In an April interview with Fox Business Network’s Wall Street Week, prominent hedge fund principal Kyle Bass, originally covered by UsefulStooges, predicted a major financial crash in China resulting in a “brief, minor recession” for 2017. He explained that China’s declining GDP growth and reverse urban migration are harbingers of an enormous credit bubble about to burst.
He highlighted the enormous gap between real GDP compared with assets claimed in China’s banking system – a $23 trillion difference, and compared it to the U.S. real estate bubble in 2006. The big difference, though, is that Kyle Bass believes China’s economy is not globally interconnected enough to cause a “Lehman moment.”
When asked about the best presidential candidate for the economy, the economic conservative expressed support for Hillary Clinton. “I think she’s the most sane actor of them all.”
Kyle Bass’ reputation rests on his accurate prediction of the imminence of the U.S. real estate and credit bubble bursting in 2007. Since then his image has taken a considerable hit. He’s been accused of profiting from anti-patent litigation against pharmaceutical firms. While he claimed to want reduced prices on powerful drugs by removing patent restrictions, the results have sometimes been critical drugs held from the market, and he profited handsomely through shorting the targeted companies’ stock before bringing suit.
He has been charged with extortion, which caused the Patent Trial and Appeals Board (PTAB) to deny two of his patent challenges recently. Bass has also been criticized for defending General Motors’ during its power-steering and airbag safety troubles, as well as supporting Argentina’s autocratic leader Cristina Fernández de Kirchner when she declared a second default on her nation’s debt.
He even recommends conversion of monetary financial instruments to gold, fearing a bank run. Based on his recent track record, I think I’ll trust the banks and leave the gold for Fort Knox.