Your 20-year investment plan is simple, according to Kyle Bass, founder and chief investment officer of Hayman Capital Management. Bet on young Americans, he says.
“Where are you going to put your money? In Europe, in China, in South America? There is no better place to put your money than the United States. We have a rule of law, and we have the best economy as well,” says Bass, in a recent interview with MarketWatch.
The hedge-fund manager is famous for making winning bets on subprime loans back in 2007 and he offered MarketWatch his thoughts on the U.S. – China trade talks, the next bubble, who is the best U.S. President for markets, and nickels.
Investing in the future
If you want to create generational wealth, then invest in the best the U.S. has to offer — education and entrepreneurship — says Bass. Those “just trying to hang onto their wealth are the U.S. middle class retirees that have all their money invested passively in the stock market,” says Bass.
“I try to invest in some of these kids coming out of college and other VC [venture capital] firms that are investing in human innovation,” says Bass, who says he has made small investments for his family in Othram, a forensics genetics firm that offers technology that uses traces of DNA to solve cold cases. That type of technology led police to the arrest of the suspected Golden State Killer.
“Technological innovation, in biotech, health care, genomic sequencing and now even many different cancer therapies are actually showing huge promise,” he said. And even looking at public companies, biotech has delivered “massive returns” over the past decade. “I think that will continue into the next decade,” said Bass.
Those trade talks
A staunch critic of China and its policies, the hedge-fund manager said earlier this year he didn’t think it was in the interest of either the U.S. or China to get a trade agreement done. Bass now says he’s unclear whether a “skinny” deal to for China to buy pork and soybeans and the U.S. to ease up on tariffs got done when the Chinese delegate came to Washington this year or “whether we’re still trying to put it on paper.”
But any deal to get the Chinese to buy pork isn’t a stretch, given that an epidemic of African swine fever is decimating the country’s pig population, he said. “The bottom line is that any president in the last 200 years could get a tariff pushed back for a food deal. That doesn’t impress me at all.”
He agrees with who want the U.S. to should stop negotiating. “I think if we were to disengage with China, people would say we’ll lose 1.5% to 2% of GDP, to which I say they steal 2% of GDP from us every year in intellectual property, which is the U.S.’s no. 1 export.” So on net basis, the U.S. is better off in the long run, he says.
The next president of the United States
Vote for me or stocks will crash, President Trump warned supporters in August, and Bass pretty much agrees. “If one of the four radical [candidates] on the left become president, the stock market will not do well,” because of the desire by Senator Elizabeth Warren and others to close the wealth gap by raising taxes.
Former New York mayor and billionaire, Michael Bloomberg, would also make Wall Street pretty happy if he got to the Oval Office, though Bass’s worry is that he’s “blinded” by wanting to do business in China. Still, he says, “from a business perspective and from a stock market perspective, Bloomberg is the best candidate and I think he and Trump will have the same stock market reaction.”
The bubble that will just keep growing
Bass, who earned fame by making lucrative bets on subprime loans in 2007, sees another big and hopeless bubble on the horizon: “One of the unintended consequences of quantitative easing has been asset price inflation. The rich get much richer when interest rates come down,” because they own all the productive assets like real estate.
“All of these uprisings around the world that you’re seeing today — Chile, Ecuador, Iraq, Iran, Hong Kong, they all have one common denominator…there’s no upward mobility in the youth because they can’t afford these things. The medium home price in Hong Kong is 21 times median income,” he said. “The wealth gap is so wide, there’s no way to close it.”
And what will happen? More unrest, and more violence, he predicts.
That nickel collection
The Hayman Capital founder is also known for hoarding nickels. He explains how quarters, half and silver dollars were made out of pure silver up to 1965, when they reduced the precious metal’s content by half, then more after that. From the day that content was changed, suddenly all 13 million of the silver dollars and half dollars came out of circulation.
“If you look at a silver dollar, silver half dollar, 1964 quarter, and you look at its melt value in silver, and then you look at it in the marketplace where it trades, it always trades above that melt value.
“I was teaching my kids the value of hard money versus paper money, versus the printing press, and explaining to my kids what the central banks were doing by printing money and how there is no other free call option in the world other than owning a nickel,” he said. “On the downside it’s always worth a nickel, and on the upside it’s always worth where nickel and copper trade.” And well, he’s hanging onto his hoard.
“Nine Lives: My Time As MI6’s Top Spy Inside al Qaeda,” by Aimen Dean. Bass calls it “one of the most exciting books” he’s read in the last two years.