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The Annotated Kyle Bass 'Short-Japan' Thesis
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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YCS, JGBS
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...
I don't know how I missed this;
We are Preparing for Massive Civil War, Says DHS Informant http://www.youtube.com/watch?v=nXg2WsNCrW4Sorry 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...
>>>...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?
A few health related stories for those of you paying attention:
http://enenews.com/watch-people-tokyo-area-report-thyroid-cysts-nodules-...
Related PostsSharespost 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.
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...
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.
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?
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.
It's only hard until you reach the acceptance phase. Then you panic about getting ready for the inevitable.
Did Kyles slides from the presentation ever get posted anywhere?
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.
Currency wars are going to be wicked, "
Currency Wars: The Making of the Next Global Crisis":
http://www.amazon.com/dp/1591845564
the ----- and ------- decide. Not math. bass is afraid of math. since when is math the ultimate ruler.
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?
are they in the process of going Zimbabwe? Their market is up like 20% the last few months.
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.
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.
"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.
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.
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..........
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?
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!!!
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?
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...
Yes, but it's all relative. I mean, it's not as bad as strangling puppies for fun.
Bernanke and the Fed's wet dream is to print.
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.
21% since October 15th.
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?
be nice
she's still getting over her split with that kris humphries guy
I admit, I have a man crush on Kyle.
hugh hendry for me-only english dudes can pull off disheveled suits
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.
If Hugh doesn't have to wear ties, then neither do I. It's the Hugh Hendrey defense.
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.
Scotland England same thing... unless the Scots get some balls and take back their country next year.
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.
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".
A lower Yen means some 15% of our bearings are cheaper...
Korea next?
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...
The scary part is if Bernanke notices what the Nikkei is doing and decides he wants to put the pedal to the metal.
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.
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.
Car sales down 50% in Japan. They need to do what history tells them to do:
1. war........or
2. debasement of the currency.
Yes, car production figures are analyzed by their Ministry of Defense on a daily basis.
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.
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
You are right to a certain extent. The biggest difference is the fact Japan could get away with their debt issues due to the carry trade and the domestic savings. We have neither ,so we won't be able to get away with it for 20+ years like Japan.
Agree. Their bubble also popped in the midst of a global boom. Not so lucky for us.
But we are lucky cause we got the choom wagen islamic in charge and Hollywood and TV love him. .
We've replaced "domestic savings" with "the Fed". We won't any trouble placing our debt. With the Fed.
Everybody knows the only solution is to default, but nobody wants to make the first move. What comes afterwards is disaster for everybody and,which country wants WWIII blamed on them?
I bet the Japanese make the first move - the JCB will forgive some of their JGB holdings within a year or two.
These people flew planes into ships even when they knew the war was lost. Took 2 nukes to stop them from self genocide. Nuff said.
Will the Nikkei still perform well? I've heard the DXJ ETF being talked about (Pisani mentioned it, lol - that's why I'm skeptical), as it hedges against the depreciation of the Japanese Yen while being long the Japanese stock market. I know Tyler has discussed how corporations can only remain profitable in a low inflation environment, but the Nikkei has performed well over the last month.
EDIT: Fixed ETF ticker
He is short JGBs via swaptions, that is the way to get convexity. He's got 1-3 yr constant maturity swaptions struck at 3% on the 10 yr JGB. Additionally he is short the yen via an array of options extending from ATM to well out. He's discussed his positioning in the past.
High on Monday in equities
http://change-in-trend.com/
+! for pretty funny!
As noted on an earlier thread, not only is the USDJPY on an accelerated ramp (in which the inverse JPYUSD has just completed a 21 month head and shoulders) but also the JGB gapped below its 200-day m.a. today. The Yen has seen a 61-year move from 620 to 75 against the USD. How much higher is it going to go vs. USD?
The global fiat monolith has to start to disintegrate somewhere. What better place than Japan where the combination of their demographic time bomb, their cultural xenophobia and their 30 year experiment with Keynesian/monetarist policies has set the stage for an economic cataclysm. Regarding the last: the Japanese have essentially been playing economic Russian roulette – and have now announced that, instead of spinning the cylinder again, they will chamber a round and commit outright suicide.
Japan will prove to be the example from which the rest of the world learns the fallacies of the Keynesian/monetarist practice of irredeemable currency and sovereign debt issuance without bounds.
I think that the issue of keynesian theory is way secondary - is really a distraction from the central iisue. I think central is corruption - the masters of finance have "won" the game and now control everything.
Nonsense. It all comes down to money-printing. It's the only idea we need. /sarc
when do they announce that due to extreme circumstances they have to start selling their treasury holdings?
As a vassel state that I will be surprised if will ever happens. It seems they have too much to lose when it comes to that.
It certainly is not happening until they are in pure flat out crisis mode. You are probably right. If they are in flat out panic mode they may not have much to lose at some point.
What is so GREAT about Kyle is that he doesn't use secret knowledge to reach his conclusions - he simply looks intelligently at readily available public knowledge. The message is - it's not rocket science folks - just use common sense and do your homework. Something which apparently is beyond the reach of 99.99% of financial gurus. This man is worth listening to.
