For Kyle Bass This Is "The Greatest Investment Opportunity Right Now"
Over the weekend, when citing from an excerpt of the latest Wall Street Week episode, we revealed what to Kyle Bass was the "best investment for the next 3-5 years": the energy space. Bass added he was agnostic as to what subsector of energy one should invest in: whether it is infrastructure, pipelines, producers, upstream, downstream, he believes that there are places in the cap structure of each of these where once can put new capital and generate substantial returns. He also added that "the energy rebound, when it happens, will be comparable to the housing rebound post 2009."
Coming from the guy who correctly predicted the collapse of housing going into 2009, one should take his prediction seriously, even though as Bass himself admitted, he was early to this trade which led to "one of the worst years in the last ten" for his Hayman Capital. Judging by today's very modest reaction in the price of oil to a dramatic escalation in the Middle East, the market will need a far more dramatic reduction in supply before it agrees with Bass' thesis.
But what about the shorter-term for those who don't have a 3-5 year investment horizon? Bass discussed that after a question by Gary Kaminsky asking the Texas hedge fund manager "when you look at opportunities as an investor right now, what's the greatest opportunity?"
His response:
"Given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency."
He is quick to note that this is not a trade for everyone: "it's very tough to invest as a non-professional" very much the way buying CDS on subprme MBS was a trade only for a select few. That said, the trade - which we agree with thoroughly, and have repeatedly said that China has to devalue further, in fact we predicted China's devaluation just three days before it happened - makes a lot of sense. Bass continues:
"China many years ago attached its currency to the dollar: they hitched their wagon to our star very smartly because back then our goal was to depreciate our dollar through inflation. So we issued debt to the rest of the world to depreciate the dollar. And so now the real problem is China has hitched their wagon to our star, and their currency has effectively appreciated about 60% versus the rest of the world since 2005 and it's killing them... China's effective exchange rate moving up versus the rest of the world made their goods and services a little bit more expensive each year and now that labor arbitrage is gone. And if that labor arbitrage is gone, and the banking system has expanded 400% in 7 years without a nonperforming loan cycle, my view is we are going to see a non-performing loan cycle."
We fully agree with this as well: incidentally, China's NPL time, or "neutron" as we call it, bomb, has been extensively covered on this website in the past for the simple reason that while the official print here is about 1.5% of all bank loans are said to be "bad" or non-performing, the real number is likely around 20%, something which virtually guarantees a financial crisis in China at any given moment (more on that in a latter post). This is our summary on China's NPL debacle:
If one very conservatively assumes that loans are about half of the total asset base (realistically 60-70%), and applies an 20% NPL to this number instead of the official 1.5% NPL estimate, the capital shortfall is a staggering $3 trillion. That, as we suggested three weeks ago, may help to explain why round after round of liquidity injections (via RRR cuts, LTROs, and various short- and medium-term financing ops) haven't done much to boost the credit impulse. In short, banks may be quietly soaking up the funds not to lend them out, but to plug a giant, $3 trillion, solvency shortfall.
Incidentally, this is precisely what Bank of America just said overnight:
When debt problem gets too severe, a country can only solve it by devaluation (via the export channel), inflation (to make local currency debt worth less in real terms), writeoff/re-cap or default. We judge that China’s debt situation has probably passed the point of no-return and it will be difficult to grow out of the problem, particularly if the growth continues to be driven by debt-fueled investment in a weak-demand environment. We consider the most likely forms of financial instability that China may experience will be a combination of RMB devaluation, debt write-off and banking sector re-cap and possibly high inflation. Given the sizeable and unstable shadow banking sector in China and the potential of capital flight, we also think the risk of a credit crunch developing in China is high. In our mind, the only uncertainty is timing and potential triggers of such instabilities.
But back to Bass and his best trade idea - he conveniently even puts a time horizon:
"We are not short Chinese equities, but we are very invested in the Chinese currency: we think we are going to see a pretty material devaluation; we think it's going to be in the next 12-18 months."
