Some Words Of Advice From Kyle Bass

Tyler Durden's picture

Michael Lewis' latest compilation of Vanity Fair articles into book format, Boomerang, is the usual entertaining romp around those back and front waters of the world that are currently on the verge of bankruptcy: from Greece, to Ireland, to Germany and, of course, to California. The premise at its core is an interview that the former Salomon bond salesman had with investing wunderkind Kyle Bass several years back which inspired to him to ask what it is that the Texan saw three years ago that so few others, due to a permafrosty cognitive bias or what have you, could (i.e., that the world is bankrupt and getting much worse). Oh, did we say wunderkind? We meant billionaire. Because unlike that other "anti-Midas" who only piggybacked on the good ideas, while blowing up LPs when left to his own non-Goldman Sachs facilitated devices, Bass actually could always see the big picture for what it is. So courtesy of Lewis' latest book, here are three pieces of advice from Bass to people everywhere, which will surely bring the fanatically jealous anti-gold crew to accusations that Bass made his billions from buying and reselling tinfoil hats.

On gold:

A guy sitting in an office in Dallas, Texas, making sweeping claims about the future of countries he’d hardly set foot in: how on earth could he know how a bunch of people he’d never met might behave? As he laid out his ideas I had an experience I’ve often had, while listening to people who seem perfectly certain about uncertain events. One part of me was swept away by his argument and began to worry the world was about to collapse; the other part suspected he might be nuts. “That’s great,” I said, but I was already thinking about the flight I needed to catch. “But even if you’re right, what can any normal person do about it?”

 

He stared at me as if he’d just seen an interesting sight: the world’s stupidest man.

 

“What do you tell your mother when she asks you where to put her money?” I asked.

 

“Guns and gold,” he said simply.

 

“Guns and gold,” I said. So he was nuts.

 

But not gold futures,” he said, paying no attention to my thoughts.

 

"You need physical gold.” He explained that when the next crisis struck, the gold futures market was likely to seize up, as there were more outstanding futures contracts than available gold. People who thought they owned gold would find they owned pieces of paper instead. He opened his desk drawer, hauled out a giant gold brick, and dropped it on the desk. “We’ve bought a lot of this stuff.” At this point, I was giggling nervously and glancing toward the door.

So many others were giggling along. They were giggling all the way as gold rose from $800 to $1900. Probably not giggling now...

On nickels:

He still owned stacks of gold and platinum bars that had roughly doubled in value, but he remained on the lookout for hard stores of wealth as a hedge against what he assumed was the coming debasement of fiat currency. Nickels, for instance.

 

“The value of the metal in a nickel is worth six point eight cents,” he said. “Did you know that?”

 

I didn’t.

 

“I just bought a million dollars’ worth of them,” he said, and then, perhaps sensing I couldn’t do the math: “twenty million nickels.”

 

“You bought twenty million nickels?”

 

“Uh-huh.”

 

“How do you buy twenty million nickels?”

 

“Actually, it’s very difficult,” he said, and then explained that he had to call his bank and talk them into ordering him twenty million nickels. The bank had finally done it, but the Federal Reserve had its own questions. “The Fed apparently called my guy at the bank,” he says. “They asked him, ‘Why do you want all these nickels?’ So he called me and asked, ‘Why do you want all these nickels?’ And I said, ‘I just like nickels.’”

 

He pulled out a photograph of his nickels and handed it to me. There they were, piled up on giant wooden pallets in a Brink’s vault in downtown Dallas.

 

“I’m telling you, in the next two years they’ll change the content of the nickel,” he said. “You really ought to call your bank and buy some now.”

And on how to prepare for what is coming and why it is coming:

We hopped into his Hummer, decorated with bumper stickers (God Bless Our Troops, Especially Our Snipers) and customized to maximize the amount of fun its owner could have in it: for instance, he could press a button and, James Bond–like, coat the road behind him in giant tacks. We roared out into the Texas hill country, where, with the fortune he’d made off the subprime crisis, Kyle Bass had purchased what amounted to a fort: a forty-thousand-square-foot ranch house on thousands of acres in the middle of nowhere, with its own water supply, and an arsenal of automatic weapons and sniper rifles and small explosives to equip a battalion. That night we tore around his property in the back of his U.S. Army jeep, firing the very latest-issue U.S. Army sniper rifles, equipped with infrared scopes, at the beavers that he felt were a menace to his waterways. “There are these explosives you can buy on the Internet,” he said, as we bounded over the yellow hills. “It’s a molecular reaction. FedEx will deliver hundreds of pounds of these things.” The few beavers that survived the initial night rifle assault would wake up to watch their dams being more or less vaporized.

