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Kyle Bass On The End Of The Debt Super-Cycle

Tyler Durden's picture




 

"When you let the politicians run monetary policy, well, that is how it [ends]... All of the ingredients are there [for Japan now] for this vicious cocktail to fall apart" is how Kyle Bass concludes this broad and succinct recent interview. With total credit market debt-to-GDP globally around 350% (or ~$200 trillion), his thesis remains that many countries will reach their profligate endpoint soon (if not already in Greece's case - where investors have already lost 90c on the dollar); but that managing around this current evolution is the single-hardest period for investing of the last few decades. The modest Texan notes it is naive to think he can call the end of a 70-year debt-super-cycle with any precision (as in mid-December's Japan fiscal data and Abe's election) but when you look at all of the inputs, he believes that Japan has crossed the proverbial Rubicon in the last two months and describes in this rather breathtaking clip how the end of twenty years of conjecture on what will happen to Japan will come to pass.

 

From his belief in the possibility of ongoing rate compression in developed nations and negative nominal yields in more than just Germany and Switzerland, Bass expounds on the structure of his fund (funding via low-duration 'high'-yield vehicles along with a long-short equity book and the core 'convex' Japan credit book) and how his template is playing out... must watch

 

 

and more detail in his recent letter to investors:

Kyle Bass

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Tue, 11/20/2012 - 19:04 | 3000254 mjorden
mjorden's picture

Oh he smells it, and he wants it ... and he wants to invite all of his naysayers for leftovers ... 

Tue, 11/20/2012 - 19:19 | 3000296 RockyRacoon
RockyRacoon's picture

If Kyle is wrong then the problems have been fixed, or at least there is a credible plan to fix them.  I guess that leaves one alternative, eh?  I'm long nickels.

Tue, 11/20/2012 - 19:40 | 3000342 Pladizow
Pladizow's picture

Irrespective of rate, as long as you can borrow, its not over!

Tue, 11/20/2012 - 19:49 | 3000360 Michaelwiseguy
Michaelwiseguy's picture

Can I borrow a cup of sugar?

In other news;

TSA Issues Warning Over Opt Out And Film Week
Hints that local police can arrest protesters using cameras at checkpoints

Steve Watson Infowars.com
Nov 20, 2012

The TSA has officially acknowledged the Infowars Opt Out And Film week protest, and warned that despite the fact it is not prohibited to film at TSA checkpoints, local laws may allow police to intervene and prevent such activity.

On its official blog, TSA official Bob Burns notes:

“TSA has given passengers the option of opting out of imaging technology. If you choose to opt out, simply let the officer know you would like to opt out of the body scanner, and you will receive a pat-down instead.”

Burns then states:

“We’re also aware of the Opt Out and Film week, where some are planning on opting out of the body scanner and then filming their experience. TSA respects passengers rights to exercise freedom of speech as well as the rights of fellow travelers trying to get to their destination safely and without unnecessary delay. While the TSA does not prohibit photographs at screening locations, local laws, state statutes, or local ordinances may.”

http://www.infowars.com/tsa-issues-warning-over-opt-out-and-film-week/

Caught On Camera: Woman Goes Into Cardiac Arrest During Traffic Stop

http://losangeles.cbslocal.com/2012/11/19/caught-on-camera-woman-goes-into-cardiac-arrest-during-traffic-stop/

 

 

Tue, 11/20/2012 - 20:20 | 3000434 Enslavethechild...
EnslavethechildrenforBen's picture

There are no politicians, that's a facade. There are only Bankers. That's our reality.

Tue, 11/20/2012 - 22:29 | 3000726 TruthInSunshine
TruthInSunshine's picture

The Government is losing the propaganda war badly. All of their headlines, memos, talking points & other bullshit, pumped out relentlessly through their official channels and the proxy main stream media (with every newspaper, cable station, network, magazine and radio station owned by 6 corporations), that allege that there's some sort of a "recovery, soft but sure," are now being dismissed even by the average sheeple (there's been a "whiff" or mild illusion of something remotely and temporarily resembling a stabilization only due to unsustainable, insane, batshit-crazy debt printing and federal reserve sponging/monetization of that debt, with the Fed now holding the illustrious title as one of the world's most toxic repositories/pustules).

The sheeple can no longer even passively ignore the massive spread between what they're seeing and experiencing in their personal lives and what is being parroted to them by the government and media.

The delay in taking the medicine this nation should have taken in the wake of the 2008 crisis will turn out to be an economic & social textbook historical lesson for the ages as to what NOT to do in the face of the massive structural economic crises the U.S. and global economy face today.

