This is the first time I've actually seen Kyle Bass of Hayman Capital in actual video after reading his work for a long while. [Oct 5, 2009: Kyle Bass Hayman Capital October Letter to Investors] It appears he will be testifying in the dog and pony show on Capital Hill today. His views appear sound, rational, and prescient. Which means they will be ignored (as with anything Paul Volcker or David Walker offers) since anything he says will not help these Congress folk secure a win in the 2010 election. Or 2012. Which is all that matters to our leadership.
The first part of the 7 minute video outline Bass' 3 key points on what needs to be fixed in the current financial system. As interesting, if not more, are his views on Japan and the United States sovereign debt issues - things we talk about all the time. Effectively, Japan defaults (or devalues its currency) in 3-4 years; the United States in 10-12... unless we do something about it. Can you imagine our leadership group doing something.. until default is 3 months away? We are a reactive society who takes action not when the room we sit in is on fire, but only when the specific couch in said room is on fire. Which is why we herk and jerk from one crisis to another, of increasing size.
I cannot stress enough that all we've done in our solutions to this crisis is pass the cancer from the private sector to the public. And we're not the only country that has done this. The 2010's will be the decade of sovereign debt crisis in multiple countries - we all have the chance to be Argentina, Mexico, Thailand, or Venezuela now. But knowing that and knowing when it matters to the markets, is a whole different situation. The comment by David Faber (the interviewer) in this video saying these things (sovereign debt) always seem to be years ahead and never seem to happen is the exact same line of thinking when the first warnings of the housing bubble came in 2005. Or lines of thinking such as housing prices can never go down across the entire nation because they never have in the past. Unlike the lemmings on financial entertainment TV we said that thesis would be proven a farce and it was [Jan 24, 2008: They Said it Could Never Happen. Ever.] Just because something HAS not happened in the past does not mean it CAN not happen - the past 2 years should make that very obvious.
As always we're early to this issue - if you care about your wealth, it is important to be aware of what is coming down the pike as 99% of the nation goes about its worker bee ways, oblivious to the bomb we (and quite a few other nations) now are sitting on... but hey, we solved the crisis and our oligarchs are back to business as usual (doing God's work). Throwing a few generations of Americans under the bus is a small price to pay - right Mr Bernanke?
[Email readers will need to come to site to view video]