Finally, judging by the ongoing collapse in the onshore and offshore Yuans overnight, which saw the currency tumble to fresh 5 year lows...
... it may be far sooner, especially when considering what Macquarie Capital’s strategist Thierry Wizman said earlier today: "the big drop overnight reflects policymakers’ willingness to allow currency to account for weak data." He expects the USDCNY to rise ~8% this year.
The full Kyle Bass interview is below, and the part discussing the best investment opportunity begins 10:40 in.
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If yer gonna play energy, you damn well better not do it thru the Public Mkts or you will be rehypothecated such taht you lose 100% of your investment.....guaranteed.
This is the type of trash that is destroying the world. These scumbags (maybe not him personally, but he's certainly part of the privileged) bring down the economy and then profit on the fire sale, and get bailed out by the government, yet too many morons believe it's liberals and "socialists" who are destroying the world.
This is the type of trash that is destroying the world. These scumbags (maybe not him personally, but he's certainly part of the clique) bring down the economy and then profit on the fire sale, and get bailed out by the government, yet too many morons believe it's liberals and "socialists" who are destroying the world.
So, what's to keep the Chinese from continuing to devalue the present form of the Yuan, and then create a new, gold-backed version after repudiating the old one? Unless I am mistaken, aren't they going to open their own gold exchange in April? Perfect time for a switcheroo. I doubt they'd leave the old currency convertable for the gold-backed one except at an outrageously high exchange rate.
The Chinese are experts at staying 'alive in the bitter sea'; in taking the long view, they may be calculating on a little pain now and a lot of celebrating later, over the cooling corpses of Western debt-based economies, choked to death by their own hyperinflated, devalued currencies, while China sits back and borrows a smile from the Buddha.
From what I undestand China is a long way off from a domestic consumption economy to support their manufacturing base. They need customers and will lower price or devalue to sell into a shrinking export market. China has problems at home. They, like everyone else need to keep it all rolling along. Granted, it is possible that the Chinese leadership would sacrifice millions for a larger international goal, but the crystal ball is far too cloudy to know for certain.
I did well in TZA holding over from last week. Also DDD. and GPRO today. Left lots on table with FEYE. nice few days of trading for me....
Kyle is trying to catch a falling guillotine. I don't doubt that it can be done, it just isn't for me. Besides, what part of all fiat will die doesn't he understand? Sorry you greedy useless paper-pusher, but even you will have to actually work for a living again.
This time is different in so much as this will be a global currency collapse.
When China finally goes to war, does Kyle really want to be recognized for profiting from their collapse?
Stay away from those nail guns buddy!
I have always wondered why rich people feel this need to invest in equities, currencies, derivatives, and always have to be "right."
I'd like to think if I had enough money - not even that much, really, like 3-400K - I'd just quit, find some land and just chill, which, actually, I'm doing, with a lot less money.
The paper chase is just that. A chase. Of paper. Nothing more. Instead of reading ZH, may I suggest the PBS show, Antiques Roadshow?
People bring in stuff from their attics, basements, kitchens and find out they're worth thousands. It's really bizarre when you think the best investment of the past 60+ years have to be baseball cards and comic books, and a host of assorted odd items of arts, crafts, novelties.
Tonight, a guy had Avengers #1 in "good" condition, a relative term. I used to have that comic. Sold it a long time ago for a lot more than the 12 cents I paid for it. They guy said today it's worth $5-6k. I don't even want to calculte the retun on that. It was 1963 vintage, so 52 years of holding it. Not bad.
Anyhow, my point is not how much money you have, because in the end it's all just paper, but what you BUY with it. I find old furniture interesting. Just sold some for three month's rent. Nice. I'll replace the stuff this spring with better furniture.
But, somebody alwyas needs furniture, so comic books, old tables, chairs, desks, lamps, it is.
