The 'Europe' sculpture of Belgian artist May Claerhout showing a woman holding up the symbol of the Euro stands outside the European Parliament building on November 17, 2011 in Brussels, Belgium. Some of the world's most prominent hedge fund managers are betting against the eurozone -- and not just the peripheral countries everyone knows are in trouble. They're taking positions against the core countries, economies that -- until now -- everyone has assumed were rock-solid.

Here's a primer on the world of hedge funds and why the latest developments in the recently resurgent eurozone crisis are yet another warning shot across America's economic bow.

How the Other Percent Invests

Put simply, hedge funds are investment funds for the wealthy. You and I put our money into mutual funds, which a fund manager watches over, moving investor money into and out of a portfolio of stocks, bonds, and other investment vehicles as he or she sees fit in order to maximize the fund's return.

Hedge funds are private investment funds that are typically open only to a limited number of investors and require a large minimum investment to participate.

Hedge fund managers use a range of advanced investment strategies to maximize investor return, including leveraged, derivative, and long positions, as well as what are known as "short" positions. "Going short" means betting that a stock, security, or other investment vehicle is going to decrease in value, rather than go up. "Going long," or betting an investment will increase in value, is the much more commonly taken position.

Say It Ain't So, Angela

Most of us know the big names in the eurozone that have gotten into serious financial trouble over the last few years.
  • Ireland had to be rescued by other eurozone members when its debt-fueled property bubble collapsed, pushing the country to the verge of sovereign bankruptcy.
  • Greece also had to be bailed out (twice) when it's sovereign-debt bubble burst, leaving it a hair's breadth away from default.
  • Spain is most recently in the news, as its own debt-fueled property bubble and fiscal problems are sending the cost of its debt to near-unsustainable levels.
  • Even France has been looked at suspiciously by the bond markets for a while.
But Financial Times is reporting that a group of hedge fund managers are now shorting some of the core countries in the eurozone, including Germany and the Netherlands, even though bond yields in those countries -- the gauge for measuring a country's fiscal and financial health -- are still at record or near-record lows.

In a nutshell, some of the world's best-paid, most-seasoned, and savviest investors are sufficiently convinced of the underlying sickness of even the most apparently stable eurozone countries that they're placing serious bets on their potential collapse. John Paulson, the billionaire who made his name (and his money) by shorting the U.S. mortgage securities market in the run up to the 2008 financial meltdown, is one of the hedge fund managers reported to be shorting Germany.

Who Rescues the Rescuer?

The financial crisis, which began here in the U.S., may still be roiling across the Atlantic.

Europe is sick. The U.K. has just slipped back into recession. Spain has, too, along with recently suffering another downgrade on its sovereign debt by ratings agency Standard & Poor's, which sent its bond yields back above 6% -- the danger zone. While the U.S. unemployment rate is still above 8%, it appears to be coming down. And while GDP growth of 2.2% is nothing to write home about, the U.S. economy is growing.

But Europe and America are inextricably linked. To a great extent, as goes Europe, so goes the U.S. American banks still have an undetermined amount of exposure to eurozone banks. The potential economic debt-market shock waves produced by the default of any of the larger European countries could send the American economy back into recession.

This is why the thought of Germany's economy going south is truly terrifying. Germany is the eurozone's biggest economy and, along with France, has orchestrated and made the biggest contributions to the above-mentioned rescues.

But who comes to the rescue when the rescuer needs rescuing?

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Mark Anthony Migut

Gentle - men/women ,

Let us just say betting against Germany is like betting against BIBLICAL PROPHECY,

The seventh Roman Empire is currently rising and based on Revelations here to stay to the end,
so I would say the law of averages will revert these hedge managers previous gains to the mean if they start shorting German bonds...now as far as stock/risk equity,, when global poop hits the fan,, this assest class as well as the World Stock Equity Index, should fart off/down 30% or so...

Good Luck Hedgies, and Auf wiedersehen,,,,,,,,,,eom.

