Kyle Bass thinks the Fed will abandon tightening as soon as stocks crash, which is a view we also believe. We could see the shortest Fed tightening cycle ever.
So Kyle Bass’s Hayman Capital is yet another heavyweight investor that believes that the Fed will not succeed with its planned four interest-rate hikes by the end of the year.
Fixed income heavyweight Gundlach recently said that the Fed could get to 1.5% on the Fed funds rate, which might happen in the next 12 to 18 months. But that would trigger a recession,” he said.
“the Fed could get to 1.5% on the Fed funds rate, which might happen in the next 12 to 18 months. But that would trigger a recession”
Kyle Bass thinks Fed will abandon tightening after hiking the Fed fund rates by 1 to 1.25%
“The Fed can’t raise rates more than 100-125 bps before they have to stop,” said Kyle Bass.
Speaking in a recent business interview Kyle Bass put forward his dovish view on Fed rate hikes and policy mismatch.
“There’s a huge mismatch, I think, between policy and reality…when you look at the reality of hydrocarbon demand…the reality is that…we’ve been pulling CapEx out of the oil patch because we so desperately want to switch to alternative energy. The problem is you can’t just turn off hydrocarbons. It takes 40 or 50 years to switch fuel sources,” said Kyle Bass.
Bass pointed to Goldman’s call for four hikes this year. When the Fed does deliver on the rate hikes it has led the market to expect, “the curve is going to flatten, the long end of the curve will invert, and the Fed” will likely need to throw it in reverse,” he said.
“The Fed can’t raise rates more than 100-125 bps before they have to stop”
“My personal view is they can’t raise short rates more than 100-125 basis points before they have to stop,” Kyle Bass said.
“Once this happens, a recession in the US will likely follow,” he said.
Kyle Bass thinks the Fed will abandon tightening when signs of a recession become apparent.
Once this happens, a recession in the US will likely follow.
“I think they’re going to have to walk away from that plan once they start hiking…that’s my view,” he said.
“there’s no way the stock market goes up this year, and it probably goes down pretty aggressively” – Kyle Bass
Kyle Bass thinks the Fed will abandon tightening, so where will capital go
The first few weeks saw the treasury bond market sell-off, cryptocurrencies sell-off, and stock sell-off.
Kyle Bass is also bearish on stocks
“With all this in mind, “there’s no way the stock market goes up this year, and it probably goes down pretty aggressively,” said Kyle Bass.
Kyle Bass is also a China bear despite PBOC implementing monetary easing by cutting key lending rates for the first time in two years.
As for those who are betting on a bounce in Chinese stocks, Bass characterized this as “a fool’s game.”
As for whether or not he’d ever invested in Chinese stocks again, Bass replied:
“Fool me once but you’re not going to fool me twice…I feel like people who are investing in Chinese equities are breaking their fiduciary duty to their investors.”
But isn’t it a fiduciary duty to their investors to make money?
NASDAQ Golden Dragon China Index is up 4.85% on the month on news of PBOC easing monetary policy. But it is down 50% on the year. A contrarian play?
Kyle Bass thinks the Fed will abandon tightening when recession bites, which makes commodities also risky. So, where does Kyle Bass think capital will flow next, bearing in mind there is no such thing as money heaven.
Large-cap stocks paying dividends? Intel…..?