Kyle Bass weighs in on the US, China, and Russia
In an interview on Bloomberg Markets, Kyle Bass, who manages the $1.8 billion hedge fund Hayman Capital, discussed his view on the U.S., given a Donald Trump Presidency. He also shared his views on China (FXI) and Russia (RSX).
Sees US productivity rising from here
He points to specific ideas that are part of Trump’s plan for America, which would help achieve this:
- The plans to lower corporate taxes from 25% to 20% or 15% would facilitate trade competition
- An accelerated depreciation regime for corporations should lead to increased real capital investment. With increased real capital investment we may see an increase in productivity, as the capital which has long been used for share buybacks and M&A activity (which do nothing to boost productivity) may now actually be used for business investment and expansion, says Bass. The U.S. should, therefore, see a rise in overall productivity.
- The envisaged honeymoon period to bring back offshore capital to the U.S. should help eliminate offshoring and Europe’s gains in stealing parts of the U.S. tax base.
Recommends border tax adjustability
Given that corporate tax cuts should help pump up growth in the U.S., the big question that arises with it is; how would the US pay for this cut? Hayman Capital’s view is that border tax adjustability; which in its simplest form is like taxing the trade deficit or forcing your trade partners to pay the tax; could help bridge the revenue gap created by corporate tax cuts. Bass does not see the imposition of additional tariffs as a viable solution here.
Overall, Kyle Bass has positive expectations from the U.S. Better deals from trading partners are other areas that he thinks U.S. corporations can look forward to. The notable point here is that all of these attempted improvements are going to happen to the U.S. when the economy is basically at full employment. “The US has been a wage giver and price taker for the last decade or so. Now it’s time for the US to be a wage taker for the next few years,” said Bass.