This page has been archived and commenting is disabled.

Kyle Bass Warns "The 'AIG' Of The World Is Back"

Tyler Durden's picture


Kyle Bass, addressing Chicago Booth's Initiative on Global Markets last week, clarified his thesis on Japan in great detail, but it was the Q&A that has roused great concern. "The AIG of the world is back - I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp - $5bn at a time... and it is happening in size." As he explains, the regulatory capital hit for the bank is zero (hence as great a return on capital as one can imagine) and "if the bell tolls at the end of the year, the 27-year-old kid gets a bonus... and if he blows the bank to smithereens, ugh, he got a paycheck all year." Critically, the bank that he bought the 'cheap options' from recently called to ask if he would close the position - "that happened to me before," he warns, "in 2007 right before mortgages cracked." His single best investment idea for the next ten years is, "Sell JPY, Buy Gold, and go to sleep," as he warns of the current situation in markets, "we are right back there! The brevity of financial memory is about two years."


Click the image below for the full presentation (unembeddable):

The main thrust of the discussion is Bass' thesis on Japan's pending collapse - which we wrote in detail on here, here, and here - and while the details of this thesis should prepare most for the worst, it is the Q&A that provides some very clear insights into just what is going on in the world.

Starting at around 50:00...

Bass On Immigration Reform in Japan - hailed as a solution to the demographic problem - Bass says "Ain't gonna happen. They need wage inflation and this will not encourage that. It's an untenable situation." Summing up his whole view on Japan - "I just don't think it can be fixed."

Question: When you look today in the capital markets at the tactical asymmetry that exists among the various financial instruments to take advantage of cheap optionality - what is that instrument?

I'll give you guys a bit of an idea... we don't talk about exactly what
we do - we tell you how much we love coke but we're not gonna give you
the formula.


The AIG of the world is back - I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp - $5bn at a time.


You know why? Because it's outside of a 95% VaR, its less than one-year to maturity, so guess what the regulatory capital hit is for the bank... I'll give you a clue - it rhymes with HERO...


If the bell tolls at the end of the year, the 27-year-old kid gets a bonus... and if he blows the bank to smithereens, ugh, he got a paycheck all year.


We are right back there! The brevity of financial memory is about two years.


I wouldn't sell nuclear holocaust risk in Dallas for 1bp - you should be fired for thinking about selling something for less than 50bps.. and yet - this is happening again...


And it's happening in huge size - huge - we bought half a trillion dollars worth of these 'options'... and interestingly enough, one of the biggest banks in the world called me the other day and asked me if I would close my position - that was an interesting day for us - that happened to me in 2007 right before the mortgages cracked.


They said "we ran some new risk tests," and I said "really?"

"Yeah, the new stress scenario is a little more punitive than the last one."
"What is it?"
"Well, we don't wanna share our proprietary secrets"
"Ok, then I am not closing it",
and they said "woe woe woe.. in our old model rates stressed 50bps, in the new one they stress 400bps"
"Yeah, that would really hurt wouldn't it".
"Yeah, we'd like to close that one"
"I'd like to but I am not going to do that for you"...

The point is - Why would they run a stress test like that? They are starting to realize! Who would have them run that stress test. It's happening again.

Question: Do you buy guns, gold, neither, or both?

I don't get paid to be an optimist, I don't get paid to be pessimist, I get paid to be a realist - and a prudent fiduciary of the capital, and then if i have time I care about the social issues of the world.


If I am right, the social issues are going to be very difficult. I don't think we devolve into anarchy and I do think the payment systems will continue to work but what they will pay with will be wumpum...


We will go thru a period where its a little tougher...


We went through a period where it was briefly tough and now there are 1400 new billionaires in the world - maybe some capital was misallocated...

Question: Which one investment would make for the next ten years

I would buy Gold in JPY and go to sleep... Sell JPY, Buy Gold, Go to sleep, and wake up ten years later and you'll be fine. Don't put all yourr money in it but that is the single best investment you can make today.

(h/t @EquityAnalystNY)


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 03/12/2013 - 22:42 | 3324765 ItsEvolutionBaby
ItsEvolutionBaby's picture

i do love me some kyle bass

i'll listen to this while i play dota 

Tue, 03/12/2013 - 22:49 | 3324777 Dr Paul Krugman
Dr Paul Krugman's picture

Investors are always right, economists are always wrong - Zero Hedge plays on.

Tue, 03/12/2013 - 22:54 | 3324794 palmereldritch
palmereldritch's picture

And TrillionDollarBoner_ strikes again

Tue, 03/12/2013 - 23:52 | 3324938 SafelyGraze
SafelyGraze's picture

I had to install microsoft silverspy on my machine in order to watch the video



Tue, 03/12/2013 - 23:58 | 3324951 nope-1004
nope-1004's picture

lmao!!!  Big government-backed insolvent bank phones Hayman, "uh, would ya mind not betting against us like that?  Please?  Pretty please?"

Bankers...... dumber than a sack of shit.


Wed, 03/13/2013 - 00:47 | 3325027 Dr Paul Krugman
Dr Paul Krugman's picture

Funny how Tyler did not mentin Austin put the forum together.

Ignore the economists!


Wed, 03/13/2013 - 00:49 | 3325031 TruthInSunshine
TruthInSunshine's picture

Congrats on your brand new newspaper, Dr. Krugman!

Wed, 03/13/2013 - 00:53 | 3325040 Dr Paul Krugman
Dr Paul Krugman's picture

I am way ahead of you.

All Me, All The Time:

Wed, 03/13/2013 - 00:56 | 3325046 Dr Paul Krugman
Dr Paul Krugman's picture

Edit:  Austan.

I guess the scotch has gotten the best of me tonight.

Wed, 03/13/2013 - 01:20 | 3325093 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

"If I am right, the social issues are going to be very difficult.
 I don't think we devolve into anarchy and I do think the payment systems will continue to work but what they will pay with will be wumpum..."



Isn't it nice to know there's a payment system that will keep on going and gaining value after the TBTF start crashing?  


