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World's biggest hedge fund in £5.9bn bet against Europe


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Posted (edited)

The world’s biggest hedge fund has made a €6.9bn (£5.9bn) bet against some of the biggest businesses in Europe as recession loomsUS fund Bridgewater Associates, which has $150bn (£122bn) in assets under management, has emerged as the biggest short seller of European stocks. New disclosures show it has made bets totalling €6.9bn against almost half the EURO STOXX 50 Index, which is dominated by French and German businesses.

“These new big shorts from Ray Dalio make all other whale trades look like shrimp trades”, said Ivan Cosovic, founder of data and analytics firm, Breakout Point. 

The positions were all put on since the start of the week amid mounting pessimism about the state of the European economy. Earlier this week Bank of America said more than half of global money managers are now predicting recession in Europe within the next 12 months


Edited by itsnotoutthere
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Posted (IP: Staff) ·

Hedge funds are short selling stocks everywhere right now - this isn't specific to Europe.

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Not surprising given what's going on. They would have been in a better position had the EU/Euro area been able to normalise interest rates earlier, last year, not something easy when the EU includes Italy that could barely stand up before covid and war, inflation pressures and the perennial banking problems.

Which caused ECB to call an emergency meeting this week on fragmentation, ie Italy unable to cope with ECB stopping the bond buying scheme.

Once the markets think that any actions to support the situation is lost then financial judgments will be made and actions taken. 

With interest rates now having to go up while economic activity falls a recession is being priced in with the usual share price drop.   

Many have lost faith in Lagarde with ECB credibility in tatters. 


"Persistent price pressures have forced the ECB into an “enormous U-turn” since December, said Carsten Brzeski, head of macro at ING bank.

From saying inflation would be “temporary” and warding off interest rate hikes in 2022, the ECB is now racing to catch up with other major central banks in the United States and Britain."


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 "The European Central Bank took steps on Wednesday to address surging borrowing costs in the weaker eurozone economies, most significantly Italy where yields have surged to an extent that has rekindled fears of a lurch back to the eurozone debt crisis.

The ECB announced it was speeding up work on a new "anti-fragmentation" instrument and would allow extra flexibility in how it uses the proceeds of its pandemic-era bond buying program. This means it could funnel cash from that scheme back toward supporting the most vulnerable countries.

With the ECB set to raise rates in July and September, eurozone countries have seen an increase in their 10-year bond yields, with some member states, like Italy, having to pay a significant premium over the effectively risk-free 10-year German bond. This widened spread had alarmed the ECB, which called an extraordinary meeting this morning to address the problem."


Could a new debt crisis split the eurozone?

Fears that Italy will struggle to repay lenders are troubling central bankers, caught between prudent countries and big spenders.

Before Brexit, there was Grexit. In 2009 Greece admitted that its budget deficit was more than four times the limit imposed by the EU, and its lenders began to fear that the country, unable to service its debt, would have to exit the euro and reinstate the drachma.

Credit ratings agencies swooned, lenders panicked and the country’s bond yields – and therefore the cost for it to borrow money – climbed precipitously. By the time the crisis was over in the mid-2010s, the fears had spread to the so-called PIIGS countries: Portugal, Italy, Ireland, Greece and Spain (and Cyprus). All had taken bailouts to keep up their debt repayments except Italy, which only narrowly avoided having to do so.

This week the spectre of that crisis returned, with yields on Italian ten-year debt climbing above 4 per cent for the first time since 2013. The country’s lenders have become increasingly nervous that central banks’ decisions to begin raising interest rates, to combat inflation, will hinder Italy’s ability to repay its debt. They are right to be worried – like those of other countries, Italy’s debt levels climbed sharply during the pandemic as it borrowed to shore up its economy during successive lockdowns, with debt hitting 150 per cent of GDP in 2021. Unlike in other countries, however, Italy’s debt-to-GDP ratio was already high before the pandemic; in 2019 borrowing was at 134 per cent of GDP, against the UK’s 82.7 per cent and Germany’s downright prudent 58.9 per cent.


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It doesn't take a genius to bet against any companies just now. At least the EU hasn't erected trade sanctions on itself or risked a trade war with its biggest trade partner as one European country has.

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3 minutes ago, The Silver Shroud said:

It doesn't take a genius to bet against any companies just now. At least the EU hasn't erected trade sanctions on itself or risked a trade war with its biggest trade partner as one European country has.

Its not the UK in trouble, we see stock trading in line with the general trend, something that supports the idea that brexit is not a problem. 

The other way of looking at it is despite Italy being a member of the EU and Euro it cannot match other countries outside the block, without the advantage.

And Italy aren't backwards so why the problem, if its not them then what. Oh hang on... I see a blue flag with stars. ;) and using a currency without a lender of last resort, and not a traditional currency, run by an ECB without options due to juggling multiple nations economic needs. 

Euro was a vanity project with a short shelf life and now its just adding to the problems.     


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