Oh, and keep some silver bars around just because.
FreeNewEnergy - I agree with what you say, but a lot of people enjoy what they do which also allows them to keep acquiring more paper. Keeps them busy or occupied or whatever. Many go crazy without having a day to day purpose. I'm not that way myself, but it is what it is.
Also, that Antiques Roadshow puts on a good spin about valuations for a lot of these things, but I kind of call B.S. on most of it. I would bet if a lot of these folks really did try to sell their item that the show valued at say $3000, they would likely be waiting a long time to find that buyer willing to pay that. More than likely, they would have to settle for 15 cents on the dollar.
Now furniture might be a different story, as they don't make it like they used to. I see loads of that retaining value or increasing in value.
At Antiques Roadshows it amazes me that even after being told the price most people have no idea what they have, revealed by nervous goofy chuckle and blind stare into the item that they brought for evaluation.
It takes some guts to take the counterpart in one of KB's bet
There's no way the average investor will be able to hold their short position for 3-5 years while bleeding from daily margin calls every time it shifts north. The same went for CDS on MBS back in 2007. That fraudulent shit of not marking down the MBS went on until minutes before everything collapsed. In fact, most MBS values went up just before they collapsed, which increased the premiums you had to pay on the CDS.
If you followed Kyle's advice, could you hold on that long paying increasing brokerage fees and margin calls on ETFs or FX punts every day? Knowing the whole system is fraudulent?
Why play this crooked game when you can benefit from their crookedness by buying cheap PMs? Just hold on to them and buy more as the prices fluctuate possibly lower and lower until everything breaks and you're smiling?
YHC - good point, but you can kind of make the same comparison to those buying PMs. As long as they are priced in the paper PM markets, one has to wait, and wait, and wait some more for their 'investment' to finally show true value when the farce finally stops. In the meanwhile, the paper price keeps being manipulated ever downward, even as the true 'buy' price stays constant thanks to rising premiums.
All PM investors are having their own Burry moments where they rant at the crookedness of the game and calculate how long they can remain solvent in sticking to the plan until the system resets.
he is right, of course, that is unless the dollar crashes because of some external event like helicopter money.
These dollar bulls are getting annoying. If there are massive credit losses, RMB should be getting stronger as total money is cash + credit. If credit declines, then you have less total RMB. This was exactly the reason why dollar bears were wrong during US financial collapse of 08
so wall street advisors are trying to unload their now worthless stocks onto Joe/Jane 6 pack, convincing them this is a GREAT time to buy? ha ha ha ha
Common core kids need iPhone APP to fucking think.
6th Century BC - The army of Kir II, first shah of Achaemenid Empire ( present - Iran), used Absheron oil in weapons of fire to invade castles and cities. (Note: much of the historic information relating to the early history in the Middle East has been provided by Mir-Yusif Mir-Babayev, Professor of Azerbaijan Technical University in Baku ).
450BC - Herodotus described oil pits near Babylon
325BC - Alexander the Great used flaming torches of petroleum products to scare his enemies
c100AD - Plutarch described oil bubbling from the ground near Kirkuk in present day Iraq
347AD - Chinese reported to have drilled holes in ground using bamboo to extract oil
8th Century AD - Baku people used ground impregnated with oil for heating because of absence of wood
9th Century AD - Arabian traveler Baladzori (Al-Belazuri Ahmed) describes in "The Conquest of the countries" that political and economic life on Absheron had been long connected with oil. (Published in English "The origins of the Islamic state", by P.K. Hitti and F.C. Murgotten, v.1-2, N.Y.-L., 1916-1924).
10th Century AD - Arabian traveler Abu-Dulaf visits and describes Absheron's oil sources; and noted that there were two major sources - black and white oil. White oil was exported to Iran, Iraq and India as a valuble article
12th Century AD - A unique medicinal oil from the Naftalan (Azerbaijan region), was used for curing various health problems. It was carried in wineskins through the territory of modern Georgia to the Black Sea shores and from there to other countries of the world.
