Bridgewater's European Short Grows To A Massive $22 Billion: Here Are The Targeted Companies

In the red corner we have Mario Draghi, who runs the world's biggest and most activist central bank... and in the blue corner we have Ray Dalio, who runs the world's biggest hedge fund and has been systematically betting against the companies backstopped by his opponent.

They are set for a historic clash.

* * *

Less than a week ago, we were surprised to learn  that what was until the start of the month "only" a $3 billion short bet against a broad selection of Europe's most popular public companies, had grown into a massive $13 billion basket of shorts. Well, fast forward to today when according to the latest breakdown of his filings by Reuters, Ray Dalio has been especially busy, and since last Friday he added another $9 billion shorts, bringing Bridgewater's total short against some of the continent’s biggest companies to a record $22 billion.

While there was no offsetting data to show whether the $160 billion in AUM Bridgewater holds more European stocks than it “shorts” overall, an investor in the hedge fund firm’s Pure Alpha Major Markets strategy said that the fund had reduced its long exposure significantly this year.

And although the filings do not say when Bridgewater first took out its European short positions - our first report of Dalio's European short was back in October when the fund had a tiny $700 million short - many of its latest disclosures are recent, with some in Germany, Italy and France in the past two weeks.

As shown in the breakdown below, Bridgewater has bet against firms ranging from Anglo-Dutch consumer giant Unilever to French oil giant Total, and virtually every single prominent public bank.

Since Bridgewater is not known for picking individual stocks, the manager’s position was the result of a view on the wider economy according to James Helliwell, chief investment strategist of the Lex van Dam Trading Academy.

"Whilst the extent to which it may be an outright short bet is uncertain, I suspect that it was seen as a relatively cheap hedge against existing global equity exposure."

Broken down geographically, Bridgewater’s short positions are the highest in Germany with $7.3 billion, followed by France with $4.5 billion while in Spain its shorts in four groups amount to almost €1.4 billion ($1.7 billion) and in Italy include Unicredit and Enel. The portfolio has been fluid, adjusting its trades and recently cutting back on shorts in the Netherlands, Spain and Ireland, while increasing them in Germany and Italy.

Overall, traders told Reuters that the bets could be because Bridgewater is either expecting the stock market to fall or they are a play on the broader macroeconomic environment - hurting companies with large business exposures in the United States.

Below is a list of the European companies in which Bridgewater has taken short bets on in the past few weeks. The table discloses the latest available data on the 59 European companies where the Bridgewater stake has triggered reporting obligations by the respective financial market regulators.

 

And the top 30 shorts, charted.

Comments

fx Ghost of PartysOver Thu, 02/15/2018 - 09:50 Permalink

Summary: A short Euro/Dollar bet, coupled with bearish bets on companies that may suffer from declining  international earnings (in Euro terms) and/or that are massively exposed to renewed Euro crisis fears and a much more dovish ECB than expected currently.

 

Ok, let's connect some dots. The Euro has rallied strongly versus the $$ despite interest rate differentials strongly  favoring the $. That will vastly reduce foreign earnings of European companies as every non-Euro unit of sales is worth considerably less in euro terms. So earnings surprises to the downside loom large. Next on, the strong euro means a detereorating cometetive position of those companies versus their US peers.

Then, the ECB may soon find itself in a position where it willfind out that the structurally unresoilved Euro debt crisis doesn't allow for any significant taperings , not to speak of interest raises. Which in turn will baldy hurt the Euro once markets start to price that reality in.

 

 

In reply to by Ghost of PartysOver

KingTut zorba THE GREEK Thu, 02/15/2018 - 01:19 Permalink

Hopefully, Dalio is not the fraudster Soros is.  Soros' "take down" of the pound was done by whole kabal of people.  It was a well known trade that was also zero risk.  Worst case you get you money back, best case you make a bundle.  A monkey could make money doing that.

Soros has lost billions on more recent trades.  And he's a gallactic asshole.

 

In reply to by zorba THE GREEK

EddieLomax 2ndamendment Thu, 02/15/2018 - 09:04 Permalink

And every single one of his shorts is pointed at Euroland, not the UK.  Interesting that he has left the UK out here, wondering what is expected to happen here.

The so called negotiations about brexit are likely to have a lot of unintended consequences, if the EU jump the shark on them they might just hand a loaded handgun to Trump who doesn't exactly need any encouragement to put in measures to hamper EU imports.

In reply to by 2ndamendment

38BWD22 Wed, 02/14/2018 - 20:25 Permalink

 

I'm too scared to short due to not having good (insider) information, but those are the kinds of European companies I too would short.

My reasoning?  Europe is worse off than the USA all things considered.

gatorengineer 38BWD22 Wed, 02/14/2018 - 20:40 Permalink

Europe has been passified and assimilated.....  Europe will "thrive"....  The Greek 10 will yield less than the US 10 before july 4th....  No the US will be ground to dust, and then the remains beanified......  Probably take a nuclear exchange, to speed things up.

In reply to by 38BWD22

EddieLomax gatorengineer Thu, 02/15/2018 - 09:08 Permalink

Since the UK and Europe both rely on large trade surpluses from the USA I don't see them profiting from any US downturn.

What information he has made this bet on though is real interesting, if its insider information then who knows.  But going on the likely, hes probably just going for the most likely result, the EU is protectionist and Trump at heart is protectionist too.

