Must Watch Kyle Bass Interview: "I Don't Know How I Can Be Long Stocks"

Tyler Durden's picture

The one must watch interview of the week (if not of the year) features Hayman Capital's Kyle Bass. Bass, who correctly called the subprime implosion (and profited handsomely from it) as a iconoclast contrarian to conventional wisdom, tells David Faber that "given my outlook on the world, I don't know how I can be long stocks." Frequent readers of Zero Hedge will notice many comparable themes touched upon in Bass' interview with issues covered on Zero Hedge: the inevitable restructuring of untenable sovereign debt, the nearly $5 trillion in new global debt that needs to be issued just to plug near-term deficits, the joke that was the European stress test and the ongoing insolvency of the European banking system which is times bigger than its US equivalent, the imminent downward revision of Q2 GDP to sub 1%, the Fed's conflicted position as a political authority whose sole purpose now is not to keep inflation and unemployment low, but merely to keep interest rates as low as possible, as even the slightest shift to higher short-end rates will be seen as a black swan, indicative the Fed is losing control over the economy, and ultimately the futility of Keynesian theory band-aiding of a world caught in a toxic debt death spiral. In short, Bass sees no way the world can get out of its current state absent a huge reset. We agree completely, and needless to say, we are confident Bass will be proven 100% correct, to the chagrin of all the permabullish lemmings who day after day refuse to accept the unpleasant reality. The only caveat: when Bass is eventually proven right, all bets on profiting from this realistic worldview will be off, as the existing financial system will no longer exist.

Part 1

Part 2

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-1Delta's picture

IF FOREIGN MONEY PRINTING + FOREIGN LENDING (AKA M3) IS INCREASING, AND US M3 CONTRACTING, THE MONEY PRINTING DOES NOT MATTER. THUS, THE DOELLAR WILL NOT TANK- THE DOLLAR IS RELATIVE. AS FOR STOCKS, DEFINE NEW HIGHS.

SORRY ABOUT THE ALL CAPS, MY KEYBOARD IS FUBAR

Dismal Scientist's picture

I'm suggesting the circle can't be squared in the long run, massive QE will lead eventually to the currency declining in value. If there's a credit contraction in the US at the same time, corporate earnings will not hold up either. So you might get a short term pop in equities, all liquidity driven, at which point valuation will be ridiculous on the real earnings outlook.

I keep saying equities can be rented, not owned, on this blog. If you're a good enough trader. But the long run cannot good until the debt issue is fixed for good.

Thanks for answering btw. Once again, Tripps has decided not to give us his wisdom...

-1Delta's picture

QE without lending will not lead to a currency declining in value as the US$M3 is still declining relative to GDP. If M3 is growing at a faster rate abroad, the doellar, as a currentsea, will rise. People generally tie the doellar index to stocks too much (IMHO), as it is not the best indicator of money flow. Other, like AUDJPY or EURJPY clear things up...

Dismal Scientist's picture

Glad to see your keyboard is fixed. We appear to be arguing about different issues. You may well be right on the currency, but I am sure I am right on corporate earnings, and therefore the stock market level. Contraction of M3, no lending, rising savings rate = reduced consumption. Bye bye SPX

Tripps's picture

the more they print, the more commodities are worth...let alone real bull markets out there for commods like potash for example

 

you guys keep on blowing it by being perma bears whether KD, ZH, etc

 

 

 

 

Dismal Scientist's picture

So now you're talking about commodities, where before you were talking about stocks ? Make your mind up.

Tripps's picture

stocks tooo....if we have hyperinflation..that would be a dash to escape cash..and people would bid up stocks, spy, etc

 

even karl Denniger admits it

Dismal Scientist's picture

You expect to win in a hyperinflationary scenario ? That is hilarious. What should your 'winnings' be worth, since the currency you get for realising them will be worth ... feck all

Temporalist's picture

Hyperinflation means destruction of a currency - as in all that currency is attached to is worthless, turned into wall paper or used for fire to keep warm.  See Weimar or Zimbabwe.  Of course a Denninger acolyte.

ColonelCooper's picture

I believe he DID actually just say, he would have more wealth because inflated stocks would be worth more dollars. 

