Comments
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KSWhat about the Theory that China manipulated it's currency to make it appear more valuable than it actually was - in order to trade for USD's, it then took these dollars through it minions (posing as "capital flight") and used them to drive up asset prices around the world. Now Xi Jinping - can press the sell button and burst these bubbles - which will devastate Western markets.
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myThe next trade he's talking about is obviously gold right?
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SDHi Raoul I've been listening again to Bass's interviews on China during some long drives I've had to do and I think they're really significant. I'm referring to his interview with you on the currency, and also with Bannon - and it's shocking that Bannon's world view is so poorly or little understood because it's compelling, logical, and convincing. But I have two questions: 1. How do projections for the gold price play into Bass's view that an impending dollar shortage is going to cripple China. Surely they will have anticipated precisely what Bass is expecting, and they will have a mitigation strategy designed to exploit the situation, above and beyond what you two refer to - opening up their financial sector to shove a bunch of bad debt on to America's balance sheet. We don't know how much gold they have, but we do know they have masses and continue to acquire more. Why then, are countries like Canada and the UK failing to shore up their own reserves? Would a gold buying program by either of these countries be seen as somehow disloyal to the US, and the US dollar? What is the rationale for a refusal to insure a nation against currency disruption by at least having some sort of commitment to bullion of various types? This all strikes me as profoundly political, because it's so essential. 2. You seem to imply that the impending dollar shortage you've been talking about now for nearly two years may be politically motivated a la Russia. Is this correct? If so, can we please hear more about this. And about anything at all to do with expectations of how China anticipates any type of movement towards convertibility, which you guys believe is inevitable, for sound reasons, seems like. This all just strikes me as stupendously important. You have provided really essential context on these issues. Please continue to pursue this issue, it would be appreciated greatly.
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MSGreat talk but man, I wanna hear what this asymmetric trade is before it's too late to get involved!
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JBUnbelievable interview. I sent it to everyone I know. Can anyone point me in the right direction on what trades make the most sense given Bass's thesis on China. What is the best vehicle to short the currency?
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BBAmazing piece, can't wait for the follow up!
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ndCan we get a piece from Raoul on his Aussie view?
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GBVery good. Thanks. Can mainland Chinese subscribe to Real Vision?
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sTsorry for using this language, but no other way to put it. Kyle has balls of titanium, going against china like this. I follow him on twitter, and it is amazing how vocal he is about china. to my mind he is a hero. thanks RV for this interview. it is gems like these that make my subscription worth it.
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IASome remarks and questions: 1. Tax rebates on auto purchases expired at the end of 2017. There is bound to have been some front loading of purchases that has had an exaggerated impact on auto sales in 2018. Yet there was no mention of this. 2. China changed the regulations for second hand auto sales in 2019, allowing for the first time the sale of a second hand vehicle from the city / province it was registered to be sold in another city province. This has resulted in a booming secondary market. 3. A number of major cities with high levels of congestion and air pollution, such as Shanghai, have made getting a license plate as expensive as a car and extended the time to get a number plate / the ability to participate in an auction to get one to contain auto congestion. They have (I think in 2017) also stopped accelerated number plate issuance on purchases of electric vehicles. 4. If we take out auto sales, consumption is not down but up across the majority of categories in China - autos make up a very large portion of total consumption given the ticket size. 5. How does Mr Bass reconcile, the fast growth in China's oil imports with a slowing economy? And how does the growing imports of oil remain in its secular trend if the economy is going to slowdown / go bust? And how is it that a fiscally constrained China is able to purchase ever increasing amounts of oil? 6. Towards the beginning of the interview Mr Bass mentions China's problem is its need for resources. Later he mentions that Chinese foreign assets consists of Sri Lankan ports, Ugandan mines, etc. which are not as fungible as Japan's holdings of liquid international assets. However, if these mining and shipping assets reduce China's need for dollar based purchases of commodities and provide a captive resource, is that not a good thing for China? 7. The chart of the CNH volumes and precious stones purchases were shown as an indicators for record high capital outflows. How does Mr Bass reconcile them with the usual hot spots for Chinese outflows such as Hong Kong, London, Sydney, New York, and Vancouver real estate being in a funk? 8. For Mr Bass's trade to go wrong (which he has been wrong on for at least 4 years now) the US dollar does not need to lose reserve status nor does the CNY have to be ascendant. Rather, nothing has to happen i.e. the status quo remains in place and his trade does not work. I understand that Raoul is sympathetic to Mr Bass's view on China. However, given how well researched Mr Bass is, it was a real shame that Raoul did not challenge him more - or at all actually.
