Kyle Bass - 10 Interesting Facts
Updated: Jul 31, 2022
Who is Kyle Bass?
And why as a trader should you care?
Put simply Kyle Bass started out life in a position probably not to dissimilar to yourself. He didn't start off with a ton of money, he didn't understand trading growing up, it was something he discovered later in life. His future as a trading sensation was by no means set-in stone.
At 51 years old with plenty left in the tank Bass is well on his way to become a trading legend. At times it seemed he had some sort of superpower to see into the future. He made trades most expert's never saw coming!
But after careful analysis its clear Bass is simply a work horse never letting his loses stand in his way. While studying this financial juggernaut I looked for key insights that I and most importantly you might be able to incorporate into your own trading and personal life.
Today we are breaking down 10 interesting facts about Kyle Bass.
Now lets talk about the man who predicted the great recession!
Fact 1 - From Humble Origins to The Highest Heights
This story sound's familiar to a lot of us I'm sure, Bass might be worth the capital of a small country, but this certainly was not always the case. Starting life to middle class parents that in his own words
“Never saved any money while living pay-check to pay-check”
Bass could have easily followed in their footsteps, but what changed you might ask? Well as Bass puts it
“I had a genuine interest in math's and science, I was on my way to becoming a chemistry major med student”. “Then I took a class in Futures and Options, I read the book in a week and changed my major the next week to real estate finance”.
He could have become a doctor making a guaranteed wage every month, no worries.
But learning about trading and investing a little bit literally changed this guy's trajectory. He saw the potential of trading, Bass was one of the first traders back in 1995 when online forex trading launched.
Still new to FOREX? check out the only FOREX introduction you'll need below
Fact 2 - Hypochondriac Mother
This one isn’t trade related but in a roundabout way I think it all fits together.
We all know that guy/girl that swears there moments from death at any given time.
Well for better or worse a young Kyle Bass would listen to his mother school him on different medications to take for different ailments.
As Bass puts it
“She was a self-diagnosing champion”
This created a sort of parallel in a young Kyle's mind as he now tries to stay medication free relying on healthy food and exercise and letting his body do the rest.
If your at home sitting on a computer all day walking to the bathroom for your exercise then you're probably not preforming to your true potential!
Fact 3 - Record Holder
Kyle Bass isn’t just a successful billionaire investor, at 28 years old he held the record as the youngest managing director at Bear Stearns global investment bank. When he eventually left the company, he was the biggest business unit outside New York.
Bear Stearns have there own story worth telling, learn about there rise and eventual fall here Bear Stearns: Its Collapse and Bailout
This goes to show with enough determination and hard work anyone regardless of age can achieve there goals in life.
In the words of the great Marcus Aurelius
“Because a thing seems difficult for you, do not think it impossible for anyone to accomplish.”
Fact 4 - 50/50 Trader
It may come as a surprise that a hedge fund manager could make the wrong investment half the time. In truth some of the best investors in the world can make more losses than wins. Don't be fooled by high win ratio's, its just a number with little context to the facts, you could win 75% of your trades with huge losses.
But its not about when you lose, but how you lose, its not about when you win, but how you win. Making sure you have a strategy in place for when the eventual loses come is a key trait for every successful trader.
Also understanding the potential upside of every investment is another key to success in trading/investing. Bass knows what level of capital he is willing to risk and what it takes to trade another day.
On the flip side when he does successfully trade the winnings dwarf his losses. This is because he understands the potential risk/reward of every investment.
Fact 5 - Net Worth
Get your calculators out as we're getting to the meet and potatoes of the subject, Bass's net worth. As of 2021 the-wealth-record estimate Kyle Bass is currently sitting on 2.5 billion USD or 1.79 billion Pound/Sterling, that is a nice bit of change if you ask me.
But how did he accumulate such a vast amount of wealth you might ask?
At age 28, as we pointed out, he was already a managing director at Bear Stearns with a salary of between 1 million to several million annually.
