Perhaps no one is as closely associated with pessimism on
the Japanese economy as Kyle Bass. He’s talked up
his short position—which he considers to be one of the
most asymmetric bets in history—in
Hayman Capital investor letters, at
hedge fund conferences and on CNBC.
Now his views have been immortalized in a Harvard Business
School case study.
HBS professor Robin Greenwood led the study with help from
the school’s Japan Research Center and published
the 28 page case March 27. It focuses on Bass’
recent self-evaluation of his bearish views given seemingly
contradictory government indicators.
"In late December 2011, Hayman Capital founder and portfolio
manager Kyle Bass was reviewing Japanese government budget
projections for 2012," says a
case summary. "The projections appeared contrary to Hayman
Capital's views on Japan, where the fund had built a bearish
position. Japan had the world's highest debt burden, whether
expressed as a percentage of GDP or government revenue. Guided
by recent global events, Bass forecast that Japan would soon
experience increases in interest rates, a devaluation of the
currency, and, eventually, a restructuring of the country's
In the end, Bass’ views are reinforced. "In
many ways I hope we are wrong about Japan," he is quoted as
saying in the case. "I could easily be wrong about the whole
thing, but I haven’t been persuaded yet."
As Bass said this week in a keynote address at the
EuroHedge Summit, the case study is perhaps the first ever
written on an event that has not yet happened.
But Hayman is in the business of looking forward. HBS
explained what could happen in Japan by quoting Ernest
Hemingway’s description of going broke: "It occurs
at first very slowly, then all at once."
The full case study is