Kyle Bass Sounds Off On "Worthless" Puerto Rican Debt, The Crypto "Gold Rush", And Guns

Tyler Durden's picture

With the dollar’s recent post-Fed bout of appreciation providing some much-needed relief for Haymarket Capital’s P&L, its founder Kyle Bass sat for an interview on Friday with Bloomberg’s Erik Schatzker. During the 20 minute discussion, Bass expounded on the importance of holding gold, his cautiously optimistic view on digital currencies, the misguided notion that holders of Puerto Rican debt will someday be made whole – oh, and Bass’s next big call: Long Greece - particularly the stocks and debt of Greek banks.

A few weeks ago, Bloomberg view published a Bass-penned editorial in which the hedge fund founder and CIO called on the IMF to stop bullying Greece publicizing the fact that he is now effectively long Greece. Greek government bonds have performed reasonably well so far this year: They’re up about 16%.

And if Bass is right, they could have another 20% to 30% over the next 18 months if the IMF abandons its insistence on austerity and acknowledges that debt relief will need to be part of the long-term alleviation of debt. Bass added that, in the near future, voters will elect a more business-friendly government that will help reestablish the country’s creditworthiness, much like the government of Mauricio Macri did for Argentina. 

I think you also have an interesting political situation in Greece where I think there's going to be a handoff from the current Syriza government to kind of a more slightly-center-right but very economically independent new leadership in the next, call it, 18 months.

 

And so, I think you asked why now? And I think you're starting to see green shoots. You're starting to see the banks do the right things finally in Greece and you are about to have new leadership.

 

So, I think that you're going to see - and if you remember Argentina as Kirschner was going to hand-off – hand the reins over to someone that was much more let's say focused on business and economics than being a kleptocrat, I think you're going to see something again slightly similar in Greece where you have leadership today that might not be the right leadership and the government-in-waiting, I believe, and I think you know Mr. (Mitsutakous) - I think you're going to see something great happen to Greece in the and next, kind of, two years.

Asked if he still considers himself a China bear after the yuan’s surprising run of strength against the dollar, Bass answered in the affirmative. But the language he uses to talk about China has softened notably, with the investor now expecting a correction instead of an all-out collapse.

Chinese President Xi Jinping has been laser-focused on consolidating power during this year’s quinquennial Communist Party National Congress, set for Oct. 18. Once it passes, Bass believes that the PBOC’s grip on the yuan exchange rate will loosen and market forces will reassert themselves. Meanwhile, the country will also relax its focus on appeasing President Trump.

What I'm telling you is my guess is their laser-like focus on exchange rates and dealing with the Trump Administration is going to be relaxed a bit once Xi consolidates his power.

 

You know, their electoral cycle is a little different than ours if you want to call it that. Their NPCs happen every five years. Xi - this is the end of his first term. He's going to solidify a second term. He's going to reconstitute the Standing Committee of the Politburo and we think that he has consolidated power.

 

He's quickly becoming the most powerful Chinese ruler since Mao and the question is will he have a third term. And so, once this consolidation of power is over and the NPC is finished I think you're going to see more natural economic forces acting on their banking system.

He acknowledged that the appreciation of the yuan "has been terrible this year" for his hedge fund, which has predicted that the yuan would fall more than 30%. But he’s standing by the position for now with the expectation that over the next nine months “you’ll see the rubber hit the road.”

It's been terrible this year. And again, you think about the time continuums of these big global macro events.

 

Unfortunately, it doesn't fit into a nice envelope that works every month, every quarter, every year. And so, you have to stick with it as long as you can and in this environment, I think in the next call it nine months from October you'll see the rubber hit the road.

Bass scoffed at the notion of investing in Puerto Rican debt, saying that investors would be lucky to walk away with between 10 and 20 cents on the dollar. The idea that the island, with a workforce of just 1.4 million people, will ever be able to pay back $70 billion in debt is ridiculous, he said.

These are two different questions - one is, should we help with hurricane? Absolutely. We should do everything possible.

 

Puerto Rico is just a simple math 101 question.

 

But on the debt question I just think you have to be a little crazy to think that $100 billion worth of debt or even $70 billion of on-balance sheet debt is worth anything with 1.4 million workers in an economy like Puerto Rico's.