The real wealth came in December 2005 when he started Hayman Capital Management L.P and became a wall-street celebrity in 2008 when he predicted the banking crisis which I will speak more about shortly.
In terms of assets, he owns a 40,000-acre ranch in Texas that’s bigger than the nation of Liechtenstein!
Along with properties in Florida and New York. Not bad for a trader barely pushing 50.
Fact 6 - Hayman Capital Management L.P.
Kyle Bass isn’t the kind of guy to run another mans company he’s an apex investor. At age 36 he left Legg Mason (a well-known hedge fund that currently has over 700 billion in assets) and started his own hedge fund, previously mentioned, Hayman Capital Management L.P.
He started off with 5 million of personal savings and 27 million he raised from outside investors. Not bad for a rookie! But this wouldn’t be an easy road even for an expert investor.
In 2006 Bass could see the eventual financial crisis about to hit the U.S economy and successfully bet against this forthcoming disaster making massive returns for his investors.
Flying high on his newfound notoriety Bass would bank another win for investors when he made moderate gains as one of the first to bet against Greece back in 2012. When it eventually burst its estimated he made 2200 times his original investment according to e24.no, that’s a zinger if I’ve ever heard one!
The winnings couldn’t carry on for ever, in 2014 Hayman owned 8 million shares of General Motors (GM). When it came to light that one of there models had a defect that caused the death's of 13 passengers, just to add some petrol to this dumpster fire, it was kept privately known but only disclosed after the deaths.
When Bass rallied behind GM on CNBC the publicity seriously damaged confidence that investors had in Hayman and Bass. That year investors pulled almost 25% of funds from Hayman capital management.
This string of bad luck would continue in 2017 when Bass shorted the Chinese RMB leading to a massive 19% drop in Hayman’s investment capital. That’s some kick in the carrots and onions if you ask me.
At the start of 2014 Hayman capital management’s portfolio sat a comfortable 2.3 billion in assists but by the end of 2019 this number had fallen to 423 million.
Want to learn strategy used by large hedge funds with teams of analysts working around the clock. Learn more about how hedge funds invest there capital by checking the Logikfx guide to Hedge Funds - 10 Step Guide!
It’s important as traders we stick to our guns and learn from our mistakes, even the best investors get it wrong sometimes. Next time you have a loss remember it’s all part of the journey!
Fact 7 - Predicted the 2008 Financial Collapse
Now where getting to why there was so much buzz originally around Bass to begin with.
Hindsight is a beautiful thing isn’t it? When we look back at past events its easy to say “Yeah I knew that was going to happen” but the reality is never that simple.
Bass was successfully able to predict and bet against the forthcoming financial mortgage crisis that was about to sweep across America and soon the world.
How did he pull off this investment you might ask? Well, that’s interesting, when the banks were handing out mortgages left, right and centre to clients, Bass saw the writing on the wall.
What did he do?
He started purchasing the credit default swaps on the subprime securities. When the penny eventually dropped, millions of people defaulted on there loans this caused the value of subprime securities to increase netting Kyle a hefty profit.
This goes to show that there is always an edge to be found if you look in the right place!
Fact 8 - Event Driven Trading Strategy
One of the trading strategies that Kyle Bass preaches is “Event Driven Trading” now how does this investing work? It works by identifying large financial, Political or environmental events to trade around.
Imagine news driven trading but on steroids and of course significantly more sophisticated.
The goal is to produce high risk-adjusted returns that do not correlate to the market. This can be management changes, spin off's, restructuring etc.
A classic example of an event driven trading strategy would be a merger, when a company expresses interest in buying another company the stock prices of said company may rise.
In this situation there is a difference between what amount the acquirer says it is going to pay for said company, and what level the target company’s share price is post announcement. The event driven investor attempts to capture the spread.
What is spread and how can you use this to you advantage you might ask? Say no more! Logikfx has you covered! Just click the link What is spread in forex
Fact 9 - Hong Kong Currency Collapse
Bass has been betting big against the Hong Kong financial market in recent years. Let me give you the long and short of his analysis. In the 1980’s there were talks happening behind the scenes between Margret Thatcher and Deng Xiaoping about the hand over of Hong Kong.
