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The Economic Bloodstain From Spain's Pain Will Cause European Tears To Rain
Those that regularly follow me know that although I'm quite the mediocre short term trader, I have uncommon strengths that lie in the realm of medium to long term strategy and macro-fundamental valuation. Unfortunately, with the advent of free money and perpetually whirring inkjets splashing that Frankiln hue of green all over the place, the value of longer term strategy and analysis has taken a back seat to buy it today and flip it tomorrow wannabe mo-mo enthusiasts who do nothing more than chase leveraged beta with a 2/20 toll to those foolish enough to part with their lesser educated funds. It's downright disheartening to hear so many lament that fundamental analysis doesn't work. My dear friends, if fundamental analysis doesn't work, then math doesn't work! If math doesn't work, exactly how is it you can measure whatever gains you have made while trading? Oh yeah, that's right! Fundamental analysis doesn't work until its time to positively value your operation, then all of a sudden math is the new sexy, right?
Listen up, math never, ever went out of style. The Fed and its cartel of global central planners, AKA central bankers, did an unprecedented job of pushing capitalism to the side for the benefit of the financial oligarchy, but truly implemented capitalism is like unto a force of nature that constantly fights to reassert itself, and like the actual forces of nature - it never gives up and ultimately, never loses.
So, all of you mo-mo trading, fair weather arithmeticians, I'm bringing sexy back!
Back in January of 2009, I warned on Spanish banks. Take note that that was nearly 3 years ago...
BBVA's valuation at... Register (for free) and download the full report 
Banco Bilbao Vizcaya Argentaria SA (BBVA) Professional Forensic Analysis 2009-01-28 16:04:04 439.80 Kb
I also warned on the entire country a year later, which was still 2 years before the sell side truly got serious about the departure port of the Santa Maria, reference The Spain Pain Will Not Wane: Continuing the Contagion Saga.
Professional subscribers can now actually download the original Spanish Bond Haircut Model that we used to calculate loss scenarios - Spain maturity extension_010610 (The Man's conflicted copy). Despite the fact I was probably the most realistically bearish out of the bunch, things have actually gotten materially worse since this model was constructed two years ago, hence it can use a refresh. Alas, it is still quite useful.
In the general subscriber document Spain public finances projections_033010, the first four (or 12) pages basically outline the gist of the Spanish problem today, to wit:
Spain_public_finances_projections_033010_Page_01
Spain_public_finances_projections_033010_Page_02
Spain_public_finances_projections_033010_Page_03
Spain_public_finances_projections_033010_Page_04
The stress caused by Spain breaking the central bank will bring to full fruition the theory behind our European Banking and Insurance research from the last few quarters.
CNBC reports Bank of Spain Says Banks May Need More Capital where this was woefully evident over two yeas ago... Spanish Banking Macro Discussion Note
A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf
A Review of the Spanish Banks from a Sovereign Risk Perspective – professional
On that note, this entire week the MSM has been on Spanish kick - Spain Is Crying for Help; Is Berlin Really Listening?
Crisis is the watchword in Madrid. Take your pick - liquidity crisis, debt crisis, banking crisis, economic crisis, confidence crisis, investor crisis, jobless crisis.
Spain, the ailing euro zone's latest problem child, has them all. As the problems pile up, Prime Minister Mariano Rajoy's five-month-old conservative administration feels like a government under siege.
Nervy top officials are reluctant to speak on the record for fear of slipping up. Policymakers contradict one another. Plans keep changing. Financial markets reel amid the uncertainty. The gloom in ministry corridors is palpable.
The latest gaffe: after weeks insisting that one of the country's biggest banks, Bankia, did not need fresh funds, ministers dropped the bombshell last Friday that there was a 23-billion-euro hole in the accounts.
Damn! That's one helluva rounding error, eh???
They have yet to explain clearly how they will find the money when they are already struggling to finance a spiralling national debt.
The effect of the Bankia news on fragile financial markets was devastating.
Spanish shares dived to 9-year lows, the euro sank and investors fled Spanish government debt, pushing the yield towards the 7 per cent level at which fellow eurozone members Ireland and Portugal were forced to seek national bailouts from Brussels.
To hear the government tell it, outsiders have got it all wrong: Spain has lived beyond its means for too long and is now going through a painful but necessary period of adjustment to shrink its state sector, cut spending and boost competitiveness.
All the right things are being done.
Rajoy's government is serious, committed and enjoys a comfortable parliamentary majority.
Officials say foreigners don't understand that Spain has boosted its exports more than any other European country in the past three years, that it has reformed its labour markets, cut its costs of production and come clean about the problems in its banks, which lent too enthusiastically to finance a huge property bubble that has now burst.
