Trump should shut the stock market until infections decline, investor Kyle Bass says.
President Donald Trump should close the crashing stock markets until coronavirus infections in the United States decline for two consecutive weeks, famed investor J. Kyle Bass said on Monday.
The economic crisis triggered by the government’s response to the pandemic is destroying savings in retirement accounts at such a rapid pace that the government has a moral obligation to step in, said Bass, who predicted the housing market crisis in 2008 and profited from it.
“We are going to have a hole in our economy that is $5 or $6 trillion large,” Bass said in interview on Charlie Kirk’s podcast. Kirk, a Newsweek contributor, is founder and president of the conservative group Turning Point USA.
“This is by far the largest financial calamity and economic calamity the U.S. has ever seen,” said Bass, who is the Chief Investment Officer of Dallas-based Hedge Fund Hayman Capital Management.
U.S. stock markets have tumbled in the past month as investors panicked over the economic impact of restrictions designed to stop a surge of infections overwhelming the hospital system. The S&P 500 index has fallen more than 30 percent in four weeks, as the number of COVID-19 infections in the United States climbed to more than 35,000.
“I am an advocate today of closing the stock market until the number of infections in the United States declines for, let’s say, two weeks consecutively,” Bass said.
“Once you destroy that much wealth and you have boomers about to retire, boomers are going to make emotional decisions,” he added. “Those are the people we’d have to care most about. Professional investors and short-sellers aren’t who we really care about.”
U.S. stock markets were last closed in the days after the September 11 attacks in 2001. They were also shut for four months in 1914 as World War I broke out in Europe.
Bass dismissed concerns that a stock market closure would provoke a run on banks or another financial crisis, saying the Federal Reserve could pump liquidity into the banking system to shore up confidence.
Unlike in 2008, when banks collapsed and drove the economy into recession, U.S. banks are healthy, he said.
In 2008, Hayman Capital’s bets on the unraveling of the subprime mortgage market paid off and the fund made a 200 percent return that year, according to the Wall Street Journal. That trade made Bass a rock star investor. While he has had other successes, his bet against the Chinese yuan famously did not pay off.
Bass said the Congress urgently needed to pass the a stimulus plan to cushion the economic shock and avoid social unrest.
A coronavirus stimulus bill has been proposed in the Senate that would send Americans a check roughly $1,200 per person. The stimulus bill also would provide loans to small businesses and other industries hit hard by the coronavirus pandemic. However, the bill has proven controversial, with Democrats alleging that the bill benefits corporations more than average Americans and gives the Treasury Department too much power in determining how to distribute the loans.
“If we have half our country with less than $1,000 in their checking account, and they’re being laid off, the way I see it is you’ve got about a month or less before you have social disorder. And it’s something that’s not being talked about on TV,” Bass said. “But if we don’t get $1,000 every two weeks into these people’s hands or something like that, until this crisis passes, we’re going to see social disorder.”
“I saw Katrina post-Katrina. And you don’t want to know how our country got social order restored. It was ugly. And ugly in a way you wouldn’t believe if I explained to you. But we can’t have that happen in places like New York City,” he added.
Hoping to stop the spread of the coronavirus, multiple governors have issued orders closing all non-essential business in their states, and ordering citizens to stay at home. Though the number of states has expanded, the first wave included California, New York and Illinois, three states that make up a quarter of the United States’ economy. Since then, states like MIchigan, Delaware and Kentucky, among others, have issued similar orders, as have a number of large cities, including Philadelphia. An economics professor predicted Sunday the pandemic could cost the U.S. $7 trillion and cause the worst job losses since the depression.