Kyle Bass Letter

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bill8902
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Kyle Bass Letter

Post by bill8902 »

Hi Bogleheads,

I'm wondering how many of you structure your portfolios based on macro economic issues like the us debt crisis. Wondering if any of you follow Kyle Bass at all or have read his most recent letter to investors. It paints an ugly picture for what is yet to come in the US and if he is right it would have a major impact to portfolios invested in equities.

Thoughts appreciated
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Re: US Debt Crisis - Kyle Bass Letter

Post by Grt2bOutdoors »

We tend to ignore the "noise" and "stay the course".
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Elbowman
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Re: US Debt Crisis - Kyle Bass Letter

Post by Elbowman »

For a talking head to gain followers, it's more important to make a fantastic prediction than an accurate prediction.
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bill8902
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Re: US Debt Crisis - Kyle Bass Letter

Post by bill8902 »

Kyle bass has made some exact calls regarding real estate in 08-09 and greece more recently. I think it would be dumb to ignore his views. I'm not talking about Jim Cramer here. Staying the course is great but if there's a crisis a year or two before you need your retirement funds you are going to be in a bad situation.
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Re: US Debt Crisis - Kyle Bass Letter

Post by livesoft »

OK, tell me how you have personally restructured your portfolio based on this letter.
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Re: US Debt Crisis - Kyle Bass Letter

Post by Grt2bOutdoors »

bill8902 wrote:Kyle bass has made some exact calls regarding real estate in 08-09 and greece more recently. I think it would be dumb to ignore his views. I'm not talking about Jim Cramer here. Staying the course is great but if there's a crisis a year or two before you need your retirement funds you are going to be in a bad situation.

You asked for our thoughts. Now you don't like the thoughts we expressed, so you then state your opinion that it would be "dumb to ignore his views". So now, tell us - do you have a vested interest in this newsletter? You are a relatively new poster, I'd like to give you the benefit of the doubt, but I don't appreciate being called "dumb for ignoring the noise".
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Re: US Debt Crisis - Kyle Bass Letter

Post by Jebediah »

I haven't read his recent letter, but in the past Mr. Bass's long term recommendation was to own "real, productive assets" and not equities. I would at least agree with him that it's crazy to dedicate 90% of one's risk to equities, such as most bogleheads do in a 60/40 portfolio.
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Re: US Debt Crisis - Kyle Bass Letter

Post by Austintatious »

Jebediah wrote:I haven't read his recent letter, but in the past Mr. Bass's long term recommendation was to own "real, productive assets" and not equities. I would at least agree with him that it's crazy to dedicate 90% of one's risk to equities, such as most bogleheads do in a 60/40 portfolio.
What, then, would you recommend in lieu of that 60/40 portfolio?
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Re: US Debt Crisis - Kyle Bass Letter

Post by Booper »

bill8902 wrote:Hi Bogleheads,

I'm wondering how many of you structure your portfolios based on macro economic issues like the us debt crisis. Wondering if any of you follow Kyle Bass at all or have read his most recent letter to investors. It paints an ugly picture for what is yet to come in the US and if he is right it would have a major impact to portfolios invested in equities.

Thoughts appreciated
I don't, but that's mostly because I don't know how. Or rather, I do so by not buying muni bonds. I follow the muni crisis pretty closely. It's scary stuff.
Will that happen on the federal level? I just don't know, and I just don't know what it would mean to protect myself.

I think that you should have posted a link to the newsletter. It's easy enough to find via google:

http://www.gurufocus.com/news/198008/ky ... v-15-2012-

I'm about a third of the way thru now. It's scary stuff. But he writes in a pretty funny way. There are a lot of gems in there. I first got introduced to him in Michael Lewis' book. I wish I could go out to lunch with him and talk more about this stuff in person.
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Re: US Debt Crisis - Kyle Bass Letter

Post by sscritic »

bill8902 wrote:Staying the course is great but if there's a crisis a year or two before you need your retirement funds you are going to be in a bad situation.
If you are retiring next year, you should have already decided on your course. It's your course, not anyone else's, so if you want to put all your money into gold or whatever, go for it. I am already retired, so it is too late to save me.