Isn't is nice to know that I'll be able to get supplies from afar?  



Bitcoin holders safe.

Wed, 03/13/2013 - 08:57 | 3325470 LawsofPhysics
LawsofPhysics's picture

When fraud is the status quo, possession is the law.  Get physical, sleep well.  Wake us when those bitcoin buy diesel for my tractors.  Morons will be morons and sheep will be sheep.  Let the fleecing continue.

Wed, 03/13/2013 - 19:14 | 3327884 Popo
Popo's picture

Microsoft Silverlight? FAIL.

I'd love to watch me some Kyle Bass, but I prefer a browser that doesn't run dog slow.

Wed, 03/13/2013 - 19:36 | 3327941 zaphod
zaphod's picture

So how do I short JPY as a retail player? 

Any suggestions?

Fri, 03/15/2013 - 08:26 | 3331958 DblAjent
DblAjent's picture

FX or ETFs

Wed, 03/13/2013 - 01:35 | 3325112 Boris Alatovkrap
Boris Alatovkrap's picture

When vodka is get better of Boris, is break a few Krugman... good for economy.

Wed, 03/13/2013 - 01:51 | 3325124 TruthInSunshine
TruthInSunshine's picture

There is saying in Mother Russia:

"Those who live in Duroplast state owned apartment (projects) not to throw empty Stolichnaya bottles at neighbor sleeping in Trabant or Lada."

Wed, 03/13/2013 - 02:10 | 3325153 Manthong
Manthong's picture

Krugman for President.. what a concept.  :D


Wed, 03/13/2013 - 07:53 | 3325325 GetZeeGold
GetZeeGold's picture



Well....he's already got the Nobel Prize.


He's totally qualified.

Wed, 03/13/2013 - 03:51 | 3325192 WelfareFTW
WelfareFTW's picture

HAHAHAHA, OMFG, How the eff do you guys come up with this s**t day after day... you guys fucking rock! hilarious....

Wed, 03/13/2013 - 07:08 | 3325261 French Frog
French Frog's picture

Yes, from the serious to the funny, the wit & repartee of many ZH replies are often as, if not more, enlightening than the original article

Wed, 03/13/2013 - 09:52 | 3325656 DblAjent
DblAjent's picture




I come here for the articles, but more for the comments

Thu, 03/14/2013 - 01:04 | 3328764 Boris Alatovkrap
Boris Alatovkrap's picture

Boris is come to zero hedge because is not like shrubs, but stay for humorous intake.

Wed, 03/13/2013 - 08:41 | 3325429 youngman
youngman's picture

Why not???? It won´t hurt the car...

Wed, 03/13/2013 - 20:51 | 3328163 Alexandre Stavisky
Alexandre Stavisky's picture

Naively many thought 2008 with the bank failures, AIG, GSEs, Primary dealer backstop, full ramp monetization, TARP, and 50% collapse in equities was the systemic shock that, regardless of gov't response, would keep the dominoes rolling to force restructuring, defaults, re-denominations of currencies and step devaluations.  I never thought that the nation would accept the financial abuse and would understand the repercussions of Fed et al showing up every day with 4 billion in thin-air money.

I was wrong.  I naively thought all the stakeholders response to open global monetization would inevitably lead toward the reset.  I was wrong.  It seems it wasn't financial armageddon.  And now, with that sour wisdom, I believe all nations that can print money, may go that next huge leap and issue currency without sterilization of buying newly issued bonds.  If the dissaving by Japanese threatens to spike bond yields and interest payments, those bonds will be further suppressed.  The central banks may be the one and only buyer and may suppress interest rates to absolute (even negative) zero yields.  They could easily make instant devaluations.

The responses show that they intend to never lose control again.  Issuance of currency irrespective of historical mechanisms can go on a long, long time.  We are past A-Ha moments.  We are past classical behaviour.  We are already deep into thin money creation and distribution.  When all the currencies are controlled, and globally large players are coordinated, outcomes will be what they dictate. The can suppress whatever they want, sponsor whatever they want, and all the stakeholders have to take it.

So even with foreign exchange risk, current account deficits, industrial contraction, lopsided demographics, retail liquidations of scale, massive debt rollover, ad infinitum, where is an investor to flee to?  If it is all arranged and coordinated and backstopped, why would anyone still be putting on trades?  Maybe 1 basis point for jump risk isn't cheap, maybe in this "new normal" it is free money for the seller.

Wed, 03/13/2013 - 01:02 | 3325060 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

This is hilarious stuff, TiS.


That offer for a beer in btc stands if you want to.

Wed, 03/13/2013 - 01:22 | 3325089 TruthInSunshine
TruthInSunshine's picture

Thanks. If you noticed, I didn't comment on the bitcoin article ZH published today.

As far as I'm concerned, I don't know enough about it to make comments that I'm confident are fair or informed, and I also don't like to see any rift develop between people who agree that one of the most significant root causes of our economic crisis is that fractional reserve banking alchemists are conjuring fiat literally from nothing, that enjoys monopoly status, and they are distributing it for free or nearly for free to their select best friends forever, to the proportional interference with and destruction of economic production that provides real goods & services, adding real value, productivity & utility to peoples' lives.

Until someone can convince me otherwise with concrete facts, those who endorse the use of bitcoin are on the same side as anyone calling out the fractional reserve fiat fraud for what it is and the damage it has done and is doing to the real economy and real people.

Wed, 03/13/2013 - 01:23 | 3325098 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

Sure.  Let's see what history has in store.  

KB is talking about breaking a bank here, and a payment system under severe stress.  

Oh well, good luck to you and please keep the comments flowing.  

High-risk high-reward, right?  Let the chips fall where they may.

Wed, 03/13/2013 - 20:17 | 3328076 eatthebanksters
eatthebanksters's picture

I'll bet the banks will pay a lot more than the 1bp Kyle paid to buy those swaps back...