I only hope that the very painful chapter of American History about to unfold destroys any remaining confidence that holdout citizens, who still deposit trust & faith in the integrity & competency of benevolent government as their protectorate, may have in fractional reserve banking charlatanism and in the wisdom of allowing a banking/financial-military/defense-Wall Street plutocracy to be allowed to suckle to maturity from the taxpayer subsidized teat of the state and deeply capture the respective branches of government, and its various politicians, regulators and other appendages.

Tue, 11/20/2012 - 23:58 | 3001073 economics9698
economics9698's picture

I am calling this bitch, September 2013.

Wed, 11/21/2012 - 00:47 | 3001189 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

Gonna be fun to watch CNBC proclaim that "nobody saw this coming!"

Wed, 11/21/2012 - 00:46 | 3001184 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

the Japanese are good people.

 

Very obedient.  

Wed, 11/21/2012 - 08:55 | 3001552 economics9698
economics9698's picture

They have been killing radicals for centuries.

Wed, 11/21/2012 - 09:13 | 3001573 Big Slick
Big Slick's picture

! For PDF of the Hayman report, Google: "Central Bankers Potemkin Village" pdf "it seems to us"

The PDF you are looking for is the only thing that comes up

Wed, 11/21/2012 - 18:04 | 3003380 kalasend
kalasend's picture

Is that an obedient Japanese in your avatar picture?

Wed, 11/21/2012 - 05:45 | 3001375 Hobbleknee
Hobbleknee's picture

I hope so too, but it's more likely that they'll blame the collapse on overpopulation, or some other lie, and the sheeple will fall for it.

Wed, 11/21/2012 - 07:27 | 3001426 Ayn NY
Ayn NY's picture

Didn't we just have an election that proved you wrong. I wish people were waking up to the funny numbers, but they aren't. I think I read one poll that 56% trust Obama on the economy! It's FDR redux, just blame the misdeeds of the guy before you for the problem and double down on the bad economic policies that got us here to begin with. The sheeple bought that for four election cycles and we've never recovered from that. Face it, this is the new normal.

Wed, 11/21/2012 - 10:42 | 3001795 Common_Cents22
Common_Cents22's picture

agreed, America is becoming much more ignorant and stupid.   We will be rearranging deck chairs on the Ameritanic.   We might as well get the reset over with, and start anew.   Those who have put on their life jackets and have arranged their own life raft will have saved themselves.     Those who trust gubmit to save them, will ironically be the first to go.   Darwin always gets his due eventually.

Wed, 11/21/2012 - 14:35 | 3002722 timothyi
timothyi's picture

Seriously, you think Romney had the answers?  Or that his policies (whatever they were) would have been materially different from Obama's?  If Romneyt had been elected we would have failed a different kind of IQ test--the one that doesn't notice or care that someone is spouting blatant lies about easily checked facts.

Wed, 11/21/2012 - 17:59 | 3003370 e-recep
e-recep's picture

people with average iq cannot wake up even if they wanted too. you want them to understand the fiat ponzi? phew, good luck with that.

Wed, 11/21/2012 - 00:41 | 3001172 e2thex
e2thex's picture

In order to state that it's over, one needs to define "end."  No one to date has done that.

Wed, 11/21/2012 - 11:49 | 3002026 ATM
ATM's picture

Fiat currencies will end. 

When that happens just look to history for a long list of the kinds of collateral damage that will inflict.

Tue, 11/27/2012 - 21:28 | 3016126 masterinchancery
masterinchancery's picture

Borrow ammo? I doubt it.

Wed, 11/21/2012 - 08:56 | 3001553 Big Slick
Big Slick's picture

Long nickels too, and pre-'82 pennies.

Tue, 11/20/2012 - 21:30 | 3000669 archon
archon's picture

While all the attention is focused on the EU, "the end" quietly begins in Japan...

Tue, 11/20/2012 - 23:27 | 3000990 dtwn
dtwn's picture

Kyle Bass seemed surprised that events in Japan were happening as fast as they are.  I think Europe will implode before Japan though.  I think the market has to see that the Euro was in fact a failed experiment and has fragmented before it will accept that Japan will default.  I think the first domino is going to be Greece and/or Portugal.  I think that one of them will decide to leave the Euro because of social unrest/political change due to austerity.  Once that happens, perhaps they exit together as some sort of strategy.  I don't know anything about their international relations though. Ireland could also default around this time.  Then I think there will be a bit of market panic, with flight to the dollar, but followed by some 'stable period'.  Whether this is weeks or months, or even years I don't know.  But then due to the relationship between Portugeuse debt and Spain, it could be possible that Spain is the real domino, the real triger because of the size of its economy and its bank exposure.  I think Italy will then default in timing close to that of Spain.  I have difficulty determining what the trigger would be in Itally though because they don't seem to be owed much by PIGS if I'm interpreting this previous post. http://www.zerohedge.com/news/2012-11-20/world-wide-web-debt

