The Annotated Kyle Bass 'Short-Japan' Thesis

Tyler Durden's picture




 

With JPY bleeding lower once again overnight extending to 28-month lows against the USD (and the long-end of the JGB curve starting to show some signs of anxiety), it is perhaps timely to revisit Kyle Bass's five key reasons why Japan is the epicenter of the world's failed monetary policy experiment. In this excellent and much-requested summary 8-minute clip, Bass summarizes his Japan thesis and destroys several of the myths that talking-heads like to assign to the so-called widow-maker trade.

 

JPY/USD...(higher = weaker JPY)

 

The long-end of the Japanese yield curve is at near-record steeps...

 

 

 

Bass's exact positioning is unknown but he has commented on using sovereign CDS and critically has not espoused a short Japanese equity position directly - preferring to focus on the debt problems.

 

(h/t InformedTrades)

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Wed, 12/26/2012 - 22:19 | 3097966 Gloeschi
Gloeschi's picture

YCS, JGBS

Wed, 12/26/2012 - 22:30 | 3097977 Zer0head
Zer0head's picture
The Annotated Randi Zuckeberg

Princess Randi and the boring photo that got away featuring her and her brother playing 'poke' with some friends

but the question remains is that Randi on the right of the photo or the left?

http://www.smh.com.au/technology/technology-news/randi-zuckerberg-stung-...

 

apparently it is about human decency

http://cdn0.mos.techradar.futurecdn.net///art/other/Onetimers/Randi_Zuck...

Thu, 12/27/2012 - 00:09 | 3098142 Michaelwiseguy
Michaelwiseguy's picture

I don't know how I missed this;

We are Preparing for Massive Civil War, Says DHS Informant http://www.youtube.com/watch?v=nXg2WsNCrW4   
Thu, 12/27/2012 - 01:38 | 3098244 Nothing To See Here
Nothing To See Here's picture

Sorry to say but it seems to me that the Japanese are people who are supremely skilled and efficient at doing incredibly stupid things, like over-hunting endangered species, going kamikaze at war and printing money like there's no tomorrow nor consequences to it...

Thu, 12/27/2012 - 09:33 | 3098578 flattrader
flattrader's picture

>>>...it seems to me that the Japanese are people who are supremely skilled and efficient at doing incredibly stupid things,...<<<

Agreed. And the new govs decision to revisit the nuclear power issue is an example.

Fuku will kill hundreds of thousands over time.  Children are developing cysts and other symptoms of radiation sickness...fatigue, nosebleeds, etc...

They've contaminated the whole island by shipping and burning contaminated debris in all parts of the country.

It will take decades to empty the failed reactors and spent fuel pools.

Does Bass ever address the nuclear problem in Japan?

Wed, 12/26/2012 - 22:28 | 3097981 CPL
CPL's picture

Sharespost is spamming the shit out of my mail box telling me all about the great stock deals on...everything.   usually get an email here and there describing how I can be ground floor for facebook or some piece of shit.  

 

But something odd when the newsletter from them comes in and "everything" is available.  By everything, I suggest anyone in shale and fracking stocks GTFO of them ASAP.  It's all getting dumped...at least the attempt to dump current pre-ipo shares.

 

CYA flag is in effect, hedge accordingly.

Thu, 12/27/2012 - 01:19 | 3098216 Sylvia Plath
Sylvia Plath's picture

This trade works, until US and EURO have as much if not more problems than Japan and round and round the (de)flation circle we go... 

Thu, 12/27/2012 - 01:26 | 3098228 SAT 800
SAT 800's picture

Everything works until it doesn't. Are you actually saying anything? Of course you have to use your informed judgement as to when to enter and leave markets; but knowing that you have a 90% probability of a lower YEN at years end is a very valuable kind of information.

Thu, 12/27/2012 - 11:27 | 3098866 Stuart
Stuart's picture

and how is this any different than the US.   Do not disagree, but Japan is small potatoes compared to the shitstorm that has to unfold in the US especially factoring in there are more guns that cars in the US...not too much imagination to figure out what happens if the spending taps are turned off and people cross that desperation line.   How is Kyle Bass's fund doing in 2012 anyways?

 

Wed, 12/26/2012 - 22:21 | 3097969 Thomas
Thomas's picture

Kyle is the nightmare machine. Imagine how scary that talk was with graphics included. Passed it to a colleague, and he wanted to slice his wrists by the end of the hour.

Wed, 12/26/2012 - 23:00 | 3098042 seek
seek's picture

It's only hard until you reach the acceptance phase. Then you panic about getting ready for the inevitable.

Wed, 12/26/2012 - 23:46 | 3098110 Manthong
Manthong's picture

Did Kyles slides from the presentation ever get posted anywhere?

Thu, 12/27/2012 - 00:24 | 3098161 seek
seek's picture

No, from what I've found so far, the slides for the conference are available (I've yet to find them) but that Bass' presentation was excluded by his request.

