Kyle Bass vs China … and the winner is…


Kyle Bass is a legend. He doesn’t have to be right on China to establish that.  But so far the market has weighed Bass… and weighed China… and found Bass to be the light-weight. This is the problem with having strong opinions. They are very expensive! As a small fish,  I find its better to have theories that one drills down into, identifying the stress-crack markets that should be an early warning to that theory. Now Bass knows this better than myself. He just possesses a bully-pulpit, which he can use to shape the markets perspective. So far the market is rolling its eyes at him. But the idea that “Bass doesn’t know why he is getting smoked in China” is just stupid. Maybe a good headline… but just stupid. 

Sometimes, no matter how right you are, you’re still wrong and you’re still going to lose money.
On Thursday hedge fund manager Kyle Bass of Hayman Capital told Reuters that China’s credit problems are “metastasizing” and that he still expects the yuan to fall 30% against the dollar when it does.
It’s a bet he’s been making since February of last year, and the currency has mocked him for his efforts. After a 2% devaluation in the summer of 2015, the yuan rallied, gaining 2.1% in 2017 alone. Of course, that doesn’t mean that the country’s problems with debt have disappeared. The banking system is indeed fragile.
“What the public narrative is and what they have been doing behind the scenes are two completely different stories,” Bass said in a telephone interview with Reuters. “China has been masterful controlling the public narrative. As a fiduciary, I have no idea how anyone can invest in China.”

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