Tuesday, August 24, 2010

Kyle Bass Interview on CNBC

Below is a great interview with Kyle Bass of Hayman Capital (one of the best macro investors in the game). In addition to talking about the massive structural problems in the European banking system, Bass gives a great overview of his short thesis regarding Japanese government bonds. With a debt to GDP ratio exceeding 200%, government expenses more than two times receipts (40 trillion of revenues vs. 97 trillion of expenses!), and a domestic savings rate approaching zero percent (as retirees begin to draw down on their savings), Heyman believes Japan is fast approaching what he terms a "Keynesian endpoint."

If I am lucky enough to ever run my own hedge fund, betting against Japanese governemnt bonds would unquestionably be one of the first trades I put on. With 10-year JGBs under 1%, this represents one of the most assymetric bets since derivatives on the ABX allowed investors to bet against the US subprime market.



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