Wed, 03/13/2013 - 09:34 | 3325588 Sweet Chicken
Sweet Chicken's picture

Truth In Sunshine for president! 

   ......and Law of Physics for VP

Wed, 03/13/2013 - 11:13 | 3325942 steve from virginia
steve from virginia's picture




" ... to the proportional interference with and destruction of economic production that provides real goods & services, adding real value, productivity & utility to peoples' lives."



This hardy weed never dies, even as it is demonstrably false. Everything that emerges from 'economic (presumably industrial) production is subsidized by debt and must be. If economic production paid for itself it would have already. There would be no debts as any would be resolved by simply deploying more 'productive' machines.


The economy provides borrowed fortunes for a handful of tycoons and plutocrats, some worthless, time-wasting junk.


Instead of productive 'output' the world's nations and peoples are burdened by hundreds of trillions of dollar-debts, that can never be repaid, against collateral that no longer exists. Almost every 'good' in the US-style waste-based economy costs more than any possible return.


Our industries are subsidized by debt: it cannot be otherwise nor has it ever been otherwise, we simply lie to ourselves about the nature of our activities as if nature herself can be persuaded by public relations campaigns.


Sadly for the believers, the 2d law of thermodynamics has a different view of 'economic production' and is now assigning real costs that cannot be evaded or papered over with wishful thinking or false beliefs.



Wed, 03/13/2013 - 18:52 | 3327823 Doomer
Doomer's picture

So, who wants to lend me a couple billion JPY so I can buy some gold?

What rate can I get for 10 years?

Have your people call my people.

Abe, are you listening?

Wed, 03/13/2013 - 19:27 | 3327914 auric1234
auric1234's picture
I loved the: 4 Killed in Paul Krugman Monetary Policy By PAUL KRUGMAN

A market correction who went on a multiple equilibria in two communities in utility function remained on the market efficiency.


Wed, 03/13/2013 - 20:37 | 3328130 Bendromeda Strain
Bendromeda Strain's picture


Gov. Andrew M. Cuomo, accompanied by the State Police superintendent, Joseph D’Amico, rushed to the village, where he was photographed near where the gunman was believed to be holed up. A news conference was repeatedly delayed as the gunman remained at large.

That effin' whore can't wait to dance on some bodies to make political points. If it was NYPD his ass might have got "inadvertantly" shot.

One can dream anyways.

Wed, 03/13/2013 - 01:12 | 3325081 AbbeBrel
AbbeBrel's picture

I can only wonder how Hugh Hendry is positioned - My guess is that he has also loaded up on insanely cheap "risk premium".

"That success was simply a matter of contentious macro posturing. In other words, going long very rich risk premium or buying cheap stuff. "

Wed, 03/13/2013 - 20:21 | 3328084 eatthebanksters
eatthebanksters's picture

Some guys know how to sniff out deals...Bass is one, Hendry is another (and there are plenty more) thing they have in common is that they tend to piss off the entrenched establishment with their brutal honesty....imagine that!

Wed, 03/13/2013 - 06:09 | 3325247 Mactheknife
Mactheknife's picture

Sure would be nice to know which bank that is...



Wed, 03/13/2013 - 07:50 | 3325319 Lost My Shorts
Lost My Shorts's picture

I hope they are too big to fail.

If risk jumps, who does Bass think will pay off his half-trillion?  The bank which is already insolvent on a MTM basis even before the event?  Or does he expect the taxpayer to cover it?  What's Texan for bleep you?

Either Bass paid for nothing on those 1-bp derivatives, just to have a funny talking point, or he is one evil bastard.  When Wall Street turns into a casino, both the player and the house are evil.

Wed, 03/13/2013 - 08:53 | 3325458 csmith
csmith's picture

"...he is one evil bastard."

Why blame Kyle? No easier money to be made than that which comes from bureacrats/taxpayers/central banks. Why look anywhere else? They NEVER learn.

Wed, 03/13/2013 - 10:00 | 3325673 Lost My Shorts
Lost My Shorts's picture

AIG required a taxpayer bailout to save the under-priced bets purchased by Goldman Sachs.

Now Kyle Bass brags that he is playing the GS role, purchasing underpriced bets from a bank that will need a taxpayer bailout if the bets pay off.

How popular is GS around here?  How is Kyle bass any better?

Just askin'

Wed, 03/13/2013 - 20:25 | 3328097 eatthebanksters
eatthebanksters's picture

Soros is an evil bastard...Bass is an opportunist.  Bass will never wait to try and collect a half the time that event happens it ill be too late to collect.  He just bought a diamond for pennies in the bargain basement of he's gonna stand out in front of Tiffany's and sell it for half its real value and still make a fucking killing.  I love the way this guy thinks!

Wed, 03/13/2013 - 10:38 | 3325823 JailBank
JailBank's picture

Because KB didn't create synthetic CDOs and sell/reccomend them to customers meanwhile betting against the very products he created to make money. Bass saw a product offered by the bank that the bank decided had nearly 0 risk and he bought it.


I recall in all the testimony from the TBTF banks after the collapse of Lehman that is was buyer beware and the banks plus ratings agencies were not at fault, the Germans should have known what they were buying. Don't compare a person that found a nitch in the market and exploited a bank selling this crap for GS or JPM.

Wed, 03/13/2013 - 10:53 | 3325891 Lost My Shorts
Lost My Shorts's picture

I will compare them exactly.

Both exploited poor risk management and the greed of individual staff at TBTF institutions.  Both placed huge bets that the counterparty couldn't / can't pay.  Both knew / know the counterparty couldn't / can't pay.  Goldman later collected from US taxpayers.  Bass would do the same.

Looks identical to me in every respect that matters.

Wed, 03/13/2013 - 11:19 | 3325970 steve from virginia
steve from virginia's picture




IF his short-term ... < 1 year ... bet pays then the bank is gone and Bass is paid in funny money. Joke's on him.


Counterparty failure ... difficult to hedge must less profit from.