Yeah. He does not trade on insider information like Stevie Cohen or front run like Cramer did.
The list of tops guys is pretty small - Kyle Bass, Hugh Hendry, Ray Dalio and maybe James Chanos.
Michael Burry is top-gun. But he ain't talking much.
I think he just invests his own money and maybe some family. Supposedly Kyle's trades are insanely profitable. For the long-term, Ray Dalio is pretty incredible. The returns he gets on a huge asset base is amazing. James Simons is also very good but his stuff is all black box.
Yes, but he does a LOT of homework; and he constantly refers to market psychology, and references you to classic University Psych. dept. experiments, which are built into his interpretation of the world; up to the minute science and the best data sets he can get. By contrast, a major economics professor at the Uni. of Chicago cancelled his subscription to the "economist"; because he was so annoyed at their frequent use of the term "bubble"; which as far he, (and his 'model'), are concerned; DO NOT EXIST. So, there you go. The one man is like Galileo trying to find out whats going on in the real world and how does it work, the other one belongs to a religious cult which cannot acknowledge reality. the bad news? the consensus economists are in charge of the financial system. You have to admit it's entertaining.
basically what is not beyond 99% of the human population is belonging to some club; cult; tribe; which has a set of beliefs. It's the one's who think and analyize for themselves that you' re looking for.
AmericanSpirit, et al, ... I agree that Kyle Bass is excellent at what he does and seems very focused. Another thing that I have noticed about Bass is that he 'seems' truthful in his interviews and lectures (strictly a gut feeling on my part). From comments in above article "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." Well, if one listens to the interview at link below, and takes Bass at his word, he is NOT using cds in a hedge strategy against Japanese debt. To determine how Bass is short Japan can be revealed by a process of elimination if one listens to what Bass says (and believes what he says). This takes a little patience and use of the ol noodle.
Here are some quotes from Bass and a link to another (BBC) interview in which the lady conducting the interview tries to pin Bass to the wall regarding his use of derivatives to short soverign bonds (especially Greece). While watching this interview we need to remember that at the time of the interview soverigns were crying foul because hedgies were using derivatives to bet against them (until the soverigns realized that their own banks were doing the same thing, then the soverigns shut up about the practice). The interviewer is noticeably hostile to Bass and toward all hedgies that were 'making money on the bad fortune of soverigns and their banks (banks that were too large in relation to the soverign's gdp's). Bass continually reminds the interviewer that 'I am a fiduciary and am responsible to my clients to return as much profit on their investments as possible and to not lose their money'... which the interviewer continually ignores.
At ~7:20 into the interview Bass comments "Whats more important (than the profitability of his Greek position) is to talk about the global debt scenario and what likely to happen going forward." Which the interviewer did not want to discuss.
At ~7:58 the interviewer asks "With a $1,000 bet you could make $700,000 because of a Greek default?" Bass points out that at the time Greek and German soverign debt were trading close and that the asymetric hedges that were possible then no longer exist and that no one was paying attention to the soverign debt problems that were coming (paraphrased).
At ~9:42 Bass comments that "currently we have no hedges in Greece, all the asymetry is gone, all the asymetry is now in Japan." The interviewer wants to continue to discuss Europe and Bass explains, as if to a child, why the EU will not work unless the EU has a central taxing authority and why Germany cannot solve all the problems of the profligate southern European countries...regardless of the rhetoric coming from EU pols. Bass explains that EU must restructure in order to get out of their current malaise.
Back to Japan:
At ~14:10 Bass explains, using indisputable facts, why Japan's economy is going to collapse.
At ~17:35 We get to the money shot! The interviewer asks (or states) "You use cds to bet against Europe and Japan and Bass interjects "ONLY IN EUROPE, NOT IN JAPAN".
At ~18:40 Bass explains that what he is doing in debt mkts is no different than naked shorting in equities mkts... after he is attacked again for 'taking insurance on something he does not own'. (end of part 1 of a 2 part interview)
At ~ 2:40 (part 2) Interviewer questions Bass about his purchase of gold and he replies "Buying gold is just a put against the idiocy of the political cycle."
At ~4:40 Interviewer says to Bass "you have been quoted that what we are going through is atonement." Bass answers "It is. You have to understand that capitalism without bankruptcy is like religion without hell. The spending idiocy of the world is going to catch up to the world and where it is today."
IMO, this is the most insightful and informative interview given by Bass... and, it's because he is under pressure from a hostile and intelligent, if misinformed, interviewer. I don't see how anyone can comment on Bass's mkt positioning without listening to this interview at least once. I have listened to it several times and still find it fascinating and entertaining.
http://www.youtube.com/watch?v=VBWiQlS5Qg0
Snidley, I agree with your assessment of Bass, and your deduction of his likely investment strategy against Japan is well considered. However, remember that the interview took place over a year ago, in late 2011.
I'd like to hear what he's saying now. Any links to that?
Anyone?
