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Kyle Bass: 'Confessions of a Dangerous Mind'

Bull****. They just transfer wealth from others. If you want to consider acquiring wealth the same as earning wealth, then maybe you are correct, but personally, to me, "earning wealth" means creating wealth, not simply getting a piece of someone elses wealth.

Do you REALLY think that a hedge fund manager creates a billion dollars worth of new wealth that wouldn't exist if they didn't perform their job? All they are really doing is skimming a percentage of wealth from investors who are have way to much faith in the hedge funds. Statistically the investors would actually do better if they randomly invested directly into the stock market. The reason for this is simple - the fees that hedge fund managers charge eats up any small statistical "above market" profits that hedge funds may make....
Typically a Hedge Fund manager makes 'only' 20% of what he makes for his customers, oft above some given percent. Unlike say a mutual fund manager who makes a flat 1%/1.5% even if the Fund goes down. You don't understand the difference I see.
To make a billion they would have to make At Least 5 billion for their investors.
Typically these returns can be 20% or even 200% on the original money. They go for big returns and are paid accordingly.
Unsuccessful ones don't stay around long. Unlike say, S&P 500 CEOs who just get paid lots because it's their turn to be boss.
Accusing the best ones, we are talking about here, of not beating 'Random' is.. off.
They only get paid big bucks if they make big bucks.
The Hedge Fund universe in general contains many levels of smarts, but the Best, including guys like Soros are worth their pay and investors Flock to the best ones.


Now lets say that a fund manager is able to manipulate the market and actually does year after year predictably beat the market. Does that actually create any new wealth? Does making bets on a investment and then intentionally driving up or down the price of that investment as to benefit from that bet create any new wealth? Of course not. It just creates a situation where people who take the other end of the bet are loosers - and transfers wealth from the loosers to the fund investors. No new wealth created.

Say that I am able to convince you that I can communicate with the dead (although I can't) and you paid me a million dollars to convey a message to your dead loved one. Did I create any new wealth? heck no, all I did was to scam you out of a million dollars.

Fund managers are not creating wealth. They are simply getting paid for a valueless service. Claiming that they made wealth is no more legitimate than a bankrobber creates wealth when he robs a bank. Yes, he did something that made him wealthy, but it created no new wealth.

As a society we really need to re-evaluate what we call "earning" money. There's a difference between creating wealth and transfering wealth, and while most certainly creating wealth can be called "earning" it, and that is positive for society, but simply transfering wealth has little value to our society. It's a concept that tends to get lost in the wee minds of many conservatives.
Investing in mutual funds in general creates No 'new wealth', but it's performing a valid and valuable service to it's customers. Investing is a different business than manufacturing.
When the average person invests (401k etc) he's just trying to make money on his money- creating nothing. This doesn't make making a profit an invalid pursuit.
Venture Capital funds, another super high paying position, do bring many new good ideas to fruition.
And as evidenced by your anger... You don't understand the objective of investing.

And you apparently didn't watch/have no reaction to the content of the vid. I wish you would watch and comprehend it, or even disagree with it. I think it was enlightening.
 
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And you apparently didn't watch/have no reaction to the content of the vid. I wish you would watch and comprehend it, or even disagree with it. I think it was enlightening.

Obviously I did watch it, and in detail. The evidence is the fact that I was the only one who commented on an apparent descrepancy between a charge shown on the video and one posted on DP recently.


You obviously didn't read my post as you made no comment about my allegation that the "valuable service" that hedge fund managers are alledged to provide is actually valueless, much like any service performed by any other type of confidence man.
 
Obviously I did watch it, and in detail. The evidence is the fact that I was the only one who commented on an apparent descrepancy between a charge shown on the video and one posted on DP recently.
You watched it and obviously got nothing. Perhaps more unfortunate than not watching. You don't agree, disagree, nor discuss it's main premise/premises.
Perhaps you couldn't even follow it and are embarrassed. More likely you are so resentful you couldn't hear a word.

imagep said:
You obviously didn't read my post as you made no comment about my allegation that the "valuable service" that hedge fund managers are alledged to provide is actually valueless, much like any service performed by any other type of confidence man.
I refuted this in detail in my last. Which is why You didn't quote me save for One line. Very poor posting/debate practice. I think an example of denial.
ie, Hedge Funders, especially the best, only make a percentage of what they make for others. Your wrong "random" tackled too. etc.

