Kyle Bass likes to predict world events that could reap his hedge fund epic rewards. Bass is the former Bear Sterns executive that was able to read between the lines back in 2006. Kyle told anyone that would listen that the subprime mortgage scheme was going to fall apart, and when it did crash in 2008, Bass made a fortune. His small hedge fund company, Hayman Capital, became a hit with big money investors, and Bass become an instant celebrity.
Bass has been milking his five minutes of fame for the last eight years. Kyle believes that the Chinese banks are in trouble, and the government is keeping them solvent using capital reserves. According to an article posted by Bloomberg.com, the banks in China are carrying more than $2.3 trillion in bad debts on their books. That bad debt is the result of the country’s desire to lend money to companies and individuals that could help turned the massive Chinese economy into a consumer-based economy. The government has spent billions of dollars to keep the economy moving in a positive direction, but every year for the past five years the economy has been shrinking.
Investors like George Soros, Paul Singer, and Kyle Bass are shorting the Chinese yuan against the U.S. Dollar because they believe the drain on capital reserves will force the Chinese to devalue their currency on the foreign currency exchange. Other economic experts think the Chinese will continue to manipulate their currency to avoid a devaluation.
Hayman Capital and Kyle Bass have had their share of questionable investment over the last years. Not all hedge funds produce the returns that Hayman Capital produced eight years ago, but for the last three years, Bass has been struggling to maintain his profit-producing image. When Bass began shorting drug stocks before the news broke that patent troll, Erich Spangenberg was accusing them of price fixing and asking for an investigation, many investors felt the unethical tone of that investment. And when Chris Kyle’s widow accused Hayman Capital of unethical behavior, another red flag appeared. Bass is still boasting like he always does, but his audience is slowly disappearing.