Inflation will be a global phenomenon: Kyle Bass


NASDAQ FINISHED MIXED. MARIA, BACK TO YOU. MARIA: STOCKS CAPPED OFF WITH THE LATEST JOBS REPORT ON FRIDAY. THE PRESIDENT’S ECONOMIC TEAM VISIT TO CHINA TO DISCUSS THE TRADE IMBALANCE AND THE THREAT OF INTELLECTUAL PROPERTY BY CHINA. JOINING ME RIGHT NOW, ONE OF THE MOST RESPECTED INVESTORS IN THE WORLD, KYLE BASS, THE CHIEF EXECUTIVE OFFICER OF HAYMAN CAPITAL COMPANY. GOOD TO SEE YOU, KYLE. THANKS FOR JOINING US.>>YOU TOO. MARIA: LET ME GET THE MACRO STORY FROM YOU AND YOUR REACTION TO THE JOBS NUMBERS OUT ON FRIDAY. THE NUMBER OF JOBS IT WAS WEAKER THAN EXPECTED, WE KNOW, EVEN THE UNEMPLOYMENT RATE FALLS BELOW 4%. WHAT WAS YOUR TAKE?>>WELL, YOU KNOW, MY VIEW ON JOBS IS YOU HAVE TO THINK ABOUT WHAT OUR GOVERNMENT IS DOING. WITH THE TAX CUTS WE’RE GOING TO STIMULATE OUR ECONOMY BY $350 BILLION OVER THE NEXT 12 MONTHS. IT’S BACK-END LOADED TOWARD 2019. BUT WE’RE STIMULATING WHILE WE’RE AT FULL EMPLOYMENT. SO WE, AT OUR FIRM, BELIEVE THAT IS GOING TO LEADS TOWARDS INFLATION AND IT’S GOING TO LEAD TOWARDS WAGE INFLATION. IF YOU LOOK AROUND THE WORLD AND LOOK AT HOW MUCH MONEY THE GLOBAL CENTRAL BANKS HAVE PRINTED. WE LOOK AT THE WORLD AS GLOBAL M-2, MONEY AROUND THE WORLD DIVIDED BY GLOBAL GDP. THAT RATIO IS THE HIGHEST IT’S EVER BEEN. 110% OF GLOBAL GDP IS WHERE M-2 SITS. AND HISTORICALLY THROUGHOUT THE LAST 100 YEARS, THAT RATIO IS SOMEWHERE BETWEEN 30% AND 50%. MARIA: WOW.>>WE SEE SO MUCH MONEY AROUND THE WORLD AS AN UNINTENDED COINS CONSEQUENCE OF QE. WE SEE WEALTH GAPS WIDENING, FULL EMPLOYMENT IN THE SKILL LEVEL SECTOR AND PERMANENT UNEMPLOYMENT FROM THE DISPLACEMENT OF FACTORY WORKERS BY CHINA AND SOUTHEAST ASIA. SO IT’S A FASCINATING WORLD THAT WE’RE LIVING IN TODAY THAT THEY SAY TEXTBOOKS DON’T HAVE AN ANSWER FOR. MARIA: YOU WOULD THINK THAT THE DOLLAR WOULD BE TRADING BETTER BUT THAT’S NOT THE CASE. SO WHAT DO YOU WANT TO DO BASED ON ALL OF THESE SINGLE NAS. YOU WANT TO SHORT THE MARKET OR BE ALL IN?>>I WANT TO BE RIGHT IN BETWEEN THERE. NO. I THINK THAT, I THINK THAT — SO WHAT I’M TRYING TO SAY IS, YOU’RE GOING TO SEE — YOU’RE GOING TO SEE REAL INFLATION HAPPENING. THIS TIME IT’S GOING TO BE A GLOBAL PHENOMENON. IT’S NOT GOING TO BE, LET’S SAY, CONTAINED BY A SOVEREIGN WALL OR ONE DOWN TRI’S POLICY. IT’S GOING TO BE GLOBAL IN ITS NATURE AND THAT’S SOMETHING WE HAVEN’T EXPERIENCED AS A WORLD IN A VERY LONG TIME. AND SO WHEN YOU ASK DO I WANT TO BE ALL IN THE STOCKS OR DO I WANT TO BE SHORT, YOU KNOW, I THINK THAT THERE’S SO MUCH MONEY AROUND THE WORLD THAT, YOU KNOW — I’LL GIVE YOU AN EXAMPLE OF THE RIDICULOUSNESS THAT WE’RE SEEING. WE JUST HAD A PAINTING AUCTION THAT WAS MAYBE LEONARDO DA DaVINCI, WE’RE NOT SURE, THAT WAS RESTORED, IT TRADED FOR 450 $450 MILLION. A PICTURE OF JESUS BOUGHT BY AN ARAB. YOU CAN’T MAKE THIS STUFF UP, WHAT’S GOING ON OUT THERE THESE DAYS. I THINK YOU’RE GOING TO SEE — IN PERIODS OF INFLATION AND MAYBE WE’LL SEE STAG SB FLATION. AND IN THOSE SPEAR IDEAS, STOCKS, YOU KNOW, IN INFLATIONARY PERIODS STOCKS KEEP UP WITH 75% OF THE NUMBERS. SO I’M NOT SAYING BE SHORT STOCKS. I’M JUST SAYING THAT THIS MACRO ENVIRONMENT THAT WE’RE KINDING HEADING INTO, GIVEN ALL OF THE CENTRAL BANK’S ACTIONS, THE FED PULLING BACK, CHINA STAYING ON THE GAS PEDAL AND THE ECB MIGHT BE PULLING BACK, I THINK YOU JUST NEED TO BE — I KNOW THIS SOUNDS LIKE A WEATHERMAN. YOU NEEDS TO BE SELECTIVE ABOUT WHAT YOU BUY BUT YOU DON’T WANT TO BE SHORT THE WHOLE MARKET. THAT’S MY VIEW. MARIA: WHERE DO YOU SEE GROWTH RIGHT NOW? WHERE ARE THE OPPORTUNITIES FROM YOUR STANDPOINT?>>WE LOOK AROUND THE GLOBE. WE OWN OM THINGS HERE WE OWN SM THINGS HERE WE OWN SOMTHINGS HERE WE OWN SOMEHINGS HERE WE OWN SOME TNGS HERE WE OWN SOME THIS HERE WE OWN SOME THINGHERE WE OWN SOME THINGSERE WE OWN SOME THINGS IE WE OWN SOME THINGS IN THE U.S. BUT. THE MAJORITY OF CAP L IS FOCUSED ON WHERE WE SEE OPPORTUNITY IN SOUTHERN EUROPE AND PRIMARILY GREECE. YOU THINK ABOUT THE U.S. GREAT DEPRESSION, WE HAD A REFLECTIVE SNAP BARBING IN TWO OR THREE YEARS. THEY’VE HAD EIGHT YEARS OF A COMPLETE DISASTER IN THEIR ECONOMY. AND YOU’RE SEEING EVERY MACRO INDICATOR IN SOUTHERN EUROPE IS HEADING HIGHER. WE THINK THERE’S TREMENDOUS OPPORTUNITY IN A SMALL COUNTRY IN SOUTHERN EUROPE AND THAT SEGUES INTO LATIN AMERICA. ARGENTINA HAS HAD TO ABSOLUTELY MOVE THEIR SHORT-END RATES IN EMERGENCY FASHION MULTIPLE TIMES. THEY’VE MOVED IT ALMOST 900 BASIS POINTS IN ABOUT A WEEK. IMAGINE IF THE U.S. RAISED THE FRONT END 9% IN A WEEK.

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