Clenow Futures Intelligence Report

Clenow Futures Intelligence Report

April 03, 2012

Kyle Bass: Japan is next to face Sovereign Debt Crisis

According to Kyle Bass of Hayman Capital, Japan is the next in line to face a sovereign debt crisis and very soon the markets’ focus will turn on it. He expects deflation that will lead to a correction in equity prices because such economic shock will spread to the world economy and if he proves to right, economic growth might go to minus 3 – 4%. That will lead to a stock market correction of 40-50% and that will be a time when investors need to have cash to buy cheap stocks. He believes that it will be the best time to buy equities, right after these big restructurings. He mentions that Japan is next after Europe but it is still unclear to us whether the European debt crisis is finished or not. We believe it is not and before we move to Japan, we will have more problems in Europe and probably more restructurings.

According to Kyle Bass, it depends on Japan and Europe, how long time USA has until a debt crisis. In his opinion it is 3-5 years away. If he proves to be right, it might be wise to hold significant cash portfolio weighing.

Kyle Bass, an American hedge fund manager, is the Founder of Hayman Capital. He received extensive coverage in the financial press for profiting $590 million by short selling the sub-prime mortgage bond market, before that market crashed. In 2011, Bass initiated a huge position in Greek sovereign debt through CDSs. Media reports were that he could profit up to 650 times his investment should Greece default on its debt obligations.