Ray Dalio: Don't Assume That Germany Will Bail Europe Out; Consider The "Fat Tail" A Significant Possibility

Tyler Durden's picture




 

Lately, more and more professional investment "advisors" and newsletter recommendations boil down to just one catalyst: wait for either Germany, the ECB or the Fed to step in, as usual, and bail the world out, because, well, they have to, and any additional thought is rendered moot as fundamental analysis is meaningless under central planning (plus it is actually more work than just repeating the same stuff over and over while charging $29.95/month for it). Of course, when these same snakeoil salesmen are asked the simple question: what if said bailout does not happen, or if it happens late (for the purposes of this exercise let's assume one is not a central bank that can print its own money, have an infinite balance sheet, and can afford to be wrong almost into perpetuity), they give a blank stare, start mumbling something and walk away, especially if one mentions Lehman brothers and the simple detail that, oh, it failed. Which is why if Ray Dalio, head of the world's largest hedge fund, is correct, it may time to summarily fire and stop subscribing to each and every broken record Oracle whose template is "X will bailout Y" for the simple reason that it is wrong.

From Bridgewater's Daily Observations:

Be Careful When Betting Against Human Nature

 

Alliances are shifting in a logical manner. The German-French alliance is breaking down in favor of contributor (higher rated credit) countries aligning against recipient (lower rated credit) countries. Similarly, the terminology to describe who is reasonable and who is unreasonable reflects these parties' respective interests. Those who don't have to contribute use terms like "inflexible" and "irresponsible" to describe the contributors' reluctance to "do enough" to prevent collapse by lending more to recipients who can't service their existing debts, while those who have to contribute use terms like "inflexible" and "irresponsible" to describe the recipients' reluctance to "do enough" cutting of their spending and borrowing to service their debts. Students of human nature and deleveragings know that this is to be expected.

 

Similarly, talk of a fiscal union to resolve these problems has to be looked at in light of the question of whether it is in the interest of fiscally strong contributors to have a fiscal union with fiscally weak recipients in which the majority rules how the money is divided.

 

For this reason, we think the popular assumption that the Germans and the ECB (which requires agreement of the key factions within it) will come through with the money to make all these debts good should not be taken for granted. Said differently, we think there are good reasons to doubt that European bank and sovereign deleveragings will be prevented from progressing to the next stage in a disorderly way, without a Plan B in place. This "fat tail" event must be considered a significant possibility.

0
Your rating: None
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 06/26/2012 - 20:37 | 2563430 Rincewind
Rincewind's picture

What's your problem?

Tue, 06/26/2012 - 21:05 | 2563516 fightthepower
fightthepower's picture

I am trying to do the Germans a service. I want them to know they are going to have to work hard and build high quality products and they will take their profits and give them to Greece, France, Italy and the USA. That's what pussies do, give away the fruits of their labor. Get used to it!!!

Tue, 06/26/2012 - 21:25 | 2563559 Catflappo
Catflappo's picture

And therein is the real, overall, master plan of the USA.

Let the world get used to defaults - umpteen of them throughout Europe, followed by Japan and the UK.... and then,  hey presto, we got 'let off' our 16 trillion and what's more it was (relatively) a bit of a non-event.

Happy Days!

Tue, 06/26/2012 - 21:41 | 2563601 fightthepower
fightthepower's picture

You got it.

Wed, 06/27/2012 - 05:19 | 2564305 BigJim
BigJim's picture

US Citizenism!

AnAnonymous. I almost miss his stupid musings.

Wed, 06/27/2012 - 01:38 | 2564134 Rincewind
Rincewind's picture

It is an interesting approach to call them "filthy huns" with the aim of doing them a service.

I will try something along this line with my neighbor, next time I want something from him.

Wed, 06/27/2012 - 02:04 | 2564164 slewie the pi-rat
slewie the pi-rat's picture

if my neighbor needed something and i could help her, she could call me a shitheaded asswipe and i'd still give it to her with compound interest

Wed, 06/27/2012 - 02:39 | 2564193 Gavrikon
Gavrikon's picture

Just don't forget the oral sex.

Wed, 06/27/2012 - 02:37 | 2564191 Gavrikon
Gavrikon's picture

That DOES seem to be the master plan.  And since the Germans have been cowed into a permanent state of guilt over that little Austrian corporal who led their grandparents into disaster, they basically ARE pussies who won't even fly their own national flag unless it be during a soccer championship.

And I say this as a Germanophile who lives near Frankfurt with many German friends.

Tue, 06/26/2012 - 21:47 | 2563619 andrewp111
andrewp111's picture

Ze Germans like Greek boys and girls, the younger the better. Returning to the Drachma will make things soooo sweeet for Germany's hordes of perverts. Sexual Tourism is Greece's future, and Ze Germans will be the biggest customers.

Tue, 06/26/2012 - 22:50 | 2563792 Richard Head
Richard Head's picture

Some German dude must have fucked your girlfriend.

