Having recently explained his "greatest investment opportunity for the next 3 to 5 years," Kyle Bass expands on his China discussions...
"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."
...to focus on Emerging Markets more broadly and specifically The BRICs.
As Benzinga summed up, Bass Warns
"we still have three tough innings to go, maybe four," he warning that emerging markets will "see a lot more pain before things are okay."
Plenty more smoke and mirrors to be destroyed yet...
Bass talks Emerging Markets with Wall Street Week's Gary Kaminsky...
“You look at Brazil, and the [carwash] scandal goes all the way to the President…It is a complete disaster with corruption,” he said. Bass believes that until the country roots out its corruption, the country “will keep going south.”
Russia faces issues related to “Putin’s global chess moves” and international sanctions.
Bass, meanwhile, called India a “semi-bright spot” in the grouping of countries, but didn’t delve deeper.
China, lastly, is “the big one,” according to the hedge fund manager. Bass cited the country’s non-performing loan growth as the key issue to watch.
"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."