 

 

When you look at sovereigns and you look at history of sovereign defaults, recoveries and wipeouts are $0.10-$0.20 on the dollar - that's what I think people are going to end up with.

Asked for his view on bitcoin, Bass said he’s accepted that he was wrong to dismiss it early on, saying he failed to grasp the technology. He acknowledges now that digital currencies are a “real asset class”. While he hasn’t yet figured out how to value digital assets, bitcoin’s deflationary features would presumably make it a strong performer as inflation rebounds over the coming years, Bass said. Bass said he doesn’t own digital currencies.  

Early on I summarily dismissed bitcoin and I shouldn't have. And didn't understand - truthfully, I don't understand the depth of the algorithms, the technology and the fundamental foundation of bitcoin I didn't understand. I spent a lot of time trying to understand it in the last call it six months and I believe that the digital-asset class of cryptocurrency is a real asset-class but in terms of kind of how the world views digital currencies we talked - when you look at global cash positions today given global Q/E, they're now north of 110 percent of global GDP. So, we're talking about almost $100 trillion of cash in the world.

 

That has never happened before in world history and so when I think about inflation - you're starting to see wages move. You're starting to see the price of all goods and services move. The thing that's been really deflationary in the globe has been technology. It's been a very positive deflationary force and I think that's played out.

 

The technological deflation has played out so, now I think you're going to start to see inflation and wages move. And this gets into crypto-currency.

 

The collective value of crypto currency is a little over $100 billion today. Global M2, global cash is like $80 trillion, $100 trillion; so, what's $100 billion? The question is, what's it worth? And as a store of value, a media of exchange and other currency I don't think there's any true institutional investor has any money in bitcoin – I know some have a little bit. They have nominal amounts invested but I think it will be an asset class that will work over time. I'm not sure how to value it yet - I really have no idea.

To be sure, Bass expressed skepticism about the red-hot market for ICOs, referring to it as a “digital gold rush” that will end with “a lot of people losing a lot of money.”

I think there's a digital gold rush that's gone on.

 

I think a whole bunch of people are going to lose a lot of money. These ICOs - you're going to see a bunch of them go completely broke - a bunch of them are frauds. And that's going to be problematic for all the people that just rushed in and so I feel like it's a bit of a mania at the moment but

With the end of the interview approaching, the conversation veered toward gun control. Bass said that he and his son own dozens of guns and are close to many members of the armed service. However, he still believes that the state and federal government should maintain comprehensive gun registries, even though such precautions probably wouldn’t have stopped Las Vegas shooter Stephen Paddock from carrying out his horrifyingly deadly crime.

My son and I have this - we have this place here that we enjoy and when I think about this debate - should guns be registered? Absolutely. Should people be able to sell a gun from one to another without recording the buyer and the seller? Should every gun have a serial number and be registered with the federal government and local authorities?

 

I think this is a no-brainer. That's just a pragmatist. The NRA fights that tooth-and-nail.

After all, people need to register their cars with the state, Bass said. Why not guns, too?

So, to sum up: Buy Greek bonds, buy Greek debt; hold gold, hold bitcoin; sell Puerto Rican debt, sell ICOs, sell yuan warning that "within nine months, the rubber will hit the road" on China's currency collapse, and register all your guns...
 

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navy62802's picture

Is Kyle Bass actually Joe Bob Briggs?

ScratInTheHat's picture

He should just shave that crap off and own it! Hair is a FN nuisance anyway!

NoDebt's picture

Explain to me again why I should care what Kyle says any more than, say, Bill Gross or Dennis Gartman?  They've all been massively wrong for years now.

 

JRobby's picture

I have heard those names. Supposedly they are famous "investment personalities".

Manthong's picture

 

Haymarket Capital ???

Now there is a fund name that suggests a tranquil investing experience.

 

However, I have stayed on Hayman Island on the Barrier Reef… that was genuine, 110% tranquility in paradise.

 

clymer's picture

Kyle

You suck.

Fuck off and leave the 2nd amendment alone.

repeat: you suck

(another homo sells out)

Bigern's picture

While we're at it, why not force everyone to register their DNA?

That way violent genes can be tracked, so that people can be safe and secure, from themselves you see.

