China is a product-producing machine. Everything under the sun is fair game for Chinese manufacturers. Manufacturing products for less and making them look expensive has been the backbone of the Chinese economy for years. But that backbone has been having major issues the last five years. Competition, commodity prices, and a changing labor force have forced the Chinese to become a consumer-driven economy, and making that transition has been expensive for the Chinese government.
Hedge fund investors like Kyle Bass, the former Wall Street executive that predicted the 2008 market crash, is one of those big-money investors. Bass made a fortune in 2008, while most of the people in the country were licking their financial wounds. Bass claims China is headed for the same kind of economic crash, and that crash is getting closer by the minute. According to Bloomberg.com, Bass is betting big that China’s banks are going to need a major injection of government reserves to handle all the bad debt on their books. Bass is hoping that happens soon because his hedge fund, Hayman Capital, has been performing like a rookie fund the last two years.
Bass is used to the spotlight and the media attention. Every chance Kyle gets to pontificate in front of the interviewers is a good day for the ex-Bear Stearns employee. But Bass hasn’t been getting the kind of reviews he got back in 2008. Some people believe Bass has misplaced priorities, and his recent investments may prove that statement. Kyle took Argentina President de Kirchner’s side when she defaulted on debt bonds and left four hedge funds hanging for billions of dollars. Bass was in General Motors corner when the carmaker installed faulty airbags and steering mechanisms in some of their models. Hayman Capital was the largest shareholder in GM at that time.
The most recent Bass misstep, according to Usefulstoogies.com, is his alliance with Erich Spangenberg. Spangenberg is calling out drug companies for price gouging, and Bass is placing a short position before the news of an investigation hits the press. It seems Bass is not afraid to bend the rules to make a buck. But his recent China bet may come back to haunt him in more ways than one, according to the Chinese government.