Now, ministers say, Madrid just needs time and some help and support from its European partners to get through the most acute phase of the crisis and give the reforms time to work.
As I said yesterday, there's no way in hell the EU will be able to bail out its banking system -The Eurocalypse Has Arrived...
Subscribers, be ready. When/if Spain cracks, these two short positions will explode:
Subscribers reference:
- Report_122511 - Professional/Institutional edition (Insurers, Insurance & Risk Management)
- Report_122511 -Retail edition (Insurers, Insurance & Risk Management)
On the banking perspective:
Bank Haircuts, Derivative Risks and Valuation
10/20/2011Of course, in today's environ of mega banks, mega marketing, mega investment returns, white hot IPOs, it may be hard for many to appreciate the words of an entrepreneurial investor and blogger. Then again, just remember that this also coming from the same man that called Bear Stearns, Lehman, GGP, CRE, RIM, housing, the entire Pan-European Debt crisis, etc. See Who is Reggie Middleton for more.
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Interesting anecdote from John Hussman's website:
Apparently Bankia lent money to Real Madrid soccer club to purchase their star forward Christiano Ronaldo. Now that Bankia has collapsed, presumably the loan will be called and in that case Ronaldo would belong to Bankia's creditors, most likely the Spannish government.
http://www.hussmanfunds.com/weeklyMarketComment.html
Bullish for windmills, old horses, and sidekicks.
The economic David Blaine has the pain train game down.
He makes it rain till the poopstain of inhumane bankers goes down the drain.
mane!
"..capitalism is like .. a force of nature that constantly fights to reassert itself, and like the actual forces of nature - it never gives up and ultimately, never loses."
absolutely correct, well said Reggie
but cartels will cheat society until someone puts them out of their sociopathic misery
They (the cartel banking families) survived the last Great Depression and actually came out 'winners' mananging to pervert the West for decades via their ratchet Govt
..but here we are again (sucked bankrupt dry) a direct result of their criminal enterprise to cream productivity and their market sapping extortion racket. Will we ever rid ourselves of these parasites.. 2nd time/Depression lucky, maybe
All "isms" are run by the same people, as long as you think they are different from each other they got you where they want you to be.
... as in vagueism
Nothing vague about it. Look at the discussions on here about socialism and capitalism. Right where they want you to be.
Or as Clint eastwood would put it "you just worry your pretty little head about socialism"...
Govt is but a table of parasites
the socialists (Unions) had enough of a following in society to 'earn' their place at the table alongside the Rockerfellas and Rothchilds to feed on productive society
... any group large enough can win their place at the table of Govt
it is up to society to repel these theiving parasites (bankers, socialists, Haliburton) and stop the feeding frenzy
Stop Paying Your Taxes ...no table left (got it?)
Very poetic title - perhaps a change in genre of your writing is due?
We said the same thing a couple of weeks ago.
http://blog.commodityandderivativeadv.com/2012/05/17/greek-default-immin...
Have you heard about the "new" math? You used to think 2+2=4. But what if the 4 is increased to 40 through number inflation? How is the left side of equation adjusted for that? How about "2 for you and 38 for me"?
What does this even mean?
This nature argument needs to stop. Additionally, the FED is capitalism so let there be no confusion. The fact that its devouring itself is going to hurt shouldn't lead to some weird cognitive disorders.
the FED is capitalism???
I want some of what you are smoking. The FED is banking at best, but is really better described as the biggest counterfeiting scheme around.
No matter what economic scheme you prefer, socialism, capitalism, feudalism, you have it wrong if you don't include an analysis of the inherent possibilities for fraud and corruption. In the case of the FED, it's control fraud at the highest level of the money supply.
au contraire...Gene is actually providing an antidote to the heavy chainsmokers of hopium who get high with the hookum pipe of supposition...
let's suppose we know what humans do in their 'natural' state...and then why don't we suppose that we know that one phony system of shylockery is better than another, and suppose we call the one we like capitalism...so as to easily encapsulate all of the fantasies of what we imagine economic activity would look like if we lived in some magical place without the need of states, or their controllers, the moneypower.
Yes, the Fed is Capitalism...in fact, the pinnacle of Kapitalist development, a private corporation masked and tasked to defraud all who are willing to buy into the conflation of free market entrepeneurial activity with a stale economist theory about the way things are suppose to work.
Kapitalism is a project of the kabbalist kleptocratic konspiracy, designed to konceal the obvious attraction of people trading freely amongst themselves without parasitical overlords by overlaying the simplicity of free markets functioning freely with a heavy ideological sludge of madeup stories....that's where we be, in a nutshell... characters in a bunch of Dr Suess type stories travelling through a funhouse of distorted values, valuations, and visions, getting high on the idea that it all will work out just around the next corner of the track...when our natural propensities are allowed to reveal themselves~!
