Kyle Bass on China’s Moment of Truth

Featuring Grant Williams

Legendary investor Kyle Bass, the founder of Hayman Capital, joins Real Vision’s Grant Williams for a deep dive into China. From shifting capital flows around the world to the threat of China devaluing the yuan, these two discuss threats and opportunities that China presents investors now. Filmed September 17, 2018 in New York.

Published on
19 October, 2018
Topic
FX, Debt, China
Duration
53 minutes
Asset class
Currencies, Equities, Bonds/Rates/Credit
Rating
88

Comments

  • TE

    Tim E.

    13 11 2018 03:26

    0       0

    I believe Bass misrepresents how the HKD peg, or "Currency Board" system actually works. There are not two piles of money, one being "required" and one being "excess" reserves. The way it works is that if anyone (or, in actual practice, their banker) shows up at the HKMA exchange window with Hong Kong dollars, and wants US dollars, the HKMA is obligated by law to sell the USD at the rate of 7.85 HKD for one USD. Once that USD has been sold, and the corresponding HKD bought, those currency units have essentially exited the Hong Kong financial system. A hedge fund "attacking" the peg, basically just means their HK banker (or their intermediary's ultimate banker) has shown up at the HKMA looking to sell HKD and buy USD. As long as the HKMA has enough USD to back every HKD in circulation -- which it is mandated to have, by law -- the peg cannot break. By definition. The only way I can see it breaks is if there is a political decision taken that the run down in the HKD money supply, by virtue of too many HKD being converted to USD and exiting the system, makes the economic adjustment process too painful to bear.

  • TE

    Tim E.

    13 11 2018 01:28

    0       0

    "They're desperately short dollars?" Huh? China is sitting on $1.18 trillion of US Treasuries as a result of all the accumulated surpluses over the years. Sure, that's a "stock" not a flow. But when they need to, will they not cash that money in and covert it to a flow? Who's got the problem then? The US and it's trillion dollar budget deficits and tanking bond market, or China?

  • KT

    K T.

    11 11 2018 05:03

    0       0

    Could someone point me to the where Kyle gets the information that Hong Kong has spent 70 odd % of their excess reserves defending the HKD. They are indeed needing to buy HKD to keep the rate within the top of the band at 7.85 but from what I can only see,they have spent max US$40B of US$400B+ foreign reserves, that doesn't include the exchange fund. SCMP estimates the war chest at US$1.835T. HKMA did extremely well out of buying equities to support the market during SARS in the early 2000's and now has a war-chest multiple times the size of 1997. Curious, as that is why no one believes in HK that the peg will go anytime soon.

  • BP

    Benton P.

    8 11 2018 23:05

    0       0

    Question to the group. This is more theoretical, but i'm just curious if anyone will answer.

    How would you put the trade on to bet that the yuan will devalue against the dollar?

    Also, does anyone have an analogue for what they think would happen to Chinese securities should Kyle's thesis come true? If there's say a 50% deval in the Yuan v USD, how much of that carries through to the chinese equities priced in USD?

  • PM

    Philip M.

    8 11 2018 22:32

    0       0

    Extremely compelling arguments...but I'm left confused in that I was under the impression that the Chinese were the biggest holders of US debt....could they not just repatriate it and actually cause the US a few issues?

  • HJ

    Harry J.

    6 11 2018 16:33

    0       0

    Really great and interesting. How can the small retail investors defend our assets against this occurrence.
    I believe Kyle May be right not perfect but right.
    I wish he managed money for me.
    Thanks RV

  • DC

    Dave C.

    31 10 2018 18:59

    0       1

    Re the concentration camps and the oblique reference to the Muslim Uyghur population - Kyle has been listening to spooks too closely or not doing enough of his own research.....

    https://journal-neo.org/2018/10/05/china-s-uyghur-problem-the-unmentioned-part/

  • JC

    Joel C.

    31 10 2018 03:25

    0       0

    yikes... being a Hong Kong'er seems like a little preparation may be in order... thanks for the insight. nothing like a positive nudge from RV to open the bag of nails and start hammering down the hatch

  • RK

    Roger K.

    29 10 2018 22:40

    0       0

    I wish If I had to listen to him more. Simply great! Thank you Kyle.

  • FL

    Flavia L.

    26 10 2018 07:03

    2       0

    I like Kyle’s analysis. But his story about China executing state department employees in front of colleagues is not entirely true. I think he is referring to this: https://www.nytimes.com/2017/05/20/world/asia/china-cia-spies-espionage.html. Over a two year period, China arrested or killed 18 to 20 people who are spying for the United States, crippling US’ intelligence gathering capability.

  • F

    Floyd .

    25 10 2018 22:18

    0       0

    Completely fascinating and informative. To those that are critical about his position being influenced or biased here is a a little prospective,of course he is making a bet on his opinion that he hopes to profit from. We can listen to his logical and objective prospective and agree or disagree that is the magic of RealVision! I wish he would have addressed the weakness in the equity market however,if the government is manipulating it that have a strange way of doing it.

  • MC

    M C.