1273 - Marco Polo recorded visiting the Persian city of Baku, on the shores of the Caspian Sea in modern Azerbaijan, he saw oil being collected from seeps for use in medicine and lighting
1500s - Oil from seeps in the Carpathian Mountains in Poland was burned in street lamps to provide light in the Polish town of Krosno.
1568 - Under the direction of Englishmen Thomas Bannister and Jeffrey Duckett, Moscow Company agents visited Azerbaijan and wrote about Baku oil (the Moscow Company was founded in London in 1555).
1594 - A stone dated 1594 and signed by Allahyar Mahammad Nurogly is found in an oil well (kolodets) 35 metres deep in Baku (in settlement Balakhani); this well is dug by hand.
1618 - Itallian traveller Pietro Della Valle spoke about great amounts of black oil around Baku; it was cheap and brought lots of income to the shah every year.
1637 - Baku oil is marked as a 'terrible weapon by ignition' in a "List of gun stocks' of Moscow state.
1647 - Turkish traveller Evliya Chelebi examines and thoroughly describes Baku oil fields while in Baku. According to his data, Baku oil brought 7000 tumans of annual income to Shah's treasury and was exported to Persia, Central Asia, Turkey and India.
1666 - Dutch sailor and traveller Jan Struys (he was taken prisoner in Iran and used to visit this place often with the merchant who owned him - he even drew the Caspian sea map) visited Azerbaijan and wrote in his work called "Journey" that there were wells built with stones inside and with white and black oil coming to the surface on Besh Barmag mountain (now - in Siazan region of Azerbaijan).
1723 - Peter the Great (1672-1725) issues special decrees about the order of oil extraction; in a letter to major-general Michael Matyushkin, who governed Baku, he demanded sending "one thousand poods of white oil or as much as possible, and to look for increase in production". Persian campaign (1722-1723) of Peter I resulted in Baku and Derbent (on the East coast of Caspian) being annexed to Russia.
1739 - Academician I.V. Veytbreht publishes the treatise "About the oil", which contains much data about Absheron oil.
1741 - Director of English-Russian trading company Ioannas Hanway investigated condition of Baku oilfields. In 1754 he published "Historical essay about English trade in Caspian Sea" in London.
1771 - Academician Samuil Gmelin (1745-1774) visits Baku and confirms that white oil was sublimated for production of kerosene in Surakhani and describes the technique of well's oil production.
1781 - Count Marko Voynovich (1750-1807), the chief of the Caspian expedition, finds the signs of oil and gas on the bottom of the Caspian Sea near the island Zhiloy (Chilov), near the Absheron peninsula. In 1781-1782 Voynovich M.I. charted a detailed map of Eastern part of the Caspian Sea.
1796 - Marshal von Frederick Bibershtein (1768-1826) notes that "the Absheron peninsula contains an inexhaustible stock of oil".
1836 - For the first time, academician G.I. Gessi researched Absheron natural associated gas from a scientific point of view and defined its composition.
