If you don’t know hedge fund manager Kyle Bass, you should. He correctly called the real estate bubble, the obfuscated delusion that housing prices could never go down in value, and subsequently, made killing off of it by betting it would eventually pop. (See David Faber’s House of Cards documentary for Bass’ monster return by betting against the housing bubble.)

Yesterday, he spelled out another piece of distressing macroeconomic analysis on CNBC’s Strategy Session, which was probably the best analysis (by best I mean realistic, even if you find it monstrously depressing) I’ve seen on CNBC post financial crisis.

So when guys like Bass decide to give advice without charging us 2 and 20, it’s probably a good idea for all of us to shut up and hear what he has to say.

From CNBC’s Strategy Session:

[Video #1]

Highlights:

1. U.S. Government is obfuscating future debt obligations for political reasons.
2. Zero Interest Policies are a long term debt trap.
3. Federal Reserve interest rates are motivated by political influence.
4. Just to plug existing fiscal deficits the world has to issue 4.5 Trillion dollars in new sovereign debt.
5. Developed world governments “printed” 12% of Gross Domestic Product (GDP), or 40% of government expenditures.
6. United States must restructure its debt.
7. We are not in a cyclical market; it’s a secular change and it happens about every 100 years.
   

[Video #2]

1. European bank stress tests were a joke; self examination tests never fail.
2. There are a handful of national governments that will restructure their sovereign debt. (Japan is one.)
3. The Keynesian Endpoint: when your debt service exceeds your revenue. Debt payments greater than money you make, you’re in a permanent structural deficit.
4. Madoff taught us one thing: you can keep a Ponzi scheme going for a ridiculous amount of time if you have have new buyers, but new buyers can’t be maintained forever, especially when you have a population decline via age demographic shifts.
5. On stocks: Given my outlook on the world, I don’t know how you can be long stocks.
6. On the future and debt: How many of your problems have you kicked down the road have gotten better?

Bottom line

Bass is long American debt, but only in select areas like bank debt, high yield corporate debt, mortgage backed securities, etc, and a few smaller bets against Japan and other European governments.

More fuel to the belief that in the world of the bankrupt, the half-bankrupt is king.

[Bonus Video from January 2010 Congressional testimony]

Sobering analysis, to say the least, but not exactly surprising to those of us who have an open mind when we begin to analyze post crash data and realize that the same people who got us into this huge sovereign risk problem are the same moronic politicians who propagated the credit bubble. Not to mention, created the very laws that allowed financial institutions, like Fannie Mae and Freddie Mac, to leverage their balance sheet 95 times their assets.