>> the following program is paid for and presented by -- anthony: hi, welcome to wall street week. greatly profited from this country' subprime mortgage crisis, he also predicted japan' s banking crisis. he is kyle. gary: and i am gary. anthony: today, the hedge fund manager sits down with us to talk about his view of the global economy and how you can profit from it.

solely about investments. we talk about anything people and their money. times square in new york city, the new "wall street week." anthony: a pleasure to have you on the show. you started in 2005 and have this nest egg to start your own business. a macro trading? kyle: my goal was to build a certain nest egg over time, running wall street firms in dallas until i could have enough capital to invest a giant portion of my net worth and have enough capital to live on until things worked out. something i always land on, i had to get to a certain day. i got to that day in december of

gary: a lot of people are watching right now and say that is what i want to do. kyle: it is a giant leap of faith but the truest that on yourself that you can make. if you believe you have the wherewithal to invest globally, you will be domestic or global. from my perspective, i had to have a number where i could take half of my net worth and put it in a fund and the other half, save for life puppies -- life' s purposes, children. it was not a huge number p are you go from high six or low seven numbers and all the sudden reversal or paying out most like the seven figures for a couple of years to hire a team, it is like the american dream, right? anthony: you' re getting into 2007 and 2008 territory. there are warning lights about housing. take our viewers through that. why did you decide to make a

kyle: i saw deterioration from the residential trust. anthony: explain that to viewers. what is trust remittance data? kyle: peoples mortgage, if they are secured a -- securitized, they package it up and sell it to an investment bank and they sell it to security. it is basically just delinquency data from households paying mortgages. anthony: you see that creep up and it has got you concerned at what do you do? kyle: july of 2006 is when we start to get housing bonds, and we launch a special purpose vehicle in september of 2006. that was your subprime. i watched it on september 16 or 17th and people say, why didn' t you wait until october 1 and that remittance data comes out on the 25th or 23rd summit. the 20th of every month. i cannot wait for another data

opportunity would go away. >> when did it start to crack? kyle: the data continued to worsen and the first crack in the marketplace for mortgage securities was february of 2007. it was a crack of eight or nine percentage points, which was enormous because the bonds traded at par and only had between 1% and 3% of interest rates. an 8% move was a disastrous move. anthony: this is a phenomenal financial success for yourself, capital, and your client. gary: why was it the wall street firms were able from the middle 2006 up until really lets say the first quarter of 2008, continue to sell all of these mortgage related products? kyle: when they could not sell

gary: from june 2007 up until september of 2008, that was completely frozen? but they were still selling in the secondary market. all of the underwriters continued to sell a lot of secondary product. but did they not see what you saw in terms of that payment? kyle: i had an infamous meeting in november of 2006, where i had all of the work we had done on housing, median income, median home prices, and our thesis, i went to meet with the head of risk management, bobby steinberg, and the room was full. one of those big conference there. i walked them through my presentation, a big deal for me because i did not want the market to move away from me while we were still getting invested. i walked them through and said, you guys realize looking at your balance sheet, if i am right,

i said you need to do something about this now and steinberg put his arm around me and said, that was a really compelling presentation and we hope you are wrong. i met with the fed as well. they did not want to believe it. the fed said home prices track incomes. they did not know whether it was the dog or the tail. they said incomes are doing this so we do not see home prices going down. that is what they said to me an earlier 2007. >> some of the people getting credit to buy homes. >> how do you think people did during the crisis and where do you think they are right now? kyle: i think they made a significant error during the crisis. i do not think there was enough of a flush of bad activity and that investing back then. the point is when investment

the feds to bail them out, taxpayers ended up bailing out the bankers. goldman sachs exists today because they made a big holding company and so did morgan stanley. back then, i do not think they would have made it if not for the fed -- >> goldman sachs -- what do you think about the central banking community today and where is the post crisis. kyle: bernanke sitting there with events with you and i together, and he said what we try to do is flood the market with excess congress' fiscal policy. ability and desire to just keep spending.