Just common sense violence control.

What could possibly go wrong...

 

“Many who think themselves infinitely superior to the aberrations of Nazism, and sincerely hate all manifestations, work at the same time for ideals whose realization would lead straight to the abhorred tyranny.” – F.A. Hayek

"This year will go down in history. For the first time, a civilized nation has full gun registration. Our streets will be safer, our police more efficient, and the world will follow our lead into the future!"- Adolph Hitler, Chancellor, Germany, 1933

Terrorism is the best political weapon for nothing drives people harder than a fear of sudden death”. – Adolph Hitler

 

 

 

 

Pinto Currency's picture

Here's the tell:

Kyle Bass wanted Hillary Clinton to win the election.

Enough said.

Bigern's picture

One would be naive if they think DNA registries are not already being mass compiled; consent being reserved for those ignorant enough to hand it over to the likes of ancestry sites and such. Otherwise, DNA traces are left everywhere, by everyone.

 

You see, they need to find something. Oh, they want to classify each person as well, but they are also looking for something specific. Genesis 3 and 6 never quit being relevant.

fbazzrea's picture

One would be naive if they think DNA registries are not already being mass compiled;

my thoughts exactly... a highway billboard with the CDC encouraging citizens born between 1945-1965 (Boomers) to be tested for Hepatitis C seemed like an excellent oppty to build a federal pre-GMO-adulterated DNA database in the event the current human genome manipulation turns out badly. or to identify particular individuals with sought-out genes for future "experiments"? just how far down the rabbit hole does this go?

 

TruthHunter's picture

Hitler quote is fake"

It's a fact he never spoke English.

Juggernaut x2's picture

How is that shorting of Japanese govt bonds going, Kyle?

booboo's picture

so....Kyle, Ted Kennedy’s car was registered, what’s your point? Registration like taxes are for the proles.

aurum4040's picture

Re _ ICOs. So Bass and probably 99% of hedgies do not understand bitcoin or crypto for that matter. But they understand ICOs? No, they dont. They are just pissed off because they are seeing their demise or a significant loss in bullshit middle man profit go where it should - to the investors and the companys balance sheet. Theres no lockup period with ICOs. And tokens arent warrants, not options, not bonds. They can be liquidated at any point into the Ethereum market and in alot of cases the BTC market as well. If someone somehow loses a ton of money on an ICO, they are just stupid. And 99.9% of the time, a person who has the  amount of wealth required to lose alot money in an ICOs is not going to stupidly sit on his hands while the ship is sinking nor will they invest a ton of money into something that was bullshit to begin w. Banks are CBs are just jealous. 

Demologos's picture

Gun registration allows NWO minions to go collect weapons or intimidate people into turning them in when the time comes (maybe sooner than later). Bass and his son will turn them over instead of resisting because they can hire private security and bribe NWO minions to leave them alone.

auricle's picture

But somehow they seem to be just as rich as before all their predictions. Perhaps they are selling snake oil and betting against their prophecy? 

Code Duello's picture

Kyle Bass has money  in the game.  Gartman and Gross, both now talking heads, do not.

Kyle's short Japanese Bond position is at worst break-even but probably marginally profitable.  His JPYUSD short is immensely profitable.

 

If you want to disparage a man, please do it with facts.  Don't fall back on the leftists' ad hominem attack.

NoDebt's picture

I was right once, too.  Doesn't mean you should listen to me about investment advice.

 

Laowei Gweilo's picture

but... but... but...

he was right once!

 

to be fair, he says things that, fundamentally or even ethnically, should be right.

but he's wrong a lot since 2009... not just macro but he got some huge stock bets very very wrong. mortgage insurer MTG, anyone? guy invested in it in the 3-4s (after its huge 2008-2009 crash), kept it until it crashed to 1 but sold it at that point

few months later back to 3-4 and then up over 10

he basically had perfect market timing to LOSE money, buy high and sell low.

 

and on macro stuff, he's been so wrong for the last 5-6 years... probably hasn't lost a huge amount but dat massive opportunity cost tho waiting and waiting and waiting for china. and he'd be right if he was talking about a Western economy. but china don't care. china can do whatever the eff it wants. change all rate payments; REIT rates; outstanding debt, whatever. it can set the yuan wtf it wants.

abyssinian's picture

so what do Greece have that the world wants?  Hairy hookers and feta cheese? I Bass for real? 

peddling-fiction's picture

Beautiful islands maybe. Rhodes is one that has previous, cross owners waiting.