How can we not listen to this guy?

hedgeless_horseman's picture

Tripps, do you understand the difference between actual and nominal returns?

Cognitive Dissonance's picture

Tripps is at best a Yahoo Fiance escapee and at worst.......well let's not go there. There is no interest in discussion, simply hit and run shouting and throwing of insults. Don't waste your time. He gets his rocks off because you DO respond. Attention seekers do anything for the attention.

Bonesetter Brown's picture

The Fed's most recent announcement is not money printing -- the decision is to keep the balance sheet at its current size as MBS/agencies are repaid.  If they had not chosen to reinvest in Treasuries, we would experience quantitative tightening, as that would have shrunk the Fed's balance sheet.  The only way we can have additional quantitative easing is if the Fed prints more money and increases the size of its balance sheet.

If anything, the Fed's move should be seen as qualitative tightening, because they are replacing MBS/agencies with Treasuries.  Regardless of how you feel about the US gov making good on its debt obligations, Treasuries are lower risk than MBS/agencies.  Thus the Fed is reducing their demand, and hence overall demand, for MBS/agencies (is ghostface around to comment?)

The market freaks out because this is a tightening move, not a further easing.

 

traderjoe's picture

Quantitative tightening only in relation to their current position. But NOT to their original QE I proposition, which was to let the positions expire as a part of their exit strategy. Now, there is no exit strategy. Your history is revisionist. 

MrSteve's picture

Yes, I see it - qualitative tightening !!  to make the Fed's interest repayments ever cheaper in purchasing power, and why the Chinese are dumping UST and gold keeps waterfalling ever lower. No doubt, this is why big bucks China-source BHP wants more potash, ie, dirt minerals are ever worth less $$. You are on planet Uranus, my friend.

greased up deaf guy's picture

don't forget to post your buy and sell calls in a timely manner so we can avert our gazes from your overwhelming splendor appropriately.

akak's picture

As Yahweh did to Moses on Mt. Sinai, I think he has decided to only show us his backside.

Turd Ferguson's picture

As long as you keep your job at the widget factory in FantasyLand, I'm sure that all will work out well for you, Mr Tripps.

http://www.youtube.com/watch?v=YlVDGmjz7eM

 

kathy.chamberlin@gmail.com's picture

turd, thanks for the relaugh.

L U V,  cannonball water "M E L L O N"

Bryan's picture

Dude, that argument is not going to fly here like it sometimes does on the SDS board.  ;-)

ATTILA THE WIMP's picture

Price of gold on Sep. 10th, 2001, the day before the horrible terrible Osama bin Subcontractor attacked us because he hates our Freedom Fries: $271.50. Current price of gold: $1,227 - up 352%.

S&P 500 on Sep. 10th, 2001: 1,093. Current S&P 500: 1,093 - up 0%

This does not take into account the dividends that one would have gotten from owning the stocks but I doubt that it would make much difference.

Gold up 352% stocks up 0%

Comrade peasants, we have been at war with the horrible terrible Islamo-fascists for almost nine years. Show me one war in all history without an increase in commodity prices or without an increase in the desire for gold, just one.

akak's picture

Your demolishment of the "buy and hold" lie surrounding equities, a market even more manipulated by TPTB than that of gold, and your arrogant exposure of the truth is positively unpatriotic, if not the act of a financial terrorist.  You can expect a friendly visit from the nice men at the Department of Fatherland, er, Homeland Security in the very near future.  Please have your affairs in order, and just in case, you may want to say "Goodbye" to friends and family now, while you can.

ATTILA THE WIMP's picture

BAWK!

I take it all back. I swear I will sell my one ounce of gold and buy Al Gore approved ethanol stocks and slap a "Bomb dem Arabs" bumper sticker on my pickup truck.

Yours truly

Attila the Wimp

 

ThreeTrees's picture

You must be a charicature.

Dismal Scientist's picture
Its better in the European hours, but only just

 

CNBC’s viewers dropping precipitously 2010.07.27

The StreetInsider.com site has a posting on Tuesday about the sharp decline in CNBC’s viewership numbers.

It writes, “According to data from Nielsen Media Research, CNBC has lost viewership during every hour long block during the prime market news hours from 6:00 am to 7:00 pm EDT, with the biggest overall drop seen during the network’s ‘Mad Money’ show featuring Jim Cramer.

