The world’s largest hedge fund Bridgewater has made a huge bet of $22billion against a large number of European stocks, according to Reuters.
European Filings reviewed by Reuters revealed Bridgewater has bet against firms including Unilever, Deutsche Bank and German manufacturing company Siemens.
Bridgewater’s short positions amount to more than $4.5billion in France, over $7.3billion in Germany, almost $1.7billion in Spain and further shorts on Italian companies.
The data examined by Reuters shows Bridgewater has been reducing shorts in the Netherlands, Spain and Ireland, while increasing them in Italy and Germany.
Bridgewater, who have been contacted for comment, has a total asset pool is $150billion.
Speaking in Davos in January Mr Dalio said “Inflation isn’t a problem. Growth is good, everything is pretty good.”
He added: “If you’re holding cash, you’re going to feel pretty stupid”.
Michael Purves, Weeden & Co Chief Global Strategist told Bloomberg News: “I think when you talk about a big fund’s positions and coming up with the ‘thats, information that I didn’t have yesterday but what do I do with that information?’
“It’s a very dangerous path to go down. Because I don’t know what else is in their book. I don’t know these shorts are being used – what’s against them and so forth. And I doubt most other people do too.
“So, you know, sure at the face of it it looks like ok, wow. Is he bearish Europe? Is this a political risk play? Is this because he thinks the euro is going to 1.35 play?Is this because the fundamentals in these companies were just rotten?
“Or is he just bearish on European companies? We don’t know.”
Mr Dalio wrote on LinkedIn on Monday: “It is not unusual to see strong economies accompanied by falling stock and other asset prices, which is curious to people who wonder why stocks go down when the economy is strong and don’t understand how this dynamic works.”
Peter Tchir, Macro Strategy Head at Academy Securities, said Bridgewater are “very good at misdirection” and you have to take everything they announce as a “pinch of salt”.
He said the public will only find out why such a large bet has been taken against European business when there is a “reason” to find out.
Bridgewater’s short positions were made public in January and February as hedge funds are required to publicise trading under European rules once they go above a certain amount. Shorting is a bet that the price of an asset will go down in the future.
Coutts CIO Alan Huggins wrote on Twitter: “My take, it’s a (large) pair trade most likely vs US equities focussing on earning momentum which favours the US, mainly reflecting US tax cuts vs. € strength headwinds for many of these names.”