Wednesday, October 6, 2010

Kyle Bass on hyperinflation

Kyle Bass was one of the few hedge fund managers who had the foresight to profit from the subprime mortgage bubble before it collapsed, so it may be prudent to hear him out on what he believes is coming next.
"The number one performing stock market in the last ten years has been Zimbabwe - in nominal terms" - that is the most memorable soundbite of Kyle Bass' presentation to David Faber at the Bearfoot Summit, because unfortunately, in real terms investors have lost all their money.

In fact, Bass says to shun stocks by and large, as in real terms (note not nominal), stocks will underperform a hyperinflationary system. This confirms what we have been observing for the past months ever since the latest FOMC regime, when gold has benefited far more from "money deluge" expectations that risk assets. In other words, those who are betting on a rising tide emanating from the inkjets' liquidity spigot, will do far better to buy gold than stocks.

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