The Fed owns the funhouse...you just ride round n round...looking for something real in a carnival of lies called "capitalism."
We had free markets, a free society and capitalism long before we had the insidious Federal Reserve.
I think Ron Paul had it right:
Has Capitalism Failed?http://mises.org/daily/2895
Capitalism does not "fail".. the rules of capitalism (productivity) exist like it or not
what is failing is Govt and banking, the non-productive sector of society
these cheats cheated their due death in 2008, propped each other up sending society (taxpayers) the bill. That is Govts primary role, transfering wealth from productive peoples pockets to societies parasites (bankrupt bankers, industry, welfare spoungers etc etc)
the bigger Govts dead hand gets in the economy the quicker you go to Hell (see USSR, Commie China, Greece). Hell is a place where there are few productive people left to create wealth, a society that's been strangled by monopolists (politicians and vested interests) to death
Capitalism doesn't fail, its Grim Reaper is merely 'delayed' from 2008 by the cheaters in society
Zero, yu and Reg are "idealists"...two guys in search of a big idea, which, you'd like to call capitalism...it's the weak spot in Reg's otherwise shining suit of cynicicsm....and the breech in yur britches my friend....
a)government DOES NOT = State
b)Kapitalism DOES NOT = free enterprise.
c)those windmills in the distance ARE NOT 40 giants to be slain in fierce and unequal combat...they're just dead banks spinnin their wheels.
Please tell the good knight Sir Reginald that the battle is indeed over, and the enemy has fled before his onslaught. Now we have even bigger fish to fry..."the rules of capitalism" are merely the imposition of talmudism onto the socio-economic sphere.
Joyful - i'm not an idealist, i'm a realist. That's why i hate Govt not as a concept but because every Dept of every Govt in every country in history produces 3rd rate garbage
i like the idea of Govt, it's just the reality that stinks of corruption and complete incompetence
capitalism is just a label/word we try to tag on a very complex beast called the economy. Does the word 'ocean' describe or give even remote credit to the uber-complex sea? Nope, not even close
like Reggie i can see through the ages how capitalism (wealth creation) ebbs and flows. It flows from private enterprise, it ebbs from destruction by the State and the thieving scum behind the State (see Greece et al)
"Govt does not equal State"
right! So who hed-fuked you into the vacuous idea you live in a country? Would it be the Govt creeps that pissed on some boudnaries, designed a flag for you to wave about and an athem for you to sing so they could tax and tag your arse cradle to grave? ...the State/Govt/country is purely a political fabrication for the benefit of its criminal inhabitants, not the peoples
"Kapitalism DOES NOT = free enterprise"
capitalism is the rules of economics, it applies to free enterprise as much as it does State enterprise. If you're a productive farmer or industrialist you make money, if you're unproductive (like GE, every Govt on the planet, solar or wind energy) you go bankrupt once the subsidies (wealth stolen from the productive) runs out
Free (individual) enterprise is the only way of producing productive enterpises that make society wealthy. No Govt, no committee or institution, no banker can do that or institute/coerce it
c) those windmills in the distance ARE NOT 40 giants to be slain ...they're just dead banks
Agreed
"the rules of capitalism" are merely the imposition of talmudism onto the socio-economic sphere
We learn through experience primarily, the School of Hard Knocks as they say. So you either back a state of being (freedom) that has worked throughout human history or you back a state of being (the State) that has fucked up everything in human history
that's human experience and you're mad (like Paul Krugman) not to listen to it ..capitalism does not impose anything on anyone except the rule if you cannot turn a profit you're out of the game
Zero - thank yu for yur detailed response...only a part of which is suitable to be addressed in a comments forum such as we are in - so excuse me if I don't cover all of the points it contained...I'll just choose this one:
actually, I am expatriate to any state, and live in a small micronation of my own crafting...given the choice, I'd rather be riding right now in a long line of Makhnovist calvary, but lacking the skills of time travel, this is the next best thing.
I'll just leave it at that, for now, methinks.
Forget semantics, social theory and the 'State'. I agree with JOYFUL, you seem a person in search of Utopia and (I take it you are in the UK?) seems the history of 'capitalism' has lead you by the nose to believe in something that just simply ain't there. Call it a severe narrative bias.
In truth, assuming you're in the UK, your very own 'nation' imposed heavy protectionism while preaching the very opposite to 'developing' nations who were generally 'Stateless' and quite ripe for exploitation. That is absolutely key: exploitation. Much of 'economic' theory simply follows for justification purposes.