This probably explains why the video never shows the slides as well.

 

Wed, 12/26/2012 - 23:37 | 3098087 Son of Loki
Son of Loki's picture

Currency wars are going to be wicked, "

Currency Wars: The Making of the Next Global Crisis"

:

 

http://www.amazon.com/dp/1591845564

Thu, 12/27/2012 - 00:56 | 3098201 weburke
weburke's picture

the ----- and ------- decide. Not math. bass is afraid of math. since when is math the ultimate ruler. 

Thu, 12/27/2012 - 01:23 | 3098223 SAT 800
SAT 800's picture

I like to find out what the very well informed are finding out; I've been making money on my JPY/USD short ever since I saw this the first time; which was like a week ago. It's just information. You thought Japan INC. was going to last forever?

Wed, 12/26/2012 - 22:23 | 3097973 fonzannoon
fonzannoon's picture

are they in the process of going Zimbabwe? Their market is up like 20% the last few months.

Wed, 12/26/2012 - 22:33 | 3097992 Dr. Engali
Dr. Engali's picture

I was thinking the same thing, especially when you consider the politicians are just coming out and telling the central bank to print or else.

Wed, 12/26/2012 - 22:44 | 3098013 fonzannoon
fonzannoon's picture

If they are it just seems so eerie. Their currency starts failing. The stock market starts shooting up and interest rates start heading north. The eerie part is people in the US for example have coctail events where they brag about their currency plays and how they are long Japanese stocks while shorting their bonds. Then they complain about having one too many shrimp coctail and get in their benz and head home. The demise of an entire country is a casino for everyone else. Crazy.

Wed, 12/26/2012 - 22:53 | 3098027 Dr. Engali
Dr. Engali's picture

 

"The demise of an entire country is a casino for everyone else. Crazy".

You said a mouth full there Fonz. It's pretty vile what people are willing to do for a buck. Japan dug their own grave just as we dug ours, but I don't relish the idea of the pain that will eventually come.

Wed, 12/26/2012 - 22:58 | 3098040 fonzannoon
fonzannoon's picture

That is the sad part. Their bankers dug their graves and the people will just fall in them. We are on QE4 and I check my mailbox everyday and still no check for me. But when the time comes I will have to take my medicine. I just hold hope that when we face down the barrell of the gun a revolution gets unleashed. But it is wishful thinking.

Wed, 12/26/2012 - 23:51 | 3098119 kito
kito's picture

I call bullshit on any imminent yen collapse.....this game has several years before the end is near....and it wont be japan that sets off the world...it will be the treasury market..........

Thu, 12/27/2012 - 00:06 | 3098141 Dr. Engali
Dr. Engali's picture

Merry Christmas kito.. I'm glad you joined the conversation. I'm currently snowed in with a bottle of Cown watching the Dark Knight, feeling a bit spunky. You said this game has several years to play out ... Define for me if you would your vision of the collapse. Where do you see the S&P and the ten year treasury ending in 2013?

Thu, 12/27/2012 - 01:39 | 3098245 kito
kito's picture

Hey doc, good tidings! Glad to hear you are snowed in....just crappy slush by us....nothing fun....i couldn't make any prediction on the markets for 2013...all I know is that a crisis will be full blown in 2015....I'm sure of it.....send some of that snow to the tri state area please!!!

Thu, 12/27/2012 - 01:32 | 3098234 SAT 800
SAT 800's picture

no one mentioned any "imminent yen collapse"; "it won't be Japan that sets off the dominos?" and you know this how? You're better at doing your homework than Kyle is? You're smarter than Kyle is? You dug harder than he did to find out all pertinent facts and trends? Or you just like the sound of your own voice?

Thu, 12/27/2012 - 05:33 | 3098358 Tommy Gunner
Tommy Gunner's picture

Ya well these fools should be careful what they wish for.  Because when any major economy - Japan, the EU, China or the US circles into the vortex, we are ALL following.

I have been short the Yen for a couple of months now and have a Japan short ETF in play and both are doing well... but who am I kidding... if the Japan really goes then there is a huge chance those bets will vapourize... kinda like what would have happened to Goldman if AIG doesn't get bailed...

I do this small money trade as amusement only - I am focused on PM...

Thu, 12/27/2012 - 01:42 | 3098248 SAT 800
SAT 800's picture

Yes, but it's all relative. I mean, it's not as bad as strangling puppies for fun.

Wed, 12/26/2012 - 23:21 | 3098083 yogibear
yogibear's picture

Bernanke and the Fed's wet dream is to print.

Wed, 12/26/2012 - 22:46 | 3098020 DeadFred
DeadFred's picture

Isn't it 20% in the last few days? Craziest ramp I've seen in awhile. Something tells me it doesn't end well, but who knows, they may have discovered a new unicorn field on Mt. Fuji.