Also, I went and found some of your wrong-headed ideas in another string.
http://www.debatepolitics.com/economics/91171-more-income-tax-facts-8.html
Suggesting TD's father should have made better investing decisions or should go back to work as a Pizza delivery guy. (at 75?)
If you Don't think providing those better decisions and preventing someone from Having to take the latter alternative is a "valuable service".. what can I say.
Clearly you have an issue.
 
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Making a killing
Micheal Lewis
The Australian Oct. 29, 2011
Cookies must be enabled | The Australian
WHILE I was at work on a book about the 2008 financial disaster I became interested in a tiny handful of investors
who had made their fortunes from the collapse of the Sub-prime mortgage market.


[......]The prices Bass paid for default insurance now look absurdly cheap. Greek government default insurance cost him 11 basis points, for instance. That is, to insure $1m of Greek government bonds against default, Hayman Capital paid a premium of $1100 a year. He guessed that when Greece defaulted, as it inevitably would, it would be forced to pay down its debt by roughly 70% - which is to say that every $1100 bet would return $700,000.

He couldn't see how any sane person could do anything but prepare for another, bigger financial catastrophe. "It may not be the end of the world," he said. "But a lot of people are going to lose a lot of money. Our goal is not to be one of them." He was totally persuasive. He was also totally incredible. A guy sitting in an office in Dallas, Texas, making sweeping claims about the future of countries he'd hardly set foot in: how on Earth could he know how a bunch of people he'd never met might behave? [......] As he laid out his ideas, I had an experience I've often had while listening to people who seem perfectly certain about uncertain events. One part of me was swept away by his argument and began to worry the world was about to collapse; the other part suspected he might be nuts. "That's great," I said, already thinking about the flight I had to catch. "But even if you're right, what can any normal person do about it?"

He stared at me as if he'd just seen an interesting sight: the world's stupidest man. - I asked him: "What do you tell your mother when she asks you where to put her money?" "Guns and gold," he said simply. So he was nuts. "But not gold futures," he added. "You need physical gold." He explained that when the next crisis struck, the gold futures market was likely to seize up, as there were more outstanding futures contracts than available gold. People who thought they owned gold would find they owned pieces of paper instead. He opened his desk drawer, hauled out a giant gold brick and dropped it on the desk. "We've bought a lot of this stuff."
At this point I made my excuses and took my leave of Dallas, and more or less Dismissed him.
When I wrote the book, I left him on the cutting-room floor.

Then the financial world began to change again -and very much as Bass had imagined it might. Entire countries started to go bust. I began to travel to these places, just to see what was up. [......] For most of the 1980s and 1990s, Greek interest rates ran 10% higher than Germany's, as Greeks were regarded as far less likely to repay a loan. There was no consumer credit in Greece: Greeks didn't have credit cards. They didn't usually have mortgages, either. [......]
 
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As a society we really need to re-evaluate what we call "earning" money.

Governments are the worst at this. They print money imagep. They print, money. And right now our global crisis is exacertbated by exactly that. Governments cannot bail anyone out right now, because the public allowed the governments themselves to run way too far into debt/defecit. This is the only significant global economic problem on the long-term horizon.

As to investing, you are not characterizing it correctly. Investing is NOT transferring wealth. It's investing, call it what it is please.
A Hedge fund manager directs the investment. Say it with me, they direct the investment. On one end you have someone with money, that wants to fund something that will grow in value. And on the other end you have someone that is growing (or not!) that needs funding to realize that growth, or even greater growth. The fund manager, lines the two up. The amount of money at risk is staggering, so you pay for the best. That's all there is to it.

You do realize that in our economy, money is akin to potential energy, it is STORED ENERGY. When you apply that energy into something that can efficiently use that energy to create *even more*, that's growing that energy. You should not get confused and claim that someone with $1M to invest is simply moving money around and not doing anything, because that's factually, logically, reasonably, false. They have stored up "energy", and are directing it to where it presumably will Grow (earnings) more energy. Money has value, it can be transferred to generate labor, for example.

For you to be correct, you have to claim that investments, do not contribute to real growth. And that is of course, demonstrably absurd (False).
 
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Governments are the worst at this. They print money imagep. They print, money. And right now our global crisis is exacertbated by exactly that. Governments cannot bail anyone out right now, because the public allowed the governments themselves to run way too far into debt/defecit. This is the only significant global economic problem on the long-term horizon.

