The collision of global markets and social mood

Wednesday, March 13, 2013

1400 New Billionaires

Kyle Bass of Hayman Capital gave a presentation last week (here) in which he laid out some more color on his Japan thesis. Apparently things are starting to get interesting.

"I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp - $5bn at a time.

And it's happening in huge size - huge - we bought half a trillion dollars worth of these 'options'...

... and interestingly enough, one of the biggest banks in the world called me the other day and asked me if I would close my position

That was an interesting day for us - that happened to me in 2007 right before the mortgages cracked."

What an eerie déjà vu moment.

The thing I like about Bass is that he takes his job of protecting capital seriously. I hear no one else mention this anymore.

"I don't get paid to be an optimist, I don't get paid to be pessimist, I get paid to be a realist - and a prudent fiduciary of the capital."

And I like that he's one of the few fund managers who can see the humor in today's world and has the guts to say so.

"We went through a period where it was briefly tough and now there are 1400 new billionaires in the world - maybe some capital was misallocated..."

It sure was.

How else could you find a Richard Mille "JACKIE CHAN" watch for €455,000 (excluding. VAT) with a button next to it that says BUY THE EASY WAY. The answer:

The Billionaire Shop which bills itself as "The final destination for winners."

That final, ignominious destination is a website for buying stuff over the interwebs.

Against this backdrop, I'm noticing that Asia and Europe are down across the board. ES futures were too in the overnight session, until US retail sales data lit a match under them in the pre-market.

I'm not at all surprised given yesterday's weak decline. I'm still hopeful that we'll see lower prices, but I'm adding SPY calls (April) and would like to add lower (even though yesterday I took profits on the SPY 155 puts that I bought Monday). Still holding VIX calls and would like to hedge those more aggressively.

What I'm hoping for is a further sloppy sell off into the 1530-1540 area which may be asking a lot. End of quarter (EOQ) mark up should follow after this Friday's op-ex. Based on open interest, I still think that between 1550 and 1525 is possible, then a rally in EOQ.

Here is Generation Landslide by Alice Cooper, who rightly called out those billion dollar babies a generation ago.

Generation Landslide by Alice Cooper on Grooveshark

And I laugh to myself at the men and the ladies
Who never conceived of the billion dollar babies

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