Thu, 12/27/2012 - 02:07 | 3098269 ghostfaceinvestah
ghostfaceinvestah's picture

21% since October 15th.

Wed, 12/26/2012 - 22:56 | 3098036 Freddie
Freddie's picture

Wasn't it the Tyler(s) who said the other day that the trade was short Japanese govt bonds and long Japanese equities.

I really like Kyle Bass and really loathe that Zuckerberg scum klan.  The sister was pissed? Why? Because she looks like a fat pig in that one picture?    

Thu, 12/27/2012 - 01:09 | 3098088 SafelyGraze
SafelyGraze's picture

be nice

she's still getting over her split with that kris humphries guy

Wed, 12/26/2012 - 22:22 | 3097975 Dealer
Dealer's picture

I admit, I have a man crush on Kyle.

 

Wed, 12/26/2012 - 22:54 | 3098033 otto skorzeny
otto skorzeny's picture

hugh hendry for me-only english dudes can pull off disheveled suits

Wed, 12/26/2012 - 23:03 | 3098046 Freddie
Freddie's picture

http://www.youtube.com/watch?v=bwA79kALFnw

Here is Hugh is talking about the way he dresses.  An advisor who has a billionaire family as a client, in Hugh's fund, told Hugh that he dresses like a tramp.  "Give money to the tramp, he will really make you money." LOL!

Hilarious Hugh along with his ongoing depression.  Funny.

Thu, 12/27/2012 - 02:23 | 3098278 IllusionOfChoice
IllusionOfChoice's picture

If Hugh doesn't have to wear ties, then neither do I. It's the Hugh Hendrey defense.

Thu, 12/27/2012 - 01:35 | 3098240 SAT 800
SAT 800's picture

As a Scottish Person, I'll have to object to your calling Hugh Hendry an "english Dude". He's as Scottish as a black pudding; and no kind of English, dude or otherwise.

Thu, 12/27/2012 - 05:34 | 3098360 Tommy Gunner
Tommy Gunner's picture

Scotland England same thing...  unless the Scots get some balls and take back their country next year.

Thu, 12/27/2012 - 05:47 | 3098371 akak
akak's picture

Kind of like Canadians and Americans --- one is just a slightly different, and slightly more neurotic, version of the other one.  It doesn't either matter which you chose to compare against the other.

Thu, 12/27/2012 - 13:12 | 3099185 Imminent Crucible
Imminent Crucible's picture

I dare you to say that in Canada. You'll get beaten to death with the purses the Canadian guys carry.

Exception: Not in Alberta. The Calgary guys think of themselves as (and I quote) "the Texas of Canada".

Wed, 12/26/2012 - 22:26 | 3097979 DoChenRollingBearing
DoChenRollingBearing's picture

A lower Yen means some 15% of our bearings are cheaper...

Korea next?

Wed, 12/26/2012 - 22:34 | 3097994 youngman
youngman's picture

Exactly...Korea is not going to just let Japan take over the car markets by debasing their currency....so I wonder what they have planned...then the next country..and the next...

Wed, 12/26/2012 - 22:49 | 3098026 DeadFred
DeadFred's picture

The scary part is if Bernanke notices what the Nikkei is doing and decides he wants to put the pedal to the metal.

Wed, 12/26/2012 - 23:01 | 3098045 TheSilverJournal
TheSilverJournal's picture

During the press conference of QE4 being announced on 12/12/12, Bernanke said that he would boost QE if the Fiscal Cliff drags down the economy.

Thu, 12/27/2012 - 02:10 | 3098272 ghostfaceinvestah
ghostfaceinvestah's picture

He's not worried about the Nikkei, he is worried about the Yen.  That IS going to hurt the US economy - not just the US Automakers, but also the domestic Japanese manufacturing.  More manufacturing in Japan, less here.

The Germans aren't going to be happy either.  

The currency wars are heating up.

Wed, 12/26/2012 - 23:39 | 3098103 Son of Loki
Son of Loki's picture

Car sales down 50% in Japan. They need to do what history tells them to do:

1. war........or

2. debasement of the currency.

Thu, 12/27/2012 - 01:40 | 3098246 Non Passaran
Non Passaran's picture

Yes, car production figures are analyzed by their Ministry of Defense on a daily basis.

Thu, 12/27/2012 - 02:12 | 3098273 ghostfaceinvestah
ghostfaceinvestah's picture

Clearly they are choosing 2.  What they are losing in exports to the Chinese, they are going to make up in exports to the US and Europe.

Wed, 12/26/2012 - 22:26 | 3097980 ball-and-chain
ball-and-chain's picture

Japan is a mess.

Nevertheless, no matter how much money they print, deflation still rules the day.

We are the new Japan.

America is following the model.

Our nations are a couple of gut-shot bears.

It's not a collapse.  It's a death by slow cuts.

http://www.angrysinner.blogspot.kr/2012/12/yesterday-we-went-to-burger-king-for.html

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