May 08 2012 at 3:27 AM Report abuse rate up rate down Reply
shiatsu999master

seems like we've already run out of other people's money,

they're now into the ruination of the middle class and taking their money

wonder who will be next?

you can call me what you will, i've not stooped to personal, derogatory, or name calling tactics..so hard to let any light in when one is that contracted....it must hurt you so bad to attempt conversation w/people who differ in thought and belief system w/o violence of any kind...including verba/writtenl violence

indigenous natives call having more than you need and more than you can possibly use 'the white man's disease'...a form of cannibalism when you eat the efforts of others

please don't choke on my behalf....lolol

May 07 2012 at 10:34 PM Report abuse +1 rate up rate down Reply
shiatsu999master

Mark Twain:forgiveness is the fragrance that the violet sheds on the heel that crushed it

man to garden:give me some veggies & i'll give you some water,not how unconditional love & abundance works under universal laws.you tend the garden & give it water,then you're rewarded w/veggies,that's not my law,it's universal law.in case you miss the point,everyone gains

you've obviously never tracked the hours worked by construction,road,farmers crews,etc,you belabor under the delusion that a ceo working 80 hours a week should be valued more than electricians,carpenters, welders,assembly line workers,plumbers,'common' laborers such as ditch diggers & garbage men,i don't know about you,but i give thanks for those workers,you do not understand that the life blood of those people is worth every bit as the ceo's.office work should not be paid so outrageously above outside work

however,in our present day world we all understand that owners & ceo's w/those amazing skills of organization & management should perhaps be paid more money.but understand please,they are making that money off the backs of others.w/o the others they would never be making those gross amounts of money.it is a grevious sin which falls under gluttony,greed & corruption that they pay the 'little' people less than a life sustaining wage w/o any hope of abundance & prosperity,we are told to give as we've been given. then they sendthe jobs of the 'little' people out of our country in order to chase their love of having more money bc that's how they measure succes while the 'little' people starve.i'm tired of hearing about all the jobs to be found bc there are none that pay decent wages & sustain a good life,while the elite alone thrive,try to understand tribal living laws,all for one, one for all

lift your veils

you should lift the veils of illusion put there by the controllers.we all have that ability bc 'we are all in the one' thru vibration thru the crown chakra,which is our power up (mario brothers game) lol. it's not the other way around, the 'soul' does not reside 'in' the body,the body lives 'in' the soul,that's the power which not only gives us life but sustains it as well,that's why,imho,they'll never find it in the brain bc it doesn't 'reside' there,it lies outside of that & when our sciences open up to that knowledge that's when we'll realize how lied to we've been by the controllers of our planet

not only have we been physically tampered with,which is how we got here in our present modern day man form,we've relinquished our natural god given 'powers' & they do not want us know about them.we no longer use them & therefore they have atrophied.it's the spine & the chakra system aligned w/it (shushuma, ida, pingala) that is the power everyone is gifted.it's whether we're hooked into it or not & how much life light is able to flow into us, those are the magic keys to heav

May 07 2012 at 6:45 PM Report abuse rate up rate down Reply
musivick

social security at 62 is a way-lot-less thya deferring social security till age 70.... no brainer--& thats why suckers will link on to the data-mining site ???

May 07 2012 at 5:37 PM Report abuse rate up rate down Reply
shiatsu999master

surely you understand that they do not labor....the money is made from the efforts of other people

May 07 2012 at 1:04 PM Report abuse rate up rate down Reply
shiatsu999master

oh sure, everything is fair in the usa....that's why the elite have all the money and we have no real jobs. how can you compare minimum wages (or slightly higher) to millions of dollars wages? they do not look at their employees as family who should benefit and prosper alongside the owners...the haves have always fed off the have nots, that's global history...good gawd, stupid people are everywhere!

the problem is that we don't utilize our vote as we should...we keep voting the same criminals into office over and over ad nauseum and then we don't demand that the guilty be prosecuted...would you hire someone who lies, steals and cheats in your business? of course not, so why vote for someone who has been caught lying, stealing and cheating? we americans deserve everything that's heading down the pike towards us...and it ain't gonna be purty!

