in the telecommunications/IT area in the 1990s, then has actually been with us ever since. We've propped it up by blowing bubbles (the housing bubble was purely artificial - having almost nothing to do with broader demographic patterns), but bubbles burst, usually leaving yourself worse off than before.
Now we're facing the first tremors as wage-based growth and productivity gains give way to withdrawals of funds from the markets to support fixed income retirement. Go-getters in their 30s and 40s play the market for the sake of building a nest-egg (or just to strike it rich), but people in their 50s and 60s become far more conservative in their spending, because it finally dawns on them that once they "retire" (or more likely "are retired") then what they have in the banks is what they have to live on for the next 30-40 years of their lives.
Depressions play out as shockwaves in a system with decreasing energy, and almost invariably end in war as demand for resources reaches the point where governments are willing to commit violence at a national level in order to secure their futures, because the alternative is continued stagnation. Recoveries follow war because you have to rebuild what gets destroyed during that war (war becomes a proxy to recession).
We avoided depression in the 1970s because of a combination of the Green Revolution and the rise of networked telecommunication in the 1980s led to a dramatic increase in the overall velocity of money. The biotech revolution may cause a smaller bump in the latter 2010s, though all in all the biotech revolution is likely have the biggest effect in making people live longer, which actually just extends the drag on the overall system (zombies going to zombie banks spending zombie money to buy zombie goods).
Short of the development of working fusion systems, there's nothing on the horizon that's going to cause a profound impulse into the system. What that means is that systems continue to slowly decay, with goods becoming more and more expensive while wages continue to decline, cities go broke and firemen watch uninsured homes burn down, corruption becomes more endemic as real power declines, while politicians continue trying to put ever larger amounts of lipstick on zombie pigs.
In the end, the system will collapse (as all decaying systems do) because the energy needed to sustain it is no longer available. At that point, the survivors will have to pick up the pieces, change the ground rules, and start over again. I think we have about 25-30 years to that point, but that's just pure speculation (it also happens to coincide with the start of the Baby Boomer die off, and the two are not unrelated, though not totally correlated either). I'll live to see it, but probably not to benefit from it.
He went to my high school. A true hero.
What a waste.
Meant in response to the recent medal of honor link
THERE IS A NATURAL GOVERNOR THAT WILL KICK IN ON BERNANKE AND THE FED, WHICH IS THE PRICE OF OIL & ENERGY. ONCE THAT PRICE REACHES THE PAIN THRESHOLD OF THE MASSES, THEN THE FEDS WILL STOP. THEY CAN NOT CONTINUE TO INFLATE ASSETS LIKE COMMODITIES AND STOCKS WHICH ARE OWNED BY THE ELITE AND NOT EVENTUALLY FEEL THE RESULTING PUNISHMENT INFLICTED ON THE MASSES AND SAVERS.
1. When energy prices increase to the pain point the Fed will have lost control of the situation.
2. Stop yelling.
This can be stopped. Scott Garrett has the right idea. Call your congressman and don't give up.
http://www.bloomberg.com/news/2010-10-06/house-republicans-concerned-fed-asset-purchase-to-fan-bubble-garrett-says.html
This can not be stopped. The death debt spiral simply has no escape route. How on earth can a 1.4 trillion dollar deficit be payed for without some major money printing. Wake up everyone. This is going to end badly.
Bass makes a lot of sense in some regards, but he's also quite sanguine when it comes to other things. He's wrong that housing is at or near bottom and will just vacillate for the next 3 or so years. No Kyle - there is another big fucking leg down! There is no reason it should take someone 30 years to "BUY" a house. Not to mention the fact most would be buyers have destroyed credit and will need to actually SAVE UP MONEY to buy.
Bass said that supply is intentionally being held off the market to keep prices from going down.
Bass Quote from end of Video 1:SCREW THAT!!! You have it wrong Kyle!