 

“It doesn’t exactly sound like a fair fight,” I said.

 

“Beavers are rodents,” he said.

 

Whatever else he was doing, he was clearly having fun. He’d spent two and a half years watching the global financial system, and the people who ran it, confirm his dark view of them. It didn’t get him down. It thrilled him to have gotten his mind around seemingly incomprehensible events. “I’m not someone who is hell-bent on being negative his whole life,” he said. “I think this is something we need to go through. It’s atonement. It’s atonement for the sins of the past.

The take home: Atonement is coming, bitchez. Beavers beware.

For those who want much more, here is a one hour interview in which Todd Groome and Toni Moss spoke with Kyle at AmeriCatalyst 2010 in Austin in September, asking him about his thoughts on prospects for housing market recovery, current policy issues and national debt implications, global debt imbalances and his perspectives on the influence of policy on the timing, sequence and magnitude of potential sovereign defaults and debt restructurings. Fascinating stuff.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
X.inf.capt's picture

WOW,

gold and guns...

nickels...

well, i see ZH is making its mark...

if people with BIG money are getting ready for a 'controlled' or uncontrolled default,,look out!

Stoploss's picture

Wate, i thowt wee wass ignernt rednex..

X.inf.capt's picture

nope, i dont think so....

i think you guys were ahead of the curve...

as usual...

Bananamerican's picture

“I think this is something we need to go through. It’s atonement. It’s atonement for the sins of the past.

I've thought this since W...

We've literally got hell to pay...

X.inf.capt's picture

i've always thought it was going to be bad...

just how we prepare now will determine how bad it will be for each of us...

but it will be bad...

Pladizow's picture

Unlike Bass, I prefer dimes to nickels, whether they be pre 1965, blond, brunette or red head!

However, like Bass, I too enjoy exploding on beavers!

X.inf.capt's picture

im a dime hound, too..

i dont go for gold, but everyone has a preference...

im not a gun guy either...well, anymore...

red beavers are pretty wild....my favorite!

Idiot Savant's picture

Kyle's a smart guy, but what's he going to do with those nickles? It's illegal to melt them. Even if he finds someone willing to break the law, they're going to want a cut. Perhaps I'm missing an angle. Additionally, why would he divulge the fact that he has land, weapons, and explosives? Sounds like an invitation to the ATF to me.

akak's picture

It will only remain (technically) illegal to melt those five-cent coins until they are no longer produced by the US Mint.

It was also illegal at one time to melt 90% silver coins --- do the smelters have to worry about today?

Personally, though, I think the tactic is ridiculous --- if one wants to hold physical metals, gold, silver, platinum or palladium are vastly less bulky, and have a much more established market than cupro-nickel alloy.If the metal in the coins were today worth, say, four or five times their face value, then one might have justification for hoarding them, but at a 10 or 15% differential, why the fuck would one bother?  Assaying and processing fees would easily eat up that small current value advantage.

Motley Fool's picture

If he betting on HI occurring in the USA then a million dollar's worth of nickels would be good for exchange, to procure what he needs during such an event.

 

A million dollars is spending money for a billionaire after all.

Mr. White's picture

He can make a hell of a battery with all those nickels, like Walter did when caught in the desert in Breaking Bad. Plus, it's like holding cash with some real value as insurance.

jedimarkus's picture

Nickel?  Ha, put on the brass/lead/copper combo spread..... = bullets....

Mr. White's picture

He can make a hell of a battery with all those nickels, like Walter did when caught in the desert in Breaking Bad. Plus, it's like holding cash with some real value as insurance.

juslen's picture

Yes, but if he is WRONG.. all he has to do is cash in his nickels and take a fractional loss. If he buys silver or gold, he has to pay a high premium, and if the government doesn't print money, prices may fall drastically. If you buy nickels by the MILLIONS the bank is definately going to charge some type of fee to get you all the nickels you ordered. So there is risk involved. But like I said, if things turn around, he can cash the nickels back in for a minimal loss. If he is right.. well.. he paid around spot for copper and nickel and if he can sell it for fair market value, he could make a 50+ percent profit.

myne's picture

Hah that's actually brilliant.