Oops, I just reread what you wrote. Since I will need my retirement funds every year for the next 40 years, which year is the year one or two before the year I need my retirement funds? That would seem to be all of the next 38 years (it is too late to do anything about 2011 in preparation for 2013).
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Re: US Debt Crisis - Kyle Bass Letter

Post by JD »

I am not doing anything, however, I reduced my equities and increased my bond allocation. It stands about 30/60 +- for the last 4 or 5 years and no plan to change the plan!
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Re: US Debt Crisis - Kyle Bass Letter

Post by Grt2bOutdoors »

Jebediah wrote:I haven't read his recent letter, but in the past Mr. Bass's long term recommendation was to own "real, productive assets" and not equities. I would at least agree with him that it's crazy to dedicate 90% of one's risk to equities, such as most bogleheads do in a 60/40 portfolio.
Most folks have to live some where - now assume that a typical Boglehead is gainfully employed and living in real property (a home) that enables them to maintain a productive career. To me, that fits the bill as owning "real, productive assets". Owing a coal mine or a natural gas well at today's prices is not what I'd call a "real, productive asset", rather it's a real sinkhole or black hole or a bottomless pit. What other real, productive assets are there - farmland? - well, most would say that class is in a "bubble" and seeing many would need leverage to make such a purchase - no thank you!
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Re: US Debt Crisis - Kyle Bass Letter

Post by Elbowman »

Jebediah wrote:I haven't read his recent letter, but in the past Mr. Bass's long term recommendation was to own "real, productive assets" and not equities. I would at least agree with him that it's crazy to dedicate 90% of one's risk to equities, such as most bogleheads do in a 60/40 portfolio.
Interesting. When Warren Buffet suggests owning real, productive assets, he is specifically referring to equities, right? Whats a real, productive asset to Mr. Bass?

Bill - no one is going to deny that you would do well if you listen to the right people at the right times. But Bogleheads are data-driven investors, and the data overwhelmingly suggests that the vast majority of investors should choose a long term asset allocation and not react to the current headlines.
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Re: US Debt Crisis - Kyle Bass Letter

Post by Grt2bOutdoors »

Elbowman wrote:
Jebediah wrote:I haven't read his recent letter, but in the past Mr. Bass's long term recommendation was to own "real, productive assets" and not equities. I would at least agree with him that it's crazy to dedicate 90% of one's risk to equities, such as most bogleheads do in a 60/40 portfolio.
Interesting. When Warren Buffet suggests owning real, productive assets, he is specifically referring to equities, right? Whats a real, productive asset to Mr. Bass?

Bill - no one is going to deny that you would do well if you listen to the right people at the right times. But Bogleheads are data-driven investors, and the data overwhelmingly suggests that the vast majority of investors should choose a long term asset allocation and not react to the current headlines.
Just read his portfolio - it's a who's who of extreme speculation including his 50% holding of "bulletproof" subprime bonds :shock: , followed by a real productive holding in Hyatt Hotels and Sealy Corp (bedding anyone? :P ). Sounds rather undiversified to me.
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Re: Kyle Bass Letter

Post by Jack »

What is this debt crisis you speak of?

Perhaps you haven't noticed but U.S. Treasury rates are the lowest in history. The burden of carrying the debt, as a portion of the budget and as a percent of GDP, is the lowest since WWII.
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Re: Kyle Bass Letter

Post by Jebediah »

Booper wrote:
I'm about a third of the way thru now. It's scary stuff. But he writes in a pretty funny way. There are a lot of gems in there. I first got introduced to him in Michael Lewis' book. I wish I could go out to lunch with him and talk more about this stuff in person.
I agree, he's a very interesting guy. Here is a long interview with him where he discusses his debt crisis ideas:

http://www.youtube.com/watch?v=xyzujydn2AU

Austintatious wrote:
What, then, would you recommend in lieu of that 60/40 portfolio?
Risk parity / Permanent / All Weather portfolios + market neutral strategies. One that considers economic cycles and diversifies risk across more than one asset class.

Grt2bOutdoors wrote: Most folks have to live some where - now assume that a typical Boglehead is gainfully employed and living in real property (a home) that enables them to maintain a productive career. To me, that fits the bill as owning "real, productive assets".


Absolutely. Real estate of various sorts is the biggie in that dept.
Grt2bOutdoors wrote: Owing a coal mine or a natural gas well at today's prices is not what I'd call a "real, productive asset", rather it's a real sinkhole or black hole or a bottomless pit.


