's up guys and welcome back to wall street millennial on this channel. We cover cover everything related to soccer. Investing run by ray dalio bridgewater associates is the largest fund in the world managing over 100 billion dollars of assets over the years. He has made a name for himself by making bold bets on the macro economy bidding on which countries will thrive and which countries will falter recently his firm unveiled a massive 10 billion short position against european stocks.

He's betting that a severe recession will engulf the eu and take its stock market down with it and we've already started to see cracks forming over the past year. The euro has lost almost 20 percent of its value and has reached parity with the us dollar for the first time in almost 20 years and citigroup ceo. Jane fraser. Says the european recession in 2022 is all but certain there's one man to thank for this economic turmoil.

Vladimir putin as russia has slowed down supplies of oil and natural gas to the eu energy prices in the continent have skyrocketed and as tensions escalate. They are growing fears that they could cut off exports completely in the winter. Natural gas is a lifeblood of the european industrial base and the results of a gas shortage could be catastrophic factories across europe are already shutting down because their energy costs have become prohibitive laying off thousands of workers and things could get a lot worse every year 5 million people around the world die as a result of extreme weather with the majority of these deaths attributable to extreme cold. If russia really does cut off all its gas exports to europe.

It's not just a matter of economic hardship. It could become a matter of life and death in this video and podcast. We'll look at how putin could crush the european economy and how ray dalio is positioning his hedge fund to benefit from it with economic recession on the horizon. It's more important than ever to save money and beef up your personal finances.

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On february 24th. The conventional wisdom was that they would win a quick military victory. But their economy would be crushed by economic sanctions. The reality turned out to be the exact opposite while russia's military has shown itself to be far less competent than originally feared their economy is held up much better than expected high oil and natural gas prices have been a massive windfall to russia's state run energy companies with their revenues approaching record highs in fact energy revenue has more than doubled since the invasion began with energy exports making up about half the kremlin's total income.

This is a big deal in fact. Russia's budget situation is so favorable that they can even afford to use natural gas as a weapon recently russia reduced gas flows to germany via the north stream pipeline by 40. Citing technical issues. But many analysts believe this was a political move to put pressure on the eu this comes just a couple months after they completely halted gas deliveries to poland and bulgaria two countries which are outspoken supporters of ukraine these actions have already sent european natural gas prices soaring to more than 10 times as normal levels and the pain is just getting started there are three main uses for natural gas firstly.

It is used in many industrial processes including the production of fertilizers and certain metals secondly. Some power plants burn natural gas to generate electricity for the grid and thirdly residential homes use natural gas for heating about 40 of all households in the eu rely on natural gas for heating in the summer. There is no need for heating your home so residential demand is almost non existent. So the majority of gas is used for industrial purposes.

Many of these factories operate on thin margins to begin with with one of their key input. Prices rising tenfold. It doesn't make economic sense to continue operating thousands of workers have already been laid off across the continent with many more layoffs expected in the coming months to make matters even worse one of the most natural gas intensive processes is the production of chemical fertilizers with domestic production forced to shut down and russian exports declining prices are skyrocketing and many farmers can't afford to fertilize their fields the shutting down of energy intensive factories is already enough to plunge the eu into recession. But this is just a prelude of more pain to come natural gas demand is highly seasonal demand troughs during the summer as there is no demand from households as the weather gets colder going into the winter people start turning on their thermostats and demand doubles remember that prices are already at 10 times normal levels this summer.

When you double demand against an already tight market. There's no limit to how high prices can go they could go to 20 50 or even 100 times normal levels during the winter in germany. It's not uncommon for temperatures to reach as low as negative 20 degrees fahrenheit. Which is negative 30 degrees centigrade if you don't have any way to heat your home in this weather you can die every year millions of people around the world die from extreme cold for the most part these are not people get lost in a blizzard and die a frostbite cold temperatures can aggravate pre existing medical conditions making things like heart attacks and strokes far more likely.

If you're already vulnerable and are forced to live in uncomfortably cold conditions for a long period of time your chances of an untimely death increase substantially in such a situation governments will have no choice. But to ration the limited gas supply in fact. The german energy regulator. Is already making contingency plans to do just that this winter last year russian exports account for 40 of total eu gas supply.

If putin shuts this off completely. The regulators will need to find 40 of gas demand to cut off the first item on the chopping block will be the industrial sector. But during the winter factories. Only make up about 20 of demand so even if you force all the factories to shut down.

You still need to find another 20 percent to cut they will have no choice. But to ration supplies to households even if the government can avoid a tragic humanitarian situation by rationing supplies at this point a financial crisis looks almost inevitable juniper is one of the largest energy companies in europe and among other things is responsible for importing russian natural gas. When russian supplies started decreasing they were forced to start buying gas on the open market for obscene prices. They also lent billions of euros to the north stream ii pipeline.

Which would import more gas from russia shortly after the ukraine invasion. The german government banned the pipeline and universe loans became almost worthless. The ceo says. The company is on track to incur a 10 billion euro loss this year.

Which would put them at a high risk of bankruptcy. This is already reflected in the share price. Which has lost 80 percent of its value over the past six months. They're currently in discussions with the german government for bailout.

Which will likely happen given unipress systemic importance to the energy grid. But if the fears around gas supply come to fruition. There will be thousands of companies across europe filing for bankruptcy. A good hedge fund.

Never lets a crisis go to waste. This brings us to ray dalio's 10 billion short position. According to regulatory filings. He shorted a wide range of eu companies including the dutch semiconductor maker asml.

The german software giant sap and others all these companies were constituents of the stocks 50 index. Which is the european equivalent to the dow jones industrial average recessions are usually bad for stock prices. But at the same time. The market is forward looking so the recession fears may already be priced in this chart shows.

A forward price to earnings ratio for selected european countries. All of them have declined substantially since the ukraine invasion began the worst performer has been italy whose p e ratio of 8 is the lowest since the european sovereign debt crisis of 2012 and there's some striking resemblances between that crisis and the current. One after the 2008 recession. European governments.

Borrowed money to fund economic stimulus. The eurozone's debt to gdp ratio peaked at 93. Which was unsustainable this culminated in greece defaulting on its sovereign debt. The government was forced to implement deeply unpopular austerity measures and financial contagion spread across the continent during the pandemic governments loaded up on debt to support the economy with the debt to gdp ratio peaking at almost 100 percent.

This doesn't sound too bad compared to the us. Which has a debt to gdp ratio of 130. But the us has a major advantage in that it borrows money in its own currency as former federal reserve chairman. Alan greenspan says the us will never default on its debt because we can always print the money the euro is controlled by the european central bank individual eu countries don't have the luxury of telling the fed to increase the money supply every time they need to borrow more money and with tax revenue set to decline thanks to the crippling energy crisis.

European governments may not be able to handle their mountains of debt of course. Even ray dalio isn't always right there are a wide range of uncertainties which could alleviate the energy crisis between now and this winter. But as long as tensions between the eu and russia continue to escalate it's very difficult to have any optimism alright guys that wraps it up for this video do you think europe is headed into a recession. Let us know in the comments section below as always thank you so much for watching.

And we'll see in the next one wall street millennial signing out.