What are the consequences of the enormous debts of the advanced countries?
Do trade imbalances matter?
What is fueling these debt levels?
Are zero-interest-rate monetary policies
What are the prospects for rebalancing the American and Chinese economies?
Kyle Bass, Managing Partner, Hayman Capital
Carmen Reinhart, Dennis Weatherstone Senior Fellow, Peterson Institute for
Moderator: Greg Ip, US Economics Editor, The Economist
Mr. J. Kyle Bass is a Managing Partner and Principal at Hayman Capital Partners, LP. He also acts as a mortgage credit portfolio advisor to several other asset management firms and manages or advises over $4 billion of investments in the residential mortgage-backed securities market.
Mr. Bass is also a Director of the Asset Backed Securities at Credit Derivatives Users Association. Prior to launching Hayman Advisors, he formed the first institutional equity office in Texas at Legg Mason, Inc., where he was the Managing Director in charge of advising special situation accounts on investments.
Prior to joining Legg Mason, Mr. Bass was employed at Bear Stearns & Co. Inc., where he was one of the youngest Senior Managing Directors in the firm's history. While at Bear Stearns, he primarily advised event-driven hedge funds on investment strategies.
Greg Ip is US economics editor for The Economist, based in Washington D.C. He covers the economy, financial markets, monetary, fiscal and regulatory policy. He contributes to The Economist's blog, Free Exchange, and is a frequent commentator on radio and television. He joined The Economist in July, 2008. From 1996 to 2008 Mr Ip worked for The Wall Street Journal, as a financial markets reporter in New York and chief economics correspondent in Washington.
A native of Canada, Mr. Ip received a bachelor's degree in economics and journalism from Carleton University in Ottawa, Ontario. He is the author of The Little Book of Economics: How the Economy Works in the Real World, published by John Wiley & Sons in 2010. It is layman's guide to economic concepts and trends written with simple language, memorable examples and humorous analogies. USA Today called it a "must-read in economic literacy."
Stephen Pagliuca is a Managing Director of Bain Capital Partners, LLC. Mr. Pagliuca is also a Managing Partner and an owner of the Boston Celtics basketball franchise. Mr. Pagliuca joined Bain & Company in 1982 and founded the Information Partners private equity fund for Bain Capital in 1989. He also worked as a senior accountant and international tax specialist for Peat Marwick Mitchell & Company in the Netherlands.
Mr. Pagliuca served as a director of Warner Chilcott, Ltd. from 2005 to 2009, HCA Inc. from November 2006 to September 2009, Quintiles Transnational Corp. from 2008 to 2009, M/C Communications from 2004 to 2009 and FCI, S.A. from 2005 to 2009 and currently also serves as a director of Burger King Holdings Inc. and Gartner, Inc.
Mr. Sheets is the Global Head of International Economics within Citigroup's Investment Research & Analysis division. Prior to Citigroup, he worked for the Federal Reserve Board in Washington D.C. where he served as Director of the Division of International Finance and as an Economist to the FOMC.
Among his most notable accomplishments, Mr. Sheets acted as the Fed Chairman's international adviser at the onset of the European fiscal crisis in the spring of 2010. He was also a driving force behind the Federal Reserve Board's global emergency lending program. Mr. Sheets acted as senior advisor to the U.S. Executive Director at the International Monetary Fund (IMF) while on leave from the Federal Reserve. In this capacity, he served as a liaison between the IMF and various U.S. government agencies.
Mr. Sheets received his Bachelors of Economics from Brigham Young University and his PhD from the Massachusetts Institute of Technology.
Stephen Pagliuca, managing director of Bain Capital Partners, believes that the U.S. political system is ill-prepared to deal with a financial crisis because politicians seeking reelection refuse to touch certain controversial economic issues.
"It's now become about sound bites," says Pagliuca. "It's not about data, it's not about doing the right thing."
Managing Partner and Principal at Hayman Capital Partners, LP Kyle Bass estimates that the world has reached its limit in debt saturation. "One more dollar's worth of debt has no more marginal utility in the economy," says Bass.
Something owed. Anyone having borrowed money or goods from another owes a debt and is under obligation to return the goods or repay the money, usually with interest. For governments, the need to borrow in order to finance a deficit budget has led to the development of various forms of national debt. See alsobankruptcy; debtor and creditor; usury.
Weekly magazine of news and opinion, founded in 1843 and published in London, generally regarded as one of the world's preeminent journals of its kind. It gives thorough and wide-ranging coverage of general news and particularly of international political developments that bear on the world's economy. In accord with the views promoted by its founders and conveyed by legendary Economist editor Walter Bagehot, the publication maintains the position that free markets typically provide the best method of running economies and governments. North America accounts for about half of its total readership.
On the "Pagliuca: Politicians Care About Sound Bites, Not Economy" highlight, I don't believe that term limits will result in more far-sighted politicians. If anything, I think it will result in politicians who squeeze the juice out of their terms even harder - more porkbarrel, more dirty lobbying.
Rather I think the key is to make the politician's job less appealing. Take away the pension benefits, take away the opportunity to be bought by special interest groups, and all the other glitz, and what you'll be left with is a job that you would only take to do the right thing.
Kyle Bass's Hayman Capital November 2011 investor letter highlights:
- Imminent Defaults
- Global Debt Saturation
- The Mirage of the IMF and EFSF (and whatever the next vehicle is called)
- Pre- or Post-?
- The importance of Psychology - Self Deception
- The Problems Between Kaiserville and Medland
"Since 2002, total global credit market debt has grow at more than an 11% compound annual growth rate (CAGR) from $80 trillion to $200 trillion. Over the same time, global GDP has only grown at approximately a 4% CAGR."
10 Fascinating Facts About The Fabulous Life Of Hedge Funder Kyle Bass
-Kyle Bass learned to love trading by playing Risk as a child.
-He has a plan for when every thing crashes — buy guns and gold.
-Aside from gold bricks, he also keeps platinum bars.
-Some things he collects are a little strange— like nickels.
-This is less strange— Bass also has a ton of semi-automatic weapons.
-Also explosives that he buys online and has Fed-Exed to his house.
-Speaking of his property, he has a 41,000 square foot ranch house outside Dallas.
-And how does he get around that land? With a U.S. Army Jeep!
-But the jeep isn't his only vehicle. He goes to work in a tricked out Hummer.
-He also spends money on his favorite cause. Wounded veterans.
Recent Kyle Bass Quotes:
"Japan Is A Giant Madoff-Like Ponzi Scheme That Will Blow Up Starting In The Next Few Months"
"There is no savior large enough with a magical pool of capital to stave off this unfortunate conclusion to the global debt super cycle. We think hard defaults are imminent."