That's a false, blanket statement. Of course, and as always, it's true in some situations and untrue in others.
Grt2bOutdoors wrote:What other real, productive assets are there - farmland? - well, most would say that class is in a "bubble" and seeing many would need leverage to make such a purchase - no thank you!


Not so. "Most" would not say that. Obviously, it depends on the specifics.
Elbowman wrote:But Bogleheads are data-driven investors, and the data overwhelmingly suggests that the vast majority of investors should choose a long term asset allocation and not react to the current headlines.
Bogleheads are world class when it comes to parsing out the minor differences between one corner of the stock market and another, but they completely fall for the lazy lie of the mainstream financial community which is: "stocks will win forever, don't worry about it". The future of responsible investing will consider equities as one of many asset classes, not the sole asset class. The more equity sub-class correlations tend toward 1.0, the less the financial product sellers will be able to pass off 'tilting' as diversification.
Elbowman wrote:When Warren Buffet suggests owning real, productive assets, he is specifically referring to equities, right? Whats a real, productive asset to Mr. Bass?
Not sure about Warren Buffet, but Kyle Bass's definition of real productive assets means thing which are not financial products, ie not equities.
Grt2bOutdoors wrote:Just read his portfolio - it's a who's who of extreme speculation including his 50% holding of "bulletproof" subprime bonds :shock: , followed by a real productive holding in Hyatt Hotels and Sealy Corp (bedding anyone? :P ). Sounds rather undiversified to me.
He runs hedge funds and has made a killing for his investors.
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Re: Kyle Bass Letter

Post by beammeupscotty »

Jebediah wrote:He runs hedge funds and has made a killing for his investors.
It seems more like he's killing his investors' money these days.
http://www.businessinsider.com/whoa-kyl ... ous-2012-5
Last edited by beammeupscotty on Wed May 21, 2014 8:31 pm, edited 3 times in total.
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Re: Kyle Bass Letter

Post by nisiprius »

Why You Should Ignore Economic Forecasts

a) All of them are insanely unreliable. The academics, who are interested primarily in their reputation among peers rather than among paying clients, admit it freely.

b) If I can't pick stocks myself, why would I think I could pick seers? How do I know I've got the guy who really sees the future and not just a guy who's made some lucky calls?

c) If I were going to be anything but a total market index investor, if I wanted to seek an edge, macroeconomics are the last place I'd look. What information does Kyle Bass have about macroeconomics that everyone else doesn't have? If he actually does have seriously valuable information, why would he give away his edge by sharing it in a timely way with me for free?
Last edited by nisiprius on Tue Nov 27, 2012 10:47 am, edited 1 time in total.
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Re: Kyle Bass Letter

Post by Grt2bOutdoors »

Jebediah wrote:
Booper wrote:
Grt2bOutdoors wrote:Just read his portfolio - it's a who's who of extreme speculation including his 50% holding of "bulletproof" subprime bonds :shock: , followed by a real productive holding in Hyatt Hotels and Sealy Corp (bedding anyone? :P ). Sounds rather undiversified to me.
He runs hedge funds and has made a killing for his investors.
Get real, running a $100MM fund in sea of billion dollar goliaths is like comparing a minnow to a 600 pound tuna. Made a killing, as Kalon said, more like "killing them softly with his song and dance". :twisted:
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Re: Kyle Bass Letter

Post by Howard Donnelly »

nisiprius wrote: What information does Kyle Bass have about macroeconomics that everyone else doesn't have? If he actually does have seriously valuable information, why would he give away his edge by sharing it in a timely way with me for free?
Excellent point.
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Re: Kyle Bass Letter

Post by Jebediah »

Actually it's kind of a silly point. It doesn't hurt him any to tell you he estimates that Japan and Greece will fall apart and he's positioned accordingly. Furthermore I suspect he knows that everyone will cling to their normalcy bias and refuse to believe it regardless of how true it becomes.

The old 'has the same info as you do' argument also misses the point. Everyone might have the same info, but they certainly don't have equal ability to interpret that information and estimate outcome probabilities. Why is that? Biases of all sorts, I suppose. Kyle Bass returned some multi hundred (maybe thousand) percent on his housing bubble bets. He later remarked on how amazing it was that he had the exact same information as everyone else and yet they couldn't see what was right there to see. The point isn't that I think he will always get it right, it's that 'having the same information' isn't always the end of the story.