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SAWhat changed in 2015? The FED started raising rates. That is the same thing that broke the US markets in 1870s. London at that time (center of global finance) raised interest rates and all the money went there to collect interest crushing the US stock market. Same thing here. By raising interest rates, US suffocated all the capital out of China.
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ALAny ideas what this big South East Asian idea is?
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TZDXY has a 56,7% weighing in EUR. So it is inversely correlated most likely. What we have to ask is where will be a worse situation Europe or USA. USA: Debt EUROPE: Greece, Italy,Spain, Portugal, even France is in huge debt, BREXIT, Italian banking sector and spanish, euro scepticism, populist movements. I would say USD goes higher, EUR goes lower.
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VSAll good.... thanks but here is one point.... Europe in recession 100% so the EU goes down to par. The dollar has to be pushed down also ....the fed has to to do this ... .gold up , stocks down ,bonds up as the Fed lowers rates? That is my take away? The dollar will still be the reserve currency but it has to decline as the products around the world go on a 10-15% sale . Trump will force this issue.
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GCOne large omission in this discussion , and I suspect it was intentional, was the Chinese plan to be able to print RMB for the dire need for commodities, especially oil. This issue has been elegantly described by Luke Gromen, on Macrovision,You Tube, and his recent book “Discussions with Mr. X. The thesis, briefly is the Chinese want out of the dollar mandate to buy commodities, so they know few commodity producers will accept RNB. The Chinese will offer producers of oil the option of trading RNB for Gold at the SGE. The gold will be traded in Shanghai, but the gold will be sourced outside of China. this maintains their grip on all the internal gold in China, and avoids the need to “close the gold window” as Nixon did in 1971.
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GTOK I admit it, I am a bit of a tart and I drift in and out of RV videos and the print stuff (I was an original subscriber so don't shoot the messenger). Just occasionally, when my mind is drifting,I think, mmm Kyle Bass, I think I will listen (Chelsea are losing anyway so I don't want to listen to 5 Live) and WWWOOOOOWWW , WTF (as the Yanks would say). Let me play that again, did he say that?
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BJCan someone tell me......... Raoul is describing the knock on effects of lack of trade with China and the Euro and the AUD falling... What levels would we be likely seeing in those currencies ? I remember Grant predicting about 0.40 in AUD if Im not mistaken.....
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BMHe never talks about all the real stuff they sell though
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CDRegarding Australia: I live and work (in the construction industry) in Sydney and it is true that the media is full of negative news on the residential property market and it is true that new building approvals have slowed down. Banks made it harder to borrow to slow down the boom a little bit and they can switch it back on when they want. On the other hand, however, the media does not mention that the biggest ever commercial construction boom (not to mention infrastructure) is happening in Australia (at least in Sydney) at high double digit growth yoy. So overall construction industry which is 10% of the economy in terms of employment is growing strong. Furthermore I looked at data from the last 50 years on residential property prices and the recent boom has been nothing spectacular on a 50 year horizon so I fully expect the property market to start going up here in about 1-2 years. Now is a good time to buy for sure. Regarding the AUD USD exchange rate, honestly, should we aussies care too much? Maybe we will buy less Teslas for a while.. It would be great if someone responded and challenged my points with some more specific details about Australia for my learning. Thanks a lot.
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HHHow do viewers get this presentation?
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HOThis came across like a Rickardsesque infomercial selling CNY/CNH shorts. This is where a little bit of push back from RV interviewers would provide a lot of value. Should ask some good follow-ups instead of fawning over guests. I think they can take it.
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JSDidn’t he say Yen was going to collapse awhile back?
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MSPopulism is not ugly, it is a beautiful thing to behold :) Down with the EU tyrants.
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MSlol... I just realized Raoul looks like a handsome Ben Bernanke!
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MS(((Foreign agents acting on our soil))) - reminds me of another group.....
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SDHope he's right. Let's hope that the Oval Office and Congress deliver proper payback. Or will the West, once again, lose its balls and insist yet again on snatching defeat from the jaws of victory? Presumably, Lighthizer isn't the lightweight Stockman seems to think he is.
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CGDo US oil exports take away from global US dollar supply?