    25 10 2018 17:36

    8       4

    While excellently researched, presented and articulated - it is way too sanctimonious. In the end, Kyle is a capitalist (absolutely nothing wrong with that) with a thesis that he is hoping to personally profit from. He needs to lighten up on the moralizing. The Chinese will do what is in their collective best interest. And that is their right.

  • KJ

    Kelly J.

    25 10 2018 05:56

    9       4

    While I agree with your basic point that the US needs to negotiate strongly with China as a competitor as well as collaborator, your views are getting too US centric, Kyle. You seem blind to US advantages and malfeasance that other countries have to contend with. I agree with Christine G's comment: "This idea of Trump trying to level the playing field is odd. What does a level playing field look like when the dollar is the reserve currency? What about Brenton Woods 1 and 2? What about Triffin's dilemma? Bass talks about China wanting its cake and eating it too, What about US Inc wanting its cake and eating it too?"

    You did fantastically well shorting what basically was massive mortgage fraud and bogus securitization by Wall Street that the FBI had called out years earlier to Congress in 2004 as a threat to our financial system (but which was ignored by the corrupt politicians too busy checking their brokerage balances). Then in 2008 and thereafter, the US printed all those dollars and the Fed minted secret trillions in credit to keep US banks afloat and recapitalize them in place without penalty to any person or bank restructure, (and let your and my shorts be paid off and be worth something rather than go down the tubes along with the counter-parties and financial system). And the corrupt US financial sector and gov't, instead of having to institute capital controls like a corrupt third world country would have had to to keep global investors from fleeing the fraud for their lives, could instead flood the world with dollars because there was just no alternative currency, no alternative banking system, no retreat from the corruption that then has continued here and in Europe in price-fixing, insider trading and fraud, papering over bad debt with new paper to the advantage of those with money in the bank year after year to this day. And the fraud will now re-ramp up to new heights under the right wing's prime mover, deregulator and lighting rod they love to disavow: Trump. The US has what I would call an unequal playing field by design, for non-insiders and foreigners alike!

    And now you want the University of Texas endowment you have some control over to enforce sanctions on Iran based on the Republican minority-in-the-world description of how terrible that denuclearization deal is for the US and still present yourself as fact-based and non-partisan? I don't think so. Why not divest the endowment from fossil fuels when the Intergovernmental Panel on Climate Change - world scientists - just told us we have 20 years or less to actually get off of fossil fuels and avoid the onset of major climate catastrophes by 2040 or earlier? In fact, I'd say we're already seeing them ramp - in Houston, North Carolina, Florida. Not likely a popular position in Texas, I imagine - but why haven't you embraced that, since it's clear you're a very smart guy who works to stay grounded in reality? You're a good guy, Kyle, but my respect for the depth and balance of your views in assessing the realities of the world today is taking a hit... https://finance.yahoo.com/news/kyle-bass-university-texas-impose-100000173.html

  • NA

    N A.

    25 10 2018 02:12

    2       0

    Those commie Chinese with their kimonos.

  • TL

    Tianyun L.

    24 10 2018 19:43

    0       0

    Kyle I love you but beware of following in the footsteps of Ahab. The soviet were able to kept their facade going until oil prices hit an inflection. There are other things you can do with better risk adjusted returns. Brazil is hitting an inflection like Argentina in 2016, you can make a lot of money on longs there.

  • PC

    Peter C.

    24 10 2018 16:05

    0       0

    Has there been any clarification yet regarding "excess" FX reserves in Hong Kong. The number quoted is so different from official published reserves

  • SG

    Sanjaykumar G.

    24 10 2018 16:04

    1       0

    How to find out excess forex reserves ? I guess it is related to forex reserves - short term forex obligations ( from trade as well as capital flows) how to tack that? Many customers hedge their forex exposure which adds to complexity. Apart from that countries which are importing prices insensitive materials e.g. crude oil and gold .. their commodity demand and hence the forex requirements is also not fixed. It will be based in few assumptions. What formula is used by speaker I am curious to know? Thanking in advance.

  • DS

    David S.

    24 10 2018 14:26

    3       0

    C.S. - I saw Mr. Bass in a CNBC 12/24 video proposing the elimination of any investments in the Texas Universities Portfolio in companies that do not comply completely with all US sanctions. This seems like a continuation of the full-court press on forcing China to devalue its currency that Mr. Bass has been proposing and positioned for many years. Another side of Mr. Bass's full court press is to back the president's use of tariffs on China to force them into more financial difficulty. This is a good example of "my enemy's enemy is my friend" as Mr. Bass does not hesitate to show he is not a supporter of the president. This continued full-court press may finally bring about a major decline in the value of the Yuan, but it will certainly cause major disruptions in the FX markets. I would be very careful in Yuan or $HK positions as this will have a life of its own if China is cornered. DLS

  • MB

    Matthias B.

    24 10 2018 10:04

    3       0

    top quality interview with compelling arguments laid out in a concise and comprehensive manner. the only negative feeling I got was Mr Bass’ effort to put the US on a moral high ground. That is not deserving and inconsistent with past US political and corporate actions. It comes across that the US is happy to dish out to gain advantages but when others respond with similar actions, then it cries foul. If the US wants to remain a moral, political and economic leader, then act accordingly. still I admire Kyle’s profound macro knowledge and wish I could be so articulate.