Wed, 03/13/2013 - 20:44 | 3328147 Bendromeda Strain
Bendromeda Strain's picture

Ya right, you and the genius above you have it all figured out. Let me know when Austan Goolsbee calls you... besides to have his car brought around that is. If the joke is on him, guess what is all over you.

Wed, 03/13/2013 - 09:33 | 3325582 kaiserhoff
kaiserhoff's picture

If he recovers a few pennies on the dollar, he's still way ahead.

Hell, it might be fun to own a big bank.

Wed, 03/13/2013 - 11:02 | 3325918 irishlink
irishlink's picture

Considering the junk on the Books of all the banks and that includes central banks and especially British banks it will not matter which bank as anyone of them is qualified to be the first domino.

Wed, 03/13/2013 - 00:01 | 3324960 palmereldritch
Wed, 03/13/2013 - 00:37 | 3324991 TruthInSunshine
TruthInSunshine's picture


Now THAT is some funny shit.

Someone spent a lot of time on that, and it's some of the best comedy I've encountered in a LONG time, since great comedy contains a lot of truth.

Wed, 03/13/2013 - 01:40 | 3325122 IridiumRebel
IridiumRebel's picture

I think I sharted.

Wed, 03/13/2013 - 01:45 | 3325127 akak
akak's picture

Not as much as Krudman.

Wed, 03/13/2013 - 04:13 | 3325203 StychoKiller
StychoKiller's picture

Krugman, a legend in his own mind!  :>D

Wed, 03/13/2013 - 20:44 | 3328148 Quisat_Sadarak
Quisat_Sadarak's picture


Just keep repeating Economies of Scale, and Keynesianism, and liquidity trap... and you can you fool 99.999% of his followers into thinking it was a Nobel Prize worthy commentary.


Tue, 03/12/2013 - 22:56 | 3324800 jldpc
jldpc's picture

One Question douche bag: Where will the money come from to pay off the 16.6T?

Tue, 03/12/2013 - 23:07 | 3324824 Anusocracy
Anusocracy's picture

Why would anyone care?

The world is rapidly approaching Peak Stupidity.

Tue, 03/12/2013 - 23:12 | 3324837 Thomas
Thomas's picture

I start consuming adult diapers every time I listen to a K-Bass seminar.

Tue, 03/12/2013 - 23:41 | 3324915 TruthInSunshine
TruthInSunshine's picture

<-Bernank has to keep printing, consequences be damned

<-Bernank can stop printing & let chips (& Global Interest Rate Price Fixing Racketeering/GrandTheft) fall where they may


Vote now or forever hold your P(OMO)s & Q(E4ever)s, bitchez.

Wed, 03/13/2013 - 19:56 | 3328013 Schmuck Raker
Schmuck Raker's picture

A disappointing poll result, TiS.

Wed, 03/13/2013 - 00:01 | 3324959 Midas
Midas's picture

You just need to take your laptop to the bathroom before you click play.

Wed, 03/13/2013 - 09:13 | 3325516 shovelhead
shovelhead's picture

Lucky you.

I wish my teeth were that strong.

Wed, 03/13/2013 - 20:16 | 3328075 Carl Spackler
Carl Spackler's picture

Thomas, you AND the Japanese are consuming those adult diapers.

Tue, 03/12/2013 - 23:14 | 3324846 Dr. Engali
Dr. Engali's picture

Why Ben will print it of course,and we will pay for it through inflation. He will print and print and print until his fucking fingers bleed from hitting control-p.

Wed, 03/13/2013 - 01:37 | 3325118 Boris Alatovkrap
Boris Alatovkrap's picture

Maybe is teach Ben where keyboard is control-z.

Tue, 03/12/2013 - 23:22 | 3324869 Jacque Itch
Jacque Itch's picture

"Where will the money come from to pay off the 16.6T?"

Just 17 of those new coins.  Hell, we will even get some change.

Tue, 03/12/2013 - 23:52 | 3324943 Meat Hammer
Meat Hammer's picture

The money is the debt and vice versa

Wed, 03/13/2013 - 19:32 | 3327927 auric1234
auric1234's picture

You're one of those naive people who think debt actually has to be paid back? This only applies to debt-serfs. For the TBTF, debt is just moved around from one place to another, and eventually finds its place in the ultimate shit hole (aka the Fed).


Tue, 03/12/2013 - 23:20 | 3324864 P Rankmug
P Rankmug's picture

"Investors are always right, economists are always wrong - Zero Hedge plays on."


Not all economists.  Only those neo-neo-neo-Keynesian demand-side economists that are the equivalent of Ptolmaic astronomers in a Copernican world.  Krugman is like a space traveler trying to understand the universe from a point on the solar system near Pluto. Bye-bye, Paul.

Tue, 03/12/2013 - 23:39 | 3324920 chump666
chump666's picture

Yes, also Rousseauism.  The forefather of liberalism and pre deterministic sciences.   A lot of these people lost their minds when major wars broke out and savagery ensured.  Human nature is fickled and flawed, chaotic and undetermined. 


Tue, 03/12/2013 - 23:50 | 3324939 Meat Hammer
Meat Hammer's picture

Kyle Bass, invester, filthy rich.

Paul Krugman, economist, bankrupt.

Wed, 03/13/2013 - 00:51 | 3325034 Dr Paul Krugman
Dr Paul Krugman's picture

That was a rumor, and I had the last laugh.


Wed, 03/13/2013 - 00:57 | 3325048 Meat Hammer
Meat Hammer's picture

I meant morally bankrupt

Wed, 03/13/2013 - 20:23 | 3328092 Carl Spackler
Carl Spackler's picture

Well played, sir. 

Mr. Hammer, you really "nailed" that one!

Krugman proves he is more naive than he looks (or sounds).


Wed, 03/13/2013 - 08:02 | 3325342 jerry_theking_lawler
jerry_theking_lawler's picture

well isn't it obvious....he called bennie boy up and arranged a few binary 1's and 0's to go to his accounts.....what's the big deal?


doesn't he 'deserve' it from the Fed and amerikan people for his 'service'.....