>> wall street week is sponsored in part by hightower, an unobstructed view. >> imagine delivering straight -- straight forward financial advice is the right thing to do. rising above the discord of an industry compromised by conflict of interest. high power is the new blueprint for financial advice. a legal pledged to put our clients interests first, not because it is the latest fad but to do. >> are used to jed giving up and going to work. >> i was tired of being a >> i looked around for what i believe in. >> is held me create a business >> they really taught me how to think big.

i am here because of score. >> get your free business mentor at score.org. >> raising rates after nine years. mistake, too late, too early, what? >> once you hit lower bound in an effort to go below so you do not have to restructure anything, i think that will keep you there almost forever. our rate cycle whatever it may be, 150 basis points, that will be it. >> why won' t rates normalize in our lifetime? >> they cannot. it is globally. they all went to the gas pedal creating money. we now have an interesting deflationary bust we' re seeing come across the globe today, whether it is crude oil, copper, iron or, you name it.

global currencies. >> you have now got this capacity putting pressure on prices. that is creating deflation . kyle: the debts are so large, the debt grows. >> this is an economic term called debt destruction to what ends up happening is the debt stays constant while wages are going down so the average american owning $200,000 of debt, with a $50,000 income, if the income goes down or gets cut in half, the capacity to service that debt goes in half.

opportunity -- kyle: china to take you were going through, they will go through a banking loss cycle, one thing will happen. china will have to dramatically devalue its currency. it is not something the readership can get their arms around but it is tough to invest as a nonprofessional investor. you know what i mean. >> the interconnectivity will also set the economy. >> while you cannot necessarily play the devaluation. >> as we know, china many years

, i think they hitched their wagon to our star very smartly back then. our goal depreciates the dollar through deflation. we issued debt for the rest of the world. we depreciate our world you are monetizing the debt. >> you pay the dollars worth less than what you borrowed. kyle: china has hitched their wagon to our star and they have depreciated about 60% versus the rest of the world. >> they will let it go and the u.s. dollar will be the beneficiary. anthony: let' s explain to viewers why it is killing them. they are depreciating goods and services being produced in china and sold around the world, they have become more expensive as a result of the depreciating currency. kyle: that is right. there was labor between the u.s.

global economy, it enabled that to normalize itself and this phenomenon helped to normalize it quicker. china' s effective exchange rate moving up versus the rest of the world made their goods and services more expensive each year there banking system has expanded 400 percent, seven years, without a nonperforming lifecycle. anthony: jim janos -- very negative on china because of many things you are saying. are you short china? kyle: we are not short chinese equities, but given this thesis, we will see a material devaluation. we think it will be in the next 12 days from now. anthony: you have a high profile

explain to our viewers why we are against? kyle: tech was saying it was per year. they got the law passed, formed an office in the u.s. patent office, and it makes it an 18 month, start to finish process that only costs less than $1 million per patent. in a federal court, it could cost two or $3 million. five or six years before you get a resolution. what pharma did not realize, when i started looking at the jug patents, and i know drug prices are something front and center on everyone' s mind today,

he always heard someone say the runaway drug prices but no one would do anything about it. we started realizing when pharmaceutical companies have patents that have these twenty-year lifespans and are about to roll off, if they just change the dosage, they go to 20 milligrams once a day and it is a new patent. they keep that monopoly that. anthony: you go through great pharmaceutical companies that have massing lobbying efforts, what does that look like? kyle: it has not been fun. anthony: what about the argument that they need these patents and the extension of the patents to keep their r&d pipeline going so they can continue? kyle: look at the pipeline and

pharmaceutical companies spent three times their r&d budget on marketing every year. they have gross margins higher than that of google. just watch tv. >> gary is particularly focused on one or two. >> it has nothing to do with cholesterol. [indiscernible] >> could not help himself. >> when you are investing, is it always about the money or is there also a social good? >> when we were in the housing market, many people thought we somehow caused the global financial crisis. that clearly has nothing to do. it would all happen with or without us. what we were doing in the subprime market was to bring it down to eyman' s terms. we are playing fantasy football. we were putting on contracts on managers were willing to put

in this case, when i win, everybody wins. the only person that loses are management teams. anthony: public opinion is decidedly with you. many in the american congress are decidedly with you. what would be your move? kyle: they dramatic increased the lobbying budgets. fight. they basically spent everything they could spend to fight us. it has been a tough fight. i will to you that. we looked through all 11,000 and actually ran a contest to find the worst ones we could find. it has no financial impact on

one of them is the michael jackson drug, the one he od don, a world health organization of us and show medicine, the anesthetic. it is ubiquitous in emergency in operating rooms in our country. drug. guess what protects that? the rubber stopper on the vial. that is the intellectual property protecting the drug. there are some stupid things out there. >> over the next five years, you intend on winning a lot of this stuff. if i am a true long-term investor, is this the best place i should be thinking about allocating capital? >> like us on facebook, follow

