Investment Star Kyle Bass Thinks The Stock Market Is Going To Drop Because Of China’s Bad Debt Situation
There’s no doubt that the world is connected when it comes to financial and banking issues. The big banks borrow money from each other all the time, and if one country is having banking issues, other countries feel the impact of those issues. A good example of the banking world’s connection is the current financial situation that is developing in China. According to Kyle Bass, the founder of Dallas-based Hayman Capital Management, the Chinese banks are in trouble because of mounting bad debt.
The Chinese banks have been lending money to companies and people in order to stimulate a consumer-driven economy, and the plan is not working like the banks expected. In fact, Bass believes the Central Bank of China is three trillion dollars in debt due to these consumer-based loans. The government of China will have to use capital reserve money to keep their banking system intact, and that will cause their currency to depreciate by as much as 30 percent. Bass is betting that will happen.
Kyle Bass is the hedge fund investors that made a fortune betting the banks in the U.S. would collapse in 2008. Bass had a huge payday when he collected on that bet and he needs another payday like that one. Hayman Capital hasn’t been the darling that investors cozied up to a few years ago. Even though Kyle Bass continues to talk about the gold market, interest rates and a global recession, his hedge fund is not producing decent returns.
Hayman Capital is having a meltdown, and Bass believes he can recoup some of the losses by shorting pharmaceutical stocks, and by making questionable decisions that some people say border on unethical behavior. Kyle Bass hasn’t made many friends over the last three years. He turned four other hedge fund managers into enemies when he sided with Argentina when the country defaulted on debt bonds a few years ago. He upset consumers when he took General Motors side when the company installed faulty steering mechanisms in certain GM models. Even the widow of Chris Kyle, the American Sniper, thinks Bass and Hayman Capital use unethical investment tactics. But Bass keeps talking and the investors keep listening and waiting.