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JBAbsolutely Brilliant. Two macro minds we can’t get enough of. Look forward to part 2!
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RRWow, amazing conversation. Gotta figure out the best trade here. Kyle, I love your presence on Real Vision, keep sticking around!
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TZAnd what about investing in CHF? Could you guys do a video on currency risks? Thank you!
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TZGuy, I think you gonna laugh on this but back in the day, early 2016 I bought a truckload of gold mining stocks! Now the funny thing is that I am European and I wanted to buy them in EUR and "accidentally" I bought all in the NYSE in USD....not thinking about the foreign exchange currency risk!!! :) Up till recently I thought okay, I am going to have gains on the mining stocks but when I am going to change back my dollars to euros I might gonna loose 30-40%. I learned recently that I might just accidently nailed it! LMAO :D
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DTI would love to watch a discussion between Kyle and someone like Louis or Charles Gave on China.
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NIGreat interview Raoul. Kyle is so right about China. It didn't come up in the interview, but China also exerts huge influence in Hollywood (in addition to the "think tanks", media, etc that were mentioned). I wish American business leaders would set aside their greed for the sake of keeping our Republic.
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RFEpic!!!
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JBJim Rickards has said, according to his research, that approximately $2 trillion dollars of China's reserves are totally illiquid. $1 trillion is fully committed to the One Belt One Road project and the other $1 trillion is in hedge funds/private equity/additional sovereign wealth funds. If Kyle Bass is correct and Jim Rickards is correct, then China is close to insolvent then?
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JLExcellent as always from Kyle. I'm a bull on Chinese equities but these stats and numbers are very interesting.
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ggFor China bulls get Michael Moritz from sequoia VC
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ggKyles view is always interesting but would be good if Raul and Kyle both covered the following: 1) China is very much unlike Tu and Argi in that it does not have as much External debt this provides for important flexibility and removes important pressure point; 2) Markets historically look 6-9 months fwd and all that negative data will have much easier comps in q3/q4, so the data will start improving and that’s need to be taken into account; 3) Chinese banks could be recapped at least partly thru other means one is foreign money and two is other instruments such as recently introduced perpetual bonds. It is unclear to me whether there is real trigger point right now in China
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SHHKD. Kyle mentioned it last time he eas on RV. HK/China burning through reserves to maintain for little benefit. Small downside risk?
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iihow they survive? they all implement capital controls and fiscal stimulus
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BHIs China currently net long or short dollar?
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SGMontgomery Burns meets Queer eye for the straight guy. Kyle shuffles through his stack of papers while answering questions coming across as psychotic. Perhaps the China trade has finally made him lose his mind. This was just sad.
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DFThanks for this interview Kyle and Raoul. It is so hard to know what is going on in China it is great that Kyle is shedding some light on it. My question is: Is it possible/plausable for China to 'recall' all those 'Capital Outflows' at some point with the co-operation of nation states like Australia and Canada? Maybe these 'outflows' can no longer be traced so the ones that got out were the lucky ones. Or Maybe Xi wants to repatriate these funds from Australian and Canadian housing for example? Thanks.
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MDAll, Any guesses about what the asymmetric trade could be? Given Bass’ general focus on larger themes, I strongly doubt its uranium (i.e. an offset to oil, which he noted is negative for the current account). My best Guess is that it is something around Hong Kong (i.e. assets or the currency). I bet he comes back to argue that the Rmb/USD at 8+ and a slowdown in global trade hits HK on the nose, driving a break in the peg. A break in the peg shatters global investor confidence in HKD assets, including property, and results in a tremendous drop in HK asset values and FX.
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SMProbably JGB's. Again.
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TBEpic tease at the end! You better get together before that trade becomes crowded!
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KShttps://en.wikipedia.org/wiki/1938_Yellow_River_flood China is being backed into a corner and they will do what they need to do to survive. Gold to 20k.