The kind of economic outcome forecasting Bass, Grantham, et al work on is fundamentally in the same spirit as the stock return forecasting Vanguard does, which was recently touted on these forums by Larry and others as a necessary endeavor. Funny how when it's stock-centric it's ok, but when it's the same exercise applied to multiple asset classes or economic outcomes, it's nasty fortune-telling and time to put our heads back in the sand. I think those who are so myopically focused on stocks will eventually (not holding my breath) evolve to accept broader investing and forecasting.
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Re: Kyle Bass Letter

Post by HomerJ »

Jebediah wrote:Actually it's kind of a silly point. It doesn't hurt him any to tell you he estimates that Japan and Greece will fall apart and he's positioned accordingly.
kalons wrote:
Booper wrote:He runs hedge funds and has made a killing for his investors.
It seems more like he's killing his investors' money these days.
http://www.businessinsider.com/whoa-kyl ... ous-2012-5
His Japan fund has lost 60% from inception.

Why would I listen to him and not someone else?

We Bogleheads are not myopically focused on stocks... Almost none of us are 100% stocks. We use bonds, and REITS, and many of us own gold and silver ETFs.

What we DO know is what we don't know.... And that's the future. We do assume that stocks and bonds will give us positive returns over the long term. We invest in broad market index funds with the lowest costs, rebalance occasionally (forces us to sell our winners and buy our losers - i.e. sell high, buy low), but mostly "stay the course".

We don't try to make changes to our portfolios based on other people's predictions. Because we know that no one can predict the future.
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Re: Kyle Bass Letter

Post by HomerJ »

nisiprius wrote:b) If I can't pick stocks myself, why would I think I could pick seers? How do I know I've got the guy who really sees the future and not just a guy who's made some lucky calls?
This is the most important point.
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Re: Kyle Bass Letter

Post by rmelvey »

As the news article clearly points out, Kyle Bass has very little understanding of fiat monetary systems and the difference between being a currency issuer and a currency user. Just like thousands of investors before him, he will probably be impaled on a Katana with his short yen trade.
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Re: Kyle Bass Letter

Post by Jebediah »

HomerJ wrote:
We Bogleheads are not myopically focused on stocks... Almost none of us are 100% stocks. We use bonds, and REITS, and many of us own gold and silver ETFs.
Most have 90+% of their risk in stocks because bonds have about 1/5 the risk of equities. "Take your risk on the equity side" is a common theme.
HomerJ wrote: What we DO know is what we don't know.... And that's the future. We do assume that stocks and bonds will give us positive returns over the long term.


That's quite a contradiction! Why do you assume this? And to such an extent as to bet the farm on this one asset class ?
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Re: Kyle Bass Letter

Post by Jebediah »

HomerJ wrote:
nisiprius wrote:b) If I can't pick stocks myself, why would I think I could pick seers? How do I know I've got the guy who really sees the future and not just a guy who's made some lucky calls?
This is the most important point.
I think it's missing the point actually. It's not about picking a seer or whether or not he gets the next trade right. It's about the endeavor of estimating economic outcome probabilities. If it's "necessary" to do this for equities, why is it not necessary to do so for multiple assets or economic conditions? Maybe Bass's methodology is wrong, I don't know, but I find it interesting how dogmatic people can be about their absolute refusal to listen to anything or look at the world around them. It's a religion of incuriosity, happily sold to you by the financial industry, low cost or otherwise.
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Post by Tigermoose »

bill8902 wrote:Hi Bogleheads,

I'm wondering how many of you structure your portfolios based on macro economic issues like the us debt crisis. Wondering if any of you follow Kyle Bass at all or have read his most recent letter to investors. It paints an ugly picture for what is yet to come in the US and if he is right it would have a major impact to portfolios invested in equities.

Thoughts appreciated
*The following is based on reading the above linked Newsletter put out by Mr. Kyle Bass.