Downside protection against deflation and upside gains based on inflation.

Upswaller's picture

It gets even better.  If or when the government decides to revalue our currency by knocking off a couple of zeros and re-issuing "new" paper money, history shows governments LEAVE the coins as-is.  So the coins KEEP their face value, while the paper loses big time.

So there you have it.

 

Things that go bump's picture

On the other hand, if we all wake up one day to find our government has gifted us with a brand new currency, say at an exhange rate of 10:1 or even the favorite of North Korea - 100:1, governments seldom bother with the coinage and those nickels will probably make the transition at a happy ratio, each being worth 1/20 of a new currency dollar. So while those not so foresighted have seen their net value drop to $10,000 for every $100,000, the value of his nickels will have made the transition intact.  Smart guy.

Manthong's picture

For $500 you can get 5 bank bricks - 10,000 nickles, and at worst, you have $500 cash that will tone the biceps.

At best, you have modest amount of coins that can make the transition to low level bullion when the government decides to stop making them at a loss and might have incremental value in Barter Town.

 

Don Keot's picture

Two weeks ago I went right down to my bank and ordered $500 in nickels.  The head teller said she would have them in three days.  She also asked why I wanted the nickels, so I said "I like nickels", that was it.  I felt pretty special when they rolled out my nickels on their bullion cart, all the way out to my car.  $100 bricks of nickels still look pretty good.  All brand new 2011 in rolls, in bricks.  

James's picture

3 - 4 weeks ago on ZeroHedge a young 20 something who lamented his inability to get in the game of PMs because of his minimum wage job left him broke w/not alot of cash to spend.

I suggested he get rolls of nickels at banks and casinos because of the spread.

Also the potential of finding pre- '65 issue

 I was laughed at by some ZeroHedge posters.

For the record, this was not my idea but James Wesley Rawles over @ survivalblog.com has a story on this subject

 

rehypothecator's picture

Up until 1964, nickels were 25% nickel and 75% copper.  But starting in 1965, they changed the composition to 75% copper and 25% nickel.  

cornedmutton's picture

I used to have a dick and two balls.  Yesterday, I woke up and had two balls and a dick.  Wild!

disabledvet's picture

i thought diamonds had the "ounce per dollar" victory hands down? ah, i understand. governments don't back anything in diamonds.

Quaderratic Probing's picture

I filled my basement with 14 tons of newspapers, at $3 a ton........

Dugald's picture

Hence the nickles, bribe money......

Gene8696's picture

This is Texas... Land, weapons, and explosives are just the norm. Yes explosives are very legal to farm & land owners... In fact the mixture that was used to blowup the fed building in Oklahoma City, is exactly what ranchers use to remove tree stumps, beaver dams, ground hogs, etc.. The only difference is ranchers don't use truckloads of the stuff.

Short of the nickels, his stockpile sounds like many of my neighbors.

merizobeach's picture

Wait a minute..  You're telling us that a bomb in a truck parked on the street blew off half of a concrete building, including the supporting columns?  Ok, physics major, nice try..

Gene8696's picture

Well I guess I am telling you that... But my point is, bags of that same mixture are in barns all around here, and it's perfectly legal.

merizobeach's picture

I take your word that it is all perfectly legal.  I've no reason to doubt it.  Sounds like that's the law.

 

I will never believe, though, that the damage to OKC federal building was done by a fertiziler bomb on the street and not explosives attached to the supporting columns of the building.  That's just physics.  http://cache.blippitt.com/wp-content/uploads/2010/04/oklahomacitybombing...

 

If you haven't, check into the story and death of OKC police officer Terry Yeakey.

mickeyman's picture

In Ghana we have seen old (copper) coins trading as tokens in the market, despite the fact that their face value was less than 1/10,000th of a cent. You don't need to melt them--they are a known weight of metal. The same could be true of nickels (and old pennies) after a currency event.