1801 - First coal powered steam engine
1803 - Offshore oil extraction reported in Bibi-Heybat Bay of the Caspian Sea (Azerbaijan) from two hand-dug wells 18 and 30 meters away from the shoreline. The first offshore oil field ceased existence in 1825 when a huge storm ravaged all wells in the Caspian
1807 - Streets of London lit by coal oil
1814 - One of the first wells that produced oil which was marketed was drilled near Marietta, Ohio, in 1814 (Hildreth 1833, p. 64). Well was actually drilled for salt water, the oil was a useless by-product which often spoiled the well. This Ohio well was almost 500 feet deep and produced about a barrel or so of oil per week, which was worth about 50 - 75 cents/gallon.*
1818 - In southeastern Kentucky another salt well produced oil. It was known as the "Beatty Well," named after the owner of the land on which it was drilled (Shepherd 1988). The site is on the banks of the South Fork of the Cumberland River, and the well produced upwards of 100 barrels/day according to some reports. By 1820, oil from this well was being shipped to Europe as well as several other southern states. Thus the Beatty Well seems to be the first drilled well which produced commercial oil in North America.*
1816 - Start of the US manufactured gas industry - the Gas Light Company of Baltimore
1825 - First commercial natural gas production and use in Fredonia, New York - well drilled to 27' by William Aaron Hart, gas piped through hollow logs to adjacent houses
1837 - Autun, France - first attempts to mine oil shale, mines were closed in 1957
1846 - Baku the first ever well drilled with percussion tools to a depth of 21 metres for oil exploration
1849 - Abraham Gesner developed a method for distilling kerosene from crude oil
1857 - Development of the kerosene lamp - provided clean burning light
1857 - Preston Barmore drilled two gaswells on Canadaway Creek near Fredonia, NY - used an 8 pound charge of gunpowder at a depth of 122' to 'frack' the well - the first record of artificial fracturing
1857 - First drilling of oil wells at Bend, northeast of Bucharest, on the Romanian side of the Carpathians.
1858 - First oil well in North America at Oil Springs in Ontario, Canada
1859 - Col. Edwin Drake struck oil 69ft below the surface of the ground in Titusville, Pennsylvania.
1861 - First recorded shipping of oil between countries - from Pennsylvania to London on the sailing ship 'Elizabeth Watts'
1862 - de Rochas of France patented the four stroke engine
1863 - J.D.Rockefeller founded an oil refining company in Cleveland
1870 - J.D.Rockerfeller formed Standard Oil (Ohio).- controlled 10% of American oil refining
1872 - Rockerfeller took over 22 of his competitors (The Cleveland Massacre) to increase Standard Oil share of market to 25%
1877 - Rockerfeller controlled 90% of American refining
1878 - First oil drilling at Lake Maracaibo, Venezuela
1879 - Thomas Edison invents the electric light bulb
1882 - Standard Oil Trust formed
1885 - Oil discovered in Sumatra by Royal Dutch
1892 - Standard Oil Company of Ohio broken up by Federal Regulators
1893 - First well drilled in Los Angeles
1895 - Extraction of bitumen from bituminous sand using hot water at Carpenteria, California
1895 - John D. Rockerfeller retired
1895 - Invention of combustion engine
1896 - Henry Ford's first motor car
http://www.geohelp.net/world.html
Ask that monkey in the Whitehouse about our magnetic atmosphere protection. How will these idiots traveling to Mars jump start the mantle? Without the magnetic strength, they're pissing in the wind to manage a atmosphere. One good CME will wipe out a geo-atmosphere experiment. Non-functional mantle is a failure for the riches man on planet.
If China relates where does that put western manufacturing where the labor input costs so much more. In a connected world whatever befalls China has an economic impact uponn the west.
I do like the bank of America point under severe debt devaluing the economy is the only course of action open. Actually agree, can Greece leave the EZ now to apply this principle in drachmas?No, not allowed.
The Danse Macbre of the currencies: This Could Be The Last Dance...
The RMB is now about 6.5 to the USD. I was told in 2011 by Chinese insiders that the goal is 5:1. Of course ZH will try to spin this planned event into a "collapse" or a "debacle" that was not foreseen by China.
They have a long term plan. What does America have?
Kyle Bass:
2010: Japan's gonna crash next year!
2011: Japan's gonna crash next year!
2012: Japan's gonna crash next year!
2013: Japan's gonna crash next year!
2014: Japan's gonna crash next year!
Also:
1. Short pharma stocks and sue them
2. Thousands die waiting for medication
3. ???
4. PROFIT
Martin Shkreli can learn something from this guy. Pure scum.
Acquiring gold bullion is about the safest move anybody can make right now
https://www.karatbars.com/landing/?s=ramgold2206