Kyle Bass gives his perspective during these tumultuous times unseen for generations and perhaps never witnessed before in a globally interconnected financial world.
Kyle Bass’s call to fame and fortune was predicting and effectively betting against the US subprime mortgage crisis by purchasing credit default swaps on subprime securities. His global views of financial markets were already bearish back June 2019. Regular readers may recall a piece we wrote entitled, Kyle Bass Quiet Panic.
Kyle Bass is known as a China bear and his call was bang on the money.
“His global views of financial markets were already bearish back June 2019”
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Today, Kyle Bass gives his perspective, in the wake of COVID-19, which has now been officially declared a global pandemic by WHO and is the final nail in the coffin of the longest bull market in living memory
Kyle Bass gives his perspective on the latest oil price crash warning that prices below 40 USD a barrel will bankrupt US shale producers. US Trump administration has been trying to get oil prices lower. “I think they should be careful what they wish for anything below 40 USD doesn’t work” said Kyle Bass. “Conventional US shale production is going to end up bankrupting itself, the one cure for 25 USD oil is 25 USD oil. It would stay here for long because none of the producers make money at these levels” he said.
Kyle Bass gives his perspective on the potential collateral damage of an oil price war on the fixed income corporate bond and sovereign debt market
The highly leveraged oil companies with low investment-grade bonds are likely to be the first to fold. Concerning sovereign (government) bonds Kyle Bass points out that some countries will do better than others. “Sovereigns that benefit from low oil prices China, Japan that have few natural resources and then there are those that are going to be hurt pretty badly when oil is 30 USD” said Kyle Bass.
“Sovereigns that benefit from low oil prices China, Japan that have few natural resources and then there are those that are going to be hurt pretty badly when oil is 30 USD”
KYLE BASS
Kyle Bass gives his perspective on Iran and other countries experiencing political instability
“Iran is dealing with the largest existential crisis with the virus running through the ranks leadership and population” said Kyle Bass. “Places that are not so politically stable are going to go into complete disarray. I think that is a problem geopolitically going forward,” he added.
“It is our view that as northern hemisphere enters the summer months the virus spread will decline in new cases” – Kyle Bass
Regarding COVID-19 peaking Kyle Bass gives his perspective believing the infectious rate will decline in warm months
“It is our view that as northern hemisphere enters the summer months the virus spread will decline in new cases” he said. “Worse affected companies are the most interesting value plays when we see peek virus infection rates” he added.
Kyle Bass gives his perspective on the impact on banks in Europe and Asia. “This is not 2008 banks are not going broke but there will be places around the world that have never recapitalize. ECB never recapitalize European banks. Europe is going to have a real problem. Italian banks are going to become insolvent quickly. Italy has north of 130 percent debt to GDP and they have no capital in their bank” he said.
Another economy at risk is Hong kong. “What we are going to see is worse than the 1998 Asian crisis over in South East Assis, I think the epicenter will be China and Hong Kong,” he added.
