China is very big and very rich, but something is happening to that capitalistic communist country that might suck some of that richness out of their banking empire. According to Kyle Bass, the notorious hedge fund investor as well as other big-money investors, China is heading for unprecedented capital reserve expenditures that could push the world into a recession that rivals the 2008 economic disaster. According to an article published by Bloomberg.com, China’s banks are carrying more than $2.4 trillion in bad consumer and business debt on their books.
China has been trying to offset their manufacturing decline and subsequently their gross domestic product decline, by building a consumer-based economy from scratch. In the process of doing that, the Chinese banks approved an enormous amount of loans that have turned out to be uncollectible for a variety of reasons. Kyle Bass and other investors think the Chinese will have to devalue their currency because of the capital reserve expenditures, and the investors are betting billions that will happen in the next 12-18 months. If it does, Bass will make another big investment killing like the one he experienced in 2008. Bass bet the sub-prime mortgage industry would implode back then, and he was right. His small investment firm, Hayman Capital Management made billions on that bet.
But according to an article posted by usefulstooges.com, Bass has been involved in some questionable investment strategies over the last eight years. Bass got involved in the General Motors steering mechanism issue, and the GM airbag debacle and the press he got from his involvement wasn’t pretty. Bass was trying to salvage his stock investment, and it backfired. Bass was also caught in the Argentina bond default issue. Bass decided to take Argentina’s side against the hedge funds that lost billions on the default criticized Bass for his comments and his involvement.
The latest reputation misstep that Bass has added to his long list of missteps is his relationship with patent troll Erich Spangenberg. Spangenberg is accusing drug companies of price gouging, and before the news comes out, Bass is shorting the stock of the accused drug companies.