Spain’s Rescate (“Rescue”)

ilene's picture

Courtesy of Russ Winter of Winter Watch at Wall Street Examiner

Spain’s Rescate (“Rescue”)

Spain’s bank rescue news is out,  and the obfuscation is very high, as usual. The rescate (rescue) amount offered is 100 billion euros, a mere two and a half times last week’s estimate. This tells us the Spanish banks are under-capitalized by at least 100 billion euros. That’s positive? We already knew the ESFS and ESM would lend Spain money, the question is in what manner?  This uses up about all the capacity Europe has on it’s own.  This opens up more cans of worms.

Once Spain takes the money, then their obligation in the EFSF and ESM bail out mechanisms would be taken over by others. Those “others” are Italy, whose share rises from 19% to 22%.  France’s share rises from 22% to 25%, and Germany’s from 29% to 33%. The smaller core countries like the Netherlands, Belgium, etc will pick up a little more as well.  By piling more on Italy and Belgium, the credibility of the guarantees given to EFSF bonds would collapse.

That’s why I think the American clown posse was out in force last week hinting at involvement to placate Germany (and Italy and France).  This may not be revealed upfront at first, because it is now necessary to go back to Germany, and have them object to the unconditional rescate.  Already Finland is demanding collateral if Spanish aid is through EFSF, and good collateral is in short supply, especially when Moody downgrades Spain to BBB. In response the IMF and US in particular will get involved. It could even take the form of a unilateral US participation without needing the harder sale involved in bringing in the IMF.

Apparently the IMF will supervise the “rescue plan”,  in an advisory role, with focus on the banking system.  That is strange given that IMF advocates bail ins (bondholders and equity holders take the hit).  It will really going to be impossible to sell this to Germany without broader international involvement.  US-Spain ties have historically been strong and I think when the fog lifts, the US will be involved backing this rescate (and further rescates) with money.   If so, this very well could mark the end of the US phony safe haven house of mirrors, and it will impact both the USD and Treasury market.  The commercials have lined up big shorts of Treasuries ( 2 year5 year10 year, and 30 year),  and are long Swiss Francs and Euros. Now we may know why.

This sets up an enormous Euro short squeeze. The boyz are so off side, that this one could take some down. Somebody important is going to gush blood. That is why I have been long a good size position in Swiss Francs in the forex market. From an actionable perspective I could see a euro rally up to 1.28-1.29 convergence overhead.


Source: Sober Look, Euro positioning.



Spain is saying that it is ‘agreeing’ to a bailout without conditions and only after the bank audit has been completed June 20- in other words sometime after the Greek election.

This should be a boost to the mutually assured depression tactics (MADT) of the anti-bailout partidos in Greece (and elsewhere).  It would be logical that political partidos in Ireland, and Portugal also adopt MADT. In fact Italy should too, because of the new burdens that have been piled on.



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Copyright © 2012 The Wall Street Examiner. All Rights Reserved. The above may be reposted with attribution and a prominent link to The Wall Street Examiner.

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Ungaro's picture

This is fine mess you got us into, Ollie! -- or --

I'll take Marbella for $200, Alex.

disabledvet's picture

the theory that in fact there was some "Grand Plan" going into this boondoggle is truly terrifying indeed. But I simply don't buy it. The fact of the matter is if Spain thinks this is some type of bailout then they are deluded indeed. This bailout by definition MUST be a "Special Interest" at work (in this case "the banks") and as a consequence not for the country as a whole. At some point it might be "for the Glory of Espana"...but for now can we not all agree "this is private interest and private interest only"? As a consequence how can we possibly go long the euro when the private interest is being bailed by what must be considered to be a public trust in the form of the ECB? And of course we cannot. So gold as well strikes me as a major problem here as well. Not saying i agree with the result folks...just saying "that's why i look at things the way i do." Not because i would like a different result.

blueskies123's picture

so on Monday the markets are set to party on like they did in the last week of December and thru Jan/Feb. 

anybody else agree?

russwinter's picture

 I think any big Monday run reverses and wipes out all gains by Tuesday’s close. After last week’s rally, there aren’t enough shorts left now to create more than a wet charcoal flame out, and no real money either.

