Kyle Bass is the founder of Hayman Capital Management in Dallas, TX. Bass is renowned for his predictions of the mortgage crisis in 2008. He profited from betting on subprime mortgages. The hedge fund manager gives his take on how the economic situation in China will affect The US. His prediction is that growth in China is going to take a dive and affect other Asian markets. It will also have a sway on how the U.S does with her economy.
Banks Growing too fast
One reason Bass gives for this prediction is the banking system in China. With the banks growing too fast and surpassing the GDP, there is bound to be a “loan-loss cycle.” China has an economy of 10 Trillion and its assets in their banking systems are worth 35 Trillion. The 400% growth of the banking system translates to thrice the GDP! With such growth, he figures that there won’t be enough equity for banks. It is the same situation that European countries had to deal with because they were not in a position to handle their banking problems. Such a situation would mean loan losses and so investors should start worrying.
Potential Downturn for U.S
His take is that the US should expect to face a downturn of about 10-20%. The lack of growth in emerging markets is one factor that will influence the US stocks. East Asian markets connect with each other on various levels. China is responsible for a big fraction of trade activities in that part of the world. When Chinese banks start experiencing problems, this situation will spread to the other markets on that grid. Bass, however, is quick to reassure that the pending crisis won’t be as severe as the global financial crisis.
Oil and Argentina
Bass is famous across the financial industry for giving valuable insights. Some of the predictions he made include the Greece economic crisis in 2012 and Japan’s crunch in 2013. Bass is now showing interest in oil and Argentina. The key market players are pointing out the risks of investing in oil, but Bass is sure that change is coming. He claims to possess research to justify his position. Bass also sees a future in Argentina although others don’t agree with him because of President Cristina Fernandez de Kirchner’s economic policies. Bass is not as quick to dismiss the potential that Argentina holds in the not so far away future.
Taking on Drug Companies
The founder of Hayman Capital is also busy challenging pharmaceutical companies, which UsefulStooges has reported about Kyle Bass before. He says that it is about time that someone holds drug companies accountable. His aim is to bring down the cost of medication. Teaming up with Erich Spangenberg, Bass is challenging patents that pharmaceutical companies own, calling them questionable. It is not clear how the investment strategy is working out for Hayman Capital because Bass is keeping it a secret.