"I constantly feel inadequate, which may be what drives me," Kyle Bass tells Raoul Pal in this excellent discussion between two of the world's foremost (non-status-quo-hugging everything-will-be-fine) market practitioners. The interview with Bass, from the newly launched Real Vision TV, [5] covers everything from how he got started in his career, what drives him, his process "it's an art - there is no science to it", and not only how we got here, but where we are going (inevitably)...
The Chain with Kyle Bass [6] from Real Vision Television [7] on Vimeo [8].
How do you find trades? "I wish I could tell you there was some magical screen but in fact "it's an art - there is no science to it"
For example...
"How did I get involved in Japan? When the bad assets were moving from private balance sheets to public balance sheets, I decided to look around the world to try to understand what the public balance sheets looked like (this is in late 2008)... and found them right at what I believe is an inflection point - when their population began to decline."
Bass also explains how he deals with the ubiquitous negativity that comes with being wrong on occasion as a fund manager...
"I think, as you know, the people who are really really good at this are ... how do I put it? They're not tremendous social people, right. They all have these crazy quirks and interesting lifestyles. They're generally all good people, the ones I've met ... I live in constant fear. Again, I live with this constant feeling of inadequacy that drives me so hard to succeed and be a proven fiduciary ... And that's what's always driven me. There are these two forces in life — positive reinforcement and negative reinforcement."
Humility appears to be key... Something we suspect more than a few other managers - guru-ised in this one-way street of a market - have yet to learn.
At 43:20, What really captivates Bass currently - and he explains he is working onm the exposition of this over the next few months - is the lack of liquidity:
"Forget equities, we saw the plumbing in the credit markets make moves that I thought we could never see... there is this confluences of events where the world has been driven to the daily liquidity of ETFs at the exact same time as broker-dealers are unable to take on risk [due to regulatory controls]... there aren't true circuit-breakers so we see gaps - and the gaps are huge - so we go from a no-vol world to a vol-world that goes off the charts because of the way the market is constructed today. What worries me is how the construct works across both equities and credit..."