Wed, 03/13/2013 - 15:43 | 3327164 WhiteNight123129
WhiteNight123129's picture

Again the fake Paul Krugman here!! Get the hell out. Your comments betray you are pale comparison to the Krugman. You can disagree with the prescriptions of Krugman but at least the real Krugman is economically articulate. IMPOSTER!

Wed, 03/13/2013 - 00:00 | 3324958 michigan independant
michigan independant's picture

I will take the consumer you evil little man.

Wed, 03/13/2013 - 00:01 | 3324961 Go Tribe
Go Tribe's picture

What do you care? The Bush-Obama axis is well protected no matter what happens to the world economy. Go play with your fucking cat.

Wed, 03/13/2013 - 01:24 | 3325101 ebworthen
ebworthen's picture

Dr. Krugman,

Please define the difference between a 21st centruy investor and economist.

Wed, 03/13/2013 - 01:35 | 3325113 TruthInSunshine
TruthInSunshine's picture

Investors "do" and economists "teach?"

Am I close, eb?

Wed, 03/13/2013 - 05:22 | 3325228 ebworthen
ebworthen's picture

Investors gamble with money they could do something with, and economists build castles in the sky, but pretty much the same thing.


Wed, 03/13/2013 - 09:01 | 3325484 TruthInSunshine
TruthInSunshine's picture

In these broken, price-fixed (by central banks) markets, I don't consider those who borrow fiat at de facto zero cost from the drive through windows of places such as the FRBNY to be "investors," though.

These entities are KronyKomrades, who enjoy express or implicit too-big-to-fail status, as guaranteed by by current and future taxpayers, thanks to scumbag politicians who sold their souls to (and are also "black-mailable") the Fractional Fiat Reserve Cartel.

Wed, 03/13/2013 - 02:28 | 3325164 archon
archon's picture

Hemm... let's see here.  You may be on to something, Paul... if economists were right, we'd be out of this mess by now.

Wed, 03/13/2013 - 15:41 | 3327153 WhiteNight123129
WhiteNight123129's picture

Again the fake Paul Krugman here!! Get the hell out. Your comments betray you are pale comparison to the Krugman. You can disagree with the prescriptions of Krugman but at least the real Krugman is economically articulate.


Wed, 03/13/2013 - 20:11 | 3328056 eatthebanksters
eatthebanksters's picture

Dr. Krugman, it's interesting that you engage in a dialogue on this site that you know you can't win.  If I know better than someone else about something and understand they have no wish to hear what I am saying or are too stupid or foolish to listen....well, I stop talking and just do my thing.  I figure one of us will learn a lesson the hard way. Why do yo have the need to prove to everyone that you're right?  Why do you insult the intelligence of others when they disagree with you and your opinions?  As they say often in these comments..."move along now, nothing here to see."  I would suggest that rather than dissing your detractors that you provide evidence as to why they are wrong and you are right. There is a great old saying that goes,"You don't have to make your decisions based upon reality, but you do need to live with the consequences."  If you are right then everyone here is just wasting time.  If you are wrong...well I'll let you figure that out.  One thing I will say is that I am done kicking the can down the road and will do my best to stop the madness.  Best of luck.

Thu, 03/14/2013 - 15:01 | 3330323 papaclop
papaclop's picture

To call Paul Krugman a moron is an insult to the rest of the morons of the world. All he knows is PRINT,PRINT PRINT. Hey Paul can we be like Zimbabwe with its worthless 100 trillion dollar bill?

Thu, 03/14/2013 - 15:02 | 3330324 papaclop
papaclop's picture

To call Paul Krugman a moron is an insult to the rest of the morons of the world. All he knows is PRINT,PRINT PRINT. Hey Paul can we be like Zimbabwe with its worthless 100 trillion dollar bill?

Thu, 03/14/2013 - 15:01 | 3330325 papaclop
papaclop's picture

To call Paul Krugman a moron is an insult to the rest of the morons of the world. All he knows is PRINT,PRINT PRINT. Hey Paul can we be like Zimbabwe with its worthless 100 trillion dollar bill?

Tue, 03/12/2013 - 23:11 | 3324833 Tsunami Wave
Tsunami Wave's picture

Is that Austin Goolsbee introducing Kyle Bass?

I suppose either way, eff you and eff your molosser-looking economist colleague Chris[tina] Romer.

Tue, 03/12/2013 - 23:21 | 3324861 palmereldritch
palmereldritch's picture

 Is that Austin Goolsbee introducing Kyle Bass?

Nice catch.  I hope Kyle knows what he's dealing the very least it adds an important qualifier to the presentation.

Tue, 03/12/2013 - 23:13 | 3324845 Perpetual Burn
Perpetual Burn's picture

Skip to 9:00, to avoid the asshole at the beginning.

Tue, 03/12/2013 - 23:24 | 3324876 fonestar
fonestar's picture

Yeah it's weird for me too.  It reminds me of being a teenager again and having your favorite band come out with a new album. 

"Oh, Kyle Bass has a new interview out?  Sweet!"

What has ZH done to me?

Wed, 03/13/2013 - 07:10 | 3325274 sumo
sumo's picture

Kyle has been thumping the table about Japan for some time now, often to the half-disguised astonishment of the MSM shills. They don't dare diss him openly because he's so rich.

I love it that lighting is going to strike twice for him, and I love the way he speaks his mind (swoon). Yeah, I'm a fan too.



Tue, 03/12/2013 - 23:27 | 3324889 Born-Again Bankster
Born-Again Bankster's picture

That's all well and good from a fundamental standpoint, but as Jesse Livermore would say you can't account for political instability.  Do you find it more likely that Uncle Sam will A. Let BOA or JPM implode into another 2008 Lehman Brothers thanks to JPY crashing or B. Implement a necessary IMF backed secret bailout of JPY because the "threat of North Korea to Global Security" is becoming increasingly important?  I wish the market traded on fundamentals, but when the ones making the rules are the ones who make the weapons you'd be wise to hedge such a fundamentally based investment strategy.  I know, I don't wanna hear it.  Sad but true.