I don't agree with Mr. Bass's understanding or assessment of monetary policy and money supply. [Economic policy opinion removed by admin LadyGeek]
Institutions matter
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Re: Kyle Bass Letter

Post by Booper »

kalons wrote:
Booper wrote:He runs hedge funds and has made a killing for his investors.
It seems more like he's killing his investors' money these days.
http://www.businessinsider.com/whoa-kyl ... ous-2012-5
I didnt say the thing that youre attributing to me!
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Re: Kyle Bass Letter

Post by nisiprius »

Jebediah wrote:I think it's missing the point actually. It's not about picking a seer or whether or not he gets the next trade right. It's about the endeavor of estimating economic outcome probabilities.
But if I don't think I can do this myself, I need to hire someone to do it for me, don't I? How do I know Bass is the one?
If it's "necessary" to do this for equities...
I don't think it's necessary to do this for equities. I don't do it. I call it "tuning out the noise." Just who says it's "necessary?" Please point me to a place in the Bogleheads' investment philosophy that talks about estimating economic outcome probabilities. Please point me to a place in Twelve Pillars that talks about it. All I see is
Pillar 11... If you are worried about the coming bear market, excited about the coming bull market, fearful about the prospect of war, or concerned about the economy, the election, or indeed the state of mankind, in all probability your opinions are already reflected in the market. The financial markets reflect the knowledge, the hopes, the fears, even the greed, of all investors everywhere. It is nearly always unwise to act on insights that you think are your own but are in fact shared by millions of others.
Jack Bogle is talking about macroeconomic insights here. He says it's "nearly always unwise to act on them."
...I find it interesting how dogmatic people can be about their absolute refusal to listen to anything or look at the world around them. It's a religion of incuriosity, happily sold to you by the financial industry, low cost or otherwise.
How many Kyle Basses are there? How much time do you expect me to spend giving serious consideration to each one?

Go to YouTube. Search on the word "overunity." You will find numerous videos of perpetual motion machines, in noisy and energetic operation, creating power from nowhere, and people explaining exactly how they work. Do you give proper consideration to each one? If you don't, aren't you worried about the possibility of overlooking the greatest investment opportunity in all of human history.

Real people in the world win state lotteries all the time, and some of them do it by reading Raven's Lucky Number Dream Book. Should I be dogmatically refusing to consider the possibility that Raven's Lucky Number Dream Book has some special insight into the workings of the universe that I don't have?
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Re: Kyle Bass Letter

Post by Random Musings »

I have not yet seen any concrete portfolio that an average investor can use to "replicate" Bass's thoughts.

I think I'll stick with my investment plan.

RM
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Re: Kyle Bass Letter

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This topic has run its course and is locked.Economic policy discussions (and politics) are off-topic for this forum. See: Forum Policy
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Re: Kyle Bass Letter

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After receiving a PM, I removed an economic policy comment and reopened the thread. Please avoid further discussions on economic policy / politics.
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Re: Kyle Bass Letter

Post by heyyou »

There is always someone in the limelight who did choose to make the right moves at the right time in the recent past. In no way does that mean that they will be right next time, but they may well be right until there is a new change.

I know that I do not have the ability to see what the future will be, nor that I have the insight to choose someone to do that for me, so I'm stuck with having to accept long term, average market returns, minus expenses. For those who can do better, go ahead, but I can't. In fact, please go ahead. Why would someone want confirmation from conservative, stodgy investors like the posters here? We know how to acquire a retirement based on 15-25 multiples of our annual incomes. Mr. Bass is discussing investments that are hundreds of times my lifetime income.

Today, I started re-reading "Boomerang" by Michael Lewis. He did ask Mr. Bass where he invested his mom's money and Bass answered that it was in gold and PMs. Lewis noted that gold had only doubled while Bass's arbitrage had grown by 13 multiples. Taleb did something very similar and has not repeated his performance. He may be wise enough to stop trying. Sounds like Mr. Bass still wants more.

If you can afford it, put 90% of your assets in low risk assets, and 5% in high risk assets, and 5% in very high risk ones.
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Re: US Debt Crisis - Kyle Bass Letter

Post by Jerilynn »

Booper wrote:

I think that you should have posted a link to the newsletter. It's easy enough to find via google:

http://www.gurufocus.com/news/198008/ky ... v-15-2012-

I'm about a third of the way thru now. It's scary stuff. But he writes in a pretty funny way. There are a lot of gems in there. I first got introduced to him in Michael Lewis' book. I wish I could go out to lunch with him and talk more about this stuff in person.
I'll betcha a pizza that you would be the one paying for the lunch. :)
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)
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Re: US Debt Crisis - Kyle Bass Letter