In any case, Spains default would probably affect the UK, specifically if Santander were to go under as Santander has a lot of UK 'assets'.  Then if the UK is in trouble, France is going to be impacted due to debt exposure and the Euro will have essentially imploded.  It is around the time that the UK has trouble that I think the market will notice Japan and restructuring will eventually take place.  While all this is occuring I think there will be flight to the dollar (and commodities of course), however temporary, before the Keynesian endgame occurs in the US.

Perhaps that is an overly simplistic view, but thats kind of the order I see things happening.

Wed, 11/21/2012 - 00:10 | 3001112 DYS
DYS's picture

I did a search and replace of your text of "I think" with "I'm totally fucking guessing"   and   "I don't know" with "I don't have a fucking clue".  Hilarity ensues;

 

Kyle Bass seemed surprised that events in Japan were happening as fast as they are.  I’m totally fucking guessing Europe will implode before Japan though.  I’m totally fucking guessing the market has to see that the Euro was in fact a failed experiment and has fragmented before it will accept that Japan will default.  I’m totally fucking guessing the first domino is going to be Greece and/or Portugal.  I’m totally fucking guessing that one of them will decide to leave the Euro because of social unrest/political change due to austerity.  Once that happens, perhaps they exit together as some sort of strategy.  I don’t have a fucking clue anything about their international relations though. Ireland could also default around this time.  Then I’m totally fucking guessing there will be a bit of market panic, with flight to the dollar, but followed by some 'stable period'.  Whether this is weeks or months, or even years I don’t have a fucking clue.  But then due to the relationship between Portugeuse debt and Spain, it could be possible that Spain is the real domino, the real triger because of the size of its economy and its bank exposure.  I’m totally fucking guessing Italy will then default in timing close to that of Spain.  I have difficulty determining what the trigger would be in Itally though because they don't seem to be owed much by PIGS if I'm interpreting this previous post. http://www.zerohedge.com/news/2012-11-20/world-wide-web-debt

In any case, Spains default would probably affect the UK, specifically if Santander were to go under as Santander has a lot of UK 'assets'.  Then if the UK is in trouble, France is going to be impacted due to debt exposure and the Euro will have essentially imploded.  It is around the time that the UK has trouble that I’m totally fucking guessing the market will notice Japan and restructuring will eventually take place.  While all this is occuring I’m totally fucking guessing there will be flight to the dollar (and commodities of course), however temporary, before the Keynesian endgame occurs in the US.

Wed, 11/21/2012 - 09:06 | 3001568 Big Slick
Big Slick's picture

'Unlike' you, DYS.

dtwn is offering personal opinion and educated guesses, yes.  But these commodities are at a dearth in the ZH comment sections - at least in any serious tone.  Where's your constructive commentary?

Keep writing, dtwn!

Wed, 11/21/2012 - 09:40 | 3001622 Landrew
Landrew's picture

I think you have it backwards. Why would the weak leave a system they rely on for funding? The Germans will be the ones that leave long before any failing nation.

Tue, 11/20/2012 - 19:04 | 3000255 Michaelwiseguy
Michaelwiseguy's picture

This is the group of real American Men and Women the GOP should be courting for a win in the next Presidential election.

Without any help from the mainstream media to get people off their ass to show up this happened, and this is why I new Mitt Romney and the GOP were going to lose;

Ron Paul Crowds at Rallies

https://www.youtube.com/watch?v=A4_vK3jCMIY

Tue, 11/20/2012 - 19:52 | 3000372 LongSoupLine
LongSoupLine's picture

I don't disagree that Kyle Bass would be the cure in the political world, however have you seen the voting public?  They are mostly minority Americans whom love their Dancing with the Stars, ObamaPhones and SNAP life.  Truly fixing America will take revolution I'm afraid.

Tue, 11/20/2012 - 21:33 | 3000679 archon
archon's picture

There was a poll that showed about 90% of Obama voters believed that the middle class pays a higher tax rate than the top 1%.  If this is true, then it really is over, because you can't fix stupid.

Tue, 11/20/2012 - 22:19 | 3000818 mkhs
mkhs's picture

Wait a second.  Do you mean to say that Warren Buffeted's secretary pays less than the Warren?  Or maybe she is not middle class?  Yeah, that is probably it. 

