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Kyle Bass: ‘Peak Virus’ in About a Month for Markets, This Isn’t 2008

Submitted by Taps Coogan on the 9th of March 2020 to The Sounding Line.

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Kyle Bass, founder of Hayman Capital Management, recently spoke with CNBC about the massive selloff in markets and oil, as well as the Coronavirus outbreak. He believes that thousands of cases are likely to be found as the US scales up testing in coming days, but that markets are likely to bottom in roughly a month as cases begin to tapper. He also notes that ‘the cure for $25 oil is $25 oil.’

Some excerpts from Kyle Bass:

“A lot of unconventional or shale production is going to end up bankrupting itself and the one cure for $25 oil is $25 oil. So, it won’t stay here for long because none of the producers make any money at these levels and then what will the collateral damage be of oil curing its own problems at $25…”

“As we all know ‘this too shall pass.’ It’s our view at our firm that the summer months will end up burning the virus down until we see a decline in new cases. Number one, I can’t believe that we don’t have testing stations in every major city in the country. That should be an open and closed issue… I think that our market has a lot of this virus factored in. When you look at airline stocks, cruise-liners. When you look at anything that has a large public presence like theme-parks, you already have a pretty significant recession priced into these stocks. Any turn in number of infections once we get everyone tested is going to be a very positive event. The question is… how many of these companies have enough cash to make it through that divide. Some of them do. Some of them don’t. There will be some amazing things to buy on the back-end of this. We… just hope that there won’t be a resurgence of this in the fall…”

“I do think it’s too early (to buy). We haven’t even gotten around the first round of testing in the US… I think that you are going to see the ranks of the US put up a few thousand confirmed cases right away… If you are asking when financial markets see peak virus, I think it will be about a month from now… This isn’t 2008. Our banks aren’t going broke. But there are places around the world that never recapitalized in the last crash. If you think about Europe, the ECB never recapitalized the European banks… Europe is going to have a real problem… Italy’s banks are basically going to become insolvent very quickly… What’s happening to Italy could be the knockout punch for Italy…”

“The other economy at risk is Hong Kong, the most levered developed economy in the world… (The Chinese) are telling people to go back to work entirely too early and no one believes the numbers coming out of China..”

There is more to the interview, so enjoy it above.

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