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AMplease get Jeff Snider for a full-length interview to talk about China's $ problems. His thesis is fairly similar, but perhaps more nuanced (much more focus on Eurodollar and the HK bypass). https://www.alhambrapartners.com/2019/02/19/not-even-pboc-supports-yuans-reserve-role/ https://www.alhambrapartners.com/2019/01/17/revisiting-hong-kong-for-reasons-we-wish-we-wouldnt-have-to/
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KDChina is basically managing its economy with a lot of the core tenets of MMT, primarily “fiscal deficits don’t matter as long as they are used to grow the economy.” Will they be able to continue doing this, and thus increase the momentum in the west towards MMT? Probably not, but they have been able to hold this together a lot longer than the China Bears thought possible (this is not a criticism of China Bears. I am firmly in that camp and have the losses to show for it). And if/when it all unravels, no doubt the MMT Brigade will wave this away and say “that wasn’t real MMT”. I agree with Kyle that the real FX balance is far worse than official numbers show – which is why they have been so aggressively trying not only to limit outflows, but also to encourage inflows. But the Current Account going negative may not be the tipping point that Kyle expects, if they are able to widen the Capital Account surplus (as he touches on). Their efforts to muscle MSCI have now been made public. Will ‘Wall St’ continue to prop up the Chinese economy (and by extension the CCP regime) by directing flows into Chinese bonds and equities? So far, the (shameful) answer appears to be a qualified ‘yes’. Which gets back to what Bannon railed about in his interview. The Wall St elite has allied themselves with CCP policy goals. If this ‘works’ for China, and they stave off crisis – and continue to threaten global order – then Lenin’s apocryphal statement that “The capitalists will sell us the rope we will hang them with” may turn out to be correct. Kyle touches on this point, but he should really make this a bigger focus of his overall thesis.
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DSThanks to a comment by Darryn L. in a recent Larry McDonald presentation, I watch Mr. Koo’s RVTV presentation 2016. I also watched an impressive 2016 YouTube video – ACATIS Konferenz in Germany, link below. IMO some of the reasoning of Mr. Koo impacts on the CHY/$US and why Mr. Bass’s trade has not worked yet. Both of Mr. Koo’s presentations are worth serious attention and I requested RVTV that he be invited for a follow up. Deflating QE will take years and many fortunes will be made and lost. I still do not know what to do, but I understand the problem better. DLS https://www.youtube.com/watch?v=8YTyJzmiHGk
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CMSo, if the EU goes into full recession before the US, does the invested capital all flow into the US (particularly into equities) - just further increasing the size of the bubble?
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DPCapitol flight from China, U.S. last to roll over in a global recession, British pound going to parody and Euro going negative…Sounds a lot like The Dollar Milkshake Theory!
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SUIt would be great to hear Raoul in depth view of China
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JSHuge Kyle Bass fan, I reckon he has absolutely nailed this China call. China well and truly peaked in 2015 and possibly on Martin Armstrongs ECM date of 2015.75. I reckon we could see a currency devaluation in China as soon as the next ECM target date of Jan 2020. China is in big trouble. I am very surprised that commodity prices (copper, precious metals, crude oil, nickel, zinc etc) are holding up as well as they are. It just goes against all logic. With USD breakout, could see a very choppy second half of the year.
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HPYou talk about the Aussie dollar and just about every currency except the CAD. Come on man you know you have a NA audience, at least talk about us a little.
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NGWow... the BTC mistake was unbelievable for someone like Kyle.
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INyou own gold, gold is money all the rest are currencies
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WMSo Kyle may have been wrong for several years on China..... But the quality of his arguments and data presented seems very high and his thesis sound. Could it just be that the amount of manipulation and financial shenanigans going on in a system that now has global debt (and corporate and in many cases personal debt) that meets and way exceeds that present in 2008, has warped and delayed the inevitable? I am with Martin Armstrong on this. What has happen over the past ten years just can't continue for ever, something is going to ignite the "powder". The impact of an imploding China would surely result in a global depression and debt implosion OR potentially very high inflation FOLLOWED BY debt implosion. I am very worried....
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SCJust a suggestion for RVTV. In videos with graphs/charts/other material that needs visualization -> putting "visual material included" on the video description would be helpful. Furthermore, including these graphs/charts as jpg files would also be great. I would rather only listen to videos without visuals (that is, videos that only focuses on the figures of the interviewer/interviewee) with downloaded MP3 files, and watch videos that includes visuals. Great interview, as always.
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JAKyle really is on a stop at nothing mission to uncover the skeletons in the closet on China! Compelling viewing; a strong opinion backed up with rationale albeit I do agree with Nick Gs comments below. Considering the airtime Kyle has now had slamming China the last 12 months how about time to hear the other side of the argument and get a China bull on the show. What do you say Raoul ?
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MKAnything which Kyle mentions can be said about US. Atleast China produces something tangible, US prints its worthless dollars, supplies it through its Capital flow channels throughout the world to buy real stuff. world is fed up of US and its worthless Dollars. More power to China !