Tue, 06/26/2012 - 21:14 | 2563537 chubbar
chubbar's picture

Speaking of fat tails, check out this crazy shit. http://www.scribd.com/doc/93058461/LAWSUIT-Complaint-SDNY-11-23-2011-Neil-Keenan 

That crazy, tin foil shit that Fulford has been spewing about, the missing trillions, gold, etc., has finally showed up in a lawsuit filed in NY. I googled the attorney of record and they are the real deal. High powered with a bunch of awards. I sure don't know what to make of it but it all ties in with those bonds that were confiscated going across the Italian border last year. If you read the complaint it is some wild shit! Apparently the judge that was assigned the case just resigned, I don't have any particulars on that. If this is anywhere close to being true then there is some wild moves happening below the surface. I'd be ready for anything to happen as this goes to the highest branches of several countries, including/especially the U.S.

Tue, 06/26/2012 - 21:41 | 2563604 Mad Mad Woman
Mad Mad Woman's picture

Fulford laces his tin foil stuff with some true stuff from time to time. My partner really gets into him. But he does come across the real deals with regularity. What you read is true.

There's a lot of shit flying below the radar right now around the world. It's a lot of black ops stuff.

Tue, 06/26/2012 - 22:23 | 2563719 earleflorida
earleflorida's picture

'Bank of Nova Scotia via ScotiaMocatta'

Wed, 06/27/2012 - 00:51 | 2564069 billsykes
billsykes's picture

these were fake bonds. 

Tue, 06/26/2012 - 19:57 | 2563313 BigJim
BigJim's picture

It's interesting to see wealth redistribution being rejected when it's asked for internationally.

Shame we don't have the same option domestically.

Tue, 06/26/2012 - 20:05 | 2563329 macholatte
macholatte's picture

 

It's interesting to see wealth redistribution being rejected when it's asked for internationally.

Shame we don't have the same option domestically.

 

Of course we do.  The opportunity arises at least every 2 years..... it's called voting at an election.

Tue, 06/26/2012 - 21:35 | 2563584 Ned Zeppelin
Ned Zeppelin's picture

Voting for Tweedle Dum or Tweedle Dumber ain't much of a choice! Both parties are vacant of any thinking.

Tue, 06/26/2012 - 23:13 | 2563838 Dr. No
Dr. No's picture

I junked you for thinking voting matters.

Wed, 06/27/2012 - 05:24 | 2564307 BigJim
BigJim's picture

 Of course we do.  The opportunity arises at least every 2 years..... it's called voting at an election.

Hmmm Last time I looked, I was still paying taxes imposed upon me by a government that got elected by people who'd be on the receiving end. Despite my having the vote.

'A government that robs Peter to pay Paul can always rely on the support of Paul'

Tue, 06/26/2012 - 20:07 | 2563335 fightthepower
fightthepower's picture

Never under estimate what total losers the Germans are. They have lost every war for the last 100 years. They are still occupied by the USA. Hell, even Iraq caused enough chaos to make us leave. Germany is the world's bitch. They will pay what ever it takes and will remain the shittiest losers in the world.

Bend over German losers!

Tue, 06/26/2012 - 20:14 | 2563357 FEARTHESHARK
FEARTHESHARK's picture

Sorry, but I didn't understand this the first three times you posted it, so can you post it another three times for clarity?

Tue, 06/26/2012 - 20:43 | 2563450 fightthepower
fightthepower's picture

No, but I will say that Germany will pay anything, and I mean anything ANY country asks them to pay. Why? Because theynare emasculated bitches. They work hard so the rest of the world doesn't have to. I am headed to Germany soon. Maybe I can find a few blond haired blue eyed woman to pimp out. LOL!

Tue, 06/26/2012 - 21:52 | 2563633 Bunga Bunga
Bunga Bunga's picture

Probably you are right, because WWII never really ended.

Wed, 06/27/2012 - 00:03 | 2563973 MrPalladium
MrPalladium's picture

So true. WWII never ended, but it is clear that Western Civilization was the loser.

My father unknowingly enlisted in what would turn out to be the War to make the world safe for communism. 25 years after the end of that war I earned the same campaign ribbon that my father earned "United States Army of Occupation Europe." Indeed, some wars never end.

And the attack upon the West by its own elites, both alien and native, continues.

Tue, 06/26/2012 - 20:30 | 2563404 nmewn
nmewn's picture

"Bend over German losers!"

Lemme guess, Greek?

Tue, 06/26/2012 - 19:58 | 2563316 lasvegaspersona
lasvegaspersona's picture

Yes.

What would you do for a dear relative asking for the 5th loan this month.

Tue, 06/26/2012 - 19:59 | 2563317 btb2010
btb2010's picture

He didn't make his billions by being wrong

Tue, 06/26/2012 - 20:00 | 2563318 veyron
veyron's picture

Tell that to Madoff ...

Tue, 06/26/2012 - 20:20 | 2563369 RoadKill
RoadKill's picture

Totally unfair. Dalio made his billions batting 0.600 with a slugging average of 1.200. He is not a 2 trick Pony like Paulson who bet against housing and then made a hugely ptofitable loan to Dow Chemical.