“The eccentric investor’s hour-long show starting at 6:00 pm lost 25 percent of its total viewer year-over-year in July, from 188,000 to 141,000, while its key demographic of viewers age 25-54 fell 24 percent for the show.

“Overall the network saw an 8 percent drop in total viewers year-over-year from 5a-7p, and 21 percent of its coveted advertising demographic.

“The key demographic is also turning off CNBC’s ‘Closing Bell’ with Maria Bartiromo in droves. The two-hour show has lost 31 percent of its key advertising viewers from 3p-4p in July compared to last year, and an even more staggering 40 percent in the second hour.

“Another of CNBC’s key shows, ‘Street Signs’ dropped 12 percent overall and 32 percent with the key age group.”

Read more here.

This entry was posted on Tuesday, July 27th, 2010 at 3:33 pm and is filed under CNBC, Jim Cramer, Maria Bartiromo.

akak's picture

Even a dog will only eat its own shit once, but not the second time through.

Temporalist's picture

But there are always other dogs to eat their shit...at least that is what TPTB could always depend on.

PeterSchump's picture

New optimally diversified asset allocation model to be taught in the finest universities in the future:

33% Crude Oil, 33% PM's, 33% Lead, 1% Renminbi

 

Topher's picture

I stopped watching CNBC, but that was worth it for a good piece. I appreciate your Blog.

Thank You ZH

Apostate's picture

Bah. We are hyperinflatin' up in this bitch. Just be patient. 

Gimp's picture

Kyle Bass rocks! maybe CNBS is getting rid of the cheerleaders and bringing on the truth squad. Just joking.

Topher's picture

I stopped watching CNBC, but that was worth it for a good piece. I appreciate your Blog.

Thank You ZH

crzyhun's picture

The Keynesian end point!! My god how can these two dufasses who are next to Bass not grasp what he's driving at. As for the rest of us......

I am looking at shorting the JGB. Long VIX.

And, what can we assume about intermarket events?

Clayton Bigsby's picture

I kept reading it thinking Lance Bass, and I was thinking, what the fuck does Lance Bass know about stocks?  I think I still need more coffee

walküre's picture

Lance Bass being the entertainer he is, probably still knows more about stocks than the Blondes on CNBC or Bloomberg.

primefool's picture

Of 1000 monkeys betting on "tail events" - a couple will hit the big time ( eg Paulson in 2008) - they will be famous, write books and get billions to manage. 998 monkeys will not live to see their favorite "tail event" materialize.
Oh - and the folks who run countries and their respective printing presses - they wake up every morning with one goal - to prevent "tail events" - at least till they have retired- and like it or not these guys and gals have quite a lot of power.

Sudden Debt's picture

How can you believe a guy that is losing his hair? He is clearly frustraded because he can't get any anymore.

 

primefool's picture

Of course the hedge fund compensation scheme of 2/20 with its ridiculous built in optionality encourages hedge funds to bet on "tail events". Its also more - well - "intellectual" if ya know what I mean - to predict the collapse of China or Japan and such - kinda justifies the outsized incomes of these folks.
So - oif an "intellectual" tail-event-betting hedgie blows up - well he can always raise even more money in round 2. ( see Merriwether et al)

primefool's picture

So if you are not on the 2/20 scheme with other-peoples-money and dont have a reputation as an "intellectual in high flying circles - best to stay away from placing big bets on "Tail Events"

Reflexivity's picture

+100.

"Tail events" are the sophisticated mans lottery tickets!!

Forbes's picture

David Faber is just unwatchable. He's not the Dean of M&A reporting, he's the grandfather, so says Faber. Please... 

FEDbuster's picture

Too bad Rick Santelli wasn't in NYC to do the interview, notice Liesman wasn't around to be bitch slapped by Bass.

akak's picture

I think CNBC management is getting tired of Liesman fouling up his dressing room with all the soiled diapers he keeps leaving in it after being challenged by those CNBC guests and commentators with some smidgeon of sense and honesty.

hedgeless_horseman's picture

Rumor:  Faber and Liesman were caught making out in the stairwell.

Mr Creosote's picture

Should we expect an interview with Barney Frank?