Wed, 03/13/2013 - 00:02 | 3324963 TruthInSunshine
TruthInSunshine's picture

Jesse Livermore did end up blowing his own brains out in the end, though.

Wed, 03/13/2013 - 04:32 | 3325210 Jendrzejczyk
Jendrzejczyk's picture

On March 28, 1933, Livermore married 38 year old Harriet Metz Noble in Geneva, Illinois; there was no honeymoon. It was Harriet's fifth marriage; all four of her previous husbands had committed suicide.[10] Livermore would be no different.

Wed, 03/13/2013 - 06:20 | 3325249 Treason Season
Treason Season's picture


Wed, 03/13/2013 - 07:13 | 3325275 sumo
sumo's picture

Livermore had bouts of depression throughout his life.

Wed, 03/13/2013 - 20:36 | 3328131 eatthebanksters
eatthebanksters's picture

that occurs when you marry a biatch...

Wed, 03/13/2013 - 10:07 | 3325691 DOT
DOT's picture

For those that follow history, The answer is:

C.  Go to War

Wed, 03/13/2013 - 00:47 | 3325026 Freddie
Freddie's picture

Does anyone understand what he was talking about?

They bought $500 billion in options at a coosy of 1 basis point.  It seems like the options are good for a year.

What kind of option? On JPY or the bank blowing up?

One of the biggest banks in the world calls and they are running stress tests and they see his $500 billion bet.  They want him to close the position because this bank will blow up.  There is a 400 basis point risk or return to bass on his 1 basis point bet?

I hope somebody has his back.  I think he avoids talking about the USA because he does not want to be heart attacked.

Wed, 03/13/2013 - 01:11 | 3325075 sadmamapatriot
sadmamapatriot's picture

I think you're onto something there, Freddie. I mean, WTF? The social fabric will tear and there will be war in Japan, but Americans don't need to buy guns or worry about anarchy. We will just be "uncomfortable". I repeat, What The Fuck? Kyle is talking out of both sides of his mouth.


-When it's really serious, you have to lie.

Wed, 03/13/2013 - 01:33 | 3325110 Freddie
Freddie's picture

I like Kyle but he is almost gleeful about Japan blowing up. My guess is his firm has tens up millions bets that will grow 10 to 20X or more.   Yeah the politicians created a nightmare but the poor Japanese are so screwed.  I do not think there will be a war.  The Japanese will probably slowly starve and freeze to death.  China might invade by why would they?

I think in the USA, it can muddle a while longer printing.  He will be careful about what he says because he is in that shithole Chicago where you know who's cronies are. 

His trade looks like this bank sold him these 1 year options and the bank is really screwed if rates in Japan increase 200 bps or more.

Wed, 03/13/2013 - 01:54 | 3325139 Taffy Lewis
Taffy Lewis's picture

Lucid stuff coming from you, Freddie.

Superior weed or superior blow?

And I mean that as a supreme compliment. Hats off to you.


Wed, 03/13/2013 - 03:41 | 3325189 Likstane
Likstane's picture

That's what happens when you turn off your TEEVEE!

Wed, 03/13/2013 - 09:19 | 3325518 Freddie
Freddie's picture

Thanks. Apparently it was swaps that bank sold him and my guess on Jap govt bonds or the currency.  They sold him these swaps for pennies. $500 billion of them!  Somebody in the risk dept at the bank ran simulations and they are screwed.  ????  Japan blows up and the bank implodes.

Sort of like selling gasoline to burn the bank down for .15 cents a gallon plus you get the fire insurance policy.  These people are insane.  These banks will sell or do anything to book a little income.

The question is who is the bank or banks that is so stupid? CitCrap? BAC?  A big Japanese bank?  European bank?  I would love to be a fly on the wall at KB office.

Wed, 03/13/2013 - 20:40 | 3328140 eatthebanksters
eatthebanksters's picture

Black Rain is about to become Black Swan...

Wed, 03/13/2013 - 04:20 | 3325205 StychoKiller
StychoKiller's picture

The real question comes down to:  Will there be anybody left to pay his markers?

Wed, 03/13/2013 - 09:01 | 3325479 csmith
csmith's picture

Of course there will. A simple keystroke from Benjamin Shalom Bernanke. Alternatively, he could be paid with 200,000 tons of nickels.

Thu, 03/14/2013 - 00:09 | 3328653 chindit13
chindit13's picture

Bass is talking about buying CDSs on JGBs, where the selling bank assumes a small tail risk that wouldn't lead to default.  With the possibility of a 400 pip YC rise, and given Japan's Debt/GDP and Debt/Tax Revenue, default suddenly looms larger than a one pip cost would suggest (which is why his counterparty wants to buy back).

To unwind, Bass eventually will sell for fifty what he bought at one, and that's on its way to a thousand.  He's smart enough to know that what he leaves on the table is already rancid, or will be by the time anyone who waited wants to get paid.

Wed, 03/13/2013 - 05:11 | 3325224 herpderp
herpderp's picture

somebody call for de doctor?

Wed, 03/13/2013 - 05:51 | 3325238 crito
crito's picture

i luv dota too

Wed, 03/13/2013 - 08:06 | 3325352 aminorex
aminorex's picture

It's not merely unembeddable, it's unviewable.


Wed, 03/13/2013 - 08:41 | 3325428 Payable on Death
Payable on Death's picture

"and they said "woe woe woe.. "

What they said was "whoa". But, I can see how one could be confused.

Tue, 03/12/2013 - 22:55 | 3324768 lolmao500
lolmao500's picture

Yep. Japan is fucked for at least the next 50 years if not for the next 200 years. The Japanese mindset is too rigid for anything to change. Every single indicator shows it's fucked... and that is if there's no more Fukushima. Another much more unlucky Fukushima style situation in South/western Japan would finish off Japan basically forever.

