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Bass On Japan's Turbo QE: "It Won't Be Enough"

Tyler Durden's picture




 

If JGB investors 'believe' as Richard Koo earlier noted, in the BoJ's new actions and Abenomics (to double the monetary base and generate inflation), then, Kyle Bass explains, a rational investor is likely to sell a portion if not all of them. The BoJ only has JPY10 trillion cushion (after the JPY60 trillion deficit) to soak up this 'rational investor paradox' selling and this is dwarfed by the holdings of JGBs in the largest Japanese banks (who are now starting to rotate away from JGBs into foreign bonds). Simply out, Bass exclaims, they are going to have make the plan even bigger... if they are to successfully contain rates. With a quadrillion JPY of JGBs out there, if a mere 5% is sold (from 'Abe'lievers) then Japan's Turbo QE is not big enough which leads to the paradoxical increase in the QQE, moar inflationary 'belief', and moar selling pressure... The BoJ has been in the market every day but 2 since April 4th trying to hold rates down (and is failing)...

 

Bass also explains his portfolio approach to positioning for Japan's problems - which is different from the mainstream media's perspective of being long the widow-maker...

and discusses the 'macro tourists' who are merely renting the Nikkei as opposed to owning it as evidenced last night - who do not comprehend the lack of improvement in the deficit despite the calamitous devaluation of the JPY (and a hollowed out manufacturing sector)...

 

Spend 7 minutes listening to some facts...

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Thu, 05/23/2013 - 17:15 | 3593716 blabam
blabam's picture

MOAR!

Thu, 05/23/2013 - 17:20 | 3593724 Cdad
Cdad's picture

Buy on the dip mentality.

Thu, 05/23/2013 - 17:36 | 3593776 PiltdownMan
PiltdownMan's picture

No kidding Kyle, The Japanese sovereign yield curve has RISEN 60 bps since the BOJ announced their Fed-like monetary expansion. See here:

http://confoundedinterest.wordpress.com/2013/05/23/bernanke-hints-at-pulling-out-early-china-slows-nikkei-swoons-7-3/

Thu, 05/23/2013 - 18:11 | 3593841 Pinto Currency
Pinto Currency's picture

 

Bass is missing the Austrian perspective of Capital Based Macro-Economics.

High interest rates are required to focus capital on productive capacity with near-term return.  Low interest rates extend the time preference and actually cripples the economy with a productive capacity that is not being adapted quickly enough.

Printing money for an economy that is already overloaded with debt and in recession gives stagflation and guarantees that it won't recover while the money printing continues.

Thu, 05/23/2013 - 18:13 | 3593853 fonzannoon
fonzannoon's picture

Bass is a fund manager first. My guess is if he had to choose between financial repression and a reset, it's repression all the way.

Thu, 05/23/2013 - 18:19 | 3593876 Dr. Engali
Dr. Engali's picture

Technically with all the gold he holds a reset would work in his favor. Unless the Feds confiscate it that is.

Thu, 05/23/2013 - 18:21 | 3593877 Pinto Currency
Pinto Currency's picture

 

He'll still have his $1 million of nickels though.

Thu, 05/23/2013 - 18:24 | 3593891 tsx500
tsx500's picture

ummm, i'm pretty sure that Mr Bass has a 'contingency plan' (let's call it) for any possible confiscation attempt !      I don't think he's losing any sleep over it ....

Thu, 05/23/2013 - 18:22 | 3593882 fonzannoon
fonzannoon's picture

Oh he is set up for both. No doubt. I just mean he probably prefers his lifestyle. He is a celebrity right now. If we get a reset ge will have several bullseye's on his ass.

Thu, 05/23/2013 - 18:24 | 3593890 Dr. Engali
Dr. Engali's picture

True. Very true. Nobody is allowed to win twice.

Thu, 05/23/2013 - 18:25 | 3593896 bank guy in Brussels
bank guy in Brussels's picture

Kyle Bass curious factoid, his address is the same as that of Craft International, the CIA-mercenary company photographed at the Boston bombing ... and who some people think are the criminal murderers in Boston:

« Craft International’s address (2101 Cedar Springs Rd., Suite 1400, Dallas, Texas) was listed in Business Week, and is the same address, including Suite 1400, for a handful of businesses, including Cayman Capital Management, LLC, a hedge fund firm headed by a J. Kyle Bass »

http://www.veteranstoday.com/2013/05/10/making-mayhem-in-boston-the-cia-...

Thu, 05/23/2013 - 18:35 | 3593923 Pinto Currency
Pinto Currency's picture

 

There was discussion on these pages that the obvious posting of Craft personnel at Boston was a frame-up of an anti-establishment organization.

Thu, 05/23/2013 - 18:36 | 3593931 Haole
Haole's picture

That's a curious factoid alright... Thanks.

Thu, 05/23/2013 - 18:42 | 3593948 Oldwood
Oldwood's picture

Kyle Bass's business is Hayman Capital, not Cayman Capital. Don't know about any other businesses operating from there but I've been there and there is a full office of people working as well as Kyle. I don't think its some kind of drop box. Says "Hayman Capital" at the door, nothing else.