As to investing, you are not characterizing it correctly. Investing is NOT transferring wealth. It's investing, call it what it is please.
A Hedge fund manager directs the investment. Say it with me, they direct the investment. On one end you have someone with money, that wants to fund something that will grow in value. And on the other end you have someone that is growing (or not!) that needs funding to realize that growth, or even greater growth. The fund manager, lines the two up. The amount of money at risk is staggering, so you pay for the best. That's all there is to it.

You do realize that in our economy, money is akin to potential energy, it is STORED ENERGY. When you apply that energy into something that can efficiently use that energy to create *even more*, that's growing that energy. You should not get confused and claim that someone with $1M to invest is simply moving money around and not doing anything, because that's factually, logically, reasonably, false. They have stored up "energy", and are directing it to where it presumably will Grow (earnings) more energy. Money has value, it can be transferred to generate labor, for example.

For you to be correct, you have to claim that investments, do not contribute to real growth. And that is of course, demonstrably absurd (False).

I've never said that investments do not contribute to real growth, but an individual who skims off of the top of other peoples investments is not neccesarally contributing to real growth at the same rate that he is skimming wealth. Income does not equate to productivity. It should, but in real life it doesn't.
 
Governments are the worst at this. They print money imagep. They print, money. And right now our global crisis is exacertbated by exactly that. Governments cannot bail anyone out right now, because the public allowed the governments themselves to run way too far into debt/defecit. This is the only significant global economic problem on the long-term horizon.

As to investing, you are not characterizing it correctly. Investing is NOT transferring wealth. It's investing, call it what it is please.

Things like oil is just transferring wealth.
 
Good news for the housing markets.

Hedge Fund Manager Buys 4.9% Stake in MGIC

"Hedge-fund manager Kyle Bass, who earlier made a correct bet on the housing market’s collapse, recently invested in the nation’s largest mortgage insurance company.

A closely followed hedge fund manager known for correctly betting on the housing market’s collapse four years ago purchased a small stake in the nation’s largest mortgage insurance company in a bet that the housing market has neared bottom.

J. Kyle Bass, portfolio manager at Dallas-based Hayman Capital Management LP, bought the 4.9% stake in MGIC Investment Corp, according to federal filings. He said on Monday the bet reflected his view that the housing market’s losses had largely been absorbed. “You can see that the pig has moved through the python in terms of U.S. housing losses,” he said.

Shares of MGIC are about 10.2% higher in Monday afternoon trading, to $2.82.

The mortgage insurance industry has faced severe stress in recent months as firms are forced to pay out amid rising losses on loans they insured during the housing boom. Arizona insurance regulators took over the principal mortgage insurance subsidiary of PMI Group Inc. last month and put restrictions on its claims payments.

“Everyone paints the [mortgage insurance companies] with a broad brush that since they took PMI … they’re all going to go the way of the Dodo,” said Mr. Bass., who spoke at AmeriCatalyst 2011, a housing-industry conference.

Unlike PMI, he said MGIC has a “pretty big positive equity position,” and he said its shares could rise above Monday’s opening price of $2.58 per share even if the firm is forced by regulators to stop writing new policies. “We think they’ll be one of … the last ones standing,” he said. “We’re in it for the long haul.”

Mr. Bass said his fund would have bought a bigger stake if doing so wouldn’t trigger a provision that would have limited a tax benefit for MGIC.
Fannie Mae and Freddie Mac require loans with less than 20% down payments to have some type of credit enhancement, typically mortgage insurance. When homes are sold through foreclosure, the insurer takes the first loss.

Mortgage insurers have absorbed billions of dollars of losses and two firms have stopped writing policies this year. The surviving firms have raised prices and tightened standards, but the weak economy, stubbornly high unemployment, and declining home prices have hindered a broader recovery for the industry.

Mr. Bass said that while the housing market was still around two to three years from firmly “bottoming out,” he said any future price declines would be quite modest. “I don’t anticipate a huge decline,” he said.

In an earnings conference call last month, MGIC’s chief executive, Curt Culver, said the company’s home state regulator in Wisconsin had consulted with independent experts who determined that even in a “stress scenario” the company would have enough capital to pay its claims."

Hedge Fund Manager Buys 4.9% Stake in MGIC - Deal Journal - WSJ
 
I've never said that investments do not contribute to real growth, but an individual who skims off of the top of other peoples investments is not neccesarally contributing to real growth at the same rate that he is skimming wealth. Income does not equate to productivity. It should, but in real life it doesn't.

Then you agree, investors and the people who direct those investments, contribute to real growth. You're in a pickle, both disagreeing and agreeing with yourself.

