DISCLOSURE: I hold a long position in MTG.
So Kyle Bass doesn’t think house prices can go much lower from here. He studied every housing bubble in the past 100 years and realized that it takes about 7 years after prices peak for there to be a recovery. Since house prices peaked in 2006, he reasons that we are close to a recovery. Going long a bond insurer would be a good bet if he’s right.
One interesting thing I found out about Kyle Bass is that he thinks the GSE preferreds are worth par! That is a really controversial view. And I’m not sure I agree.