What Happens When The Markets Call The Collective Bluffs Of The IMF, EC & ALL Major Rating Agencies' Spanish LIES?

Reggie Middleton's picture

Throughout the last two quarters I have bandied about corny, colloquial, yet highly descriptive articles describing the factual representation of Spain's outlook, such as The Economic Bloodstain From Spain's Pain Will Cause European Tears To Rain or You Have Not Known Pain Until You've Tried To Limit The Borrowing Costs of Spain!!! Well, as humorous as my nascent stand-up routine may appear to be, the facts of the matter should have market participates on edge. 

Fact 1: As revealed in the post, The Embarrassingly Ugly Truth About Spain: The IMF, EC and ALL Major Rating Agencies Are LYING!!! Spain has serious asset/liablity mismatch and extreme issues with NPAs in its banking system. It will NOT be able to grow out of this situation in the near term and this was apparent 3 years ago! 

I warned that Spain was effectively ignoring some very large, bank related and budgetary problems as far back as 2009/10.... Reference The Spain Pain Will Not Wane: Continuing the Contagion Saga:

In the general our analysis Spain public finances projections_033010, the first four (of 12) pages basically outline the gist of the Spanish problem today, to wit here are the first two:

Spain_public_finances_projections_033010_Page_02Spain_public_finances_projections_033010_Page_02

Fact 2: These NPAs will get much worse before they get better, detailed in As The Truth Catches Up With Spain, Will Banks Finally Be Forced To Mark To Market? You don't need my analysis to see the light. Spain currently sports more than  than 50% youth unemployment. Greater than 50% - and it's major grading partners are not far behind, or even far ahead!

See this chart from  ZeroHedge:

Data: Bloomberg and Greek Statistics Office

Fact 3: Spain is already on FIRE, yet so few refuse to smell the fumes.

What is FIRE? See Reggie Middleton Sets CNBC on F.I.R.E.!!! and First I set CNBC on F.I.R.E., Now It Appears I've Set... For more on this, see The F.I.R.E. Is Set To Blaze! Focus On Banks, part 1. A lot of people, even professionals, truly believed that the FIRE malaise would not be European in nature. Whaattt????!!!

Here are some more anecdotal facts fanning the FIRE...

Egypt Pays Less Than Spain for Euros as IMF Talks Persist

Businessweek- Egypt locked in lower borrowing costs than higher-rated Spain in selling a more-than-planned 640.2 million euros ($817 million) of debt, 

Spain's bad loan ratio hits new record of 10.7%: central bank

MADRID -- Spanish banks' bad loans surged to a new record level in September with more than one in ten classed as high risk, the central ...

Spain Sells 4.94 Billion Euros of Debt, Exceeding Maximum Target

Spain exceeded its maximum target at an auction of bills and its borrowing costs were little changed from a month ago as euro region finance ..

To bad the Spanish aren't Egyptians, though... Egypt Pays Less Than Spain for Euros as IMF Talks Persist

Egypt locked in lower borrowing costs than higher-rated Spain in selling a more-than-planned 640.2 million euros ($817 million) of debt, ..

The Spanish heat is not just in real estate and banking, either. Reference this European Insurer That Needs Insurance As $6B Of Its Bonds Are Instantly Subordinated Due To "Spain's Pain". Insurers are very heavy investors in European sovereign debt AND the debt of financial institutions. This is a wonderful place to be when you are recovering from the most expensive natural disaster that hit the US eastern seaboard, eh? But hey, weren't the European financial institutions getting killed by choking on Sovereign debt (reference Dead Bank Deja Vu? How The Sovereigns Killed Their Banks & Why Nobody Realizes They're Dead)? You know the saying, "You can run but you can't hide?" Well, banking officials have been doing a lot of hiding (of NPAs), and soon its going to be time for the running to come into play. In case you missed the pun, European Bank Run Watch: Spaniard Edition

It would be interesting to see who will be in the condition to feast at the Spanish barbecue...

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