On a side note, choosing where to invest, the tax implications, etc., is highly valued work, and if it leads to greater investment success, is indeed, contributing as you note, to real growth. These are some of the highest paid jobs in the world. I'm going to *suggest* this is because they are also highly valued with respect to growing an investment... The fee negotiated for that between two highly knowledgeable individuals is without a doubt, normal, good, and expected free market transactions.
 
Good news for the housing markets.

Hedge Fund Manager Buys 4.9% Stake in MGIC
"Hedge-fund manager Kyle Bass, who earlier made a correct bet on the housing market’s collapse, recently invested in the nation’s largest mortgage insurance company.
[..............]
Mr. Bass said that while the housing market was still around two to three years from firmly “bottoming out,” he said any future price declines would be quite modest. “I don’t anticipate a huge decline,”
he said.

In an earnings conference call last month, MGIC’s chief executive, Curt Culver, said the company’s home state regulator in Wisconsin had consulted with independent experts who determined that even in a “stress scenario” the company would have enough capital to pay its claims."

Hedge Fund Manager Buys 4.9% Stake in MGIC - Deal Journal - WSJ
He spoke Yesterday at the 2011 version of the OP. (AmeriCatalyst 2011)
He revealed the MGIC stake through a filing and then reiterating it orally.
I will post the current interview if it becomes available.

I followed his lead when I saw the news yesterday afternoon.
Stock was up 15% yesterday, 11% today. Big burst on the news.
He's probably up 50+% already on his several week/month accumulation. Trading as low as 1.63 last month, closing at 3.26 today.
Still way down form it's high of 11.79 last February.

This should NOT be taken as a recommendation to buy this highly Speculative stock. (especially after recent burst)
Rather as a demonstration of his credibility/weight.
 
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I've never said that investments do not contribute to real growth, but an individual who skims off of the top of other peoples investments is not neccesarally contributing to real growth at the same rate that he is skimming wealth. Income does not equate to productivity. It should, but in real life it doesn't.

would a stupid allocator of those funds be less likely to put them where they generate the most return?
 
Bull****. They just transfer wealth from others. If you want to consider acquiring wealth the same as earning wealth, then maybe you are correct, but personally, to me, "earning wealth" means creating wealth, not simply getting a piece of someone elses wealth.

Do you REALLY think that a hedge fund manager creates a billion dollars worth of new wealth that wouldn't exist if they didn't perform their job? All they are really doing is skimming a percentage of wealth from investors who are have way to much faith in the hedge funds. Statistically the investors would actually do better if they randomly invested directly into the stock market. The reason for this is simple - the fees that hedge fund managers charge eats up any small statistical "above market" profits that hedge funds may make.

Now lets say that a fund manager is able to manipulate the market and actually does year after year predictably beat the market. Does that actually create any new wealth? Does making bets on a investment and then intentionally driving up or down the price of that investment as to benefit from that bet create any new wealth? Of course not. It just creates a situation where people who take the other end of the bet are loosers - and transfers wealth from the loosers to the fund investors. No new wealth created.

Say that I am able to convince you that I can communicate with the dead (although I can't) and you paid me a million dollars to convey a message to your dead loved one. Did I create any new wealth? heck no, all I did was to scam you out of a million dollars.

Fund managers are not creating wealth. They are simply getting paid for a valueless service. Claiming that they made wealth is no more legitimate than a bankrobber creates wealth when he robs a bank. Yes, he did something that made him wealthy, but it created no new wealth.

As a society we really need to re-evaluate what we call "earning" money. There's a difference between creating wealth and transfering wealth, and while most certainly creating wealth can be called "earning" it, and that is positive for society, but simply transfering wealth has little value to our society. It's a concept that tends to get lost in the wee minds of many conservatives.

So those few hedge fund managers who called the sub-prime crisis correctly and made billions, they were just 'skimming'? But what about those pension and other fund managers who lost billions of mostly OPM (other people's money)?

Your usage of the word 'skimming' implies that there is some sub-class of folks sitting out there in front of their computer screens taking a nickel or a dime out of every dollar transacted in the securities markets in some secret riskless manner. Sortuva you gotta know the secret handshake to get in on this kinda thing. Do you really think that?
 
imagep said:
an individual who skims off of the top of other peoples investments is not neccesarally contributing to real growth at the same rate that he is skimming wealth.

Actually, that kind of activity is illegal. It is called 'frontrunning' and people who do it typically wind up in jail.
 