The Oi nuclear power plant has a big earthquake fault line just below it... if that goes, Osaka, Kawasaki, Saitama, Yokohama, Nagoya, Kobe, Kyoto and Tokyo are screwed... and those are the 10 biggest Japanese cities except Sapporo and Fukuoka. You have there most of the wealth and population of Japan.

Tue, 03/12/2013 - 23:36 | 3324897 oak
oak's picture

there are two fault lines, one from north-west and the other one from south-west, converge at the nearby of tokyo.

if there would be a earthquake at that joint, unimaginable disaster would occur.

Tue, 03/12/2013 - 23:56 | 3324949 H E D G E H O G
H E D G E H O G's picture

oh shit!  there goes my Kobe Beef Burgers......damn, we gotta move them cows! and as an aside, FUCK YOU KRUGMAN!

Wed, 03/13/2013 - 00:03 | 3324965 francis_sawyer
francis_sawyer's picture

Kobe Horse

Wed, 03/13/2013 - 00:04 | 3324966 McMolotov
McMolotov's picture

It's Kobe horse burgers now.

EDIT: Great minds, and all that...

Wed, 03/13/2013 - 01:24 | 3325099 IridiumRebel
IridiumRebel's picture

It's called Wagyu.

Wed, 03/13/2013 - 20:45 | 3328153 eatthebanksters
eatthebanksters's picture

At least you'll be able to see your steak in the dark....

Wed, 03/13/2013 - 00:42 | 3325021 Savyindallas
Savyindallas's picture

 Fukushima style situation to finish off Japan? and what if Godzilla returns? That island is fooked. But then again, so is Europe and the U.S.  - no wonder the 1400 billionaires are heavily invested in bomb shelters. They know what's coming  -just a matter of when.  I suspect the rich folks won't let it happen until they get their 30,000 drones running up over America and finish with the police state. That way they can sit in their luxurious underground bunkers and fight the resitance in front of their computer screens. If they have enough time, they'll have T1 terminator machines out trying to hunt us down in search and destroy missions.  I'm not bullshitting  -that appears to be where these psychos are heading.

Once the elites wars are over and their enemies are subjugated and destroyed  and their populations subjugated  -the war on humanity begins. It won't be by nukes, like in the terminator series - a series of EMP attacks will knock out the power grids. They estimate that one year after an EMP event knocks out power over the US, 90% of the population will be dead  -murder, starvation, mass canniblization. Ever wonder why their are so many post-apocalytic movies? Escape from New York, Postman, Waterworld, Terminator, Shawn of the Dead, etc. ? The elites are giving us a glimpse of our future. 

Tue, 03/12/2013 - 22:43 | 3324772 catacl1sm
catacl1sm's picture

The wheels on the bus go round and round...

Tue, 03/12/2013 - 22:47 | 3324784 fonzannoon
fonzannoon's picture

why wouldn't he add "short the banks" if they are all about to blow up again?

Tue, 03/12/2013 - 22:53 | 3324792 Godisanhftbot
Godisanhftbot's picture

 Yeah, how is he gonna get paid on that zillion to 1 shot?

Tue, 03/12/2013 - 22:56 | 3324801 kito
kito's picture

The guy talks his book, desperate to see Japan go belly up.....never do I hear about the downfall of the u.s., which is odd because as Jim rogers states , at least Japan is a large creditor nation despite their debt...and at least Japan still has a manufacturing base....u.s seems much worse off...what of the u.s.kyle????

Tue, 03/12/2013 - 23:10 | 3324815 NoDebt
NoDebt's picture

Agreed.  It's fair warning.  Know your source.

He may well be right.  Dunno.  But he's definitely got a dog in the hunt here.  Anyone who really knows what's going on is not likely to put it out in the media or blogosphere for all to profit from it for free.

I think it's generally agreed, however, that things are so intertwined in the finacial world that the failure of any major (or semi-major) player is going to trigger a cascade of failure.  If the world's #3 economy suffers a melt-down (no pun intended, Fukushima!) it's going to flow to all developed economies very quickly.

Tue, 03/12/2013 - 23:20 | 3324865 gjp
gjp's picture

Agreed Kito and NoDebt, and I'd like to hear just how he thinks the payments system will work with 'wumpum'.  All signs seem to point to anarchy, with the core of the problem clearly in his own backyard, but he doesn't want his US hedgie cat-bird seat threatened.

(Smugly) talking his book all the way ...

Tue, 03/12/2013 - 23:40 | 3324921 hedgeless_horseman
hedgeless_horseman's picture



I once had someone call and ask me to close a position.  It was March of 2000.  I closed half.

Tue, 03/12/2013 - 23:30 | 3324899 Caviar Emptor
Caviar Emptor's picture

...right. And that would hurt his JPY short. Not to mention his bank counterparty would need a bailout to make him whole

Tue, 03/12/2013 - 23:54 | 3324947 cifo
cifo's picture

kito, you did not watch Kyle's presentation, did you?

Wed, 03/13/2013 - 10:43 | 3325849 kito
kito's picture

i have watched at least 5 of his presentations over the past several years.......all of it the same...................ive heard him state that the u.s. problems are nothing that some math cant fix.......laughable...............

Tue, 03/12/2013 - 23:27 | 3324890 prains
prains's picture

Yes he talks his book, who doesn't, but the sad fact is he's right and we all know it. He doesn't connect the dots because he too is smart enough to know you don't trash talk the biggest mafia syndicate in the world or you get a visit from uncle 18 inch dildo for life.


he's assuming his audience is smart enough to connect the dots themselves

Tue, 03/12/2013 - 23:33 | 3324905 Caviar Emptor
Caviar Emptor's picture

Would said Mafia syndicate through Japan under the bus? Who would benefit and who would lose in that scenario, ask yourself

Tue, 03/12/2013 - 23:38 | 3324916 prains
prains's picture

Japan and Germany are American constructs they do the bidding of the all powerful OZ, consider myself asked

Tue, 03/12/2013 - 23:44 | 3324922 Caviar Emptor
Caviar Emptor's picture

You are wise for your years, grasshopper. And now the next level of truth will be revealed to you.
Agree that JPN and DL are US constructs. Only competing regional powers would benefit from a Japan-o-slam. And that would violate the status quo and demand a whole new game

Tue, 03/12/2013 - 23:58 | 3324952 prains
prains's picture

I didn't say that this was intended/desired by the status quo; but do agree with Bass that it's merely a mathematical certainty however undesirable that may be to the Bernakatron et al. Add in the sublime chinese manuvering and to me it appears they are the ones looking to gain control of Japanese "trigger" day.

