announcer: the following program is paid for presented by skybridge media llc. gary: welcome to wall street week. sandler ared ricky part of the new class of wall street titans. they take big risks, but create big rewards. anthony: today, we will learn more from our money moving managers with commentary from kyle bass on emerging management what it takes to make a great investment. announcer: this show has never been solely about investments. we have talked about anything that affected people and their money. from times square in new york

city, the new wall street week. paths tothere are many wall street. for ricky sandler, it was to further his acceptance to law school. for kyle bass, it was about falling out of a premed program. a-ha moment. their gary: you were born in miami but raised in texas. you went to public high school. class i went to public grade school. then dallas and arlington. gary: where did you end up going to college? >> texas christian. i went into the global training s.ogram for retail fa'

i spent two and a half years there and then left to go to bear stearns shortly thereafter. anthony: how did you make the transition? >> my goal was to build a nest egg to haveest and tocapital to invest have enough until things worked out. i got to that day december 2005. gary: who were some of the people on wall street that you looked up at. other than gary kaminsky. you thought that his great success in the industry. >> i was impressed by the psychology of it all. i wrote -- i read every book that soros ever wrote. i was able to meet george and his son. it has been -- i have come full circle. gary: you come from a family of money managers.

online -- on up in long island. i'm just a little bit younger than gary. anthony: you can say a lot younger. [lghter] in themy dad was money-management business. he was in our honest for goldman sachs. one of the early hedge fund guys. my brother went into the business as well. grow up talking about p/e ratios and gdp at the table. and about the goings-on little league. it was always in my blood. i didn't think i wanted to go into it. after i decided to defer my law school acceptance because i talk to lawyers who did not like what they did, i came into the business and came to work for a guy named morris mark. analyst,ther legendary analysis at goldman.

you went to the university wisconsin. what did you study? ricky: accounting and finance, which i think are the two underpinnings for investment, and money management. the bell go off and say, my come god, i am going to follow my dads -- ricky: there was this moment when i decided to defer going to law school and see what it was like to work for a while and and just loved it. i worked for a guy in wisconsin named david haro, a great friend and mentor to me. he and morris mark shaved what i have become as an investor. have 6.5 billion under management now. our 17th year.n

we started with an investment philosophy that i call quality value. i think it goes back to the two people i mentioned before. haro, a classic value investor, a contrary in, and morris mark, a deeply search and growth investor. i like the intersection of those two things. sometimes stocks that are cheaper are cheap for a good reason. i wanted us to be not only investing in high-quality businesses, but in an organization that had a great repetition. we have a great culture at eminence. we have our research team that has an average of nine years, which in this business is really impressive. i love going to work every day. anthony: so what motivates you now? kyle: i like to win. having any losses on your card drives you anymore -- even more.

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anthony: drive, passion, purpose, just some of the few that make a great investor. are going toler teach you about their investing philosophy. we've had a number of people coming on the show talking about the difference between fundamental research and technical analysis. you are a fundamental research guy. do you talk -- do you think about technicals at all when you make investments? do you watch the trading in the equities or the currencies? kyle: i do. in the various selloffs, whether the, pharma, the amount upstream, midstream mlp, you can do all of the fundamental do.ysis you want to

but you have to have views on what the future price decks are going to be peer to and the behavior of the process offense. economics assumes that all participants are rational. we know there aren't that many rational participants anywhere in the world. anthony likes to say everyone is a long-term investor until you have short-term losses. long-termnition of a investor is a short-term that went bad. gary: money, intellectual exercise, social good? intellectual growth. social good has been really fun to be on the right side of. and then winning. i like to win. having any losses on your card drives you even more. gary: i get that, believe me. 10 years from now, will you be doing this? kyle: i will never stop.

in what context? anthony: my thoughts is you will be managing money. you found a profession you will be self-actualizing in. kyle: for sure. anthony: what type of people make good investors in your mind? socially inclined people? financially inclined people? , wheni always say thinking about this and talking about it with the people i admire most, the people that tend to do well over long periods of time have something that is innate. i call it a constancy of purpose. you know these people that get up every day. no matter what is going on in they life, in the world, get up. they were card. they have the constancy of purpose and they don't let anything get in their way. and you and i know many of these people. you can't teach that. and you can't lose that when you have it. i actually think -- it is a sickly being driven and that drive is what gets people to the

finish line. to take you back to a value investment approach and the stock value investment approach. on the growth side, you are willing to pay out because you think the company will outpace itself with its earnings. but you are saying you are at the intersection of that, which some people call growth at a reasonable price. explain to us why you like that the most. ricky: to me, growth and value are on the same track. a growing business can grow into a value stock. token, a value stock may be statistically cheap today, but the business is performing a certain way, it may be more expensive tomorrow. our view is that growth and value sort of work together. as an investor in good businesses, you have the opportunity to benefit from growth and intrinsic value.