  • SD

    Stephen D.

    24 10 2018 09:31

    1       0

    This was a very high quality exchange. The question that appears in these comments quite frequently is "Kyle Bass has bet against China in the past and lost, what's different now?" and it is a good question. I would say two things are different: 1. Xi has collected more power around himself than any leader since Mao before the disastrous famine of 1959. That makes the Chinese system more prone to mistakes, and those mistakes when they come will be magnified. 2. The imposition of tariffs on China are not a short term tactical stance, even though President Trump sometimes seems to make policy on a whim or a tweet.. The strength of the feeling is revealed in Peter Navarro's polemical Death By China, which is long and not that good but instructive of the depth of feeling
    https://www.youtube.com/watch?v=mMlmjXtnIXI
    It also shows why it might be a rare bipartisan issue in the US. The US withdrawl from the Universal Postal Union, a move led by Navarro, underlines how things are changing, and not to China's advantage.

  • DS

    Darryl S.

    24 10 2018 09:30

    1       0

    Bass on discussing the genesis of the trade wars, on Trump and what he has actually achieved vs. the cacophony of political trashing of Trump himself is seminal. And refreshing. Objectivity during times of high emotion is what makes a good trader.

  • ME

    Malcolm E.

    24 10 2018 07:03

    9       0

    Very enjoyable but from, dare I say it New Zealand, I hear Bass as a very centric U.S. commentator perhaps not fulluy accepting that the Chinese not so much 'stole IP' but actually America was too free to give it away because doing so made them a quick buck and that was all they were interested in. Is not the real problem of China influencing U.S thinking more that Apple, Wrangler, Nike and other U.S icons wanted to advantage thmselves with cheaper labour costs and you (U.S. employess) suckers be damned if we are going to pay for your retirement fund too. But a quality interview.

  • DY

    Damian Y.

    24 10 2018 05:16

    5       2

    Great interview. It's a breath of fresh air to hear some common sense about China. There are so many China bulls out there that will not listen to any facts or reasoning about how corrupt China is. They remind me of the bitcoin millennials who would attack you if you said anything negative about bitcoin.
    Just reading some of the comment below and people are saying negative things because there are no trade ideas. These interviews that Grant does are for your knowledge. It's like reading a history book on finance. There are no trade ideas but you get a lot of knowledge out of it. With this knowledge you then then come up with your own ideas instead of relying on others. If your ideas turn out wrong then you can take full responsibility for your mistakes and learn by them instead of blaming someone else. If you need someone else to give you trade ideas because you have none of your own, then you are basically saying "I've got no idea." There are so many trade ideas out there if you just open your mind.
    My only complaint about this video is that it only goes for 1 hours. Kyle has such a great mind and a depth of knowledge when it come to finance and China that I could easily listen to him for several hours.
    Thanks RT for another great Kyle Bass interview.

  • JM

    John M.

    24 10 2018 03:11

    5       0

    I assume Kyle Bass has given up on his other trade i.e. short Japan. I thought the arguments he presented were very compelling and yet it didn't happen at least not within his expected time frame. Would have appreciated a question about lessons learned.

  • CM

    C M.

    24 10 2018 00:38

    2       0

    One of my favorite things about watching the RV videos is reading the comments. Most people keep it between the lines in adding worthwhile thoughts. Appreciate the added insights.

  • AB

    AJ B.

    23 10 2018 18:54

    4       2

    Thumbs up. Only critique is Kyle needs to study the American press. It's not Trump's job to communicate how his policies benefit the US. The media's job is to report the truth, not mislead.

  • CG

    Christine G.

    23 10 2018 13:34

    8       7

    This idea of Trump trying to level the playing field is odd. What does a level playing field look like when the dollar is the reserve currency? What about Brenton Woods 1 and 2? What about Triffin's dilemma? Bass talks about China wanting its cake and eating it too, What about US Inc wanting its cake and eating it too? The financial system and government have done very well having the reserve currency; manufacturers and workers have not (as predicted by being the reserve currency). US Inc has done very well for the top 10 percent. Government has been able to spend (mostly on the military) while giving the wealthy tax breaks. By financializing everything, we have cultivated a very short time line (how much can management make this quarter; how can we use financial instruments to kick the can down the road). The Republican refrain about big government has let the power elite reduce government, take tax breaks, and be short sighted; we have not dealt with real needs like investing in the future (e.g., climate issues, education, infrastructure). Investors have been able to make money often without doing due diligence and the Chinese have taken advantage of weaknesses in our system; why not, God knows there are enough Americans taking advantage of weaknesses in our system. Certainly Trump is and has taken advantage of as many weaknesses as he can. He continues with short term policies that continue or worsen major weaknesses while running the most corrupt administration of modern times if not ever. I think Bass has brought up real issues while side stepping root causes and problems in our system. Why does the press get it wrong? Why do voters often get it wrong? Why does Congress often get it wrong? Because the world is complex, people are under-educated, economic and financial systems are poorly understood, people who want to manipulate others and systems have more practice manipulating than the public has at not being manipulated.

