Category Archives: Financial Forecasts

Kyle Bass’s Polarizing Persona

Some may think that Kyle Bass is short on China, he’s certainly never been short on making big predictions. Unless you’re a character from Harry Potter, big predictions can make you a star or blow up in your face, and Kyle Bass has experienced both sides of that fence.

In the mid 2000’s Bass was basically the lone voice that predicted the 2008 subprime mortgage crisis. Hindsight providing a clear view shows us how accurately he foresaw the pending meltdown. It was one of the biggest calamities in our country’s financial system and he got it right.

Despite several news headlines, Bass says he is not short Chinese bank’s but rather he’s short the non-Chinese banks that lend into China. His reasoning is that Chinese banks have grown too large too quickly and thus they are poised for an almost natural cycle of decline. In true Bass fashion, he makes the bold prediction that Chinese banks will “lose all of their equity”.

This possible forthcoming hit to the Chinese banking system would be severe but according to Bass, “it’s not the end of the world.” Bass says that the Chinese government “has the ability to deal with it through financial resources and a government committed to recapitalizing banks.” This creates a potential short trade for the rest of the non-Chinese banks around Asia that lend into China.

Having predictions come to fruition however, is more difficult than simply forecasting beliefs on his blog. There are many who believe Bass’s prophesies are merely self serving and not just a genuine vision of things to come. Bass, who founded his hedge fund Hayman Capital Management in 2006, is akin to the major league batter that hits a homerun his first time at bat, and then strikes out thereafter. Many of his post mortgage crisis predictions have not been accurate.

Bass’s critics also point to his seemingly constant wiliness to pontificate through the media more often as his actual fund performance declines. Many commenters’ claim that Bass uses these public forums to serve his own bottom line and not to provide actual unbiased analysis.

The harshest allegations of financial shenanigans revolve around Bass’s continued support of Argentinean President Cristina Fernandez de Kirchner. Argentina has defaulted on their sovereign debt twice in the last 13 years, all while purportedly ripping off the Argentinean citizens. Through this public turmoil, Bass has continued to nonsensically champion Kirchner. This bizzaro world stance leaves many wondering what Bass’s financial end game plan may be for providing supporting to Kirchner.

Not surprisingly Bass’s views draw significant criticism. For example, Bass shifting the blame from GM onto the victims in the faulty airbags scandal doesn’t leave a lot of room for defending Bass. When it’s difficult to understand someone’s position, and the most obvious assumptions lead to purely self serving purposes, it’s no wonder that Bass is so polarizing.