Kyle Bass Perspective of the Looming Asian Financial Crisis and Deteriorating Honor

January 26, 2016 at 9:40 pm
filed under Business

The debate about what money management experts’ term as an imminent financial crisis facing Asian economies, China, in particular, ranges on. Every other day, different market leaders are coming up with their ‘well-thought’ yet diverse observations of what they feel is ailing the Asian economy. Most agree that the economy is going through a credit cycle, what they can’t seem to agree, however, is its outcome.

Kyle Bass is the latest of these to join in the discussion and as usual, he differs with almost everyone and introduces his own theorem as to the cause of the looming problem. While almost everyone else consider peaked profits by the Chinese corporations as the cause of the crisis, Kyle believes that the problem lies with the China’s banking system. He believes that China’s present situation is just repetition of the European crisis.

He is of the opinion that the outgrowth that has become a characteristic of China’s banking industry is the reason behind the looming crisis among the Asian economic giants. The GDP of the banking industry in China stands at over $35 trillion against the national GDP of the $10 trillion. According to Kyle, the banking sector has over-led and now that the economy is at the peak of the credit cycle, losses are inevitable.

Kyle Bass further suggests that this will lead to a global financial crisis that will be felt even in the United States. He, however, remains optimistic that the US will be less affected compared to the rest of the world insinuating the economy will only dip in between 10-20 percent by year end. Nevertheless, he further believes that lack of credit growth in emerging markets might present a real problem for the economy.

Leftist orientation
On his blog Bass’ opinions on this particular matter aren’t, however, the only differential comments he has made in the recent past. After making headlines with his accurate prediction of the American housing crisis in 2008, he directly shot to fame in the money market circles but he has not been to maintain his accurate predictions. He has almost always making a wrong and unpopular opinions and investment calls that have hurt those around him and can even be seen as being leftist.

For instance, it is reported that his hedge fund, Hayman, is reporting -30% progress a mirror reflection of the best performing industry. He has also made unsavory alliances with market spoilers like Argentina’s Kirchner. He has made utterances supporting Argentina’s default on a sovereign bond, embroiled in the Pharmacy scam that seeks to raise the cost of healthcare, engaged in a legal battle against American Sniper’s widow and these are just a few of the many leftist moves he has made in the recent past.

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