The market action will be driven by a huge Euro short squeeze. That is disruptive, not bullish. By end of next week we end much lower than where we are now. By the following next week will come word of some big hedge fund collapse off the Euro currency recovery. Over the next weekend comes the Greek election. Very dangerous week ahead.

RoadKill's picture

Anybody suggesting the US will give a dime to a Euro bailout before the election simoly doesnt understand polotics. This would destroy any chance Obama has. Now instead of bailing out US banks you are bailing out Europe bnaks. Not going to hapoen unless we are loosing 500k jobs a month and the SPX retests 666.

ejhickey's picture

didn't we fight a war with Spain in 1898

bank guy in Brussels's picture

The US 1898 war with Spain was started with a false flag 'attack' on a US ship, the Maine, which the US claimed was attacked by Spain ... like Gulf of Tonkin in Vietnam, 11 Sept 2001 etc. ... Standard American and Adolf 'Reichstag Fire' Hitler playbook.

The US then proceeded to invade and seize Spanish colonies and territories, like the Philippines, after murdering thousands of their inhabitants.

At the time, US writer Mark Twain was so disgusted with the false-flag-started American imperialist war against Spain, that he said the US should just change its flag to the Jolly Roger - the skull-and-crossbones black flag of pirates.

mkhs's picture

Make it simple.  Who didn't we fight a war against?

Buck Johnson's picture

I think they aren't taking into account the possibility that Germany may say Fuck it and leave one afternoon.

Al Gorerhythm's picture

Germans capitulate...... unconditionally. Bailouts for everyone! Debt jubilee. Here, I give you my baby's milk. Suck on my Bavarian tit. 

philipat's picture

Time for Germany to "Just say no" and move on. At least a stronger DM would be within Germany's own control and it would not involve unconditionally transferring all its savings to Club Med without the holiday thrown in.

Alternatively, let the fucking Spanish Banks FAIL, like it used to be with capitalism.

Eireann go Brach's picture

Obama is probably behind some of these mysterious bailout funds that showed up today! He does not give one fuck about the consequences of this as long as it gets him another 4 years! May he get fucking annihilated in the upcoming election!

The Age of Useful Idiots's picture


You are absolutely right. Thank god you can vote for Romney who is ready to look after your interests. Here are his donors, courtesy of ZH:

lasvegaspersona's picture

The Age...

if you cannot see a difference between Romney and Obama I'll buy you some new specks. I'm pretty sure Romney is a US citizen I'm certain the 'birth certificate' Obama presented on the White House website is a computer generated file and even now does not exist as a paper certificate.

Yes Romney is a rich boy and the son of a governor and privileged but he at least can run a large company ...and I doubt his core beliefs are Marxist. I will once again vote R but I won't have to hold my nose this time. He is not my first choice ideologically but his Supreme Court picks alone are worth the vote.

I'll save my contributions for the Club for Growth candidates...they tend (36 out of 38 seated) to be principled and stay that way after the election is over.

Cast Iron Skillet's picture

I think Romney is a fascist - he believes in the power of Government to enrich his personal causes - just like Obama. Neither is a Marxist or free market idealist.

I think I'm going to write in someone who could do a better job. Like maybe Robotrader ...

HarryM's picture

Obama game plan - win the election at any cost (the higher the better)

- the economy crashes and burns

- he grabs more power

- we get the change he believes in.

Uchtdorf's picture

And, naturally, this happens over a weekend. We're truly rolled and smoked by the elites.

HarryM's picture

Seems the new work week is from 16:01 EST Friday to 07:59 Monday

russwinter's picture

Should read  "This should be a boost to the mutually assured depression tactics (MADT) of the anti-austerity partidos in Greece (and elsewhere).