The USA will have a recession somepoint, Trump will want to export that recession and keep the party going, Europe looks like a great place to export it too since no one there likes Trump.

In reply to by gatorengineer

The_merovingian GoldenDonuts Thu, 02/15/2018 - 04:15 Permalink

Their bet is actually the opposite. They short European global companies because the Euro has strengthened, making their global income worth less in EUR terms. This and the coming recession which will affect Europe more because they are already in weaker position.

And you also have BEAT (base-erosion and anti-abuse tax) in the new Trump Tax law. Which will affect precisely the companies on this list. Have a read here: https://www.wsj.com/articles/beat-up-u-s-tax-provision-may-sting-foreign-firms-1518526800

In reply to by GoldenDonuts

Yen Cross Wed, 02/14/2018 - 20:31 Permalink

   I've been adding to my euro shorts as well. Totally agree with Dalio on this trade.

   FWIW I think traders should look at the Dax and overlay it with the eur/usd. They were almost 100% correlated today. They moved in perfect lock-step.[also the $usdx]

  I think KCS offered fantastic insight pertaining to OPEX Friday, and that info also applies to F/X options.

Yen Cross gatorengineer Wed, 02/14/2018 - 20:55 Permalink

  I'm a bit perplexed with your comment?  This EEM?

   I've made it abundantly clear that the euro is being used as carry currency because of lower borrowing costs for how long now?

  As has the yen. What's happening, is that[those two] currencies are so over subscribed that their strength is curtailing their own exports.

  The first thing to collapse when markets pullback, or inflation kicks in, are the emerging markets. Did you see that yuuge Yuan infusion several days ago. I also stated that the PBoC is buying euros to suppress the $usd value, and was correct.

   Japanese and German GDP's are falling in the shitter.

 

23:00  EURGerman CPI (YoY) (Jan)1.6%1.6%1.6%

23:00  EURGerman CPI (MoM) (Jan)-0.7%-0.7%-0.7%

23:00  EURGerman GDP (YoY) (Q4)  2.3%2.3%2.2%

23:00  EURGerman GDP (QoQ) (Q4)  0.6%0.6%0.7%

 

15:50  JPYGDP (YoY) (Q4)  0.5%0.9%2.2%

15:50  JPYGDP (QoQ) (Q4)  0.1%0.2%0.6%

15:50  JPYGDP Capital Expenditure (QoQ) (Q4)  0.7%1.1%1.0%

15:50  JPYGDP External Demand (QoQ) (Q4)  0.0%0.4%0.5%

In reply to by gatorengineer

gatorengineer Yen Cross Wed, 02/14/2018 - 21:31 Permalink

Dollar / RMB, RMB / Euro have been in a 1 percent trading range for a month now, if the Chinese RMB was being sold hard, it would move against at least one ....  Carry trade is a search for yield, the yield is not in Europe...  If the world thought the dollar was going to strengthen, then money would pour into US bonds (Not happening), and they would collect a 3% yield while bond prices rose and the dollar strengthened.  

Emerging markets as symbolized by EEM, are 8+ percent straight up since Friday....  Again, if Emerging markets where cracking, they should show it on this bounce.  They arent.

GDP numbers and inflation stats amongst countries are like the card game bullish, except no one says bullshit, so take that with a grain of salt.  The ECB has ran out of stuff to buy, and having squeezed the European investor out of Bonds and into stawks has been what has catalyzed the german markets......

The play right now is volatility, Up till the 50 day dma, then down again, how far is the question.

 

In reply to by Yen Cross

Baron von Bud Wed, 02/14/2018 - 20:33 Permalink

Dalio wants you all to know his short positions. I guess he feels confident betting against government index rigging. They're both dirtballs. Buy the one asset they aren't rigging upwards. When this game ends all your dollars will likely be near worthless.

SDShack Wed, 02/14/2018 - 20:56 Permalink

We've had Trade/Resource Wars going back to the 70's. The result is the crowning of the Petro$. This is now evolving into Full Blown Currency Wars. There is a reason why the USSA Security State is greater then all industrial nations combined. The USSA will sacrifice anything and everything to maintain the Petro$ against all others. Japan was written off decades ago. The EU is being set up as todays fall guy. Yuan/Ruble is next in the crosshairs, along with any non-approved crypto. Long term cashless crypto is the goal of the NWO, but only after any possible fiat threats to the Petro$ have been eliminated. The USSA Security State will make sure the Debt Ponzi Shell Game leaves the pea under the USSA dome. Everyone else will be emptied first.

Pi Bolar Wed, 02/14/2018 - 22:04 Permalink

Seem ok for a hedge fund to be $1bn short on Unilever and Total, but when Bill Ackman did the same to shadow pyramid scheme Herbalife (HLF) there was a massive outcry from the CEO and other invested cronies. I guess billion dollar shorts are the new norm. VIX anyone?

Mimir Thu, 02/15/2018 - 03:21 Permalink

"hurting companies with large business exposures in the United States"

 

What is going on is just Bridgewater's playing to to the tune of Trump's "America First" fit.

They could do the same to American companies having big exposures in the EU or China.

gkolmer Thu, 02/15/2018 - 08:11 Permalink

What happens when Ray is proven is correct, and in accordance with the European "crisis" playbook, they ban short-selling and they make them cover 20 billion plus?