it may not be intrinsic which you today. but in a reasonable period of time, it should be statistically cheap. -- taketry to take a advantage of is that growth and value investors create opportunity for us. growth investors -- traditional growth investors want growing businesses, great -- growth that is accelerating and they don't care much about the price they pay. that presents an opportunity for overpricedocks get or we buy something that turns into a traditional growth stock and then they take it to a level that is beyond we think is fair. anthony: that is sometimes called momentum investing. not necessarily focused on what that value is in terms of long-term earnings. ricky: that's right. in terms of value and what price you are really paying. value investors look for relatively cheap stocks based on a number of characteristics. rice to earnings, book value,

free cash flow. they tend to care less about where the business is going in three years. they can get tripped up on a business that i think is growing slowly, looks cheap. but the difference between a business that is growing in the low single digit rate and a business that starts to decline is very meaningful, especially where leverage is involved. with traps are businesses secular pressure where the guy on the other side is saying that this is a cheap stock. value trap is it looks great on a fundamental business, book value analysis, pe analysis, but it is not growing enough to have a stock-price appreciation overtime. ricky: and maybe it's shrinking. with a little bit of topline declines, some financial leverage, it will beat when times earnings in three years. gary: would it be fair to say that eminence is shorting value traps and getting long growth at a reasonable price? ricky: we own high-quality

businesses that we think are under priced in the market for a given reason. it could be a business that we think will grow more than the market thanks to a could business that is a growth business that his trip to and people are focused on the short term. so we think it will regain that. or it is a slow growth and quality business where the market is a -- is misunderstanding a piece of it. businesso look at a that has disappointed wall street at citations. this could be a high growth stock that is going to disappoint or a stock that thesis achille pressure where it could appeared to be cheap that is a value trap. it has accounting related sure it's where we think the market is looking at statistical numbers that are completely false or aggressive. anthony: where in general do you get your investment ideas? ricky: i don't have a long side. it comes from the guys paying attention to what is going on in her sectors. it tends to be where -- in their

sectors. shortted e where is some problem but promising in the long-term. companies where the accounting is all messed up and free cash flow and earnings are going in opposite directions. return: absolute strategies like eminence, it is not relative performance. it is the absolute return. au can't buy groceries at supermarket with relative performance. kyle: i think that's right. investors who short stock need to realize that. the wind is blowing against you. you're right that's -- you're right benchmark is not whether or not you are making money.

b >> i was on the old wall street week." announcer: dive deeper in the most recent episode with articles and investment primers. go to wallstreetweek.com and sign up today. street week is funded in part by koch industries.

anthony: we live in america but live in a global economy. let's talk about opportunities in argentina, a country that is

in the midst of little change. the good news is there is new leadership in argentina. i think he is going to end up engaging with these of vulture funds that have held them up for the last 10 years plus. i think they are going to get to some sort of settlement. there is a lot of -- gary: these are hedge funds and other funds that are sticking these guys in bankruptcy courts over that debt. the part -- the prior administration was resistant to dealing with them. and you think the new president will deal with them. kyle: that's right. of the debt that restructured -- when argentina stopped paying its debts in the early 2000's, roughly 93% of that debt exchanged into new debt. said we are not going to

exchange the hold the country ransom, hold it hostage. they want 100 cents on the dollar plus accrued plus penalties. that is the hedge fund vulture universe. gary: how do you think that reconciles? kyle: they will come up to a number somewhere in the middle. argentina has been locked out of the global capital markets from a sovereign perspective for a decade. imagine if the u.s. could not sell bonds? anthony: i don't want to imagine that day. gary: that will never happen, i don't think. kyle: but argentina has a much brighter future ahead of it than it has had. anthony: after 2008, after the correction, a lot of advisers advised clients to look to emerging markets. what advice do you give to viewers who have some of these assets, emerging markets, bric funds -- kyle: they will see much more

pain before they see it's ok. is a scanazil, there all the way to the president. a complete disaster. until they root out all of the corruption and fix brazil, brazil will keep going south. russia, a couple of things -- andn's global chest moves -- global chess moves and being sanctioned for it. china is the big one that is going to have a nonperforming loan cycle. probably in the mid fifth inning, maybe entering the sixth. gary: when you look at opportunities as an investor, what is the greatest opportunity -- this is what we see now? views, credit