  • RB

    Raghav B.

    23 10 2018 05:01

    5       0

    Excellent stuff guys. Keep up the quality interviews.

  • mp

    michael p.

    23 10 2018 00:17

    1       0

    Talk of trade deficit. Never heard that from Bass until now. Hopping on the Trump train. Not wrong but not sure that was the original negative China thesis, I respect his own intellect and view point but he has been wrong for some time. Real vision needs to not just promote its founders views.

  • HH

    HODL H.

    22 10 2018 14:11

    1       2

    Best part comes at the end with dig on Botox Lips Mnuchin. Motives of person running department is skewed because Chinese helped finance films before he was appointed and he will care about that after!! Well said Kyle! Mnuchin’s definitely has conflicts there

  • SD

    Salvatore D.

    22 10 2018 13:04

    9       3

    This whole interview makes no sense if KB's comment about HKD reserve to USD 11Bln is not accurate or formerly corrected. RV please check KB...

  • VS

    Victor S.

    22 10 2018 11:22

    4       9

    I enjoyed the talk - but- grant ,people listen to get the guest’s opinion on what he thinks will make money and why! This was virtually academic and had very little on what to do. For example does he suggest shorting yuan? Is this the trade? I’m not sure. I think Real vision has to focus on getting the investment position and why? My 2 cents as data without a trading connection is like going to college-its almost worthless.

  • JF

    Josh F.

    22 10 2018 10:28

    11       0

    Is there a link to any reporting on these State Department executions? It's not something I was aware of.

  • VS

    Vasil S.

    22 10 2018 09:45

    10       1

    In Kyle Bass's last RV interview he told Raoul that the deval would happen between November 2017 and June 2018. It didn't. Yet in this interview he questioned trying to pick the moment everything turns. Did others' pick up on that?

  • MS

    Matt S.

    22 10 2018 08:05

    11       4

    I don't know why anyone wouldn't like the Trump, the personality...! Telling CNN they are fake news! lol.. so true! So refreshing to hear a leader be a MAN!!

    Kyle Bass, he's a good guy. Smart too, could listen all day.

    This is good RVTV.

  • M.

    Milton ..

    22 10 2018 07:16

    2       0

    Hey folks - Thank you for sending us all the details and playback is back to normal. If you're still encountering problems, please let me know.

    M

  • AH

    Ahmed H.

    22 10 2018 06:40

    15       4

    As always thoroughly enjoyed KB's thots - esp the HKD trade. Have to say though - a little disappointed as there 's a lot of riding on my high horse in this - why's there so much china hating in the west? for me, parts of this interview did not sound objective - there seems to be a lot of 'personal' in this for him (maybe he's been short China too long? ) - also as someone else commented, lot of self righteousness - we are funding a govt. who is taken a million people against their will, so why are we buying their bonds?? -- really? is this even an argument?

  • JM

    Joe M.

    22 10 2018 05:13

    4       0

    KB dropping the jamba juice reference, he must've loved Astroworld

  • GO

    Gary O.

    21 10 2018 20:14

    3       0

    Thank you both for your insight. There is no other place in the Matrix that you will find a show like Real Vision.

  • TK

    Taimoor K.

    21 10 2018 17:16

    20       16

    Kyle is a brilliant guy and a better investor than i'll ever be.

    However his polly-annaish, ridiculous and borderline racist views of "the evil thieving Chinese offenders" and "the noble kind Americans victims" is out of touch, delusional and advertises the ignorance of even the smartest Americans.

    Extremely self righteous

  • EL

    Edward L.

    21 10 2018 16:21

    4       0

    This video and Grant and Kyle are mind expanding to a degree few other publications can excite me. I was trying (obviously inadequately) to explain some of the world economics yesterday to my daughter and I realized how much of my understanding has come from Real Vision over the past few years. I am sincerely grateful.

  • AS

    Ahan S.

    21 10 2018 15:11

    3       1

    Kyle, some great comments in the interview. I especially liked the ones about ethics (or lack thereof) in investing. It's disappointing to see inclusion of China in various indices so that people are forced to buy.

  • BT

    Brian T.

    21 10 2018 13:03

    22       0

    It's a great interview and RVTV continues to deliver outstanding content. Here's where it missed. Luke Gromen talks a lot about the Chinese buying gold and their desire to create an ability to buy food and energy with a currency they can print, like the U.S. I don't remember where I heard this, but there was a recent "rumor" that China has amassed several times 10,000 tons of gold (I think the rumor was 30,000 or 40,000 tons). Grant is a "gold guy". How does China's setup of an oil-for-RMB contract, and their importation of large quantities of gold (where the quantities are intentionally hidden by running through Hong Kong and other methods), affect Kyle's thesis? Surely this should be part of the puzzle.

  • MW

    Marco W.

    21 10 2018 04:11

    9       0

    I guess the title of the whole interview is "Emotion versus Reality", not only Chapter 4.

  • DY

    Dmytro Y.

    21 10 2018 03:38

    0       0

    This video plays well on a smartphone say on IPhone. iPad indeed does not play it.

  • JK

    Jan K.

