Hayman Capital

"Given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency."

“To the intelligent man or woman, life appears infinitely mysterious, but the stupid have an answer for everything.” ~Edward Abbey

The just concluded 13-F bonanza shows that "some of the world’s top hedge fund managers scaled back their U.S. stock investments last quarter as markets tumbled." Below, courtesy of Bloomberg, is the full summary of what the most prominent hedge fund names did in Q3...

Following Marc Faber's reality check on China recently, Hayman Capital's Kyle Bass took a swing tonight noting that "China's 7% GDP growth is a farce," and adding that, just as we detailed previously, China's credit cycle has begun and non-performing loans will rise rapidly leading to an emerging Asia banking crisis ahead. Japanese markets continue to entertain with "someone" insta-ramping NKY Futs 100 points at the open only to give it all back as USDJPY slides back towards 120.00 (and 10Y JGB yields drop below 30bps for the first time in 6 months).

Kyle Bass shared his macro views during the “Squawk on the Street”

We are silver bulls! Yes, that’s true. But before we make some money we will most probably lose some. $12 silver is a real possibility! Hedge Funds Wrong Again. Same as with Oil

Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."

• That will teach the UAE who's boss: U.S. Won’t Consult Syria on Militant Strikes: White House (BBG)
• Putin Set to Meet Poroshenko as Ukraine Tensions Escalate (BBG)... but the de-escalation algo?
• Tim Hortons’ Canadian Fans Squeamish of American Hookup (BBG)
• Israeli air strikes target more Gaza high-rises (Reuters)
• How Steve Ballmer Became a Rookie Basketball Mogul (WSJ)
• Buffett to Help Finance Burger King Tax-Saving Deal (BBG)
• U.S. Factories Keep Losing Ground to Global Rivals (WSJ)
• Boehner, Camp Profit From Corporate Bid to Avoid U.S. Tax (BBG)
• Experimental U.S. hypersonic weapon destroyed seconds after launch (Reuters)
• The Neo-Neocons (WSJ)

With the Fed tapering and both China “I don't think the markets are discounting what’s really happening in China,” and Japan’s currencies likely to weaken, the net impact on the U.S. will be deflationary, Kyle Bass warned in a recent presentation. That trend will be accelerated by the improvement in the balance of trade for the U.S., which had its current account deficit shrink due to increased hydrocarbon production. Bass warns, the crucial moment will come when the U.S. reports a sub-6% unemployment rate, meeting the target it has set for normalizing its monetary policy by ending QE and raising rates. He predicted that will come in July. That will be the Fed’s “worst nightmare,” he said. Raising rates would stifle growth and recreate unemployment problems, which would be disastrous politically, according to Bass.

• "May?" New Cold War May Emerge in Ukraine Crisis, Medvedev Says (BBG)
• Wristslaps will be fast and furious: EU Commission charges HSBC, JPMorgan, Credit Agricole with rigging (Reuters)
• Credit Suisse Rises as U.S. Guilty Plea Ends 3-Year Probe (BBG)
• After Martial Law Declaration, Thailand Waits for General's Next Move (WSJ)
• China property slowdown spells trouble for Asia bonds (FT)
• Russia Close to $400 Billion Gas Pipeline Deal in Pivot to China (BBG)
• Dimon-by-the-Sea Shows London Banking’s Engine of Growth (BBG)
• Modi Faces Greece-Sized Snag to Economic Revival (FT)
• U.K. Inflation Accelerates on Airfare Surge (BBG)

From fears of Argentinian devaluations (and a 26-year-old running policy) to Japan's structural collapse; from Europe's false hope to China's bubbles; and from the Fed taper to the US hydrocarbon revolution, Hayman Capital's Kyle Bass provides a broad-based presentation of global risks and opportunities in the clip below. The Q&A is where Bass comes alive and is well worth the price of admission for a hedge fund manager unafraid to discuss the possibility that the status quo is unsustainable. Bass sums it all up perfectly succinctly, "proceed with caution."

Get long 'Depends' may be the most befitting headline for tonight's massive macro miss in Japan. For the 3rd quarter in a row, Japanese GDP missed expectations with a meager +1.0% annualized growth (versus a +2.8% expectation), and a tiny 0.3% Q/Q change vs expectations of a 0.7% increase, this is the biggest miss and slowest growth since Abe retook the economic throne after his chronic-diarrhea-prone first attempt to save the nation. No matter how hard they try to spin this, there's no silver lining as consumer and business spending missed expectations notably and the only Tokyo snow fell just last week so long after the quarter was over... and this is before a tax hike that is aimed at showing how fiscally responsible the nation and not simply an insolvent ponzi scheme alive through the good graces of the greater fools of leveraged carry trades.

Momentum stocks are the absolute best stocks to invest in from a risk and return standpoint, and there are 5 drivers for GM being a momentum stock 2014.

• Yes: Support Builds in Congress for U.S. Strike Against Syria (WSJ)
• No: Boehner backs Obama on Syria, but House leaning toward ‘no’ (The Hill)
• U.S. Congress fight over Syria pits establishment versus upstarts (Reuters)
• Wednesday humor: Japan’s Abe Says Fukushima Will Be Resolved Before 2020 Olympics (BBG)
• Bank of Japan to Consider Further Easing if Sales Tax Hike Goes Ahead (Reuters)
• S&P accuses U.S. Justice Department of filing $5 billion lawsuit against it in "retaliation" for the company's downgrade of America's debt in 2011 (WSJ)
• German Candidates Spar Over Records (WSJ)
• Emerging Nations Save $2.9 Trillion Reserves in Rout (BBG)
• Split Congress Mulls Denial of Military Force Request (BBG)
• Sharp Fall in Overseas Investment By Chinese Firms (WSJ)
• Jorge Lemann: He Is...the World's Most Interesting Billionaire (BusinessWeek)
• Why Amazon Is on a Warehouse Building Spree (BW)

With all eyes fixed on GDP and unemployment data this week (and all their revised and propagandized unreality) for more hints at if (not when) the Fed will Taper; the dismal reality that few seem willing to admit is that it is when (not if) and that the announcement of a "Taper" has nothing to do with the economy. There are three key factors driving this decision: Bernanke's bubble-blowing and bond-market-breaking legacy, the political 'clean slate' his successor needs, and, most importantly, the fear that QE will be discovered for what it is - monetization. As BoJ's Kuroda admitted last night "if QE is seen as financing debt, this could lead to rise in yields." With deficits falling, the Fed's real actions will be exposed (unless QE is tapered) and as Kyle Bass has explained before, it was out of the hands of the BOJ (or The Fed) and entirely up to market psychology.