Margin of Safety » Hayman Capital

More on Europe from SocGen and Kyle Bass

Ray Galkowski, CFA — Wed, 14 Dec 2011 19:54:20 +0000

From a SocGen Analyst’s note released today:

The extraordinary events we’ve seen these past months are now threatening the euro project, and calls for its dismissal, which were laughable a year ago, are becoming more mainstream. Risk aversion has increased dramatically and we are arguably in as bad a shape as in 2008/2009. Peripheral bond yields are now much higher than they were back then, as are all sovereign CDS. The low yields of the safe haven bonds (Bunds and US Treasuries) also highlight the sharp risk aversion in the markets and while the tensions in the money markets are not as bad as they were back then, they remain at extreme levels.

Kyle Bass on CNBC today essentially said the following:

“Europe is trying to fix a solvency crisis with liquidity. Liquidity is not the problem. No one is saying the payments system will fail; it did not fail in the US when Lehman went under, either. However, bills are coming due in Europe that no one can pay.”

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“It’s a Disaster, the United States…” Kyle Bass

Ray Galkowski, CFA — Wed, 14 Dec 2011 03:58:54 +0000

Bass’s usual upbeat outlook on Japan, Europe and the US as broadcast on BNN today. I wish the interviewers would have allowed Bass to fully answer their questions. They cut him off too many times to ask a new question in the middle of thoughtful analyses.

I do not believe Bass is a permabear like Roubini and Shilling. I think he has thoroughly analyzed developed western economies, sees a disaster coming, and is willing to place a large bet on his convictions. Enjoy…

http://watch.bnn.ca/the-street/december-2011/the-street-december-13-2011/#clip584881

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Kyle Bass on Japan and Europe at a Darden School Conference

Ray Galkowski, CFA — Wed, 16 Nov 2011 03:30:07 +0000

Michael Lewis opens his latest book, Boomerang, which can be found in the bookstore above, with a vignette about his meeting in 2008 with Kyle Bass of Hayman Capital. He left the meeting thinking that Bass was a bit of a crank because Bass predicted the collapse of Europe and Japan under the weight of their crushing debt loads. It was Bass, apparently, who alerted an incredulous Rogoff to the crushing debt loads. Rogoff and Carmen Reinhart later wrote This Time Is Different.

Lewis writes, almost smirkingly, that Bass was so concerned about a financial collapse that he was literally buying nickels–TWENTY MILLION of them–because the value of the metal in the coin was worth more than five cents. The implication being that there may be little else that retains as much value as such hard assets after a collapse.

Four years later Lewis wonders how Dallas resident Bass got almost everything so right, while experts in financial centers around the world got everything so wrong.

They are still not getting it:

H/T for pointing to the video: Santangel’s Review (Resources to the right)

It would be hard to guess given his mild and erudite demeanor in this video, but Bass is a shotgun-toting Texan who lives in a “fort” and drives a Hummer with a bumper sticker that says: “God Bless Our Troops, Especially Our Snipers.” God Bless indeed.

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