This page has been archived and commenting is disabled.
Kyle Bass Bearish on Emerging Markets for at least 2 More Years. Looking to Short Currencies
Kyle Bass, the founder and manager of Hayman Capital and the man who spotted and shorted successfully the subprime bubble was interviewed today at CNBC. He shared his macro views during the “Squawk on the Street” and revealed that he is bearish emerging markets and believes that the Chinese economical issues are just starting and that’s because the banking sector still has more bad debts to reveal and write-off. According to Kyle the loans pass due in 90 days grew by the whooping 167% just for half an year. He thinks that it will take at least 2-3 quarters until the banking sector reaches its NPL peak and thinks that this will force the government to recap its banks. But Kyle shares that it will be at least 2 more years until the emerging market slowdown is over and banking problems are fixed.
Another country he is bearish on is Malaysia. He sees the same problems in their banking system. It just grew too quick and too much. Michael Arnold quoted a paper from the San Francisco FED according to which emerging markets of countries with twin-deficits suffered the most in the taper-related selloff. One of the governments in panic last summer was that of Malaysia. The country had high fiscal deficit which it used to finance infrastructure projects and it made a lot of steps not to also get its current account into deficit. Other vulnerable countries are: India and Indonesia, which were punished by the markets. A tool developed by Deutsche Bank Asia and which combines 16 factors of country analysis such as: debt, current account, household debt, reserves cover, interest rates, currency valuation and credit growth showed that the countries most at risk in Asia are: Malaysia, Indonesia and Singapore.
Another country Kyle mentions he is bearish about is South Africa. He shared that it runs 4.5% twin-deficit and has only $34 billion reserves which are enough to cover just 2 months of imports. This is probably the reason their currency went down so much so far.
About trading, Kyle is currently looking to short the currencies of countries that run twin-deficits as these are usually the countries to enter a currency war. He thinks that some of these countries could devalue their papers a lot. Its true that China doesn’t run twin deficit but all of its trade partners devalued their currencies a lot: Europe, Japan, Russia, Australia. Its hard to be competitive during such cycle. May be Kile is also bearish the yuan?
Kyle said: “We talk about this race to the bottom and this currency war. Well it’s happening as we speak,” he said. “China literally just started with its devaluation process—wait until you see where that goes.”
He believes that the Asian problems could affect the world and this could be serious. He shared that China’s reserves which are about $3 trillion are enough to cover just 10% bank asset losses. This is because since 2007, the Chinese banking assets rose more than four times and reached $31 trillion. This is too much for an economy of $10 trillion. Its 300%+ banking assets to GDP. We at Octafinance think that the Chinese stock market is just forecasting the future and these issues and the question of whether the stock market will go up or down depends on the real issue, which according to Kyle is the banking sector NPL. Kyle thinks that same as the US and the UK did, its now time for China to recapitalize its banking system.
When asked about his legal fight against drug patents that are unfair to the people and the market, he stated that he will not stop here and will continue filling legal challenges.
Read More at Octafinance.com
- octafinance's blog
- 29546 reads
- Printer-friendly version
- Send to friend
- advertisements -


Nickels, bitchez.
This tool is worried about fking South Africa's twin deficit?
But he managed to miss the elephant in the room.
http://data.worldbank.org/indicator/BN.CAB.XOKA.CD?order=wbapi_data_valu...
Most states are rapidly deteriorating from within. One "province" defaulted already. The noise about ISIS and about China going to crash and burn just happens around the time that Puerto Rico defaults.
The whole US economic news is just about how to distract investors with problems about the other side of the world and completely pass over or minimize issues at home as a strategic means of forcing cash flows into US assets.
https://upload.wikimedia.org/wikipedia/commons/e/ee/TwinE.PNG
This is just silly talk. Chinese banks are all state owned. 90% loans are to state enterprise or municipal government. Beigjing can write off ,transfer those loans to central gov't in the blinkof an eye.