    21 10 2018 03:07

    1       0

    i have the same problems. Every 10 sec the red circle spins around and there is a break in the sound for a second.

  • DH

    Derek H.

    21 10 2018 02:32

    6       0

    The Kyle Bass video will not play but all other videos work fine. Anybody else have this problem? Any Resolution? Thanks

  • DS

    David S.

    21 10 2018 01:47

    0       0

    Apples and oranges. Hong Kong dollar reserves and Hong Kong dollar excess reserve quotes from Mr. Bass in the transcript with slight editing: ***“But what's lost in that dialectic is when you have a currency peg, for every US dollar, you have to have a Hong Kong dollar. For every Hong Kong dollar, you to have a US dollar if you're going to keep a peg. So, what you have to look at is what they call excess reserves. The excess reserves is kind of their war chest that they have to defend their peg. How much of their war chest do you think they've spent defending their peg since June 1st of this year? We're in September. 70% of their war chest is gone”. DLS

  • OS

    Oliver S.

    20 10 2018 21:59

    3       0

    Great stuff again. Grant, looking sharp!

  • DL

    Derek L.

    20 10 2018 21:13

    14       12

    Enjoy hearing Bass' views on the economy and China but does anyone else notice that he needs to preface his observations by expressing absolute revulsion toward President Trump before saying he is absolutely doing the right thing? Almost as if he has to apologize for giving Trump credit and reaffirm his credentials as an anti-Trumper. I guess that is how you stay in good graces with RV, agree with Raoul that Trump is to be hated no matter what. Deviation from the group-think is not allowed among the globalists.

  • PD

    Peter D.

    20 10 2018 21:09

    23       7

    Kyle Bass gives a great interview, as always, with some out-of-the-box ideas. But bad-mouthing of China signals weakness in his arguments. Churning Mike Pence's complaints about China wanting to defend itself (China's defence budget is 1/7 that of America's), so called IP "theft," (technology transfers are perfectly legal in China) and calling Xi names (Emperor and Winnie the Pooh) are no substitute for a sound investment thesis. The way to attack China is to acknowledge its strengths and then to poke holes using facts, not rhetoric.

  • PJ

    Paul J.

    20 10 2018 20:13

    9       18

    how can I get rid of the fucking time on the screen? Every fucking time the persistent timer won't fuck off!

  • dh

    daniel h.

    20 10 2018 17:38

    21       3

    hmm, the assumption of US ethics being of a high order is open to doubt.
    As to a US naval presence in Chinese local waters being ok also suspect.
    Then the US in the late 1800's behaved like China today. The IP came from europe.
    SO lets have balance not US self interest.
    disappointed.

  • rl

    roger l.

    20 10 2018 15:53

    7       2

    Kyle got the Hong Kong war chest amount to defend the HKD peg completely wrong and of humongous proportion. It is all public information and for one of the 'smartest' guy to get such basic info wrong is plain ridiculous!

  • T~

    Tshort63 ~.

    20 10 2018 15:43

    1       0

    Love watching Kyle break down his process and how he collects and interprets data, always a thrill. RealVision delivering amazing content at an incredible price point. The value in the last year -relative to the subscription cost- is now a ten bagger.

  • DY

    Dmytro Y.

    20 10 2018 15:43

    8       0

    Unfortunately Kyle did not go into more specific details about HKG. As of 05 Oct 2018 official FX reserves of Hong Kong are USD 426 billion. It's Billion with B and its in US Dollars. Not sure what USD 10 Bln excess reserves he referred to (HKD 80 is about USD10). Second, though Hibor doubled and indeed stock market is very vulnerable HK banks only increased mortgage rates ones for o.125 pct thus far (!) and let's not forget down payments are much higher than in US posing far less risk to banking system than in US or Australia. Yes risks are high and exist but his numbers do not align with actual stats and facts here. I live in HKG.

  • TT

    Trenton T.

    20 10 2018 15:08

    5       0

    After building a greenfield plant 'in" [or is that "for"] China in 2007 and watching the real estate market until 2011, I made a gentleman's bet on what I saw was the imminent decline of the Chinese residential real estate market over a case of Dom Perignon 2003 with a former Centaurus trader who will remain unnamed as he did not agree to any publicity around the bet. He had a bead on the Fed and other CB flows sloshing around and ending up in the Chinese real estate market and I handed over a case of Dom. Shorting the Chinese banking system (or HK or Sing parents as some suggest) is a fool's errand as it is not separate from the Sovereign. If the HKD peg does not break within the next quarter (or two), that means the Sovereign has more staying power than Kyle thinks and the whole thesis is broken. I am glad to see Kyle is looking well. I was a bit worried for his health after the last interview. Japan is the old bank and can make anyone's hair fall out - I don't hear Kyle talking about Japan anymore. Great think piece in any case, especially when viewed in succession with certain pieces referencing SDRs and how the next crisis and the massive trade imbalances that have only worsened since 2008 will be "handled" using the IMF clearing house. Thanks Grant for both interviews.

  • RD

    Ravi D.

    20 10 2018 14:20

    0       0

    i am not sure how he got to the $11bn FX reserves.. seen no reports to this at all??

  • RP

    Roberto P.

