Legendary Investor And Heyman Capital Management Founder Kyle Bass On Why The Stock Market Should Be Closed Until We Reach Peak Virus
Legendary investor and Heyman Capital Management Founder Kyle Bass was interviewed on CNBC’s Squawk Box this morning/March 23, 2020) and he strongly argued that the U.S. stock markets should be closed till we are past peak virus. Mr. Bass belives the Federal Reserve is going to have to expand their balance sheet to the $5T-$6T level. And, closing the market is not unprecedented, as Mr. Bass said when the U.S. entered WWI, the stock market was closed for four months. And, in the immediate aftermath of the 9/11 terrorist attack, the U.S. stock market was closed for a week. And, when you look ar what is going on,” Mr. Bass said, “we know we’re going to get to the other side of this. But until then, we’re going to see worse news almost daily as infections rise, until we hit peak infection.” When asked how long markets should be closed, Mr. Bass said “look at pros and cons. If things worsen, and the experts believe somewhere around the first week of April that our emergency rooms and ICU’s will be overrun, and we’re having to make decisions — hopefully not a bad as Italy — as to who gets to live and who dies, peoples fears are going to be really challenged over the next few weeks. If I told you that we’re likely to reach peak infection a month to six weeks from now, and then we’ll reopen the market when we see light at the end of the tunnel.” Mr. Bass said he thinks that decision could potentially save a dip of another potential 40 percent downside to what we have already witnessed. And, Mr. Bass added he is “thinking about those boomers who are either entering retirement or close, having to make some very emotional and gut-wrenching decisions with the market down another 40 percent.” Mr. Bass said to think about the generational wealth that has already been lost as a result of this pandemic. And, he noted that “when this generational wealth was lost during the Great Depression, it changed the proclivity and operating nature of the manner in which people conducted their lives. That change is going to occur again here in America as a result of this pandemic. This will change the way people think about investing,” he added, “going forward for generations to come. This isn’t just going to snap back, and everyone’s going to be fine [financially], and we’re going to be stronger. This black swan event is going to have enormous implications for the way average investors think. Mr. Bass said his point is, “we’ve lost so much generational wealth already, at a point in time in which many baby boomers are at the point of retitrement. The baby-boomers are going to have a hard time with this,” he added.
Mr. Bass is always thoughtful and interesting, and he may well be right — I am not smart enough to know — and, I know there is a counter argument. But, it is a debate worth having; and, a decision worth considering. RCP, fortunascorner.com