Just another hedge fund mogul wanting to rip off the investing public.
I'm not sure its as easy as simply writing it off.
If it was, we'd have been doing it for the last 40 years.
Right, because it's just that simple, but he and other analyists warning about China's banking sector don't realize that. Share your brilliance with them. They might hire you.
And America's economy can never fail either as we can print all the money we need. Ask the 94 million who manage to live with no job. Something for nothing IS the new paradigm.
This is a big part of why the Fed is holding off on raising rates. Almost more important than the Fed's interest rate is the value of the dollar in comparison to other currencies. For years I thought the dollar would succumb to market forces and predicted its demise. I now concede my failure to grasp the larger picture made me rather shortsighted.
While I concede the dollar is nothing to brag about as the world reserve currency the dollar is still the most liquid and the safest of the four major currencies. More on why the dollar is about to soar in the article below.
http://brucewilds.blogspot.com/2015/08/dollar-about-to-soar.html
If the Fed really wants inflation, then bump the rate and watch the dollars return home.
If the U.S. really wants to show China where the bear shits in the buckwheat, have the Fed raise rates and watch Chinese "reserves" drain to zero along with the Yuan.
With China holding plus/minus $1 Trillion in U.S. debt vs $19 Trillion outstanding, the Fed or the U.S. bond market shouldn't have any problem mopping up any China sales. And a little wink-wink, nod-nod would have Japan helping out with the mopping up.
Maybe the Chicoms can build islands with excess yuan.
K
What if the dollar will become too expensive to own ? Countries will look into cheaper currencies to trade into. Jim Willie has an interesting theory about the demise of the dollar: it will be like a baloon rising too high...
The problem with a higher dollar is the debt denominated in dollars which gets more expensive to repay as the currency increases........emerging market bonds may end up in fulll default as a result.
I don't see a problem with that. At some point the US will have to do it too...
I think you give people way too much credit. When your currency is down, only a handful of people in the world will be smart enough to jump in and buy it. When it is going through the roof every cab driver and shoeshine boy on the planet becomes an FX expert and wants to buy it at any cost.
I think kyle needs to find another barber
Kyle cuts his own hair.
Every time I cut my own hair I can save over 400 nickels for my "collection."
Don't laugh, I haven't paid for a haircut since 1994.
the loans pass due in 90 days grew by the whooping 167% just for half an year.
Pass due.. wtf is this football?
speech to text perhaps?
Are you asking..., WTF, is this football?
Or, are you asking..., WTF is this football?
You see? Or another speech to text...
WTF is this; football?
The Fed decision on EM, QE4 and hiking rates will be determined by one thing only: Will their actions allow the banking cartel hoover up EM assets at knock-down prices.
Bass has made it clear that he won't reveal strategies and a lot of what he does is really just a hedge against his main investment thrust.
btw...Bass has nickles...not pennies.
Kyle has gotten his marching orders when it comes to talking about gold or the US economy.
That guy hasn't even been right about hording pennies. Plus dudes got financial pervert written all over his bald forehead. Arrest the middleman for taking other people's money and not working.
and you're not even right about him hoarding pennies. It's nickels.
Better to say nothing and be thought a fool than to type out a profoundly stupid comment and remove all doubt.
He was so right about Japan.
Two years and they'll be sharing recipes for braised long pig on Wall St. I just wonder if Yellen has finally figured out that no matter what she does, it'll be the wrong thing.....
Patience Graucehoppa.
Are the people at Octafinance illiterate...? Really undermines the credibility of an article and an organization when there are this many grammatical and spelling errors...wow. Of course, Bass is probably correct in his analysis.
U be weigh two tuff on octo.
Grammer is way over rated. Who gives a shit, just read the fu****g article.
Grammar q:B
Hay! Lei-off OctoFinance! They right real good!
https://www.youtube.com/watch?v=8Gv0H-vPoDc
You right reel good to...