Kyle Bass pinpoints opportunities amidst the chaos in his recent interview.
Kyle Bass is the founder and principal of Hayman Capital Management, which since its inception in 2006, the fund has returned 436.75% and an annualized return of 16.7%.
Like so many top investors Kyle Bass underplays his success.
“I think my record might be 51% 49% so I wouldn’t consider myself great in any way” he said. “I think I am average or below average on timing” added Kyle Bass.
“I think my record might be 51% 49% so I wouldn’t consider myself great in any way”
Kyle Bass pinpoints opportunities which he believes he has become receptive to due to seminal moments in his life, which he thinks happens to all of us during our lifespan
“Seminal moments in life is when you meet someone that is an incredible thinker, or you read a book that sets you off in a different direction, all of these things happen in your life path” said Kyle Bass.
“My working-class parents never saved any money, there are positive motivation and negative motivation forces” said Kyle Bass. But he believes that it was the latter that drove him harder. I got a scholarship where a lot of wealthy kids attended. I was always the broke kid at school” he said. My parents didn’t have any money and my goal was to study capital and so that I could earn enough money to have a comfortable lifestyle” said Kyle Bass.
“I set off that path the moment I left college” he added.
“Seminal moments in life is when you meet someone that is an incredible thinker, or you read a book that sets you off in a different direction, all of these things happen in your life path”
Kyle Bass is a macro investor he is known as a China bear, his investment strategy is global event-driven, which is how Kyle Bass pinpoints opportunities
“We are always looking for a particular catalyst, or an event not buying value for value sake, and not investing in something because it is cheap,” said Kyle Bass.
Kyle Bass pinpoints opportunities by ideological constructs rather than orthodox methods
“The 800-pound gorilla in the room is the central banks, that means the traditional laws of physics in financial markets have changed radically, said Kyle Bass.
True north and true south are no longer true north and true south. Compass doesn’t work anymore, he added.
“We have focused in the right places, but we haven’t time things well”
– Kyle Bass
“You have to invest around an ideological construct of the central bankers taking us down this road, many would say to fruition” said Kyle Bass. “But I think the pattern is set, where the central banks know they can do what they are doing” he said. But he also noted that in the weaker economies with currencies less in demand central banks don’t have much wriggle room.
Kyle Bass is also unclear how the greatest monetary easing experiment in the history of finance will end. The major central banks in cahoots have expanded their balance sheets by $7.5 trillion to prevent a financial meltdown due to the global shutdown of economies in the 2020 pandemic great lockdown. “We are six or seven-inning in a nine innings ball game and I am not sure how this one is going to end” he said.
Kyle Bass pinpoints opportunities but the macro investor also notes that timing, the other part of the equation is difficult
“We have focused in the right places, but we haven’t time things well” said Kyle Bass.
“Timing is hard, what you have to do when discussing this with investors ideology and thesis, you have to talk about that timing continuum, potentially set lockups on your spvs that happen to be parallel with your timing expectations,” said Kyle Bass.
“You have to set up lockups” he reiterated.
Kyle Bass then gives an example.
“When we launched the Japan fund in late 2012 it had a three-year time frame. We expected something like Abenomics had to happen, or it was going to collapse under its weight. We had major drawdowns before we made triple returns” he said.
By constructing situational portfolios Kyle Bass pinpoints opportunities
During 2006/2007 Kyle Bass’s fund focus on mortgage back security.
“Sovereign had to step in and support the banking system so we were watching bad private assets go to private balance sheets. That led me to study public balance sheets of the world in 2008 that took me to a place from the US to Europe to Japan to China and now Hong Kong,” said Kyle Bass.
“There is so much money printed around the globe whether you are talking about dollars, euro, yen, or pounds, and it needs to go somewhere”
– Kyle Bass
“What do you think the implied volatility of 36-year peg is,” asked Kyle Bass regarding his HK trade. “I think it is very close to zero. I think the options market has never been so mispriced the question is timing” he said.
“10 trillion-dollar question is how much reserves does China have to help HK.
I think post-November 3, we have a whole new ball game over there.
I see 10 to 20% of deposit leave HK, that 300-600 billion dollars leaving HK, that kind of capital flight causes existential crisis to the HTML” said Kyle Bass
On the long side, Kyle Bass pinpoints opportunities concerning stocks oversold due to the pandemic, which he refers to as Wuhan flew
“Airlines cruise lines everything that is kind of obvious should do a lot better when getting to some medicines, or God help us vaccine that works. If we zero-in on regional theme parks, Six Flags is a big position for us. I think You are on 75 cents on the dollar of what real estate is worth,” he said. “We are long hydrocarbon transport we own energy transfer partners I am a big proponent of alternative energy and green energy” added Kyle Bass.
Kyle Bass pinpoints opportunities in a system awash with central bank liquidity
“There is so much money printed around the globe whether you are talking about dollars, euro, yen, or pounds, and it needs to go somewhere” he said.
He believes capital will flow to places where there is some semblance of a rule of law and opportunities.
“We are already fighting three conflicts with China. The only one we are not fighting is the kinetic one. Fighters and bombers are very close to Tawain right now-you’re going to see conflict” he said.
“We are going to see feast and famine, but feast will be easier to find,” he added. Kyle Bass remains a USD bull.