The World according to Bass
In Kyle Bass we find an investor who looks at what everyone else is looking at but sees what nobody else has seen. That’s the primary reason why we are always interested in what he has to say. His profitable – and very large – bets against US credit default swaps and then against Europe and Greece suggests his thoughts are worth paying attention to.
At this year’s Buttonwood Gathering Kyle Bass joined a panel to answer questions about the global economy, negative real and nominal bond rates as well as whether the US starts to raise rates this year.
In a world where rates are low, because central bankers are worried about growth, how long can equities remain supported? Or will growth emerge? Or will profit margins come down as wage inflation emerges?
Echoing Ray Dalio’s recent concerns, Bass notes, “The next recession will be a hard one because the tools in the toolbox are not there to avert a severe downturn”
At 18 minutes 40 sec Bass says the stock market in the US will return “plus or minus zero”.
If you can find a spare half an hour, it’s worth watching Kyle Bass in action.
Roger Montgomery is the founder and Chief Investment Officer of Montgomery Investment Management. To invest with Montgomery, find out more.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Chris B
:
Interesting video. The economic boom that happened in USA and Europe since 1950 is not going to be as fast anymore. The population of USA doubled from 1950 till now from 150m to 300m. All 3 of them say bond rates won’t be as high as in the past. Pension funds were returning 10% pa 30 years ago, now they return 2% pa.
Another point Kyle made was that the skilled workforce is fully employed in USA. Unemployment of 11% for a decade is something that a country can handle. In Australia in the early 90’s recesssion, a lot of people never worked again, they found it hard to get work. If unemployment rises here, we will ride the storm.
Aaron Somner
:
Roger thanks for the post. I also like Bass’s views & had not seen this video. One of the main themes of the discussion for the first 20 minutes was the fundamental analysis of whether negative yields in the bond market are justified. Bass clearly thinks not. Where the other gentleman thinks they are insurance. However all three spoke about investing through the cycle” or ‘when the next recession hits’. This indicates the dynamic nature of the worlds economy. On each dynamic peak of this cycle a particular market becomes a magnet for the worlds capital creating a major bubble. I know I have asked this question before but do you think that the bond market is that bubble?