    20 10 2018 12:38

    5       0

    Swift is one thing and trading with yours partners outside Swift is another. Would be interesting to check how much China trade outside Swift. By the way, market share of oil contracts in cny has risen very fast.

  • TS

    Tamás S.

    20 10 2018 11:51

    22       8

    "Kyle Bias", anyone being non US and nor Chinese can see how skewed his views are. I have the sensation he is just angry at China. Just two examples:
    -39:55 "evil china takes ppl into concentration camps, but ppl buy their bonds" -> counting on the ethics of bond markets WTF?
    -36:50 "to oppose US in the south china see" This second one really gives it away, it's them against "US". Those ugly Chinese... Kyle will teach them a "Short" lesson :)

    Being angry at the market is probably not a good idea.

  • SP

    Sat P.

    20 10 2018 10:56

    1       0

    Awesome insights, especially around the link to working capital from abroad running negative. I will have to watch it again to take more notes!

  • CS

    C S.

    20 10 2018 09:29

    1       0

    Anybody else working and living in Hong Kong? In '98 they defended the peg and let asset prices take the hit. It makes sense for them to ultimately take an adjustment in the currrency this time.

    I've been concerned about the HKD for a while as I have savings in that currency. Switching to USD or other currencies is one measure. But how about HK banks? Would it be wise to move funds to a bank in another country eg, Singapore (Australian banks are dodgy),?

    Just thinking out loud. I dont know any financial types socially. And have another 18months to go before I consider leaving HK.

  • BM

    Beat M.

    20 10 2018 08:50

    0       0

    So, do I understand it right, HKD would weaken 30% to peg with mother China, to let’s say 1:10, at the same time stocks would appreciate (in HKD), the opposite SNB play?
    Thats one for trading ideas, no? How to play best?

  • WC

    Wilson C.

    20 10 2018 07:19

    1       0

    apologies, i just posted and even though i had spacing and paragraphs, everything got jumbled together when it posted, totally understand if people don't read it :-) it's messy

  • WC

    Wilson C.

    20 10 2018 07:17

    14       0

    Interesting discussion, have been w/ RV since the beginning, and started following Kyle Bass since the GFC. Grant is such a great and balanced interviewer, and it did come across that Kyle had a very strong opinion on China/China thesis that went beyond the data (analysis), ie, his personal opinion (nothing wrong, just to be aware).

    Some thoughts to share:

    - talks about monitoring flows, current account deficits, USD shortage. all makes sense.. but betting against a country & central bank? in US, it was trade ahead of the Fed and not against (no matter what you thought of QE or economy), not trading against the JCB, and I would think same applies here re: RMB/Central Bank.

    - someone mention his Japan thesis (last 10 years?) on Yen devaluation / Bug in search of a windshield, all supported by the data but then you have the JCB / Govt Policies... how long do you want to trade against someone who can print money :-) the same apply to RMB/China?

    - on China as the bad actor. IP theft. paying for their military, letting china into the WTO. Seems to be the common press narrative that Kyle is articulating. Hmmm...
    ... IP Theft. What type? Military espionage? pretty sure every country is doing to to every other country. Industrial espionage? Same, companies been doing it to each other for eons. Unfair Trade policies? ie you need to share your trade secrets or partner w/ a local chinese company in order to do business/sell in China (probably this one?). Well, we can always say no, and walk away i don't need your business (or let avarice take over). This reminds me of companies between a rock and hard place selling to Walmart, if you sell, you mess up your pricing in the market with your other customers (as Walmart will sell it at the cheapest price everywhere) but you have volume, or you don't and Walmart goes with your competitor (so you have less market share and may be bankrupt anyways as customers go for the cheaper brand). Damn if you do, and damn if you don't... kinda like China market? Sour grapes much?
    ... I like how Grant remind Kyle the funding (bonds?) for chinese military is not hidden, it's transparent if you do due diligence, but most investors are greedy and going for the investment return and don't care enough to find out... no evil empire intent i think
    ... China in WTO, interesting spin. I don't know much about this, but I don't think China was in WTO from "goodness of heart", didn't it make it easier for multi-nationals to leverage (I won't use language like exploit haha) the cheap labor, land, electricity lack of concern on standards/safety/environment in China? then China grew up and costs and standards got expensive.
    ... i saw another article somewhere that China already files as many patents as USA? and if you go to china at least once/year, you can see the innovations are surpassing the world, be it the bullet trains, or wepay/alipay, services, etc esp in the big cities. They've taken ideas/tech and improved on it. No different from the Japanese in the 70'/80's, the Korean's in 90's/20's and now Chinese. and in the future, maybe Vietnam or India etc... the virtuous cycle continues...

    - interesting take on HK. I live in HK last 20 years. I don't think the general population would agree that last 10 years was the best in HK, except if you own a few properties post GFC. thus, the Occupy Central angst, the young restless against China/mainlanders flooding into HK making everything expensive and taking jobs, life is not getting better when you have to pay $750K USD for 300sqft condo (27 sqm)... wonder how regularly Kyle travels to HK as I'm sure he would get a different perspective.

