On the coming global debt restructuring
Kyle Bass is the founder and managing partner of Hayman Capital. Hayman successfully called the housing crash by modeling themortgage securities industry, and now Kyle Bass makes a strong case that the world will have a massive debt restructuring event in the next few years.
One hour YouTube video:
http://stks.co/fI1
If you watch an hour of television this week, watch this. (Or, read his letter to his investors.)
Summary --
* Washington wants us to earn our way out of the deficit/debt in
order to gain re-election, but he argues that:
1) All job growth since the 2008 crash have been in gov't and
healthcare, education and defense which are subsidized by gov't
2) There are not enough borrowers left; marginal benefit in GDP of new
credit is down to 7 cents on the dollar
3) Unemployment duration is the highest since 1948.
4) After printing over $1T in new cash, consumer sentiment has hardly
grown.
5) Every bank is levered 17 times.
6) Many countries around the world have huge debt-to-revenue ratios.
It's not just Greece that will have to restructure, but Iceland and
Ireland as well.
7) On Japan:
- Housing market has gone down 70% since its crash despite zero
interest policy
- Gov't interest payments are now 25% of
revenue despite just 1% yield.
- On top of that population is aging and declining.
- Gov't budget deficit has exceeded aggregate cash savings
* Bass' conclusions:
1) Massive loss of paper wealth, esp. bond and money market holders.
2) Gov't has to continue to support housing, but Fannie and Freddie have
to wind down.
3) Good news: China won't invade Japan.
One hour YouTube video:
http://stks.co/fI1
If you watch an hour of television this week, watch this. (Or, read his letter to his investors.)
Summary --
* Washington wants us to earn our way out of the deficit/debt in
order to gain re-election, but he argues that:
1) All job growth since the 2008 crash have been in gov't and
healthcare, education and defense which are subsidized by gov't
2) There are not enough borrowers left; marginal benefit in GDP of new
credit is down to 7 cents on the dollar
3) Unemployment duration is the highest since 1948.
4) After printing over $1T in new cash, consumer sentiment has hardly
grown.
5) Every bank is levered 17 times.
6) Many countries around the world have huge debt-to-revenue ratios.
It's not just Greece that will have to restructure, but Iceland and
Ireland as well.
7) On Japan:
- Housing market has gone down 70% since its crash despite zero
interest policy
- Gov't interest payments are now 25% of
revenue despite just 1% yield.
- On top of that population is aging and declining.
- Gov't budget deficit has exceeded aggregate cash savings
* Bass' conclusions:
1) Massive loss of paper wealth, esp. bond and money market holders.
2) Gov't has to continue to support housing, but Fannie and Freddie have
to wind down.
3) Good news: China won't invade Japan.