"wall street week" is sponsored in part by coke industries. we are koch. >> two thirds of our planet is covered in it. why do it hundred million people suffer around the world question mark it is completely on acceptable to me and that is why i am working on a way to solve the global problem. like here in brazil. by taking polluted water we already have an providing technology to infiltrate it back into clean water. technology. we are koch. >> just my 401(k) statement. >> i have got a pizza for a todd. >> can somebody spot me? >> do not get left behind. >> down in dallas, i have been down there to the ranch. a lot of distrust happening in the energy world.

opportunity in what is happening. >> i think there is opportunity in energy and my views are dogmatic about situation in energy. this has been one of our worst years. in energy, i believe that first of all, the margin of safety for the globe is the smallest it has ever been for energy. 96 billion barrels a day, the highest it has ever been. let' s say incremental supply capacity is at the lowest point as one percentage of that. >> very few margin producers across the market. at its peak, 9.6. only 400,000 barrels per day has been shaved off u.s. production. opec production has gone higher.

protect their market share? kyle: it is opec. gary: if you got a scenario where the global economy will slow down a little bit, isn' t that in direct correlation with energy assets? kyle: global gdp will still be positive. it will not be 4%, will not be 3.5%. it might only be 2%. when you look at scale, that is a huge number. it is a massive amount of money. but it is still growth. ins -- incrementally, new demand for crude every year. right now, we have maybe 600 700 barrels a day. you have to realize the u.s. added per year. we are the largest swing producer in the world and we

per day next month. the world is not ready for that. >> if i am a investor, is this the best? is it infrastructure, pipelines, upstream, downstream, where? >> it depends. those businesses are dominated the equities trade per pennies, subordinated debt trades, senior s, no one knows when they file bankruptcy, which many of them will.

>> it is a difficult answer to tell a crowd like this. >> we are not trying to take specific stocks. you referenced the housing recovery post 2009. would you describe the rebound in energy when it happened, will it be a similar type of rebound? kyle: it will be. there are not many instruments available in the energy market. >> the housing market is way more liquid than the energy market. >> maybe the best thing they could do is get rigs sitting there . >> for this crowd we are talking to, all we do is go and buy crude oil etf. that means you do not have to bet on a specific management company. just supply and demand.

>> i am carl icahn. >> i am ben bernanke. >> larry summers. >> david rubenstein. >> jeff smith. >> david the tray us. >> i am watching wall street week. >> iwatch wall street week. >> i am watching wall street week. >> i was a guest on original wall street weekend and pleased to be on the brand-new one. >> and you should, too. quite spanking on wells fargo, bank of america. j.p. morgan chase. financial sectors, spider etf. to help minimize stock risk to why invest in a financial stock when you could invest in the entire sector of s&p 500.

read it carefully and visit us on the web. >> you can join millions of americans we are available online. world. your iphone or android. do it today and find out why millions are tuning in. for real news, better talk. >> sponsored in part by morgan stanley, where capital creates change. >> i took an interest in helping a gentleman by the name of chris kyle, who wrote the book, the american sniper. became a fantastic movie directed by clint eastwood. tell us a little bit about chris kyle and your experiences with him? kyle: i met him through

enter a more disciplined and extreme workout regimen. i went out to the west coast and did this program with mark , the reserve commander for seal team three. chris was with seal team three . i got to know a few of the guys while i was out there. mark called me one day and said hey, there is a guy you need to meet who wants to go back to texas. i met chris and we became friends. i moved them in with my family. and then started a business, trying to reintegrate them. into society a little bit. it was a great relationship. it was fun to try to help him reintegrate into society. what this guy does is he trains

into the program and then he dumbs it down for people like us. you work out alongside these early 20' s, high teens kids who are super freaks with their bodies. you just do let' s wait but you do as many reps and work as hard as they do. it is an amazing program where you will lose an enormous amount of weight in one week. >> it is not just weight training. it is running. kyle: swimming, running, weights, jujitsu, mental activity. everything. it is worth doing if what you' re trying to do is get fit. gary: what do you do when you are not managing money? tell the viewers what you do. kyle: i love hanging out with my kids, traveling, reading, and hanging out in the wine country.

spearfishing, and reading a book. anthony: a pretty good combination. i want to thank kyle forced us anytime with wall street week. until next sunday, have a prosperous week. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]

. (applause) well god bless you! it's a joy to come into your homes. if you're ever in our area, please stop by and be a part of one of our services. i promise you we'll make you feel right at home. thanks so much for tuning in and thanks again for coming out today. i like to start with something funny. i heard about this man. he was on vacation in jerusalem with his family when his mother-in-law suddenly died. he went to make arrangements to get her body back home. the consulate said it would cost $5,000 to have her shipped but he could have her buried right there in