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AGEvery Kyle Bass interview leaves me amazed how thorough his research is
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RKGreat stuff. It is very sad to see the investment world closing both eyes ignoring the moral implications of pumping money into this dictatorship. https://www.cnbc.com/2019/03/01/msci-to-quadruple-weighting-of-china-a-shares-in-global-benchmarks.html
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AMGood interview. But I can’t believe someone at Kyles level did not know when BTC had it’s major drop, I would have thought someone would have corrected him ahead of time, he was a year off.
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CHNo one knows the size of their gold reserves. They've been buying physical gold whenever their currency strengthens, are the largest gold producer in the world, and do not allow any gold to exit the country. Their foreign currency reserves may be low, but their gold (real money) reserves could be large.
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DGSo, there is this thesis floating about that the Chinese (CCP) have a grand plan to dump US assets (treasuries, bonds, equities, real-estate) as part of a strategic pump and dump scheme designed to crash US markets. As we saw 2 months ago when a puny 10% drop caused Mnuchin to start cutting himself and the FED to panic and shift policy 180%, everyone (esp Chinese) know without a doubt the FED would be forced to ride to the rescue to save the US economy by throwing the printing press into hyperdrive, thereby devaluing the dollar and threatening its reserve status, which theoretically would makes the RMB (comparably speaking) more respectable. Finally, if China is indeed short US Dollars as Kyle suggests, wouldn't dumping US assets en mass provide the source of dollars China needs?
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JWit is very good insights
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BFspectacular macro data shared by both! bravo.
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DDI respect the guy but, enough is enough! This has been his singular obsession for a very long time and heretofore he's been incorrect on timing. RV has retreaded this topic now one too many times. Can one really claim they are correct if for instance you are wrong 9 out of 10 years and then finally in the tenth year your thesis proves correct? I guess you can if you stay solvent long enough although you have to factor in all the opportunity costs that you forwent in the interim. Trump is going to cave soon and the Chinese economy is going to get a positive bump as a result.
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MNomg killer interview! did kyle drop the slope of a line formula as well lol. cant wait for part 2
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MMNot sure I am ready for this CAT 5 it sure does seem close at hand. All it will take is an Arch Duke Ferdinand moment. Great conversation.
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JBKyle has been pounding the drum on this trade for years. On a multi year time frame, early = wrong.
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clRiveting interview. Thank you. Buy bitcoin.
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ETGreat interview! Thanks Kyle and Raoul.
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TTThis was outstanding. I have been a RV member for going on six months and I feel like most of the content is not conducive to my investing style, meaning too much content directed at traders. But then some of these big macro pieces come out and remind me of the value I get from RV.
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BPMore blah blah blah from Kyle on China.
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SSNow this is REAL VISION into the future by two huge PRO's in the business. Kyle, we're dying to know the asymmetrical trade???? What is the insurance trade too?? Can't express how clean and easy to follow this presentation. Can we have some more please?!
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DRKB's long USD/CNY is among the very most crowded trades on the planet, and like all such crowded trades, it will likely fail (as before) and indeed this has already been moving against him for months. The other side of this trade against KB currently includes, among others, Luke Gromen, Seth Klarman, Peter Schiff, Ray Dalio and Erik Townsend. In fact, in the panel discussion at the most recent Cambridge House Resource Investment Conference (available on youtube), Brent Johnson, Peter Schiff and Erik Townsend all opined that USD/CNY will eventually trade down to 1:1 parity!! Similar long-term conclusion echoed by Juliette Declercq and Luke Gromen at Macorovoices Live conference. Meanwhile, KB and heaps of specs & amateurs altogether on the same side of the boat vs the aforementioned legends... guess who probably loses his shirt (again!).
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DBIs anyone here staring back at the most Asymmetric trade Kyle bass has ever seen?
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TSI could listen to Kyle and Raoul 24 hours a day.
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BMFantastic! I needed this so much! All the bullshit talk lately (Gross favoring MMT, P. Malmgren sees 10 years of happy growth, Powell playin‘ good boy) Extending, pretending, just please, no pain! The basement is on fire, we could have jumped out of the first floor, but we were afraid. Now the fire is geeting to the 10th floor and we are standing on the roof, hoping for chopper(money) to save us.
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REBrilliant insights.
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BF