Presenting The Original Kyle Bass Subprime Presentation

Tyler Durden's picture

In this day and age of pervasive momentum trading, herd-following and unfathomable and sheer "investing" stupidity, it is refreshing to now and then run across forward looking pieces of research that were not only spot on, but ran completely counter to conventional wisdom and groupthink. Such as the following analysis from Kyle Bass' Heyman Capital, which was also the pitchbook for the fund's Subprime fund, which showed, in plain language why Subrpime was not only the class to short, but the implications for the broader market. As a reminder, the fact that Bass made a killing by being one of the first to short subprime, is because the vast majority of the market was dumb enough not to see what he saw. Because it was inconceivable that the Fed could be wrong. After all, throughout 2006 it was none other than the Fed that told everyone who was stupid enough to listen that housing issues were "contained." Ironically, all those same people who lost an arm and a leg believing the Fed are back again, telling everyone to never get in the way of the Fed.


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besodemuerte's picture

Kass is bunk.  Pisani tells me the market is strong, and whatshertits says we feel 'so much better' despite horrendous numbers.  I'm calling shenanigans on this happening again.

SGS's picture

Is this the 2012 Canadian presentation?

Pladizow's picture

Buying nickels - the new sub-prime short?

redpill's picture


Speaking of originals circa 2006, I still enjoy watching this compilation from time to time.


Keynesians versus Austrians


Some of Bernanke's comments make you truly wonder why this man is still in the position of power he is and why anyone listens to a damn word he says.

And the greasy haired mortgage a-holes on various cable news shows guffawing at Schiff are good for lulz.

Ahmeexnal's picture

Who cares if you were stupid/greedy enough to get your ass handed to you when the subprime bubble imploded. Ogolfer rewards greediness/idiocy:

The Obama administration will extend mortgage assistance for the first time to investors who bought multiple homes before the market imploded, helping some speculators who drove up prices and inflated the housing bubble.

Yep, you read correctly. Ogolfer is about to bailout the greedy bastards. Those smart enough to stay away from the housing bubble will end up paying!

Snakeeyes's picture

Very interesting. Thanks for posting.

The news today is the LPS report where foreclosure starts JUMPED in January, mostly by Fannie, Freddie and FHA.

But loan originations continue to slide. How will declining loan originations work with escalating foreclosures? Answer: not well!


rosiescenario's picture

Our governments plan is to get a Volt in every underwater home....problem solved....shovel ready jobs created....get short home insurers.

StychoKiller's picture

Mixing Volts with water, NOT a good idea...

resurger's picture

I have big respect for Kyle Bass. One of the great Hedge Fund managers.

taniquetil's picture

Indeed one of the only hedge fund managers that actually runs a "Hedge" fund.


I've always been confused as to how you can make a "hedge" fund, and then hold large quantities of blue chip stocks. Doesn't that make you just a risky mutual fund with higher fees? Shouldn't a hedge fund exist to "hedge" market risk and not just be the market?

Mercury's picture

"Hedgeable but not necessarily hedged" is too much of a mouthful.

 "Lightly regulated, comingled investment vehicle for qualified investors" (LRCIVFQI!) would be more accurate, yes.

Chaffinch's picture

Agreed. The word 'hedge' implies safety, but in practice they are often the opposite - geared to hell with derivatives, all following each other's trades.

PaperBear's picture

"Bass made a killing by being one of the first to short subprime" ?

Didn't Morgan Stanley and a host of other mega banks originating toxic liar loans otherwise known as subprime also short the crap they sold ?

I am a Man I am Forty's picture

mainly deutsche bank and goldman, but he was there before them, when goldman went short is when everything imploded, they pushed it over the cliff, MS got crushed, Michael Burry was probably the first that saw the disaster ahead

Clueless Economist's picture

The average obese, food stamp American is beyond stupid.

Looking at the current top five searches on Google, we have:

1) Demi Moore

2) Katy Perry (whoever the hell that is)

3) NFL draft

4) Lady Gaga

5) Snooky pregnant?

This country is beyond screwed!

taniquetil's picture

"The only solution to debt, is to trick everyone into forgetting about it"


Paul "Nobel Prize" Krugman, professional blogger.

Clueless Economist's picture

I concur with you are a smart man.

P. Krugman

EmileLargo's picture

True. You could run similar checks on other countries and end up getting similar results. Winston Churchill once said, "the best argument against democracy is a five minute conversation with the average voter".

Pool Shark's picture



Oh, c'mon Paul, the average American takes great interest in fiscal and economic matters.... wait,... did you say Snooky is pregnant? No way!!! I gotta check that out...


spartan117's picture

What is Kyle Bass saying now?  I'm more interested in his views going forward.  Unfortunately, I do not have $50 million for him to manage.

subqtaneous's picture

hoard nickels, lead & acres of ranch land.

Pool Shark's picture



Optimists: => Buying Gold

Pessimists: => Buying Lead


Ahmeexnal's picture

you forgot to mention....


Power Elite:  => Buying Slaves

rayduh4life's picture

You mean creating slaves.  In droves.

Uchtdorf's picture

Realists:  => Buying both

taniquetil's picture

Realists: => Buying copper.


Lead bullets aren't going to full-metal-jacket themselves after all.

iamgogi's picture

Nihilists => Buying nothing

JPM Hater001's picture

Kyle has recently said we should put our head between our knees and kiss our ass goodbye.

Moneyswirth's picture

2006?  Meh. 