Ranger4564's picture

Never mind... some clever people above made more interesting points.

Sgt.Sausage's picture

What do folks do with all those silver dimes, quarters, halfs and dollars from 50 years ago.

I don't know a single individual who melts them down - legal or not - but they're still worth a metric shit-ton more than face value today. A quarter, 50 years ago, was 25 cents. Now it's, what, about 600 cents?

So, too, will the nickels go.

 

 

Taterboy's picture

As long as he doesn't shave the beavers, he's okay in my book.

lincolnsteffens's picture

Just a little trim around the edges and snip the split ends.

knukles's picture

"W" as in Woodrow Wilson, right?

Pure Evil's picture

And the dude pays good money on the value of tinfoil hat trade in's.

My neighbor just bought an upgraded aluminum foil hat with all the bells and wistles.

X.inf.capt's picture

hmmm...

well, evil

how can someone preparing for an emergency be wrong...

FEMA says stock up, in case of an disaster

i think most ZH'ers see a disaster coming...

no tin foil hat needed for that...

Pure Evil's picture

We'll all need tinfoil hats soon, keep the RFID chip implanted in your brain from networking with skynet.

They'll also serve another purpose.

Zombies are attracted to the Delta waves generated by the electro-chemical impulses of your neurons.

Therefore in order to keep the Mexican zombie hordes from discovering your whereabouts, you'll need a 100% aluminum foil hat to attenuate the signals produced by your delicious brain.

Brains, the delicacy of zombies.

flattrader's picture

Tin foil hats don't protect you from beaming.  They enhance it.

Here is THE definitive study--

http://berkeley.intel-research.net/arahimi/helmet/

 

On the Effectiveness of Aluminium Foil Helmets: An Empirical Study

Ali Rahimi1, Ben Recht 2, Jason Taylor 2, Noah Vawter 2
17 Feb 2005

1: Electrical Engineering and Computer Science department, MIT.
2: Media Laboratory, MIT.

 

>>>Among a fringe community of paranoids, aluminum helmets serve as the protective measure of choice against invasive radio signals. We investigate the efficacy of three aluminum helmet designs on a sample group of four individuals. Using a $250,000 network analyser, we find that although on average all helmets attenuate invasive radio frequencies in either directions (either emanating from an outside source, or emanating from the cranium of the subject), certain frequencies are in fact greatly amplified. These amplified frequencies coincide with radio bands reserved for government use according to the Federal Communication Commission (FCC). Statistical evidence suggests the use of helmets may in fact enhance the government's invasive abilities. We speculate that the government may in fact have started the helmet craze for this reason.<<<

I thought ZHers where smarter than to fall for the obvious NWO propaganda on tin foil hats.

Sheesh...

RockyRacoon's picture

Your research tax dollars at work.  

X.inf.capt's picture

hey, rocky, please tell me these guys arent serious....

WTF

merizobeach's picture

I've almost got the $250K, then I can buy my own 'network analyser'!

Dave Thomas's picture

I only use genuine 3M Velostat ® in my deflector beanies! It keeps the aliens away, but also much lighter!

 

 http://www.stopabductions.com/

 

P.S. That MIT Team works for the Illuminanti so what do you think THEY want you to think!

flattrader's picture

I thought we were trying to stop the government from beaming messages into our brains?  What do aliens have to do with this?

Stop trying to obfuscate the issue!

[Alien abduction may be the only way to avoid getting swept up in the Great Reset...So there.]

CrazyCooter's picture

Sounds like he's just a good ol' boy ...

http://www.youtube.com/watch?v=ch41ZEtGIe4

Regards,

Cooter

X.inf.capt's picture

hey, cooter,

he sounds like he see's something...

 

CrazyCooter's picture

It didn't occur to me just now, but I think Kyle Bass is part of the Bass family from Ft Worth.

The Bass family is an interesting clan. You can read a bit here ...

http://en.wikipedia.org/wiki/Robert_Bass

Short version is the Bass family is multi-generational business owners involved in a lot of stuff. They are very active in Ft Worth with regards to arts, philanthropy, and such. They just seem like a class act for the most part.

Besides, if I had a couple billion, I would have a huge ranch, explosives, and sniper rifles too ... LOL

Regards,

Cooter