Bridgewater Bets Big On (Our) Short Europe Call

In just one week Bridgewater, the world’s biggest hedge fund firm, more than quadrupled how much it’s betting against European Union companies.

The firm, run by Ray Dalio, has at least $13.1 billion in shorts, or wagers that a stock will fall, according to EU regulatory filings. That’s up from the $3.2 billion it had disclosed on Feb. 1. It also more than doubled the number stocks it’s shorting to 44 from 20...

Bridgewater has been building positions against Italian banks and insurers ahead of the March election, which is widely expected to produce no clear winner, hindering the country’s ability to produce economic reforms.

"Contrary to our positive outlook in the U.S., our model is prospectively signaling a concomitant deceleration in both economic growth and inflation across the Eurozone economy. This view is very counter to consensus that remains extremely complacent on the long side of the euro and European equities."

• The TREND (i.e. 6MMA) in Eurozone consumption growth has inflected from what has previously proven to be an unsustainable rate;
• The TREND in Eurozone manufacturing growth has negatively inflected from a 7-year high;
• The TREND in Eurozone export growth is explicitly negative;
• The TREND in Eurozone headline CPI is sideways; and
• The TREND in Eurozone core CPI is explicitly negative at half the ECB’s +2% inflation target and a breakout in wage inflation remains elusive despite the marked improvement across Eurozone labor markets.