Thu, 05/23/2013 - 19:34 | 3594008 Dr.Vannostrand
Dr.Vannostrand's picture

Bass was buddies w/ Chris Kyle (Founder of Craft); and I believe helped fund the start up. So not too much of a stretch to think that they would share the same building, as CK would probably appreciate having KB's biz expertise close by.

My opinion: CK was murdered because he didnt want Craft to follow in the mold of Xe (blackwater) and other mercenaries (contracted out by alphabets and the m-o-s-s-a-d); running ops like Boston, Sandy Hook. CK was somewhat arrogant and had a high body count behind him; but seemed to have some ethics and beliefs; as well as a young family. But then again, I'm just playing backup Monday Morning QB so feel free to to extrapolate whatever you like.

Thu, 05/23/2013 - 22:24 | 3594530 Divine Wind
Divine Wind's picture

 

 

Solid Factoid:

 

Chris Kyle was in discussions with Kyle Bass for a personal protection job.

Chris himself said that it was Kyle who popped the idea of starting a training facility.

For the record, Craft is a TRAINING facility. While many operators / LEOs / contractors receive TRAINING there, Craft is NOT a large scale supplier of bodies. TRAINING TRAINING TRAINING.

Many Seals wear the craft cap as a tribute to Chris Kyle. Many alumni from training sessions wear the Craft cap.

Few work for them.

 

Thu, 05/23/2013 - 18:01 | 3593829 prains
prains's picture

Bifurcate, Glitchez !

Thu, 05/23/2013 - 17:20 | 3593725 SWCroaker
SWCroaker's picture

They just need faster machines.   Duh.   Swallow pride, call the Koreans, and get some REAL HFT capable stuff.   Put in flash un-crash mode drawing on unlimited virtual funds.    <slaps hands> Problem solved.

Thu, 05/23/2013 - 17:20 | 3593726 The Shootist
The Shootist's picture

Currency Meltdown!

Thu, 05/23/2013 - 17:24 | 3593742 Cdad
Cdad's picture

Buy on the dip mentality.

Thu, 05/23/2013 - 18:45 | 3593952 drdolittle
drdolittle's picture

Or bond meltdown. Can't have it both ways.

We live in exciting times folks. That's supposed to be a curse and may end up being one but hotdamn! it's exciting to me!

Thu, 05/23/2013 - 17:21 | 3593728 fonzannoon
fonzannoon's picture

"The BoJ has been in the market every day but 2 since April 4th trying to hold rates down (and is failing)..."

and the fed? POMO?

Thu, 05/23/2013 - 17:21 | 3593732 falak pema
falak pema's picture

abenomics works on helium; it'll never come down.

Kyle will have to wait; like heaven.

Thu, 05/23/2013 - 17:21 | 3593733 Ham-bone
Ham-bone's picture

We're gonna need a bigger boat...

Thu, 05/23/2013 - 17:22 | 3593735 TahoeBilly2012
TahoeBilly2012's picture

Has anyone ever figured out what those stupid lazer sound are on CNBC? How does such an annoying gimmick stick around for so long?

Thu, 05/23/2013 - 17:24 | 3593745 Cdad
Cdad's picture

Buy on the dip mentality.

Thu, 05/23/2013 - 17:27 | 3593750 Midas
Midas's picture

If you want to talk about the longevity of annoying CNBC gimmicks, you have to start and stop with Mr. Jim Cramer.  Boo Yah!

Thu, 05/23/2013 - 18:46 | 3593954 drdolittle
drdolittle's picture

My buddy called me up drunk off his ass and said the cramer had mentioned PAAS and it was time to sell.

It was at that time but I own that crap again.

Thu, 05/23/2013 - 18:48 | 3593951 The Thunder Child
The Thunder Child's picture

"I'm a STOCK STAR... PEW PEW PEW" - CNBC Pundit

Thu, 05/23/2013 - 17:22 | 3593738 howenlink
howenlink's picture

I think Kyle Bass should be the opening act for the next Black Sabbath reunion tour.  I'd go.  He rocks.

Thu, 05/23/2013 - 17:24 | 3593746 q99x2
q99x2's picture

Finally he begins to hint at the Ice-nine factor. And, further that Japan should stay the course to recovery.

Everything fixed. All better now.

Thu, 05/23/2013 - 17:27 | 3593751 Cdad
Cdad's picture

Buy on the gamma radiation mentality.

Thu, 05/23/2013 - 17:25 | 3593747 resurger
resurger's picture

Congrats Bass

Thu, 05/23/2013 - 17:40 | 3593781 Lore
Lore's picture

The guy is so cool, so deadpan - better than Super Dave Osborne.  How does he keep a straight face? 

We sure aren't getting much coverage of the reaction among Japanese savers and investors.  Do they exist?

Thu, 05/23/2013 - 17:25 | 3593748 fonzannoon
fonzannoon's picture

Kyle Bass is not describing an imminent collapse. He says "on the front end" they get GDP growth the rest of this year. Everyone back to work.

