Kyle Bass, head of Dallas-based hedge-fund Hayman Capital Management may be doing business in China soon. Bass has been known for picking tops in economic cycles, and states that China is a targeted landing spot that could be encountered soon. At the Ira Sohn investing conference in San Francisco Bass spoke to Fortune and stated his plan for China’s impending banking crisis, explaining that even though this is bigger than than the 2007-2008 financial crisis in terms of the assets at risk, the China landing will actually have a small impact on the global economy.
China is known for having foreign reserves, and Bass knows that a huge economy like China’s has the potential to burn through trillions somewhat rapidly. He stated that many people think they can easily change any situation. Bass believes that to be false because specifically, “their banking system used to be 41 trillion RMB only eight years ago and now it’s 184 trillion RMB. They have $31 trillion of assets in their banking system. Their economy is $10 trillion.”
Bass continues to state his point specifically saying: “My view is that China is an emerging market. Last time it has a non-performing loan crisis in 2001 to 2003, their losses got to over 30% of assets across entire banking system. My view this time, since they have grown 400% in eight years, is that they are going to have some loan losses. And emerging markets should never be higher than developed markets in bank assets to GDP. That is my conservative assumption.”
Bass struck success when he correctly predicted the 2008 subprime mortgage crisis. For a long span, Bass was looked up to. He was M. Night Shayamalan in 2001, popping up out of nowhere getting nominated for both his script and direction of The Sixth Sense. He was looked at as man who knew it all and could do no wrong. As time went though on Bass started to hit some bumps along the way.
Bass has had a tendency recently to make ill-advised calls and has formed off-putting alliances. Bass has been known to defend Cristina Fernandez de Kirchner who has been viewed as a liability to her country’s economy. Bass has been long known for having shady ties with kirchner. Many believe Bass is looking more like Argentina’s Leftist economy minister Axel Kicillof than a U.S. hedge-fund manager.