It has been a while since you saw much in the news about Italy’s continuously troubled banking sector. Yet just this past week, the world’s largest hedge fund Bridgewater Associates, started and run by legendary investor Ray Dalio, revealed that it has launched an eye-watering $770 million short assault on the critical financial stocks of Italy. This is its largest bearish position in all of Europe, per data put together by Bloomberg.
The hedge fund has taken so-called bets on the share prices declining in not one or two but five Italian banks and an Italian-based insurance company. Their reasoning is that the Italian banks have not dealt with their absolute mountains of bad debts amassed during the Global Financial Crisis and the European Sovereign Debt crisis. New stricter European Central Bank-issued rules on bad debt are now coming into force.
Dalio and company are sure this will spell serious trouble for the already-embattled Italian lenders and insurance firms. Bridgewater’s biggest bearish position against Italian financials is Intesa Sanpaolo SpA, followed by UniCredit SpA and then the Italian insurer Assicurazioni Generali SpA.
With around $160 billion in assets, Bridgewater has also sold short Italy’s biggest utility provider Enel SpA and the largest cable maker in the globe based in Milan— Prysmian SpA. The firm took on a staggering $311 million short against the utility. These speculations bring Bridgewater up to over $1.1 billion in total shorts against major Italian firms, as this graph below reveals:
What is it that Ray Dalio and co know that the rest of us don’t? More to the point, are they the only ones ganging up on Italian banks and financial service providers? The answer to the latter question is no. Oceanwood Capital Management and Marshall Wace have also joined the vote of no confidence in Italian companies, along with other hedge funds.
The reasons that Dalio has for placing a considerable bet against Italy are numerous and somewhat obvious. The stricter ECB rules mentioned above are only the tip of the iceberg. To their credit, Italian banks are attempting to sell off loan portfolios gone bad via securities which provide exposure to pools of failed loans. Yet this has been a half-hearted measure against what amounts to a staggering $300 billion euros (or $356 billion) in total gross non performing loans as of the end of 2016.
The banks may tout Bloomberg Intelligence reports that claim the NPLs have declined by a quarter while bad debt has been reduced by nearly 40 percent, yet the hedge fund sharks are not buying it. Nor are the likes of Dalio and friends concerned that the recent rescue of Banca Monte dei Paschi and liquidation of two Veneto regional banks have somewhat lowered the Italian banking sector’s systemic risk.
It is all smoke and mirrors thanks to the ECB’s announcement on October 4th that it will begin to hold all lenders, including Italian ones, to its harsh new provisioning standards for bad loans at the beginning of 2018. The FTSE All-Shares Banks Italia Index has declined five percent in the meanwhile on the potentially devastating news for Italy’s banks.
Is Your Retirement Portfolio Protected from the Upcoming Italian Banking Collapse?
You should pay careful attention to Ray Dalio and Bridgewater Associates. He did not become among the richest investors in the globe by backing or betting against the wrong side in the financial markets. What he is telling you is that the Italian banking sector’s woes are only just beginning thanks to the ECB who is selling Italy downriver with its draconian policies once again.
This “Black Swan” looming Italian banking crisis does not have to upend your portfolio along with everyone else’s out there. Gold is your best-proven hedge against market instability and geopolitical chaos like this. Click here today to receive your no-cost, no-obligation gold IRA rollover kit from the nation’s most award-winning gold and retirement company Regal Assets, which will provide you with all of the key information that you need to safeguard your retirement assets with a partial diversification of your IRA accounts into physically held gold.