Tue, 11/20/2012 - 23:30 | 3001004 Doña K
Doña K's picture

That may be true if you include income from investments, tax free municipal bonds and other shelters. Romney paid 14% overall.

The real question is the definition of middle class. In the US classes are defined by income. In other countries middle class and upper class is a combination of income and breeding. Put that asside, ask any politician to define the middle class parameters and you will get no answer.

Obama just defined the upper limit of $250K for a family, but not the lower limit. Which means that a family of two that make $249K in wages they pay a higher percentage than Romney. But a family of 4 who make $60k does not pay more. Americans with income of $40k also consider themselves middle class

Wed, 11/21/2012 - 11:12 | 3001899 Kobe Beef
Kobe Beef's picture

In the interest of truth, allow me to introduce the "Real American Class System":

Owner Class: you get paid via ownership of hard assets, businesses, stocks, bonds, printing presses & politicians.

Worker Class: you get paid for work, whether turning a lathe, programming a computer, answering a telephone, indoctrinating children, or reading a teleprompter.

Parasite Class: you get paid for being born into a "disadvantaged group", birthing more, and voting democrat.

 

Forget income, as that is all subject to reporting, rigging, fudging, and change. Classifying via income stream is more appropriate, agreed?

Sun, 11/25/2012 - 13:44 | 3009888 Doña K
Doña K's picture

Amen!

Wed, 11/21/2012 - 09:47 | 3001638 Landrew
Landrew's picture

Let US not be stupid, are we confusing tax rate with total tax dollars? Many of the 1% live on long term cap gains (I would if I could) paying 15%. Most of us in the middlle class pay between 25 -35%. So yes the middle class pays a higher rate and the 1% pay a higher % of the total tax dollars. Does that clear it up for you?

Wed, 11/21/2012 - 11:54 | 3002049 ATM
ATM's picture

are you factoring in estate tax?

Tue, 11/20/2012 - 19:08 | 3000261 fonzannoon
fonzannoon's picture

I wonder if he can talk his book into getting a developed nation to default.

Tue, 11/20/2012 - 19:37 | 3000337 kito
kito's picture

hes trying, hes trying............damn those japanese, they just....wont....die!!!!!!!!!!!!

Tue, 11/20/2012 - 19:45 | 3000351 fonzannoon
fonzannoon's picture

If Japanese woman marry men who own JGB's do they cheat on them with JGB vigilantees?

Tue, 11/20/2012 - 19:48 | 3000361 kito
kito's picture

no, the japanese women hire u.s bond owning gigolos..................

Tue, 11/20/2012 - 19:08 | 3000263 A Lunatic
Tue, 11/20/2012 - 19:10 | 3000270 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Get long floating rate bonds?

Or just buy as much nickle as your living room can hold?

Tue, 11/20/2012 - 20:17 | 3000418 peekcrackers
peekcrackers's picture

Holy paper humpers .. Bass buy japan ???

Never  can understand how ppl still think solid investment in I O U notes

built on enslament of tax payers

Tue, 11/20/2012 - 20:22 | 3000440 UP Forester
UP Forester's picture

You mean picking up 10 yen coins off the running bullet-train tracks is a bad idea?

Tue, 11/20/2012 - 22:26 | 3000841 mkhs
mkhs's picture

Who needs ten fingers?

Wed, 11/21/2012 - 14:38 | 3002740 timothyi
timothyi's picture

YCS - 2x inverse Yen.

Tue, 11/20/2012 - 19:16 | 3000287 Seasmoke
Seasmoke's picture

I don't think it will ever be over until negative rates go to 100

Tue, 11/20/2012 - 19:17 | 3000290 muppet_master
muppet_master's picture

end of treasury bubble?

I'll call it BEFORE it happens..how about sometime in middle of 2014 when 10 yr is at 0.5%

ZH says about kyle bass:

The modest Texan notes it is naive to think he can call the end of a 70-year debt-super-cycle with any precision

 

Tue, 11/20/2012 - 19:20 | 3000299 RockyRacoon
RockyRacoon's picture

ZH didn't say that about Kyle Bass.  Kyle Bass said that about Kyle Bass.  Watch the effing video.

Tue, 11/20/2012 - 19:22 | 3000301 fonzannoon
fonzannoon's picture

He is already considering going long the yen. So thats how good he feels about this. I just wonder how CNBS tries to rise above Japan defaulting in their propoganda.

Tue, 11/20/2012 - 20:36 | 3000477 GuyJeans
GuyJeans's picture

Ill have to re-listen but I though he said "yen devaluing" esp against usd and yuan, so I assumed going long to mean long the usd.  Why long the yen in a yen currency crisis?

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