did you know that romney took the hard drives out of his and his staff's computers when he left the governor's office? those weren't his, they belonged to the state! what could be the purpose of that? imho, it could only be to hide from the people what he was really doing behind closed doors. what other reason could there be?

and nuclear IS NOT safe and never will be bc it was first used for evil purposes...they cannot figure out what to do w/the depleted uranium, oh yeah, i forgot, they cover munitions w/that stuff now...but all is well, who will need jobs of any kind when we're all dead?

if you cannot wrap your warped thinking around tribal living (and we are all one tribe whether you like it or not) watch 'i am' on oprah winfrey's network...

may god save us from really stupid people

May 07 2012 at 6:16 AM Report abuse -1 rate up rate down Reply
1 reply to shiatsu999master's comment
cpo1514

Hello 666master.... how is your relocation to France coming along?? Hope you will be taking a few thousand of the 99% with you.. Say hello to Moochelle.

May 07 2012 at 10:32 AM Report abuse +2 rate up rate down Reply
Condley

Thos who think like Richard below need a brain transplant. Our economic problems are are own fault. The United States has the highest corporate taxes and the most intrusive government regulations in the world. We have driven our corporations out of this country. Corporations are not social programs for the sole purpose of providing jobs. The corporations that are left in this country should lay off all their workers, shut down the company, liquidate it, and give the money to the stock holders. The unions and the government can then go pound sand!

May 06 2012 at 11:26 PM Report abuse +3 rate up rate down Reply
2 replies to Condley's comment
Mikey

Your comment is absurd and only factually correct. The idiocy that our corporations have the "highest" income tax is crazy. The basic rate of 35% is high, but show me 1 corporation that pays that... Apple, GE, didn't come close. In fact PEPCO has paid has not only not paid anything, they got a REFUND on millions of profit. The only one who should pound sand is you with your anti_American views. The only reason we've "driven" companies overseas is because of the crazy tax breaks we give them. These companies couldn't exist without the USA economy. Take that away and they fold... But they have the money and influence to "game" the system, and the anti-American Koch Bro's are a prime example.

May 07 2012 at 2:41 AM Report abuse -2 rate up rate down Reply
2 replies to Mikey's comment
Dan

False. You merely give liberal talking points. However, the facts are not on your side. US effective corporate taxes are still among the highest. PWC reported last year that effective rates for the top 2000 corporations were 27% in the US. that's 8% highere than the average. http://www.portfolio.com/views/blogs/capital/2011/04/14/yes-america-corporations-do-pay-taxes

Guess what? All the top US oil corporations paid over 35% in taxes. Even GE paid a couple bill in taxes (and that is only low because they won a tax settlement with the IRS) http://www.forbes.com/2011/04/13/ge-exxon-walmart-apple-business-washington-corporate-taxes.html

So you are 100% wrong. And the Koch brothers are anti american now? Would that be because they believe in limited government and a return to the economic policies this nation was built on? You know the world is in sad state of affairs when liberals without any knowledge of history or markets claim the Koch Brothers are anti american. The only anti americans ARE YOU. You drive businesses away. Pure and simple.

May 07 2012 at 4:45 AM Report abuse +3 rate up rate down
cpo1514

WhyMikey???/

Exactly what business do you own.... ??????? How do you function with that pathetic business model????


Oh a 99% sit and complainer??? Never mind... OMG !!! Obama Must GO !!!!

May 07 2012 at 10:34 AM Report abuse +2 rate up rate down
bunnyswanson

Well, if the major corporations want another cheaper labor force in a foreign land, go at it. But at the same time, new companies in their respective industries should be taking their place. Seems to me profits and salaries are at record highs, bonuses and generous benefit packages never stop. Even with bail outs. Except they monpolized and price fixed low, taking out competition, or via mergers and acquisitions. So not only is there very little compeitition (prices will not be going UP), we have less choice and no one to work for. I'll start a corporation if the goddam banks would lend the money. I will taken a reasonable percent of the profits for my wages, business operation and company equity and live a good life. I just won't live like I am a ******* rock star. Ma Bell did this and it took congress to break it up. Corporations are run by power hungry men who will never be rich enough because they are running scared.

