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Sunday, November 18, 2012

Kyle Bass: The Global Economy, Japan, & Why He's Buying Mortgages

I'm going to do my best not to "gush like a little girl" over the person who I personally hold in the highest regard over all other financial market participants due to both his track record and ridiculous understanding of the global economy.

In brief, because I have told this story in depth a few times before, Kyle Bass was one of the handful of investors that made massive bets against subprime mortgages through Credit Default Swaps (CDS) back in 2006 - 2008. He then sold out of his position in 2008 and re-invested the profits into gold and bets against Greece government bonds. This was two years before Greece was in any headlines, just as he placed bets years before any headlines emerged on subprime mortgages.

Today he has the same trade on with a massive bet against Japan. Just as with his subprime mortgage and Greece bets he continuously is called "crazy" as the mainstream feels that betting against Japanese debt and currency (a losing trade for two decades) is the absolute wrong move.

Before you read or watch any financial article or show for the rest of the month, I would highly recommend reading this letter in full. If Japan rolls over in 2013, it will be looked back on as perhaps the most prescient letter in history; the equivalent of having the blue print for why you should have bet against subprime mortgages and Greece before they blew up. Bass feels that based on the way Japan is currently priced in the market compared to the risks the country faces, it could be the greatest opportunity in modern financial history. Click "View In Full Screen" on the bottom right to enlarge.

Kyle Bass

As a bonus you can hear his most recent, and rare, interview with CNBC discussing some of the same topics provided in his in depth letter.