Hayman Capital's Kyle Bass is back and cutting through the caustic bullshit that surrounds every waking moment in this kick-the-can world. Dispelling the myth of our 'deleveraging' virtue, with global debt having grown from $80tn to over $200tn in the last ten years alone (a 10.7% CAGR) and the frightening reality of central bank balance sheet growth of 16% per annum, Bass concludes (rightly) that "you can't do this for very long" as governments infinitely leverage and central banks have begun the endgame of open-ended money-printing. Addressing the question of timing, Bass notes that while Europe and Japan are 'perceived' to be 'staying together' there are in fact devastating losses occurring (ask Greek bond-holders) and he firmly believes that "Germany will never go joint-and-several with the rest of Europe." The world sits at a place it has never been before in peace-time - as far as global debt balances and deficits - and that is why the global investing playbook is so hard. He goes on to address the US fiscal debacle, Japan, hyper-levered economies, delayed inflationary outcomes, and worries that the cost-push (lower GDP, higher CPI) prints are just beginning in Europe. Must watch.
As a fiduciary, and something all investors should consider - "Given what we see coming, our job is not to lose money!"
On Fiscal Cliff: Won't happen - politicians won't fix anything.
On the CBO Budget crisis: As a non-partisan third-party 'accountant', "I can't fix it!"
On Inflation: "It takes time - but it's coming"
On Housing - he doesn't believe housing will go up but has stabilized. "Everyone who ever thought of buying a house, has bought a house" and we need to flush the inventory - which wil take a few years.
On Trading The End of the World: Use Convexity - which is grossly concentrated in Japan
Own anything that is nailed down - productive assets!