Bridgewater: Europe Faces Greater Challenge Than the US in 2008

Prior to the G20 Summit that took place in Mexico in June this year, analysts at Ray Dalio’s Bridgewater Associates, made some key observations on how he expects the meeting to play out. The analysis was critical of the role that policy decisions made at these summits play in restoring investor confidence. Policy makers face challenges at these times when deleveraging processes are leading to risk of further slow or negative growth. The analysts of the world’s largest hedge fund, they also note that the fate of Spain was decided a few years ago, but policy makers failed to realize the signs. They still give out empty assurances and seem incapable of planning any significant changes to alleviate the dire consequences.

The European leaders still don’t have a definite Plan B when their present actions, that mostly rely on the fate of the Spainish bailout, and the ECB’s support, will fail to deliver the desired results. The current crisis in Europe differs from the 2007-08 meltdown of the US economy. The major difference is that the US had a focused and united economic interest, while opinions and interests are largely polarized in the Eurozone. Countries like France, Spain, and Italy are not ready to give up fiscal sovereignty, while Germany wants to take part in debt sharing, only when a fiscal union has been achieved. There is a lot of work to be done in Europe, if an actual fiscal and banking union is implemented. Angela Merkel did emphasize on the need for unified policies in the EU Summit that took place in late June 2012. The Brussels summit also agreed on an elaborate bailout plan for Spain.

Bridgewater also comments that the European economy is capable of stonewalling the growth in emerging markets and other developed economies. The observations are true, as China and Japan slowed in the face of the choppy European markets. The most concerned of the group are the US and China, but their ability to provide stimulus is severely strained, as they await impending elections. Dalio comments that if EM countries take part in increasing IMF funds to Europe, it should not be taken as an action purely reflective of their concern for the Euro economy. These economies are looking for a larger voting share in the global lender, and for this reason, the German Chancellor is not excited about these rescue measures. Dalio further adds,

• “Policy makers in Europe have a particularly tough road ahead, and “the challenges of the European policy makers much greater than those of American policy makers in 2008.”

Europe does now have more of a plan to deal with the situation, but Dalio notes the hardships ahead. In an interview earlier this week, he specifically mentions the tough conditions in Southern Europe which will not end any-time soon.

Source: ValueWalk

Ray Dalio is an American businessman and founder of Bridgewater Associates. Bridgewater Associates has since attracted many clients including pension funds and is currently (as of January 2012) the largest hedge fund in the world with nearly $120 billion under management.

Ray Dalio recent thoughts

Ray Dalio of Bridgewater hedge fund response to the question 'What keeps you up at night?' is most likely the reason why the ECB and FED went 'unlimited' with QE policy this month.

Points to note:
- Europe crisis has much more trouble to come and will result in a lost decade
- $2 trillion euros of losses to be soaked up by European banks by either write offs or monetary policy
- Age of great returns is over, as there will be no benefit from interest rates falling (as they are already zero)
- De leveraging safely requires the correct balance between austerity, monetary and fiscal policy
- Depressions happen when there is no monetary or fiscal policy

At 9.50, the question is: What keeps you up at night?

Response: We are in a one world economy and the world is slowing. In the past when the world economy sank the response was to lower interest rates. This can't be done now as rates are already at zero, thus there is an air pocket of what policy can be used. IF the world falls into recession, the response will need to be global with the correct mix of prudent monetary and fiscal policy. Ray fear that the response will be be prudent, due to the fact the policy makers will not know how to respond.



Ray Dalio is an American businessman and founder of Bridgewater Associates. Bridgewater Associates has since attracted many clients including pension funds and is currently (as of January 2012) the largest hedge fund in the world with nearly $120 billion under management.

Bridgewater Associates makes the world's largest hedge fund

The largest investment company in the world, Bridgewater Associates intends to launch a new hedge fund with unprecedented capital of $ 10 billion, says Wall Street Journal.
The amount is a record for similar projects, and starting with such large capital is evidence of recovery of business investment since the crisis in 2008, the newspaper said.
The new fund will be called Pure Alpha Major Markets.
It is assumed that it will be focused on working with the stock exchanges of the most developed economies, such as Germany and the UK. For now, it can belong to only existing investors from Bridgewater.
The company itself was founded in 1975 by entrepreneur Ray Dalio, who graduated from Harvard and deals mainly with macroeconomic investments - such as gold and bonds.
Bridgewater manages assets are currently over $ 100 billion.
The large amount of Bridgewater - the company has 1,200 employees, is very attractive for investors because the fund can provide resources for services that others can not.
Bridgewater analysts regularly produce valuable reports that can not be found elsewhere, points out financial issue.

Ray Dalio is an American businessman and founder of Bridgewater Associates. Bridgewater Associates has since attracted many clients including pension funds and is currently (as of January 2012) the largest hedge fund in the world with nearly $120 billion under management.