May 07 2012 at 4:24 AM Report abuse rate up rate down Reply
Condley

Thos who think like Richard below need a brain transplant. Our economic problems are are own fault. The United States has the highest corporate taxes and the most intrusive government regulations in the world. We have driven our corporations out of this country. Corporations are not social programs for the sole purpose of providing jobs. The corporations that are left in this country should lay off all their workers, shut down the company, liquidate it, and give the money to the stock holders. The unions and the government can then go pound sand!

May 06 2012 at 11:26 PM Report abuse -1 rate up rate down Reply
Richard

As long as the very few but extremely powerful wealthy elite across the world continue to hoard more wealth than they or their childrens children could ever dream of spending, then the very many will have suffer with little or nothing. The huge concentration of wealth at the very top has never been greater than it is today, and that is the real reason why economies are failing. They have always squeezed the populace for our last dollars, but have recently taken to raiding incredible sums directly from the government treasuries. Its easy to blame the poor, sick, and unemployed for all our problems, but we really need to do is focus on the real problem, the greedy people who put them there. Those who shipped our jobs overseas, market and sell us overpiced and unsafe products, pay us unfair wages, and frankly club everyone they can over the head to line their pockets with ill gotten and insane profits.

May 06 2012 at 10:41 PM Report abuse +1 rate up rate down Reply
2 replies to Richard's comment
bunnyswanson

You said that so eloquently and described it perfectly. I sense contempt and that is a bad thing to be having your govt project toward you as a citizen. Very troubling. It's like a witchhunt only the poor and middle class are the ones to be burned at the stake, for no other reason than existing.

Tea Party and ows movement need to join. Some already have. Common ground is here. Sometimes we have to pick our battles carefully and this is one of them. Pace has picked up. It's a sad time in history. Yes, hoarding the loot after shifty business transactions, signed, sealed and delivered to the people by the government they elected to represent them.

Upper middle class will be hit next. DOW will wipe them out. Poof. USD will be fled like the plague. Then, my friends the fun starts. Baby boomers will make noise but it'll be too late. May already be too late. 16 trillion with all the theatres of war, tax cuts. dollar falls buying merchandise is going to be impossible.

America is being gutted during a fire sale. The Federal Reserve may be the next self-appointed figure head, telling us he is trying to understand how this all could have happened. Offering a new currency and a value of it against freign currency. That could take years. I can hardly think about this it is so upsetting. What is more upsetting is that no one cares enough to do anything about it. It becomes a topic in a blog. Americans and Europeans must feel like trapped animals. This was a huge scam, a bait and switch.

Lacking confidence....Americans are too vain to be in this poor of shape. It's the food, the quality is bad, and it has no nutrients. Overnourished yet malnourished. The people of a nation reflect the leadership. You want sound citizens, invest in them. In every way. What alternative do you have? Not everyone is born into money or a family business. Some are victims of circumstance and deserve a fair shake. You'll get a tax paying citizen in return.

May 07 2012 at 4:49 AM Report abuse rate up rate down Reply
gpfs

Richard you need medical attention! Somehow losers think someone else is responsible for their status in life. I'm sure they have a government pill for your illness....

May 07 2012 at 6:26 PM Report abuse rate up rate down Reply
jem6695

The hedgefund game has to be brought to and end.. it is killing the entire world with the games they are playing at the expense of everyone--- and they need to be regulated more.... The dodd frank will starts to do that but the wall streeters continue to fight it --bringing it to court to try and cut the restrictions that we desperately need in this country and around the world... We need to get back to some stable sensible trading and investing and get rid of all the gambling and betting against our survival...What good does it do that a few get stinking rich over this and the rest lose everything... In the end everyone loses..

May 06 2012 at 10:08 PM Report abuse -4 rate up rate down Reply
1 reply to jem6695's comment
marcanagnos

We aren't going to follow a law written by two criminals. The ones who caused most of this mess.



MARC

May 07 2012 at 12:42 AM Report abuse rate up rate down Reply