Thu, 05/23/2013 - 17:43 | 3593786 Nue
Nue's picture

Which of course means nothing because GDP itself is a meaningless number. The Soviet Unions GDP was growing by leaps and bounds all the way to the break up and the crash of their economy.

Thu, 05/23/2013 - 17:43 | 3593792 fonzannoon
fonzannoon's picture

I agree and changed my viewpoint below. fuck cnbc.

Thu, 05/23/2013 - 18:48 | 3593960 Oldwood
Oldwood's picture

You would think with a hole in the hull we would all be more intent on bailing, but we mostly seem concerned about the possibility of our bailing saving the necks of the assholes in the wheelhouse. What my dad would say was cutting off my nose to spite my face. Seems pretty sad that we have to drown ourselves to get even with the ones who put us on the rocks, but being principled has never been easy.

Thu, 05/23/2013 - 20:30 | 3594217 GMadScientist
GMadScientist's picture

You overlook the possibility of not staying on the ship.

 

Thu, 05/23/2013 - 17:29 | 3593755 Bay of Pigs
Bay of Pigs's picture

Bigger plan to sustain rates? Sounds bullish...and sustainable too.

:/

Thu, 05/23/2013 - 17:29 | 3593756 Yen Cross
Yen Cross's picture

     If/when BoJ makes the QE program bigger, that will cause the yen to devalue even more. Japan will be eaten alive by import and energy costs.

Thu, 05/23/2013 - 17:32 | 3593766 virgilcaine
virgilcaine's picture

Land of the Setting Sun.

Thu, 05/23/2013 - 17:34 | 3593770 fonzannoon
fonzannoon's picture

I listened to Schiff today. He was flipping out over this Yen move. He is more collapse than Bass. Bass just sounds so chill. I guess CNBC is holding his nut sac and won't let him yell RUN!!!!!

Thu, 05/23/2013 - 17:42 | 3593784 The Shootist
The Shootist's picture

What time is the Nikkei scheduled to open this evening? 7? 8EST? I need to get my coffee and chair comfortable.

http://www.schiffradio.com/f/loop

Thu, 05/23/2013 - 18:38 | 3593939 TheEdelman
TheEdelman's picture

Maybe not cnbc censorship. He just might be positioned accordingly.  Lying in wait.  

Trying to replicate an 06/07 success, where this time, people might be actually listening to his advice.  

The malaise and caution are very thick this time around the track.  He doesnt want everyone to screw up his climax.

https://fbcdn-sphotos-e-a.akamaihd.net/hphotos-ak-ash3/p480x480/942613_5...

Thu, 05/23/2013 - 17:41 | 3593789 CrashisOptimistic
CrashisOptimistic's picture

I again ask, what does collapse mean?

Does 100% of the population die?

Does even 90% of the population die?

Or do a few people lose some money and aid organizations come in and prevent any starvation?

All this "beginning of the end" stuff and "collapse" stuff needs to lay out exactly what that means, because if no one dies, it doesn't mean anything.

Thu, 05/23/2013 - 17:59 | 3593824 Panafrican Funk...
Panafrican Funktron Robot's picture

Paper collapse.  I tend to think supply lines will still be fine, there is movement underneath for "currency reform" that will start coming to light as this thing moves off the rails.  The only dead will be a few window jumpers, and frankly, good riddance.

Thu, 05/23/2013 - 18:06 | 3593835 Jugdish
Jugdish's picture

Sisa ia an excellent alternative for those window jumpers. It makes you want to hold on to life as long as you can. It provides a goal and gives direction. Free Sisa for all NOW President O'bama.

Thu, 05/23/2013 - 19:38 | 3594059 They trynna cat...
They trynna catch me ridin dirty's picture

If you think there is "currency reform" in place so as to allow a seamless transition for the EBT card savages to simply continue acquiring their grape soda and cheez doodles through a paper crash like as though nothing happened, you are dreaming.

After Hurricane Sandy NYC came very close to riots in the EBT areas due to some relatively mild inconveniences.  When the dollar crashes and Lamar's not able to get his menthol cigarettes and scratch off lotto tickets, you are going to see same major civil unrest in the inner cities.  Just about everyone credible has predicted such already.

The scenario is going to be TOO MANY CLAIMS TO TOO LITTLE WEALTH.  That means that whoever doesn't sink sufficient dollars into real physical things before the crash is screwed, and if you live in an urban area with close proximity to EBT people, not only are you screwed, but your life will be in jeopardy.

Thu, 05/23/2013 - 18:25 | 3593898 Professorlocknload
Professorlocknload's picture

Collapse, Dire, Crash, Die, Armageddon, Disaster, Calamity, Bleed, Train Wreck, Waterfall  et al, all generate hits and attract attention.

No one really knows what the end of all this will look like, it's all up to the imagination.

Each nation state will most likely have it's own version of realization of the fact that the old way is passe', and will come up with it's own "remedies." New currencies, war, protectionism, print storms, austerity, totalitarian tactics, and such. Looks like the latter might be the way our leaders plan on handling it. We'll see.

But, yeah, if the Nukes came out, some folks could get very dead. Same as could happen in a breakdown of distribution systems.

No one knows. All speculate.

 

 

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