    In short, I thought Grant had the more balanced view (esp since he lives in Singapore), Kyle shared some fascinating data points on China (for another interview, search for Leland Miller one) and his thinking process, but I'm more inclined to think this may be similar to his Japan/Yen is a bug in search of a windshield thesis.... still waiting for that one to drop.

    thanks for reading

  • MT

    Mark T.

    20 10 2018 06:24

    0       0

    52.39 time stamp
    I disagree with Grant . The Golden Carrot is not important. The concept of Chinese ethics and moral foundation being entirely alien to ours will, in retrospect, be seen as the overarching factor determining outcomes. I am frightened to think that my president and Congress have too little awareness of this as they prosecute policy on my behalf.

  • JB

    Jason B.

    20 10 2018 04:31

    1       0

    Fantastic interview! And I didn't hear any of the background noise that was warned about beforehand!

  • SB

    Stephen B.

    20 10 2018 03:34

    1       0

    Priceless. An amazing hour.

  • rr

    rlw r.

    20 10 2018 03:19

    0       0

    Epic chat. Thanks Kyle & Grant for your many valuable insights.

  • HO

    H2 O.

    20 10 2018 03:00

    15       2

    Well, KB still doesn't understand Chinese politics and how policymakers respond to these kinds of situations. It has cost his firm tons of money. The CNH shorts are piling on, and before the currency craters, PBOC will jack up CNH Hibor again (as they have done numerous times) and the slaughter will recur. There are a lot of trades here, but this doesn't make sense of them. Instead of cheer leading, ask the simple question of where has money been made on China trades, and where has money been lost.

  • CN

    Charles N.

    20 10 2018 01:32

    4       0

    With so much content (noise) in the world today, an interview like this illustrates why RV is head and shoulders above anyone else in financial media. If only every day was a Friday!

  • JL

    John L.

    20 10 2018 00:47

    1       0

    Just went back to my notes on Kyle's interview with Raoul last year.....He was "Spot on" with so many of his macro calls.

  • LK

    Lyle K.

    20 10 2018 00:22

    0       0

    Kyle Bass the master of thinking of the unfathomable. He nailed 07-08 GFC by seeing something that 99.9% of the world missed. His thoroughness always amazes me, it is no wonder why he is one of the best on earth at what he does.

  • CG

    Chase G.

    19 10 2018 22:41

    11       0

    Dear RV team being able to play these videos streaming in the background on an apple device or better yet do picture in picture in the background would be super chill. Thx, great interview!

  • SS

    Sam S.

    19 10 2018 21:41

    6       0

    I'm far more encouraged to hear Washington is well aware of the situation with China, as many of us feel Washington has lost it's way in protecting America/citizens. No question much of our country has been sold down the river and maybe the flow of funds buying influence will be drying up to those doing the selling? I have some of those nickles Kyle talked about in a former interview years back and still worth at least a nickle. Principle protected. Rest of the drama around the world might be a distraction to the real action/risk coming from China/Asia.

  • CC

    Christopher C.

    19 10 2018 21:25

    12       0

    One of the biggest macro differences I have noticed amongst the lion's share of the Titans that RealVision has interviewed, and those great men, whose interviews I have watched closely over the years in other places, is the willingness by the self-made to discuss morality, and the implications of morality at all levels of finance, government, and personhood, etc. A person that makes himself something from nothing, or with little or no advantage to start in life, knows something about himself that someone who has held high station, in part or whole by birth, can never possess. Some fewer can even observe and reflect on the matter dispassionately.

  • GC

    George C.

    19 10 2018 20:24

    1       0

    At 51 minutes, Kyle hits on a major point but it doesn't get due time or attention (perhaps because it is contrary to the narrative that it's white hats vs the black hats). In any case, as usual Kyle informs and stimulates thinking. Hope there is a subsequent interview covering investments topics putting China to the side.

  • AK

    Ai K.

    19 10 2018 20:21

    9       22

    I don't understand why he is using aggressive words like "stealing" or "China makes people go away". Please keep the talk professional, not propaganda. This is Realvision, not Trumpvision. I know Kyle Bass has been wrong about China for many years. China may be going through a tough time in the short term, but they can come out ahead in the long run.

  • DS

    David S.

    19 10 2018 19:46

    0       0

    Is it reasonable to believe that the drop in Hong Kong reserves will drive Hong Kong to drop the dollar peg, which no longer makes sense, and peg to the Yuan? Is this playing into the Chinese hands or is it part of China's strategy to merge Hong Kong into China proper? How many Hong Kong banks have branches or head offices in Singapore? DLS

  • DS

    David S.

    19 10 2018 19:19

    0       0

    The real Bank of China is the Chinese Government that controls all the levers of China's financial assets. What would happen if you factored in all of its financial resources to make your calculations on risk? DLS

  • TP

    Tucker P.

    19 10 2018 18:48

    3       0

    One of the most intelligent conversations unpacking an incredibly complex subject I have ever seen. Kyle's broad perspective is matched only by his knowledge of granular detail. Great job Grant.

  • DD

    Daniel D.