So those few hedge fund managers who called the sub-prime crisis correctly and made billions, they were just 'skimming'? But what about those pension and other fund managers who lost billions of mostly OPM (other people's money)?

Your usage of the word 'skimming' implies that there is some sub-class of folks sitting out there in front of their computer screens taking a nickel or a dime out of every dollar transacted in the securities markets in some secret riskless manner. Sortuva you gotta know the secret handshake to get in on this kinda thing. Do you really think that?

not only that, but you get to date Jennifer Anniston!
 
It's Out.
Only 200 views so far.
KB Redux at AmeriCatalyst 2011. This was November 7.
(OP is 2010)



Not so much as a Hat Tip/Thanks from Nathanj63 for using him on his 'smartest' economist list for bringing him to this board in this string or another.
 
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Kyle Bass on the CBC's Business Network yesterday on EU, Japan, China, USA, and Canada.
His predictions seem to become truer and more obvious every month.

11 Mins:
Prepare for a European default: Kyle Bass - BNN News

Thinks Resource-Rich, Balance-sheet-sane, Canada will be better than most.
 
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It's Out.
Only 200 views so far.
KB Redux at AmeriCatalyst 2011. This was November 7.
(OP is 2010)



Not so much as a Hat Tip/Thanks from Nathanj63 for using him on his 'smartest' economist list for bringing him to this board in this string or another.



Did anyone else find what he said at 47:25? (Im paraphrasing here)

"I spoke to a senior member of the Obama administration last week about how we are going to get out of this deficit. They said we are going to export our way out of it. I asked how can we achieve this if we do not allow nominal wage deflation? He replied "were just gonna kill the dollar"."

I found this very interesting. Is the Obama administration planning to deflate the dollar to compete with more competitive countries? As others here have suggested and been ridiculed for that the Obama administration is intentionally bringing US standards down or "intentionally destroying" our country. His comment seems to support this to some extent. Is the plan to lower our standards to a 2nd would country?
 
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You don't remember when Obama announced the 5 Year Plan to double our exports?

It's all about the Managed Decline.
 
I thought it interesting how his discussion of Swiss banking mirrors Michael Lewis' depiction of the decline of Salomon Brothers being tied to it going public.
 
It's Out.
Only 200 views so far.
KB Redux at AmeriCatalyst 2011. This was November 7.
(OP is 2010)

Not so much as a Hat Tip/Thanks from Nathanj63 for using him on his 'smartest' economist list for bringing him to this board in this string or another.

I'm not sure what your last sentence is saying =] But I will say that I found this board when I googled "kyle bass" after hearing him being interviewed on BBC while I was going to sleep one night and found a thread with Kyle Bass on American Catalyst in 2010. So my thanks go to whoever posted that.

I wish I knew more economic jargon to understand what he is saying a little more clearly. But he is clearly VERY well informed and worth listening too. I just hope he's wrong...
 
Did anyone else find what he said at 47:25? (Im paraphrasing here)

"I spoke to a senior member of the Obama administration last week about how we are going to get out of this deficit. They said we are going to export our way out of it. I asked how can we achieve this if we do not allow nominal wage deflation? He replied "were just gonna kill the dollar"."

I found this very interesting. Is the Obama administration planning to deflate the dollar to compete with more competitive countries? As others here have suggested and been ridiculed for that the Obama administration is intentionally bringing US standards down or "intentionally destroying" our country. His comment seems to support this to some extent. Is the plan to lower our standards to a 2nd would country?

I thought I would add something I found today that supports Kyle's claim. The Federal Reserve's Explicit Goal: Devalue The Dollar 33% - Forbes

The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years.
 
I thought I would add something I found today that supports Kyle's claim. The Federal Reserve's Explicit Goal: Devalue The Dollar 33% - Forbes

No, the Fed's "explicit goal" is not to devalue the dollar by any amount. The Forbes article extrapolates the Fed's currently acceptable rate of inflation of 2% for 20 years or so, and concludes that a 2% rate of inflation over 20 years will approximately halve the purchasing power of the dollar from it's current levels. The article is another in Forbes' long-running series advocating a return to a gold standard.

With his 2% over 20 years, the author, Charles Kadlec, ignores any intervening economic cycles, productivity improvements or essentially, any other economic phenomena, merely employing a straight-line extrapolation to produce a scare-story headline. He simply assumes that the Fed will maintain it's current 2% inflation rate target continuously, a highly unlikely scenario. Not very helpful or informative. But, hey, that's just my opinion. Others may well disagree.
 
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