During recent SALT 2016 conference, Kyle Bass, a hedge fund manager who predicted the 2008 financial collapse, stated that we’re back to 2007 (pre-crisis levels) when it comes to credit and equity markets.
Bass, who runs Hayman Capital Management LP, thinks that the great macroeconomic imbalance comes from China, specifically its credit markets. He sees that a bubble has been formed, which eventually will burst. As Bass portrayed, the asset-liability mismatch in China is 10%, while it was only 2% or 3% in the United States before the 2008 crisis.
As Bass went on further, Chinese authorities are likely not showing the entire truth when it comes to credit issues. But, developing problems are seen in Hong Kong and Singapore, two countries which had seen credit declines. So, if things aren’t rosy there they’re probably not so rosy in China as well.
Kyle Bass is well-recognized in the hedge fund industry. He’s also known for come controversial statements and actions. He defended the Argentinian government when the creditors sought to recover on defaulted debt. Some say it’s due to his relationships with the Argentinian political elite.
Bass also blamed the victims of GM car crashes for not being careful, or even being drunk. Yet, it appears the accidents were due to GMs cars having faulty parts. What raised questions as to Bass’s involvement was the fact that he was a shareholder of GM stocks at that time.
As a hedge fund manager, Kyle Bass resorts to shorting stocks, which basically involves betting on stock price declines rather than increases. He’s known for shorting shares of pharmaceutical companies, and then suing these companies for issues related to patents. Such moves are designed to bring down the share prices, thus bringing profits to the short sellers.
Many critics consider such actions to be highly unethical, even illegal, as drugs’ availability may be delayed, costing the patients dearly.