Kyle Bass: Meet the Texan investor who made millions from the credit crunch
BC Business Magazine Article
I got interviewed for an article in BC Business Magazine about a month ago. Whee! Thanks guys… the photoshoot was a blast and you did a pretty decent job representing my ideas. 
No online version available yet but I think the scan is large enough to read if you’re interested.
Awesome photo by Jeremy Maude.
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It’s been a torrid three years for most people since the world economy began to go into meltdown.
But not everyone has suffered.
Kyle Bass founded hedge fund Hayman Capital in Dallas, Texas, in 2006 in his late 30s after saving $ 10million from selling bonds for Wall Street firms.
He made millions gambling against the sub-prime mortgage bond market – and now he’s betting on the collapse of whole countries in Europe.
In the money: Kyle Bass founded hedge fund Hayman Capital in Dallas, Texas, in 2006 after saving $ 10million from selling bonds for Wall Street firms
Mr Bass’s story so far has been documented in Michael Lewis’s new book ‘Boomerang: The Meltdown Tour’ – serialised in The Sunday Times today.
Mr Lewis charts how Mr Bass was one of only 15 people who placed ‘enormous bets that vast tracts of American finance would go up in flames’.
Mr Bass believed as the sub-prime market collapsed that the financial crisis was being hidden by rich western governments.
He said these nations had taken on ‘dodgy securities worth trillions’, as worldwide debts doubled over just a few years to $ 195trillion.
A big issue he identified was large banks being treated as ‘extensions of their governments, sure to be bailed out in a crisis’.
Clever man: Mr Bass made millions by gambling against sub-prime mortgage bond market – and now he’s betting on the collapse of whole countries
Falling prices: Traders work on the floor of the New York Stock Exchange in Manhattan last week, as the Dow Jones suffered another bad month
Mr Bass spoke to Harvard economics expert Kenneth Rogoff about sovereign balance sheets and finally realised the scale of the problem.
New Book: Michael Lewis’s Boomerang: The Meltdown Tour is out this week
‘The sub-prime mortgage crisis was more symptom than cause,’ Mr Lewis wrote. ‘Deeper social and economic problems that gave rise to it remained.’
This made Mr Bass believe another bigger economic crisis was brewing – and he started to buy ‘credit default swaps’ on European countries, according to the book serialisation in The Sunday Times.
These let him bet against a bond’s price without owning it – like ‘default insurance on another person’s investments’.
He believes Greece, Ireland, Italy,
Switzerland, Portugal and Spain are the countries least likely to be
able to pay off their debts.
He bought Greek default insurance for 11 basis points – meaning insuring $ 1m of bonds would cost $ 1,100 dollars a year.
‘It may not be the end of the world. But a lot of people are going to lose a lot of money. Our
goal is not to be one of them’
Kyle Bass
A Greek default would make it pay down its debt by around 70 per cent, meaning every $ 1,100 bet would get him an astonishing $ 700,000, Mr Bass said.
Mr Bass, who lives in a 40,000 sq ft house, has also bought 20 million nickels for $ 1million. He said the metal inside each coin is worth 6.8 cents.
‘It may not be the end of the world,’ Mr Bass added. ‘But a lot of people are going to lose a lot of money. Our goal is not to be one of them.
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