November 09, 2012
• Bass sees convexity in pricing and “all the convexity of world is in Japan.”
• The next 18 months will set the stage for the Japan
• Central banks have replaced traditional intermediaries – that is why global volatility is so low
• Availability heuristic - people can only process data from readily available data
• Accepting the logical conclusion is detrimental to many factors of our life
• 3 false axioms of Japan according to him
o (1) Can Japan run a current account surplus to self-fund? Bass says no.
o (2) Bank of Japan is not buying debt. Bass says false. Monetization is occurring.
o (3) Retail investors will actually be able to hold all the debt.
Kyle Bass, an American hedge fund manager, is the Founder of Hayman Capital. He received extensive coverage in the financial press for profiting $590 million by short selling the sub-prime mortgage bond market, before that market crashed. In 2011, Bass initiated a huge position in Greek sovereign debt through CDSs. Media reports were that he could profit up to 650 times his investment should Greece default on its debt obligations.