With 2% inflation-targetiing, Abe has mandated biflation. There will be no reversal of the 20+ year deflation (rooted in debt, demographics and competition), yet there will be more inflation. Nice strategy.
Being that their biggest trading partner is China, I wonder how long before the Chinese figure out that the Japs are defaulting on them specifically. Given that the Yuan is pegged to the USD, they're interchangeable with the FX chart above. That's a massive trading partner collapsing on China.
Bass talked about it in that lecture. You know how this ends, right? With war. That's how these things usually get resolved. Sino-Japanese War feels like an underdeveloped thesis right now
How does an aging 120 million Japanese take on 1.1 billion Chinese? They did it 60+ years ago but today????
Don't think for a moment that the genetic propensity for violence is not still in them.
What a moron...
Robots, giant killer robots.
I think there's an anime/manga or two out there that outlines their plans.
http://www.giantfreakinrobot.com/sci/japanese-engineers-develop-madetoor...
Or maybe they are actually developing sex robots. Not sure, maybe they'll do both.
Who said Japan was invading China?
How do 1.1 Chinese deal with 120 million aging Japanese?
Congrats, you wom the Most Idiotic ZeroHedge Conspiracy Theory of the Week award!
That's awesome. I didn't even present a conspiracy. Pickings must have been slim this week
Pretty smart guy, that Kyle.
Kudos to Informed Trades for creating this well-done 'get to the heart' excerpt from the longer presentation.
He hasn't espoused a short equity thesis? Of course not! If anything his conclusions should have lead him to go long the Nikkei.
Anyone see the performance of Zimbabwe's stock market?
I just did. It's not that bad: http://hararestockexchange.com/index.html
The stock market will even go up - for a while at least. When it becomes obvious that the country is close to hitting the wall, the stock market will start going down again.
Should have been more clear - I meant during their hyperinflation.
http://mises.org/daily/2532
One should think through the entire chain reaction of these moves. Who is hurt by this (other than the Japanese population)? I would think, besides the Koreans, Detroit and the Germans are pretty nervous. Those Lexus and Infinitis are going to be a lot cheaper when the Yen hits 150.
There will be a time when hedge funds aren't bailed out. Like maybe if the world's third largest economy collapses. Who's going to pay such a crowded trade. No one.
Agreed. of course this is true.
Japan may last a lot longer than envisaged simply because just about every nation is faced with a uniquely troublesome fiscal, demographic, trade and political malaise which is in danger of collapsing because of a shakey foundation of debt both private and government.
This will result in more printing right across the board of nations which will keep the show going but at the cost of gutting people's savings and standard of living wherever they are.
The only danger then is whether society breaks down as each man and his dog demand a place in the sun.
Link to a 12/24/2012 article by Benjamin Fulford, who lives in Japan:
http://lucas2012infos.wordpress.com/2012/12/24/benjamin-fulford-full-upd...
People always want to shoot the messenger. Whether it's Benjamin Fulford or the Wilcock-Drake interview (http://tinyurl.com/czrlm2n), people say they are "kooks" or "crazy". You can sneer at them and call them unstable, but that doesn't change some of the facts presented. There is intrigue and murder at the highest levels of finance and government around the world. You can form your own opinion about the events at Sandy Hook.
"The situation is less clear in the US but it seems that the Sandy Hook murders have provoked the exact opposite reaction from what was intended. The inconsistencies in the official story, the videos of laughing actors suddenly turning into “grieving parents,” the reports of multiple gun-men etc. have outraged military and law enforcement types. It was, as a gnostic illuminati leader put it, “a fatal mistake.”
However, many of these dangerous and desperate criminals are on the loose and can still carry out other atrocities. That is why we must keep our powder dry and stay alert so that we can make sure to finish the job."
Kyle's Trade:
His funds have positions in the Yen (Short), interest rate options, and swaptions on interest rates. That is really it. Barely any exposure to CDS on government bonds and CDS on Japanese Equities.
Correct and exactly what Bass says in this interview... I have posted a summation of the interview upthread.
http://www.youtube.com/watch?v=VBWiQlS5Qg0
the japanese are a resilient race
worst case for them is thet do an Iceland and say fuck your debt
Most Japanese I know would happily eke out a borderline living rather than succumb to the foreign cartel hammer.
"BEST case for them is they do an Iceland and say fuck your debt"
Fixed it for you...........assuming "them" is the taxpayers.
Meanwhile, I just saw a WSJ headline indicating that "ex-spurts" are suggesting that Japan's stock market is a bargain because Abe is going to borrow and spend even more to stimulate the Japanese economy. After what we've seen over the past 20 years, and looking at the whopping debt of Japan, how can there really be that kind of blind stupidity among Wall St investors? Have central criminals so effectively blinded global investors to risk that they perceive none at all? If so, then we need a global catastrophe to awaken people to the reality that all is NOT well!
Laughing. Gideon Gono did that in Zimbabwe, and their stock market boomed too. In nominal Z dollars. Everyone was soon a gazillionaire! Excellent strategy.....