    19 10 2018 17:55

    8       7

    It seems like Kyle is becoming a one trick pony (China). This topic is getting a little long in the tooth. If his thesis is correct (and I'm not saying it is or isn't) and it takes a decade to play out, will he be able to say he was was right? I can tell you it will rain in the desert, tell you for years how and why it will and when it does eight years from now everyone will think I'm so smart? It seems he's been on RV and other places forever pontificating this story. Again, nothing whatsoever against him or his convictions.

  • BM

    Beth M.

    19 10 2018 17:17

    1       0

    Fantasic...always appreciate (to the Nth degree) Kyle's insights...shining lights on doors that we continue to see opening and being able to understand why certain doors are opening! Thank you

  • BP

    Bryce P.

    19 10 2018 16:47

    2       18

    I’d have to watch this first but I can’t imagine I’m going to agree with Kyle on his China thoughts. I just think he’s dead wrong on China. I like Kyle and enjoy listening to him but he’s just dead wrong on China pure and simple.

  • MC

    Minum C.

    19 10 2018 16:16

    17       19

    This interview comes across as being too politically biased for me to place any weight on what is actually being said. I down voted it. It seems fitting for Grant to be wearing red socks for an interview on China. Perhaps it will bring him good fortune in the gold market in the coming years.

  • GF

    George F.

    19 10 2018 16:10

    2       1

    " China to ascend in the WTO in 2001. We lost 4 million jobs "

    2001 something else happened that year. Oh, The Forever War started. Is it possible that China agreed to the whole craziness in exchange for a favorable commerce environment? BTW, how is it that you never hear anyone talking about the forever war as driving finance and the economy.

    Hong Kong. I never have been there but I loved the movies. Did China destroy the HK film industry?

    "I think they know more about the bigger picture than we'll ever know" Conspiracy theory?

    " one of the preeminent thinkers in the hedge fund community" I think some humility is due, search on [kyle bass nickels] for details.

  • JG

    John G.

    19 10 2018 15:44

    2       0

    Thank you, Grant and Kyle for the illuminating update on China.

  • PR

    Pedro R.

    19 10 2018 15:06

    14       0

    Great interview one of best narrators of China problem.
    It should be a two hours interview. My only criticism is that probably I will have to wait another year to see a new interview with Kyle in Real Vision.

  • ZH

    Zayd H.

    19 10 2018 13:48

    5       0

    Kyle/Grant - great interview. I was hoping the interview was going to be more about Kyle's take on his interview with Graham Allison. Instead it seemed more of a well-reasoned argument as to the bear case for RMB.

    My interpretation of Kyle's thoughts in this interview here, as it pertains to the USA / China Thucydides Trap, is that the likely outcome is war. This is based on statements by Kyle such as "we are funding Chinese warships", "we will seek reparations for IP theft", etc. But that is just me tee'ing up what I hope is an addendum interview with Kyle...

  • CR

    Carmen R.

    19 10 2018 13:37

    13       0

    Kyle is great. But Grants interviewing skills are second to none!

  • XP

    X P.

    19 10 2018 13:24

    7       1

    This interview is Gold!

  • RS

    Ruben S.

    19 10 2018 13:16

    1       0

    Very interesting interview, and as always with Mr Bass very detailed analysis. i m just surprised that you focus so much into Current account shrinkage to justify the timing of the Chines bobble burst without mentioning the "risk" that they could get their Dollars through the capital account. And being such a big economy (enough to be it only in terms of size) you have A LOT of dollars willing to get there just to match portfolio exposure to share of global GDP. Hence, don't you think the Chines could delay the burst quit a lot if they open completely the capital account ?

  • JS

    John S.

    19 10 2018 12:07

    4       0

    Excellent

  • AR

    Abishek R.

    19 10 2018 11:43

    33       2

    Very well moderated discussion by G Williams. However, in the China vs. USA coverage, Real Vision is almost only covering one side of the story for the past year, so while useful its not the complete picture.

    How about somebody like Kiril Sokoloff / G Williams travelling to Beijing or Shanghai with a Chinese interpreter and speaking with Chinese economists about their view of the situation and why they feel this will ultimately end with USD crashing or USA unable to finance itself.

  • Nv

    Nick v.

    19 10 2018 10:57

    3       3

    You put a duty on an imported product, priced in USD.
    The US company tells you it will pass this price increase on the imported good onto consumers.
    You believe it will cause no price increase for US consumers.
    Riiiiiight

  • CM

    Carlos M.

    19 10 2018 10:45

    7       1

    great interview!!! only one question I know China has invested for over a decade in EM countries in order to have better access to raw materials, if their main problem is the CA turning into a deficit and not having USD to finance China inc, isnt it possible that they start a parrallel market in CNY to buy Oil for example from the saudi, iran russia venezuela, etc? This particularly so when Trump has given a clear message of World trade as a 0 sum game and every man for himself. Is it just an unfeasible task to replace the dollar as the commodities denominator?

  • CL

    Charles L.

    19 10 2018 10:43

    2       0

    Speachless...Grant, you bring out the best of those you interview. Outstanding. P.S: wonderful socks!!

  • JS

    John S.

    19 10 2018 10:11

    6       0

    Superb

  • EA

    Eldon A.

    19 10 2018 09:06

    4       1

    Great interview