correction in china, they will go through a banking loss cycle equated. china will have to dramatically to evaluate its currency. that is not something the readership can really get your arms around, but it is really tough to invest as a nonprofessional investor if you know what i mean. anthony: devaluation because of its interconnectivity with the rest of the world economy will also upset the world economy. it will create a slower growth dynamic for everybody. while you can necessarily play the china devaluation, in terms of the u.s. dollar, what does it mean? anthony: kyle: it means a stronger dollar. ago attached to their currency to the dollar because i think they hitched their wagon to our star very smartly back then because our goal in the united states was to depreciate our dollar through inflation. ofwe issued debt to the rest

the world. we depreciated our dollar. we ended up getting -- gary: monetizing the debt. lesshe debt with dollars -- dollars with less than the dollars you borrowed. kyle: china has hitched their wagon to our star and their currency has appreciated. to let: they are going it go in the u.s. dollar will be the beneficiary. gary: let's explain to viewers why it is killing them. their goods and services produced in china and sold around the world will become more expensive as a result of that appreciating currency. kyle: that's right. there was a labor arbitrage between u.s. labor rates and chinese liberates. the free end up in global economy called free trade enables that arbitrage to normalize itself. and this phenomenon helped 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. now that labor arbitrage is gone. and if that labor arbitrage is gone and banking system has expanded 400% in seven years without a nonperforming loan cycle, my view is we are going to see a nonperforming loan cycle. gary: jim janus was on this show a few months back -- jim chain nos was on this show a few months back very negative on china. ale: we are going to see preteen material devaluation. we think it is going to be in the next 12 to 18 months. anthony: are you supporting anybody in the accompany -- in the upcoming election? kyle: i think she might be the most fit to govern the country.

anthony: now it's time to get personal and learn a little more about kyle bass and ricky sandler. from football to spearfishing, there is more to these guys than just money management. are you supporting anybody in the upcoming election? will the election have any impact on the markets? kyle: elections always have an impact on markets. i think the macro forces are going to overcome that and any potential election outcomes.

i think we have a little bit of a hollywood, you know, crew on the republican side. and on the democratic side, i really think it's hillary. to elect hillary is going to be really tough and although i think you might be the most fit to govern the country given her experience. gary: we would like to finish up with a little bit of word association. i will see -- i will say couple of words and i would like to see a reaction. favorite book. kyle: i read enjoyed this book that michael oren book -- how theoren wrote, middle east and the conflict with the united states really began when our founding fathers [indiscernible] anthony: texas. kyle: a big state. gary: the second amendment. kyle: there are plenty of things wrong with the gun laws come in my opinion. for anybody to go by a .50 that

can take down an airplane, you can go to a gun store and buy a bullet that has a head that bigger down -- bigger and end can take a plane down, maybe we should reconsider that as a right to bear arms. i think everyone should have to register with the state and the government. that is not a crazy idea. and that is something that the gun lobby would -- spot.favorite vacation kyle: the bahamas. anthony: what is a day off? kyle: i love reading and spearfishing and hanging out in the wine country. gary: what about michael lewis? kyle: i think michael lewis writes some interesting books. in my interactions with him, what i have noticed is that hyperbole tends to sell books. he has great stories and he is a great investigative journalist and he has a little hyperbole in

there and then that book takes off. gary: your favorite sport. is it football? ricky: to watch, my favorite sport is football. to play as tennis. anthony: favorite book. ricky: "into thin air." that was the book that spoke to me. anthony: your favorite vacation spot, athens or aspen? ricky: aspen. i love the mountains penpal of the activity. gary: wisconsin football. ricky: i love wisconsin everything. anthony: the person you admire the most. ricky: i think bill gates has been one of these entrepreneurial visionaries, built a business into something unbelievable, defy the odds of what he did, and then turned his life to charity and making the world a better place. hisen buffett allocated philanthropy capital to bill gates. we want to thank kyle

bass ricky sandler for joining us today. that is it for today. all daycheck in with us at wallstreetweek.com. until next sunday, have a prosperous week. ♪ announcer: the preceding program was presented and paid for by skybridge media llc.

straight ahead, the blizzard is ended, now the massive cleanupca can begin. plows have been out all night, but with more than two feet of snow on the ground they barely scratched the surface. this morning donees of thousands of people are out shovelingut sidewalks and digging out cars, but it could be days before lifs in the d.c. region gets back to normal.no for the souls brave enough to head outside, an all out sundayt morning snow war awaited. > all right, let's do it, folks. welcome to the final hour and a half of this coverage of the blizzard of 2016.f you know, for a sunday.und we're