Post by VennData »

bill8902 wrote:Kyle bass has made some exact calls regarding real estate in 08-09 and greece more recently.
And he was wrong about stocks in '09, very very wrong, and wrong about bonds. So he's batting .500. Anyone throwing darts can bat .500. Ignore Kyle Bass and his crackpot nonsense. The guy "invests" in nickles:

http://www.economicpolicyjournal.com/20 ... llars.html
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Re: Kyle Bass Letter

Post by Jebediah »

nisiprius wrote:
Jebediah wrote:If it's "necessary" to do this for equities...
I don't think it's necessary to do this for equities. I don't do it. I call it "tuning out the noise." Just who says it's "necessary?"
Larry Swedroe is one example. He recently wrote an article + forum thread on the necessity of forecasting stock returns in investment planning. Anyone who decides to bet their money on financial markets (as we certainly do) is making a forecast of some sort. Whether you model it in your head or via computer simulation, there is always an estimated outcome distribution, you can't pretend that there isn't. How sure are you that your estimation is good? How fat is your left tail? Maybe there are reasonable scenarios heretofore unconsidered that make it fatter than you thought it was.

IMO, the point of this thread is only that Kyle Bass is reminding you of the left tail that you might have rather ignored. I happen to think he does so plausibly, others may disagree with his thesis. But nobody is saying "Kyle will be right about the future, so time your buys and sells accordingly". The future is going to be whatever it is despite our probability curves. But that doesn't mean they don't exist and can't be thought about.
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Re: Kyle Bass Letter

Post by HomerJ »

Jebediah wrote:
nisiprius wrote:
Jebediah wrote:If it's "necessary" to do this for equities...
I don't think it's necessary to do this for equities. I don't do it. I call it "tuning out the noise." Just who says it's "necessary?"
Larry Swedroe is one example. He recently wrote an article + forum thread on the necessity of forecasting stock returns in investment planning. Anyone who decides to bet their money on financial markets (as we certainly do) is making a forecast of some sort. Whether you model it in your head or via computer simulation, there is always an estimated outcome distribution, you can't pretend that there isn't. How sure are you that your estimation is good? How fat is your left tail? Maybe there are reasonable scenarios heretofore unconsidered that make it fatter than you thought it was.

IMO, the point of this thread is only that Kyle Bass is reminding you of the left tail that you might have rather ignored. I happen to think he does so plausibly, others may disagree with his thesis. But nobody is saying "Kyle will be right about the future, so time your buys and sells accordingly". The future is going to be whatever it is despite our probability curves. But that doesn't mean they don't exist and can't be thought about.
The only forecast I'm making is that stock market will go up over the long term... You already asked why I thought this way... Because, so far, it always has. Because economic growth, and population growth, so far, has always been positive over the long-term (And even if the stock market doesn't go up, there's always dividends)... I still see plenty of growth available long-term in this world. There's a billion Chinese and Indians that will probably move into the middle-class over the next 20-30 years, and they are going to want to buy refrigerators and razor blades.

I don't ignore the left-tail... And I don't try to forecast stock returns... I live well below my means, and save a ton... I'm 50/50 stocks/bonds with a bit of gold and silver (technically, I'm 48/48/4). The only difference between a 4% real return over the next 20 years and a 2% real return is if I retire at 55 or 60... And if the real return over the next 20 years is 0% a year, or if stocks drop 50% and never come back, then I'm ready to accept a lower standard of living or work until I drop.

Tell me, exactly what does Kyle suggest, in concrete terms, to protect oneself's from the left-tail? What moves can one do to protect yourself from the left-tail without hurting your chances at the much more likely center curve area?

What exactly is a "real, productive asset"? How much of my portfolio should be composed of real, productive assets? Do they not also have risk? Do they not also have a left-tail where they lose money? Will investing heavily in these real productive assets keep me safe if disaster strikes, but leave me poorer if the much more likely normal economic progression takes place?
Jebediah
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Re: Kyle Bass Letter

Post by Jebediah »

HomerJ wrote:
The only forecast I'm making is that stock market will go up over the long term...
I don't ignore the left-tail... And I don't try to forecast stock returns...
um...
HomerJ wrote: Tell me, exactly what does Kyle suggest, in concrete terms, to protect oneself's from the left-tail? What moves can one do to protect yourself from the left-tail without hurting your chances at the much more likely center curve area?
diversification

