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Spain - Out Damned Spot

Tyler Durden's picture


Via Mark J. Grant, author of Out of the Box,

“And it is a mark of prudence never to trust wholly in those things which have once deceived us.”
                      -Rene Descartes
If you own the debt of Spain; sell it. If you are thinking about buying their sovereign debt; don’t. I hope that is clear enough. I don’t believe that I have left out any corner of my thinking or that there is any wavering on my part. All of the new Spanish debt will carry Collective Action Clauses which gives Spain the right to force bondholders to their knees. This is reminiscent of Greece and we should have all learned the lesson from that experience. Then there is what Spain certainly might do which is to retroactively pass CAC’s when expedient for the nation so that all Spanish debt could include these clauses. The clear signal here is that Spain is in serious trouble or CAC’s would not be an issue and that the State will put it to bondholders if necessary. Spain has benefited from Draghi’s “Save the World” plan which was by far the best move of the European Union in 2012. Yields are down, the central bank is the backstop and the ECB’s promise has limited the interest that each nation in Europe has to pay for their debt.
Yet there are two sides to this coin and that is that not only will interest rates affect the sovereign debt of a nation but the absolute amount of debt can also play havoc with the finances of a nation. The Wall Street Journal reports this morning that 90% of Spain’s national pension fund has now been utilized in buying Spanish debt of various sorts and class. This means that $77 billion has now been spent on propping up Spanish debt while another $7 billion has been withdrawn in cash. The pension fund is effectively out of money now and how they will fund their social security system is anyone’s guess. Spain plans to issue $270 billion of new debt in 2013 which is up from $242 billion in 2012 or a 10.5% increase. Even as the pension fund buying is unable to continue, the Spanish banks are up to their eyeballs in Spanish debt and the losses at the Spanish banks continue to mount. It is my opinion that Spain will be forced to the till at the ECB and the EU and that the amount of financing that will be demanded will cause rancor in the fiscally disciplined nations. For all of these reasons I have concluded that Spain is a disaster in play and their debt should be avoided or sold.
The United States
The Fed’s recent minutes provide a notable change of course in their policy. On one hand it is a positive as the Fed is slowly coming to terms with the fact that there are limits on what it can do and that monetary policy is not an endless charade. On the other hand it is a marked change from what they have told all of us before which calls out their promise to keep rates low well into 2014 so that political/economic expediency could reverse their prior promises. The slope is certainly slippier but at least there seems to be a recognition that the ballooning of their balance sheet has repercussions. Yet the $95 billion of monthly buying of Treasuries and mortgages continues for now, the supply of new issues is limited and the recent back-up in long yields is at least partially off-set by the free-floating capital that is still resident in the fixed income markets. This can also be said for the equity markets and a real decision by the Fed to curtail their buying programs could set-off a sell-off in both markets. Some accumulated cash may be in order while Municipal Bonds represent the best value currently in the marketplace. The sword hangs in the balance while severe economic problems in Europe may also booster both the Dollar and demand for U.S. securities. I would not be in a rush to jump too far now as the forward picture is far from certain.
“There are negotiations being made that are going to answer all of your questions and solve all of your problems. That's all I can tell you right now.”
                        -The Godfather

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Fri, 01/04/2013 - 13:00 | 3122485 ebworthen
ebworthen's picture

Dunno, look at how they have made the spot of Greece dissappear; the ECB stain remover appears to remove ink, wine, and blood stains.

Don't get me wrong, I want this global Ponzi to collapse, but the lies seem to remove more spots than the truth.

Fri, 01/04/2013 - 13:02 | 3122497 boogerbently
boogerbently's picture

I wonder how much the geniuses at JPM, GS....etc., own?

Fri, 01/04/2013 - 13:02 | 3122498 fightthepower
fightthepower's picture

Gold and Silver bitches!

Fri, 01/04/2013 - 16:10 | 3123510 TPTB_r_TBTF
TPTB_r_TBTF's picture


I wonder how much the geniuses at JPM, GS....etc., own?

Their Algos own all the volume.  They "own" every trade (front run).

Fri, 01/04/2013 - 13:16 | 3122552 Stoploss
Stoploss's picture

Much like the carpet spots i have great success in hiding.


That lasts for about 2 weeks, then they come back bigger and darker..

Which means at some point, the carpet will be thrown out for new carpet, or preferably a reclaimed wood floor.  :)

Fri, 01/04/2013 - 13:52 | 3122729 jmcadg
jmcadg's picture

I tend to move the furniture to cover the stain.

Am I Spain?

Fri, 01/04/2013 - 15:13 | 3123164 Vegamma
Vegamma's picture

Depends. Are you close to running out of furniture?

Fri, 01/04/2013 - 13:29 | 3122612 Theta_Burn
Theta_Burn's picture

Not only that

According to the thread just under this one, Europe just ended the best week...in weeks

Whats to worry about?

Fri, 01/04/2013 - 13:54 | 3122745 LawsofPhysics
LawsofPhysics's picture

"Whats to worry about?" --

The cost of any real asset you actually need in order to survive or get anything actually done.  Same as it ever was.

Fri, 01/04/2013 - 14:42 | 3123015 MillionDollarBoner_
MillionDollarBoner_'s picture

"the ECB stain remover appears to remove ink, wine, and blood stains."

The ink is from your bank statement

The wine is from your cellar

The bloodstains are from their own shorts

Oh...and the ECB stain remover also works brilliantly on corruption, vice and tzatziki. Avaliable now at a central bank near you (conditions apply).