Let's see now, 2012:

Central banks levered to 40 times capital?  Check

Impending financial collapse of Greece (with at least three more Euro-countries to follow)? Check

US leaders banging the drum for war with an Muslim country?  (Iran and/or Syria)  Check

Complicit media parroting whatever the current government in the White House?  Check.

Fat, lazy electorate too stupid to realize their society is collapsing? Check

2012 will make 2006 look like the Roarin' Twenties. 

Karma Bitchez!!





rosiescenario's picture

....and then we will find out who is in the chain of hypothecated, rehypothecated, polyhypothecated paper.


Let me take a guess....all the TBTF banks...but who could'a known???? Just because they always get a tit in the wringer, we really think this time will be different?


Will our newly elected prez Mitt bail them out? Of course.

vh070's picture

You forgot repolyhyothecated.  Triangulated rightly that would be the repolyhypothenuse.  Mitt won't get elected.  But if he does we can add any number of syllables as required.

rosiescenario's picture

My only mistake during that period was to not commit more funds to the leap puts purchased on Wamu....that is the danger of periodically turing on CNBC....having learned from that lesson, it is now turned off for good.


It is simply amazing that all the market gurus who were so wrong before are still in the press spouting their current misleading info....Abbey Cohen, for example, gets space in Barrons despite her internet fiasco....all is foregiven and forgotten....simply amazing.

EmileLargo's picture

Kyle Bass is a very smart guy. The ability to see things that others cannot see is an uncommon ability. As Orwell once said, "to be able to see what is front of your nose is a constant struggle".

franzpick's picture

Almost no one I've talked to since 2006 has seen any of the collapse coming.  I like the phrase: "It helps if you're riding the horse in the direction in which it is headed", and Kyle was.

realitybiter's picture

I wonder how Kyle fared with his European CDS exposure.  I am pretty sure he owned them.  Crikey.  It is tough to beat the other guy when they storm off the field with the ball.   Kinda like those GM bond holders.  Or MF Global customers...or  _______________ and _____________ and_____________


and US treasury holders...will be the final sucka

mr_T's picture

Nickels biachezz. Gold or silver won't buy you a loaf a bread with exact change. Very incognito... Why u always pay in nickels...cuz I like Nickels..


Moneyswirth's picture

We need to continue our national conversation about government-subsidized contraception for law school co-eds.

Focus people....

Hugo Chavez's picture

She looks sponge worthy.

But studies show conservative women are more orgasmic. She probably wouldnt be much fun.

adr's picture

To me anyone with a brain should have been able to see the subprime crisis coming. It wasn't hard to figure out that the rate of home appreciation was exceeding income growth by a wide margin. Or that unemployed people being given $500k 0 down loans with no background checks wasn't going to end well.

The banks and the system was blinded by the paper money bing generated. It wasn't real but it looked and felt good. Shooting up the entire population with heroin would have had the same result.

In the '00s housing was a hell of a drug. All addictions end in death or one hell of a downer. Instead of rehab, the government and the Fed chose one last great bender to go out in style.

EmileLargo's picture

There were many who saw it coming and still lost their shirts when trading it. Most shorted this stuff too early. The same has happened with Japanese government bonds. People have been shorting them for years and have been getting their fingers burnt.

Bass shorted it with rigorous analysis of cash-flow and timed it to perfection. That takes some doing.

Moneyswirth's picture

It wasn't hard to figure out that the rate of home appreciation was exceeding income growth by a wide margin. Or that unemployed people being given $500k 0 down loans with no background checks wasn't going to end well.

I agree with your comment 100%.  However you're assuming to much of the sheeple.  The sheeple don't think in those terms--if at all.

As long as the gravy train kept rolling, and you can buy your flat-screen TVs, lease up an Escalade to show off your neighbors, while using your McMansion as an ATM--nobody cared.


jmcadg's picture

Listen to just Kyle Bass and Hugh Hendry and you wouldn't go far wrong.

Smokey1's picture

Kyle Bass knows his shit lights out. And he has stated repeatedly in recent months that within the next 4-5 years it is game over for the USA. We are fucked eighteen ways to Sunday, and he says that Europe and Japan are worse off than the USA. He says the backbreaker of the USA will be when inflation causes interest rates to rise---making debt service rapidly escalate.

slewie the pi-rat's picture

today, we see the smart money going into soybeans!

the pundits' "certainty" about PM and oil prices took another big dump!

as far as even this "risk-off" down-day is goin, so far, everything looks "screwed down, tight", still, to me

people can fine tune thier "risk profile exposure" till they fuking die for all i care, and "win big/lose big" price-wize. as did kyleB by understanding the "new" default swaps and what they "meant" when they "went"

i cna't get his "report" for more than a few pages, so whether he mentions that or not, i can't tell

the psychology is not the same, today, imo, as w. housing, when this was "true"

the game has changed, imo, altho there does appear to be a gross "instability" around a few $BIL (few hundred Bil) of greek debt and all those casino bets arround it

however, things are not always as they appear to be..., even in the house0'crads

so now we have the big "deadine" coming up, and if you don't have popcorn ready, you just haven't been paying attention

what is happening is just as cool, imo, as what WILL happen if mary fuks joe and pete shoots joe and aunt fanny goes tits up, and someone leaves the cake out in the rain

i've played cards here for 3 hours, and it's only 845AM, so ill sign off and get ready to GAMBLE some more

50 tournaments a week, sometimes, BiCheZ!  and it's fun, too!  and not at all expensive!  L0L!!!