Let the prices find the REAL market price, not some artificially propped up scam. Intentionally holding off supply that exists is FORCING PRICE FROM DOING WHAT IS NATURAL! Why do people want to pay MORE for something? Makes no sense!
It's been coming, but since the last presidential election this is the biggest pile of fuck-ups history will ever know. So many great people of the past and I had to live now. No nation can survive this much incompetence.
Why do you put it down to incompetence?
@ silverhog
I am saddened to report that there are no neurosurgical solutions to retrograde amnesia. We could map your frontal cortex, attempt to find the dead spots, and insert a permanent electrical stimulus, but the results would be dubious at best.
That being said, I would refer you to a psychiatrist for evaluation. We need to find out what happened on January 20, 2009 that prompted a complete black-out of all political events prior to that day.
Warmest regards,
Dept of Neurosurgery, St. Joseph's Hospital.
I do have a question.
How can Ivy League grads be wrong with such amazing consistency? Is it because they are just legacy fools admitted for the money, or do they have goals that are contrary to what they state?
Just asking because they seem to defy the laws of probability.
10/10/10 : Stay Safe my Friends
Anonymous Monetarist
CNN : August 22, 2006
Michael Scheuer, who once headed the CIA's bin Laden unit, says bin Laden has been given permission by a young cleric in Saudi Arabia authorizing al Qaeda to "use nuclear weapons against the United States ... capping the casualties at 10 million."
"He's had an approval, a religious approval for 10 million deaths?" I (Christiane Amanpour) asked him.
"Yes," Scheuer responded.
Terrorism, Vigilance and the Limits of the War on Terror, Stratfor.com, October 5, 2010
'The current warning is a perfect example of the problem. We do not know what intelligence the U.S. government received that prompted the warning, and I suspect that the public descriptions of the intelligence do not reveal everything that the government knows. We do know that a German citizen was arrested in Afghanistan in July and has allegedly provided information regarding this threat, but there are likely other sources contributing to the warning, since the U.S. government considered the intelligence sufficient to cause concern. The Obama administration leaked on Saturday that it might issue the warning, and indeed it did.
The government did not recommend that Americans not travel to Europe. That would have affected the economy and infuriated Europeans. Leaving tourism aside, since tourism season is largely over, a lot of business is transacted by Americans in Europe. The government simply suggested vigilance. Short of barring travel, there was nothing effective the government could do. So it shifted the burden to travelers. If no attack occurs, nothing is lost. If an attack occurs, the government can point to the warning and the advice. Those hurt or killed would not have been vigilant.
I do not mean to belittle the U.S. government on this. Having picked up the intelligence it can warn the public or not. The public has a right to know, and the government is bound by law and executive order to provide threat information. But the reason that its advice is so vague is that there is no better advice to give.
The alert serves another purpose beyond alerting the public. It communicates to the attackers that their attack has been detected if not penetrated, and that the risks of the attack have pyramided. Since these are most likely suicide attackers not expecting to live through the attack, the danger is not in death. It is that the Americans or the Europeans might have sufficient intelligence available to thwart the attack. From the terrorist point of view, losing attackers to death or capture while failing to inflict damage is the worst of all possible scenarios. Trained operatives are scarce, and like any strategic weapon they must be husbanded and, when used, cause maximum damage. When the attackers do not know what Western intelligence knows, their risk of failure is increased along with the incentive to cancel the attack. A government warning, therefore, can prevent an attack.'
Deseret News: Sept. 6, 2009
'It was Daniel J. Hill who converted to Islam as a young U.S. Army paratrooper stationed in Beirut in 1958. It was Hill who learned fluent Arabic. It was Hill who joined the Mujahedeen Freedom Fighters in Afghanistan and fought the Soviet invasion there in the 1980s. It was Hill who personally met Osama bin Laden. It was Hill who used information from Islamic extremists to warn Rescorla that terrorists would use the underground parking garage for a car bomb attack on the World Trade Center. It was Hill who asked the U.S. government to assist him in an assassination attempt on bin Laden in 1998 (the request was rejected). And it was Hill who warned the FBI just weeks before Sept. 11, 2001, that his Mideast contacts told him "something big" was about to happen in the United States, in New York, Washington, D.C., or Philadelphia — maybe all three...Hill said the next terrorist attack will involve suitcase nuclear bombs that will be detonated in small, low-flying two-seater private airplanes manned by men hanging onto the belief that, like the 9/11 hijackers, they are about to die as martyrs and enter paradise.'