Tue, 06/26/2012 - 20:00 | 2563320 The Watchman
The Watchman's picture

Fat tail. My favorite.

Tue, 06/26/2012 - 20:26 | 2563389 IndicaTive
IndicaTive's picture

+1 for the scary avatar.

Tue, 06/26/2012 - 21:16 | 2563541 harmonymonkey
harmonymonkey's picture

Yep.  I could never leave her behind.

                             ~ Spinal Tap

Tue, 06/26/2012 - 20:01 | 2563322 Ropingdown
Ropingdown's picture

Dalio lays out the obvious as only a cool head can.  A year from now thousands of money managers will be saying "how could this happen to such fine 'very old' [ref. de Villepin] countries? Unthinkable!" and we'll just print this post for them, as we did with Kyle Bass' posts and Michael Burry's  interviews.

Tue, 06/26/2012 - 20:02 | 2563323 Robot Traders Mom
Robot Traders Mom's picture

God...What I wouldn't give to see a pay-per-view debate between Dalio and some fucktard like Steve Liesman.

Tue, 06/26/2012 - 20:11 | 2563350 macholatte
macholatte's picture

 

 

Sept. 15 (Bloomberg) -- Ray Dalio, founder of Bridgewater Associates LP, discusses the European debt crisis, investment strategy and the global economy. He speaks with Erik Schatzker at the Bloomberg Markets 50 Summit in New York.

http://www.bloomberg.com/video/75534426-bridgewater-s-dalio-on-europe-ec...

Tue, 06/26/2012 - 20:12 | 2563352 stocktivity
stocktivity's picture

Liesman is paid to be a cheerleader

Tue, 06/26/2012 - 20:43 | 2563452 long-shorty
long-shorty's picture

as Dalio is paid to see reality. excellent point. people excel most at what they are compensated/evaluated on.

Tue, 06/26/2012 - 20:45 | 2563461 Robot Traders Mom
Robot Traders Mom's picture

100% correct. Good post.

Tue, 06/26/2012 - 20:05 | 2563330 lasvegaspersona
lasvegaspersona's picture

The Euro was developed with a plan and a purpose...to survive. No where have I read of a plan to bail each other out of indescriminent spending. Certainly not the long term,structural kind that comes with socialist programs for age security and healthcare (the kind politicians rather than insurance companies dream up.)

Tue, 06/26/2012 - 20:36 | 2563431 Not Too Important
Not Too Important's picture

"The Euro was developed with a plan and a purpose...to survive."

No, it was designed to fail:

http://www.gregpalast.com/the-euro-is-a-big-success-no-kidding/

And civil war is such an ugly thing . . .

Tue, 06/26/2012 - 21:51 | 2563632 andrewp111
andrewp111's picture

"The Euro is a burning building with no exits." (William Hague)

 

I just love watching stuff burn.

Tue, 06/26/2012 - 20:05 | 2563331 PhilB
PhilB's picture

I dont think people have a clue as to how the ECB works including dear old Ray. Get with the program Ray, the truth be told, the ECB can , in theory, run over the votes of Germany. The ECB runs by simple majority vote in the end. Germany has been overruled many times already (Axel Weber on Bond Purchases) and now you can guess the LTROs and lowering of credit quality.

Tue, 06/26/2012 - 20:17 | 2563363 web bot
web bot's picture

Ray Dalio is a financial Einstein. He has a cult culture that is based on hypothesizing everything... with 5,000 employees doing this day in - day out.

And... who are you?

Tue, 06/26/2012 - 20:50 | 2563474 SwingForce
SwingForce's picture

It works every day, until it doesn't. Getting cocky means the end is near.

Tue, 06/26/2012 - 22:11 | 2563690 PhilB
PhilB's picture

If i had a euro for every time a financial einstein spouted shit to the masses and dogs like you lap it up as if it were pearls of wisdom i could bailout the EZ by now. What he says about the ECB is just plain wrong. WHat the hell does he mean by "key elements"?. Germany has been bitching while Draghi has been doing the slapping...get your cheek in line biatch cause your next.

Tue, 06/26/2012 - 23:22 | 2563865 Crisismode
Crisismode's picture

Repeat question:

 

Who are you?

Somebody?

or

Nobody?

 

It looks like the answer is self-evident.

 

Tue, 06/26/2012 - 21:53 | 2563637 andrewp111
andrewp111's picture

Germany can leave. Then the ECB will be free to print to infinity and beyond, they will,  and the Euro becomes a Drachma. You won't want to hold Euros after Germany leaves.

Tue, 06/26/2012 - 22:14 | 2563696 PhilB
PhilB's picture

Andrew. Germany can leave? Really?? I guess so, but not after if it gets fucked over on 1 Trillion plus Euros of money its owed. Oh and less you have forgotten, some 70% of Germany's current account surplus is within the EZ. Germany would be like the US in the great depression.

Tue, 06/26/2012 - 23:48 | 2563940 fattail
fattail's picture

The ultimate fattail, Germany should leave, I can't figure out why they are sticking around. 

 

Do NOT follow this link or you will be banned from the site!