History, the chinese love to remember history

Wed, 03/13/2013 - 00:08 | 3324975 Go Tribe
Go Tribe's picture

China gets Japan, we get rid of North Korea. South Korea becomes the new Japan/US ally. I would not put it past the monied.

Wed, 03/13/2013 - 00:19 | 3324988 prains
prains's picture

china has been waiting 3000 years and will wait another 300 days if that's what it takes

Wed, 03/13/2013 - 08:54 | 3325460 Terminus C
Terminus C's picture

S. Kirea w/o Japan is a stategic nightmare.  The U.S. would not hold it long if they made that "deal".  I think China is enjoying the slow, painful death of the Japanese state.  I'm sure they'll place the appropriate kick to keep Japan from recovering, if they are appearing to do so.

Interesting times...

Wed, 03/13/2013 - 19:51 | 3327997 cougar_w
cougar_w's picture

For the Chinese, the whole "western industiral miracle" has been nothing but a gay afternoon party, a small pretentious play put on by drugged clowns who won't survive the coming night, but die of a self-inflicted overdose of self-importance.

Tomorrow it goes pop and suddenly this entire planet will become Asia.

That is what we have done.

Tue, 03/12/2013 - 23:51 | 3324941 Matt
Matt's picture

America produces a fair chunk of its energy needs, and produces surplus food. Japan imports nearly all the energy, and a good chunk of its food. America's demographics are not that bad, since there is tons of immigration and decent population growth in some areas.

I suspect food and energy will turn out to be more important than manufacturing over the next 40 years.

Wed, 03/13/2013 - 00:06 | 3324970 McMolotov
McMolotov's picture

The Japanese will slowly starve to death, but at least they'll be glowing.

Wed, 03/13/2013 - 00:35 | 3324997 tickhound
tickhound's picture

It could be Unicorn Day here and you're U-LOCKing your bike frame and tires, securing the seat or taking it with you.. sometimes even the front tire.

Less than Unicorns and its a risk just wearing your AirJordans.

It could be Economic Armageddon in Japan and they still wouldn't need to lock their bikes.




Wed, 03/13/2013 - 19:54 | 3328006 cougar_w
cougar_w's picture

Anyone living within 200 miles of a major US urban center should watch their back. 200 miles is about how far a ravenous, destroying horde can travel on foot before they run out of human meat.

Wed, 03/13/2013 - 01:06 | 3325067 akak
akak's picture


America's demographics are not that bad, since there is tons of immigration and decent population growth in some areas.

Sounds to me like you just contradicted yourself.

Or are you another one of those blinkered believers in infinite growth?

Wed, 03/13/2013 - 03:55 | 3325197 Likstane
Likstane's picture

I understood the jist of his comment.  What seemed contradictory?  I believe his comment indicated the US would be in less of a shitstorm than the Japonis due to better demographical circumstances.  Am I missing something? 

Granted, a shitstorm is still a shitstorm, and I probably just want to pick a fight.  I like to pick on the hardened veterans just in case I get a win.  A loss is just the norm but a win makes me feel like somebody. 

Wed, 03/13/2013 - 11:12 | 3325946 Matt
Matt's picture

You need new young people to replace old dying people. Japan has negative population growth, so for the next 40 years, I see them in a downward spiral. America will be less bad off then Japan, I think. I didn't say things will be good, or better than today; I suspect things will be continuously worse. Just not as bad as Japan.

Wed, 03/13/2013 - 03:52 | 3325193 John_Coltrane
John_Coltrane's picture

You only need energy to reduce entropy (the purpose of all self-organizing systems such as life).  Everything else is just useless friction or heat (like the FIRE sector of the economy).  Its ALL about cheap abundant energy.

Wed, 03/13/2013 - 20:06 | 3328049 kito
kito's picture

america is a country where 50+ pct of households rely on the government to get through the day.........a country where violent crime is much more rampant than japan...................a country where the average person has not a clue what self reliance or community means anymore.............a country that would quickly devolve should adversity rear its ugly head.....................what good is energy MATT if nobody can afford it??????? what good is food if nobody can afford it???????? victory gardens are a thing of the past MATT........youre cluess and i feel bad for you.........................

Wed, 03/13/2013 - 00:21 | 3324993 Savyindallas
Savyindallas's picture

We can't fall  - Ben will bail us out. He's the magic man. Manufacturing is obsolete. Baby Boomers retiring? No big deal. Japan won't bring in cheap foreign labor. We don't have that problem. We bring in millions of mexicans who are breeding like rabbits  -millions of legal Indians, pakistanis, Nigerians, Koreans, Chinese, Vietnamese, Ethiopians, etc. The Asians are taking over our universities - it's getting tough even for Jewish kids to get into the Ivy league schools of their choice. Now granted, in a few decades, there won't be any white folks left - except a few rich ones that live  Hollywood, Wall Street, and retired ones in Florida  -but if you really love white folks  -move to Iceland. That's where I'm thinking about going.  Ice fishing is almost as good as spearfishing. Good looking blonde babes there too. Did you ever see the palyboy edition of "The women of Iceland"? 

Wed, 03/13/2013 - 02:34 | 3325171 MedTechEntrepreneur
MedTechEntrepreneur's picture

KB is telling you everything you need to know.  It's called domino's.

Wed, 03/13/2013 - 08:53 | 3325457 Hulk
Hulk's picture

Cause Domino's deliver !!!

Do NOT follow this link or you will be banned from the site!