June 23, 2022
Notorious fund manager Ray Dalio has increased his short position in European equities to more than $10 billion.
The American investor Ray Dalio is not the first one. He is the founder of Bridgewater Associates, the largest hedge fund in the world with $150 billion in assets under management.
Dalio has gone ‘short’ on several European stocks for about 6.7 billion dollars with Bridgewater, it was announced last week. That means he is speculating on a decline in those shares. He has expanded that short position to – just swallow – 10.5 billion dollars.
Among the 28 European companies that Dalio is targeting, there are roaring names. Including the chip machine manufacturer ASML
from farmareus Sanofi
and the oil producer TotalEnergies
are the hare.
Robert Habeck, Germany’s economics minister, even warned of a ‘Lehman Brothers effect’. “High gas prices could cause a collapse of energy markets,” was the ominous message from the green energy minister. Germany has the alarm phase for its gas supply activated.
Is Dalio betting on such a Lehman Brothers moment? It may explain why he is targeting Europe and not the United States with his shorts: our region is much more dependent on external partners for its energy supply than the US.
Remarkably, the stock markets in Europe collectively turned red on Thursday, while Wall Street sought higher regions in the first hours of trading. Increasing uncertainty about the energy supply plays a role in this. Also the German chemical giant BASF
who also short Dalio, said he is gearing up for an even bigger climb in gas prices.
Central banks should run the economy like a good driver drives a car.
All companies that Bridgewater Associates targets are part of the European star index EuroStoxx50, which groups the 50 largest companies in the eurozone. Bridgewater’s bearish positions appear to be betting on an overall decline in eurozone equity markets.
Dalio has been analyzing economic and political relationships in the world for Bridgewater for years – with great success. So if Dalio’s hedge fund takes a sizable short position, investors should keep their ears open.
The New Yorker, a descendant of Italian immigrants and the son of jazz musician Marino Dalio, has also been critical of the way central banks fight inflation for some time. Central banks should run the economy the way a good driver drives a car, namely by using the accelerator and brakes in a controlled manner – not always slamming on the brakes and then accelerating again. Dalio wrote on LinkedIn a few days ago† The title of that post? “Trying to cut inflation will come at a high price: stagflation.”