When this information was leaked in 1983 the Hong Kong dollar was still a free flouting currency.
Now what does free flouting currency mean you might ask? In simple terms it is a flexible exchange rate system solely determined by market forces of demand and supply of foreign and domestic currency, and where government intervention is totally inexistent.
Now we cleared that up, back to our story!
The day this information was leaked the Hong-Kong dollar depreciated a whopping 50% compared to the British pound! Now that is an almighty price drop. Just the idea of the communists coming to town had the market running scared.
Its no surprise communism and capitalism don't exactly work well together.
Fast forward to January 1st, 1997 the U.K hands over sovereignty to the Chinese communist party (CCP) and the next day the Asian financial market crashed. Coincidence? I think not!
Unfortunately, it has not gotten easier for freedom loving Hong-Konger's with the loss of their autonomy.
Now fast forward to 2020 the Hong-Kong banking system is the most leveraged system in the world in relation to its GDP. Currently leveraging almost 9 to 1. I don’t know about you guys, but I get sweaty palms just thinking about that much leverage!
Still not 100% comfortable with how much capital you should leverage? Logikfx has you covered! Check out our Position Size Calculator!
To add to the mix COVID and a GDP that’s fell 10% since last year Bass believes the writings on the wall.
So, what does all this mean for traders? As Bass puts it
” It’s the worst financial set up I have ever seen for a developed nation, and a terrible political situation, it’s the perfect storm”.
It has been reported that Bass is using options contracts with 200-times leverage to bet the currency pairing officially set at 7.80 per US dollar will not last for the next 7 months according to Bloomberg.
Fact 10 - 4 Investing Tips From Kyle Bass
Take a top-down approach
Top-down investing sits in contrast to the bottom-up approach. The top-down strategy focuses on microeconomic factors such as the performance broad industry sectors to guide investment possibilities.
This approach can help investors economize on the time and attention they have to bear on their investments. The downside of this is potentially missing out on individual investments.
Use stop losses whenever possible
If your new to trading understanding how stop losses work can save you plenty of money and heart ache. This handy tool is used by traders as a failsafe to sell an asset when the price hits a predetermined margin.
This is an essential tool for smart investors that take their risk management seriously. For more tips check out this Logikfx stop loss masterclass video:
Have conviction in contrarian opinions, but be afraid of losing
What is the contrarian opinion and how does it work? A contrarian opinion is a psychological trading strategy used by some industry experts.
In the words of the great Seneca
“We should not, like sheep, follow the herd of creatures in front of us, making our way where others go, not where we ought to go.”
Put simply, do the opposite! when everybody buy’s, you sell! When everybody sells, you buy!
Think Carefully About How You Structure Trades
This can come in many forms for the average FOREX trader. Understanding the fundamental principles of your next trade is essential to success. There are a couple of ways we can do this on the retail level for instance thinking about interest rates, equity’s, bonds related to the trade and options.
There are many ways we can structure our trades, as traders we need to make sure we are leaving no stone unturned. One handy tool for this task is to keep a trading journal! Logikfx has kindly made an easy to follow guide for your convince below!
Conclusion
What did we learn about Kyle Bass and are own trading habits? We learned there's still plenty of predictions left before Kyle Bass calls it a career. We learned that with the right set ups and the right exit strategy's we can minimize are loss and maximize are wins. Success isn't a straight line but if you learn from the best and remember your mistakes we might too be as successful as Kyle Bass in the future. Still interested in Bass check out his twitter handle 🇺🇸Kyle Bass🇺🇸 (@Jkylebass) / Twitter
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Kyle's story is quite inspiring. Great breakdown.
I think I need to add Kyle to my file of people who I respect for what they've done! Fantastic breakdown from his trading down to his motivational story.
Can't disagree with one of the greats of our generation... top-down approach does work wonders (especially in forex) Superb summary Dan