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During an interview with CNBC Thursday afternoon, Hayman Capital founder Kyle Bass joined Jeffrey Gundlach and other astute observers of the market by postulating that the Fed won’t be able to succeed with its planned 4 interest-rate hikes by the end of the year. “Gundlach said that the Fed could get to 1.5% on the Fed funds rate, which might happen in the next 12 to 18 months. But that would trigger a recession,” he said. But by the time the Fed gets to the second hike, markets will tank, forcing the central bank to backtrack. Kyle Bass agrees with Gundlach (and the market): “The Fed can’t raise rates more than a 100-125 bps before they have to stop” — zerohedge (@zerohedge) January 13, 2022 Speaking during his first CNBC interview of the year, Bass argued that there’s a “huge mismatch, I think, between policy and reality…when you look at the reality of hydrocarbon demand…the reality is that…we’ve been pulling CapEx out of the oil patch because we so desperately want to switch to alternative energy. The problem is you can’t just turn off hydrocarbons. It takes 40 or 50 years to switch fuel sources,” Bass explained. And as the global economy shakes off the impact of the pandemic, Bass predicted that “the same forces that applied to bring oil below zero [ back in April 2020 ] will apply on the upside. We will get the world reopened by the middle of the year…you can’t just flip on an oil well…the only people funding the oil patch are family offices.”
As demand for oil intensifies, the dynamic will send prices on front-month contracts “well above” $100/barrel”, Bass projected. “There are so few people out there funding CapEx…if we reopen, you’re going to see numbers that people aren’t ready for.” […]
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