When I was very young I had a recurring dream.
My bedroom was always pitch dark and I slept by the window. In my dream I would be awakened by a sliver of bright light that made the bottom of my window shade glow.
Pulling up the shade I would see children playing in a blazing dazzle of white, I wanted to join them but couldn't leave my bed ... my last thought before waking up with a smile and feeling great, this must be heaven.
Would be nice if heaven were a place where 'nothing ever happens' or you could get yourself ' a little piece of heaven, waiting for the time when Earth shall be as one' as some of our modern bards have opined- where you could play a slow game with your friends as careless as a child.
Trouble with today is there may be too many folks rushing to get to heaven.
From a micro-view, personally and professionally, and from a macro-view, politically and economically, once again, it feels like the Buddha is in the middle of the road with a flak jacket on and fork extended.
The last time this fella's thoughts turned to scenes most desolate was back in October 2009. Did you know that Germany most probably foiled a terrorist strike planned for October 11th, 2009? The warnings from the terrorist B-team, that within two weeks of the German election on a Sunday there would be a strike bigger than 9/11 ... had Germany security knocking down doors throughout the country, rounding up the usual suspects and busting up a 10 person cell in the bosom of where the 9/11 attacks were planned.
Sunday October 11th, 2009 had symbolic significance because 70 years ago on that date a German physicist alerted the Americans as to the possibility of atomic weaponry.
Did you know that 'terrorist' plots uncovered in the US, and publicized around that time(10/09), reported that officials were saying the suspects had dozens of contacts stateside that may have been complicit? The Federales, were purportedly,'watching' them.
With that premise in mind, the shapes illuminated on my cave wall are most certainly not for family viewing.
Per Ockham's Razor the most symbolic date, 10/10/10, for 10 million, is the most likely date, if in fact, something is going to happen.
My trade? Sell 10/10/10 and buy a weekend out in a 'far' 'burb for the kids.
Looking forward to returning to the Great City on the Lake. Fervently hope it will be exactly in the same condition as left.
Stay safe my friends
http://anonymousmonetarist.blogspot.com/2010/10/101010-stay-safe-my-frie...
10/10/10
2011 feb 07
Congressional resolution authorizing force in Iraq was 10-10-02.
Just saying.
SPX is on the way to break Apr high.
the only question is how.
now is this bass related to the "DICK' bass family fortune out of Texas? cause i had private ski lessons for a Bass out of Texas, oh his bitch wife. all she could do on the chair lift was look at herself in her compact mirror and ask me if she looked ok. well i was dumb and young and just said, sure you look great. really the Bass name has some regalia, wondering just wondering.
its a different family
This is easy and it can be summed up in one short equation:
Barney Franks + Gargling some dude's balls at Freddy Mac = home ownership entitlement
The above - government balance sheet = (we're f'd!) And of course Barney needs some Listerine
Heading off to teach math class...
Kathy, do you have a face for radio? Just curious as you just show your cans...and they're um nice-n-all but you may be uglier than one of those peeps from the Hills Have Eyes for all we know?.
And if you're all that from the neck up, you may want to check out persiankitty.com or paltalk etc. etc. as your chances of generating revs there may be markedly better...
"Must watch" ? Nothing that hasn't been said more eloquently, here and elsewhere, for months. And hyperinflation taken as a given -- no serious consideration of deflation, or the path from it to more flation. No sense of the scope of the problem, what caused it, and the likely eventual system reset. A few very uninteresting hedgies/institutionals full of themselves. Perhaps revelatory in the MSM, big deal.