One of the actions that took centre stage in 2015 has been going short on the EUR/USD currency mostly because the ECB is implementing strongly quantitative easing (QE), and the Fed in the US starting to place a grip on its policy with a surge of interest rates lurking around the corner.
The greenback has literally been trending higher while the Euro has been losing ground. Also the expectation of the ECB purchasing bonds has seen the price of such securities go higher while the yields have been falling.
Kyle Bass disputes the general belief
Kyle Bass, the hedge fund manager from Texas and founder of Hayman Capital Management, gives a fantastic interview to Raoul pal. Showing now on Real Vision Television.
In the interview, Kyle Bass responds to a few questions and also reveals the trading ideas that he has for 2015, and also offers investors some advice.
According to Bass, he believes that those investors in Europe taking a position to trade the market with QE in mind might be making a mistake and could be caught with a surprise
“The market seems to be misjudging the rates in Europe at present, it’s kind of front running Draghi” he noted.
He also added that “ Even though in a slow pace, the economies of Europe at present seem to be showing signs of recovery and standing firm; and I’m of the opinion that those investors active in the European market and buying lots of bonds would be left clinging on to the bag.”
For 2015 the European rates are topping his trading ideas “taking a short position regarding bonds and paying European rates” he noted (i.e. he is making a prediction for the EU yields to hike, which it should be fairly said, since this interview was made, that is exactly what has been happening since the start of May)
“We had it all wrong”
When he was asked to talk about the last trade he had gotten wrong and the reason why, Kyle Bass referred to the trade he had made on Japanese interest rates, betting that they were going to increase, he then explained why he had thought so and what really happened.
“We all had the wrong impression” he noted. “That one we definitely had got it wrong, thankfully at least with the currency we had it correctly.”
For the past 4 ½ years, he has highly been involved in Japanese trade. The trade consist of two parts – the Japanese rates and the weakness of the Yen. With the weakness of the Yen it seems to confirm itself, but the rates have just not been playing as expected…not yet.
“What I would advise”
Kyle Bass also provide the best advice he had to investors, placing accent on the necessity to have humility and insight, even when it comes to trades that are to be considered as self evident.
“The best advice I could provide is that you cannot place forward your self-esteem in such a matter,” he noted. “It implies that if you have some theory you have well researched, thought of, and that are quite convinced about it, and that you are wrong, it is necessary that you admit of having been wrong.
“I’m of the conviction that by showing humility into the matter, you will make savings of a lot of cash.”
Real Vision Television was launched last year by Pal, a former GLG fund manager – the television is provided on-demand subscription and offers a wealth of information regarding investing and economics. Pal launched the TV program because he sought of having true and frank discussions with those who are considered as champions in the industry and that a traditional financial television just does not seem to provide.
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