Good interview of Kyle Bass of Hayman Capital Partners by CNBC's David Faber. Kyle Bass made almost as much as John Paulson betting on the housing collapse. His focus now is on sovereign risk. The second part of the interview is what is interesting. The last couple of posts I mention that Greece to me is the New Century Financial and a warning of things to come. Kyle Bass has his crosshairs directly on Japan. According to Kyle 56% (I think that was the number) of U.S. debt is bought by people overseas. In Japan that number is 6% meaning the Japanese people are the ones funding its deficit. According to Bass the problem is that the demographic changes in Japan is going to cause the Japanese to become a net seller of government debt. The largest pension fund in Japan has told the Japanese minister that it has begun becoming a net seller. What that means is that Japan must go overseas to borrow money. Japan's debt will than reprice to have a higher interest rate. A one to two percent increase would have devastating consequences. He says the consequences for the US going down the same path are 10 to 15 years out. I would argue if he is right on Japan it will have massive implications worldwide for the U.S. and Europe long before 2020.
Entire video can be watched here.