HomerJ wrote: What exactly is a "real, productive asset"?
farms, real estate, timber, goats, forklifts, etc
HomerJ wrote: How much of my portfolio should be composed of real, productive assets?
it's your AA
HomerJ wrote: Do they not also have risk? Do they not also have a left-tail where they lose money?
nope, they are risk free ;-)
HomerJ wrote: Will investing heavily in these real productive assets keep me safe if disaster strikes, but leave me poorer if the much more likely normal economic progression takes place?
yes; no
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HomerJ
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Re: Kyle Bass Letter

Post by HomerJ »

Jebediah wrote:
HomerJ wrote: Will investing heavily in these real productive assets keep me safe if disaster strikes, but leave me poorer if the much more likely normal economic progression takes place?
yes; no
So, there's no chance of real estate, farms, and goats doing worse than the stock market?

Shouldn't I be 100% in real estate, farms, and goats then? Is that what Kyle Bass is saying?
Jebediah
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Re: Kyle Bass Letter

Post by Jebediah »

HomerJ

You seem confused. It's simple: Diversification means exposure to different kinds of risks. You don't know what will outperform when, but truly diverse asset classes will behave differently in different economic scenarios. So have some of each.
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HomerJ
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Re: Kyle Bass Letter

Post by HomerJ »

Jebediah wrote:HomerJ

You seem confused. It's simple: Diversification means exposure to different kinds of risks. You don't know what will outperform when, but truly diverse asset classes will behave differently in different economic scenarios. So have some of each.
Well duh...

Is that what Kyle Bass is saying? Diversify across all asset classes? Buy equal amounts of farms, goats, stocks, and bonds? Or is he predicting that stocks will crash and burn and that people should avoid them?

Sounds like you actually agree with us Bogleheads... Diversification is important to us. Because we don't know what is going to happen next. We don't try to change our asset allocation based on what we "think" is going to happen in the future...

Unlike Kyle Bass.
Elbowman
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Re: Kyle Bass Letter

Post by Elbowman »

Jebediah wrote:
HomerJ wrote: Will investing heavily in these real productive assets keep me safe if disaster strikes, but leave me poorer if the much more likely normal economic progression takes place?
yes; no
Partner, that there's what we call a free lunch. And we don't take kindly to fellers who come round promise'n a free lunch.

// its late...
Verde
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Experts

Post by Verde »

Jebediah wrote:
HomerJ wrote: What exactly is a "real, productive asset"?
farms, real estate, timber, goats, forklifts, etc
A tenet of Boglehead philosophy is that index funds (invested in listed securities) are priced by liquid markets eliminating the need for investors to have- or hire skill to determine value.

These “real productive assets” trade in illiquid, inefficient markets where the experts have an edge.

How do I figure out the right price to pay? Do you think price matters?

Should I pay Kyle Bass or someone else for this expertize, how do I identify the best valuation specialist?
Jebediah
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Re: Kyle Bass Letter

Post by Jebediah »

HomerJ wrote:
Jebediah wrote:HomerJ

You seem confused. It's simple: Diversification means exposure to different kinds of risks. You don't know what will outperform when, but truly diverse asset classes will behave differently in different economic scenarios. So have some of each.
Well duh...

Is that what Kyle Bass is saying? Diversify across all asset classes? Buy equal amounts of farms, goats, stocks, and bonds? Or is he predicting that stocks will crash and burn and that people should avoid them?
You seem rather fixated on this guy. You can read the letter, watch the videos, etc, but I don't know if you're going to get a specific AA out of it.
HomerJ wrote: Sounds like you actually agree with us Bogleheads... Diversification is important to us. Because we don't know what is going to happen next. We don't try to change our asset allocation based on what we "think" is going to happen in the future...
Totally agree with that statement. I think it's the definition of 'diversification' that we disagree on. To me it means exposure to more than a single source of risk.
Jebediah
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Re: Experts

Post by Jebediah »

Verde wrote:
These “real productive assets” trade in illiquid, inefficient markets where the experts have an edge.

How do I figure out the right price to pay? Do you think price matters?
That's hyperbole. A commodity index works fine. If you feel like you have no idea whether or not say, a piece of land, is fairly priced then I'd agree you probably shouldn't buy it.
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