Take their advice and Yule be sorry

What are the chances that a fund damager will get a big, fat macro bet right twice in a row? Particularly if said master of the universe is rather bearish and the rest of the world is, er, somewhat bearish, too?

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It tastes sour, but it may be a sweet spot

Well, going by the frenzied hubbub in hyperspace, quite a few people are taken by the views of one Kyle Bass, a hedge-fund jockey who made his name by correctly wagering that the US subprime mortgage market was going to fall on its nose.

Countless billions of dollars later, and Bass's words are being copied and pasted into every Tom, Dick and Harry's investment strategy.

I think we've seen this movie before.

Contrarian investors like John Paulson were deified in the pages of Michael Lewis's brilliant chronicle of the 2007/08 meltdown, The Big Short. Yet Paulson's recent calls have been disastrous. This year he sold 11 million SPDR exchange-traded fund shares in a stupid, loss-making punt against gold.

Worse, Paulson got bullish on financial shares too soon. Bloomberg reported this month that Paulson's main vehicle, Advantage Plus Fund, has sunk 44% for the year, dragged down by an outlandishly large purchase of Bank of America stock.

Someone got just a little bit too clever. You win $15-billion on one spin of the chamber (subprime), you're eating a bullet the next. Paulson lost.

Next!

In the foreword to Michael Lewis's latest work, Boomerang, it is Kyle Bass's turn to receive the hero worship. I hope you got in early on this, because his main thesis is that the credit crisis has shifted from being a private problem to being a sovereign problem.

(Cue a million smartarses going, "Like, duh, dude.")

But wait, there's more! In his latest newsletter released to us mortals, Bass spells out in some detail what the implications are of our present situation. What to do about it, of course, you are welcome to leave to him and his team at Hayman Capital Management - provided you've got the requisite mountain of soft currency and a fondness for paying unpleasant amounts in fees.

Hmm, before I progress, there's another matter I'd like aired. If this guy is so clever, why is he telling the whole world about his plans?

Except! Maybe he's playing a double-bluff. He could be saying he's pessimistic to the point of hara kiri , but all the while he's El Toro ... ready to snap up our cheap junk, coin another mint, and make us all look like poephols.

(Oh dear heaven. May we proceed to the report in question ..?)

Hang on a minute. If portfolio managers in charge of running billions know Mr Bass is short the market (surely he is, unless he's lying), then they will doubtless take long positions and squeeze the hell out of him. Eh?

And where does that leave Mr and Mrs Kiepie - you and me? Hopeless, that's where.

The latest stats out of the US show record-low participation in the markets among retail investors - that means mom-and-pop share traders and buyers of mutual funds (what we know as unit trusts). Leaving the playground almost entirely free and full of big boys' toys.

Let them get on with it. Faced by fathomless "dark pools" of off-screen book-over trades and algorithmically-programmed robots flickering trading orders among themselves, your average buy-and-hold monkey is on a hiding to nothing.

There is no pattern to markets that we outsiders can discern - other than the one we know, deep down, is quietly being shaken upon by big bankers with nice margins to make as prices gyrate.

A statistic, courtesy of whichever poor sod worries about such things: the US benchmark index, the S&P500, has whipsawed back and forth over 1200 points since May - yet remains at the same level it was in May.

Consider, very soberly, the cut taken by the investment banks on that volume and volatility - without really ever having to have taken a long-term position. Suits you just fine, sirs.

Since the overnight borrowing rates in the US have been between 0.25% and 0.15% this year, and in euro terms between 0.3% and 1.5%, there has been plenty of cheap cash to fuel the party.

Kyle Bass, I hear you cry? To hell with Kyle Bass, I say. Aren't you sick and tired of hearing every second bloke in a suit telling you their version of the truth and the way?

Yeah!

If you believe these schmucks, it's a sure thing we're in for a Christmas crash ... or was that a rally?

Either way, take their word for it and Yule be sorry.