Code Duello's picture

Kyle Bass is speculating/investing on currency- and interest-rate differentials.  That's something that one with substantial equity balances can do.  You, with your limited/zero spec/investment equity cannot even hope to comprehend his investment outlook.

Chryoprase the Troll's picture

> What do Greece have that the world wants?

Don't believe the prejudices. Greeks are smart, creative, and hard working people.  But they certainly do need to get the government (finances) organised plus reverse the massive brain drain of the middle class to the rest of Europe. At the moment the taxes are way too far to the right on the Laffer curve so that entrepreneurship is not rewarded. Debt forgiveness is the only true way forward. fiscal transfers within the US federal system are anyway bigger than total Greek debt. So it is a question of political will and German bank finances.

Rapunzal's picture

Yes a billionaire is for gun control, ha the parasitic elites getting worried when the people realize how they got robbed, they might turn up at those mansions and ask for a room to stay. The parasitic elites seemed to get scared.

Creative_Destruct's picture

"Pitchfork wielding peasants with murder in their eyes..." - (V.W. Varga, Fargo)

Bass wants the armaments deployed against him and his fellow elites confined to farm implements. 

lasvegaspersona's picture

Kyle has money, all the new gun fees and 'mental health exams'?..... he can afford.

Also, I don't think he understands that the Dem want ALL guns gone. The Republicans he is dismissing do understand this problem.

Not another inch...ever.

MozartIII's picture

Just had to end with gun registration. That has such a wonderfull history.

espirit's picture

That and Marilou Henley was a Chinese operative just managing an asset.

Remember Los Alamos? Embarassing...

Creative_Destruct's picture

A dictator is not likely to confiscate your registered automobile...registered guns on the other hand...

koan's picture

World wide debt jubilee.

TheLastTrump's picture

Yes. Long overdue. Problem is, it's supposd to be every 7 years, so the overhang is a killer.

vato poco's picture

wellll, guess ol' kyle's off the list. 

"after all, people have to register their cars with the gummint, why not guns?"  now I KNOW bass ain't *that* fucking stupid, so that means he's being a lying hypocrite, or he's applying for entrance into the bilderburger globalist neofeudalism club. either way, fuck 'im

07564111's picture

I question if Kyle Bass employs armed security for himself and his property ?

Oldwood's picture

Kyle does not fear loss of his guns, nor do any fear the loss of their cars. But no one that proposed registering vehicles was also supporting their outlaw. No one proposing the register of guns is NOT also supporting their outlaw.

The PURPOSE of registration IS their ultimate confiscation. American exceptionalism tells some that history does not apply to us. Watch the warm embrace of communism.

TheLastTrump's picture

Story is, Kyle hangs out with a lot of SEALs, like the American Sniper. So he should know things like Iraqi households all owned full auto AK47's for defense. Sounds like he's been 'acculterated' by BIS. So smart, but he doesn't understand birds of a feather flock together.

 

I'm starting to buy ZH posters interpretations of events...someone please save me.

Oldwood's picture

People who enjoy great freedom are not always anxious to share them with others. Some "freedoms" come as a cost to others.

zjxn06's picture

"Story is, Kyle hangs out with a lot of SEALs."

Yup and when he says he owns "dozens of guns" we're talking hundreds of guns.

He also is a big fan of Tannerite. Likes to blow up beaver dams on his property.

a Smudge by any other name's picture

Where can I buy some ZH posters? They would look rad in my garage.

jaxville's picture

   I wish I wouldn't have heard this interview.  I once thought Kyle was a smart guy.  Now I just think he is clever.

    Kind of reminds me how I felt after getting red pilled on the holocaust.  Sympathy turned to cynicism.

earleflorida's picture

it's all about the 'RUM' and spirits!

Never One Roach's picture

Hasn't he heard about Rogaine?

Juggernaut x2's picture

With the kind of money he has buying some plugs would be like you or I buying a gallon of milk

Sabibaby's picture

A whole lot of people lose a whole lot of money all the time.