You must read another set of books, start here:
http://www.amazon.com/Things-They-Dont-About-Capitalism/dp/1608193381/re...
capitalism is not what you're taught in school by Trotsky 'Economics' Professors of cigar puffing fat cats in chalk-stripe suits.. capitalism is not even as described in the Oxford English Dictionary or the dull collectivist membrane, Wikipedia
Capitalism is the free market, the free competitive market
The Fed, like Govt, is the exact oppsoite of the free market and competition in the marketplace. It is a monopoly on money, a cartel, a hoarding of power to benefit the few (parasites)
a free competitive market benefits all, both the productive entrepeneur and the consumer, it's the ebb and flow of self-balancing power
The Fed and US Govt (both monopolies on power) did what you expect of criminals of capitalism in 2008 and bailed out the bankrupt frauds of WS ..they perverted the free market and propped up the shit instead of as capitalism permits, the dead-wood going down the toilet to allow green shoots (recovery)
But as Reggie says you cannot cheat capitlism (see Stalin and Maos vein attempts), it catches everyone up eventually. There's only so much productive wealth you can thieve before the tipping point where you're completely broke (see USSR, Communist China, Greece et al)
the way to hurry this tipping point is to Stop Paying Your Taxes
starve the parasite (Govt) and with it, The Feds cartel will crumble. Every rotten fruit in society hangs on Govt, the No.1 enemy of a free society and free markets
"This nature argument needs to stop"
Nature is the blueprint of man and indeed the blueprint of markets, industry and the economy.
What we do is a fractul of nature, we're clever monkies for sure but we'll always be animals first and foremost and go through natural seasons (ebbs and flows) beating the same drum as nature
The Fed is not capitalism, it is a monopoly on money, a perversion of capitalism (free, competitive productivity).. the Fed is a cartel of uncompetitive, unproductive parasites (same as Govt) and a sack of stinky corrupt puss on society and mans natural state of being (free and competitive ....like nature)
Was this a new comment?
What Reggie is saying is:
1) I told you so!
2) i told you 2 to 3 years ahead of everyone else!
3) pay money to subscribe to see how to profit from this!
People... nothing is new. If you had been in Greece or Spain 5 years ago you could see that the impossible was happening. If you would have been in the Netherlands 10 years ago you could have seen the start of the crazy housing bubble.
If you would have been in Yugoslavia right after Tito died you could have seen army excercises displayed in repurposed shop windows. Of course, as a western european tourist you would have been gently pushed away by a soldier and his rifle...
Nothing is new.
If you need websites to inform you of "what is new" then you are always 5 years behind.
Not everybody can afford the either the time or the money to constantly travel everywhere in the world to see everything from the ground view. Although that would be quite beneficial.
Besides, being way too early is just as good as being wrong.
You need to be connected to people who travel and do business. Even now many people will be able to tell you what the world will look like in 5 years. It's really not a mystery.
Then again, people like one of the contributors on here, who go to Paris, see some people on a car roof and claim that the revolution broke out... Those are not the ones to listen to.
"Even now many people will be able to tell you what the world will look like in 5 years. It's really not a mystery."
Well then, why not enlighten us? As Ross Perot once famously said, "I'm all ears."
Hopefully you're not just here to taunt.
What kind of responses did you think i got when i told people what was going to happen? It's not about seeing the obvious, the problem is that most people don't want to hear what is obvious.
Some things:
- think local, very local for production and currencies
- forget consumer electronics, they will be ubiquitous
- full-time work will not be the source of income
- investing will not be automated
Whatever is playing now is not interesting, no need to worry about that, cause it doesn't matter in the greater scheme of things.
Thanks for the reply. But in all honesty, I think the vast majority of the readers on here would already agree with you on the things you mentioned.
I think many of us come here for news from a different perspective than the weird spin, distortion, watered down news and occasional censorship from the mainstream media.
Even though this article may be something that looks like what you had been expecting for some time, it's still quite different, and more accurate I would say, than watching things unfold on the nightly news, or from other mainstream media outlets. Reggie made the point that he also has been making this same point about Spain for years now. A lot of these things play out slowly or go at a different tempo than might people might think, and it's always worthwhile to follow the story as it unfolds. The broad outline of the future may be seen dimly through the fog, but details can be surprising and things don't always unfold exactly as predicted.
It also depends a lot on who you're talking to. I'm "on the ground" here and get some dramatically different views of what's going on from different people. Ditto for people "on the ground" elsewhere, and for the professional news guys and economists etc.
You have to evaluate, pick and choose who seems credible, and who seems to understand what's going on and makes the most sense. Listening to a variety of sources, including Reggie, who seems to be pretty good at getting things right from a medium to long term perspective as he says.
To each his own, I suppose.
There is a Russian proverb for this. If I knew where I was going to fall I would have placed straw there.
This has nothing to do with coincidence.