The number of things Kyle Bass is having an opinion on these days, makes us worry if he will take the place of Whitney Tilson. Jokes aside, Kyle Bass of Hayman Capital was on Bloomberg today and talked about several things including gold, mortgages, Japan and Bill Ackman.
Watch the full video of the interview here.
When asked if his investment in subprime mortgages have played out yet, Bass replied in negative. He exited his positions in Fannie Mae’s preferred stock back in April 2012.
Bass still has a long position in the housing sector, which he described as focused on asymmetric areas around housing that are not expected to get worse like the services sector and mortgage insurance companies. On the other end, hedge funds are still wagering bets on Fannie Mae’s preferred stock which has more than doubled in this year.
On the best hedge fund drama, Herbalife Ltd. (NYSE:HLF), Bass said that jumping into such controversial holdings where there are so many players is not his firm’s focus. He had words of praise for both Dan Loeb and Bill Ackman. About Ackman he particularly said that he is a great investor and his losses in the past are not shocking. He said “We all do poorly at some point in time”.
Bass also shared his stint at activism with a regional jet company which was unfortunately unsuccessful. He admitted that activists like Loeb and Ackman are much better at playing the activist and do well in governance roles. Bass has not disclosed if he is on the long or short side of Herbalife Ltd. (NYSE:HLF), however he has said at one point that he would never think of going against Dan Loeb, who is long Herbalife.
On the subject of gold, he said that one should always have a position in the precious metal, because the aggressive monetary easing that the whole world has become a fan of, will eventually crumble the value of paper currency. Bass said that he takes gold as a currency not a commodity and would prefer to have own gold than paper.
The recent downfall in gold’s price has discouraged a few ardent gold investors like George Soros. He said that gold’s safe haven status has been destroyed by the most recent episode of economic crisis in Cyprus.
Kyle Bass has been saying for a long time that Japan’s sovereign bond market is a bubble that is on the verge of bursting. This was again the theme of his recent sitdown with Bloomberg TV. Japan has the highest government debt to GDP ratio globally, the government inaugurated a massive round of monetary easing which is likely to have many phases over the next two years.
Bass said that he does not know when the bond market will blow up, but judging by what happened on Friday it seems that it could happen soon. The massive selling in short-dated JGBs took 5 year bond yields to new highs, he said that the bondholders know that they are insolvent and will scramble to exit sooner or later.
Bass is involved in the widowmaker trade in JGBs which means that he is short Japanese government bonds. In the era of fiscal stimulus, this has not been a successful trade for most hedge funds.
We wait and see how this plays out for Bass.