Fri, 01/04/2013 - 13:01 | 3122494 Comay Mierda
Comay Mierda's picture

The Fed changing its course? my ass

Cant wait until the GAO publishes the GAAP gubmint financial statements mid January

the GAAP deficit will prob be around $7 trillion.  the printing will continue, cuz nobody else will monetize the current or future insane deficits

Fri, 01/04/2013 - 13:05 | 3122509 Jam Akin
Jam Akin's picture

Exactly - looks like we should expect an always fluctuating story from teh Fed to help keep things "in balance" moving forward.

Fri, 01/04/2013 - 13:11 | 3122530 redpill
redpill's picture

QE4EVA may or may not be curtailed in a couple years, but ZIRP can't.  In order to afford the interest payments on the debt in a higher interest rate environment they would have to inflate/monetize to come up with enough money.  So they can't end ZIRP without QE, and they can't end QE without ZIRP.  So we will have one, or both, perpetually until the shit finally hits the fan.

Fri, 01/04/2013 - 13:56 | 3122755 El Oregonian
El Oregonian's picture

All they need is just the right coagulant to stem the hemorrhaging. Quaky Dr. Ben is working at this very moment on the 'Patch'. He mentioned something about making more paper dolls or was that dollars, I'm not sure, our phone line was bad...

Fri, 01/04/2013 - 13:03 | 3122502 Manthong
Manthong's picture

Was the sword of Damocles made in Toledo?

Fri, 01/04/2013 - 13:04 | 3122507 bank guy in Brussels
bank guy in Brussels's picture

Regarding Europe, we are really missing the savvy trading perspective of Peter Tchir on ZeroHedge, instead of the so-often-erroneous and outright wrong nonsense of Mark Grant

Ironically enough, from a trading perspective ... over the past year:

« Many of the markets most mentioned as markets to avoid, if not being outright despised did very well. PIIGS debt blew away the S&P 500, and in many cases had reasonably low volatility on top of it.»

- Peter Tchir of TF Market Advisors


Fri, 01/04/2013 - 13:13 | 3122540 Cognitive Dissonance
Cognitive Dissonance's picture

I read and respect Peter Tchir. That said........volatility and performance from time period to time period do not accurately reflect overall market risk. I think the author is referring to the overall risk of owning new Spanish bonds.

Fri, 01/04/2013 - 13:08 | 3122516 Cognitive Dissonance
Cognitive Dissonance's picture

"All of the new Spanish debt will carry Collective Action Clauses which gives Spain the right to force bondholders to their knees."

Let The Buyer Beware.

<I don't see that clause on my Federal Reserve Notes so I'm good..........right??>

Fri, 01/04/2013 - 16:33 | 3123576 TPTB_r_TBTF
TPTB_r_TBTF's picture

You will always be able to buy debt with a FRN:  "Any debt, public or private".

Your FRNs are legal tender for any debts.  Wanna buy my debt?

I wonT sell you any gold for your FRNs, but I will accept your FRNs in exchange for my debt.

Fri, 01/04/2013 - 13:12 | 3122525 THE DORK OF CORK
THE DORK OF CORK's picture

Spain is actually far more wealthy then many believe , infact in many ways its far richer then up North as its capital base is new rather then old. (Germany exported its capital to Spain)

However it does not have domestic currency.

The function of the PIigs is to bail out the core.........

But  the core is not a real living sun - its a black hole.


Spain can refuse to cross the event horizon by simply printing 

Spanish Pesetas


Its time to take the jump


Fri, 01/04/2013 - 14:03 | 3122795 Stuntgirl
Stuntgirl's picture

Unfortunately I don't think we'll be printing Pesetas anytime soon.

NeoPesetas have been sold to the public as an abolute horror story complete with zombiepocalipse.

It is true that while a lot of money was squandered by our criminal politicians in useless infrastructure, a lot of new not useless infrastructure was accidentally put in place as well.

Another factor slowing citizens down is the government sponsored separatist movements. Up till now, none of the so-called separatists really wanted to separate. It was just a leverage argument to get tax cuts/cash transfers. A lot of the current tension is being intensified on purpose by the government: Divide and conquer.

As we say in Spain, noone gets much done if they're busy staring at their bellybutton. This is what citizens are doing.


Fri, 01/04/2013 - 14:36 | 3122974 THE DORK OF CORK
THE DORK OF CORK's picture


Look to what French banks are doing with your capital flight.......

They are simply creating another post 1986 Spain in Morrocco ,Alergia Turkey etc........

They merely wish to bypass labour to gain a larger wage arbitrage.

But they are burning your capital ration to do it.....and simply huge amounts of it.




Think of how stupid this is (for Spain and the other PIigs)............you have most of the toys already yet the banks won't give you the tokens to play with them as it would reduce their ratio of claims on the remaining wealth base.

It actually takes far more diesel to create more toys. (especially if you have rail systems already in place)



Ever hear of this strange concept – “Industrial co-localization”


It produces nothing net.
Its more labour extraction of value.
The Euro is a expression of pure evil.

The wastage of present intact resources to build more junk is simply fantastic.
Because the Euro is a capital token rather then a money token it must build more and more stuff for export rather then internal demand.

It is much like a Shark – it must keep swimming and hunting.

If not it becomes organic rain for the various bottom feeders.



Spain is collapsing simply because it cannot produce any national tokens to use its previous massive investments.

Now France is leaving its southern neighbour which it shares a very long border with to rot in a debt stew while it engages in a manic effort to sell stuff to its former colonies in Africa…………



nother great line – “we are using sustainable concrete”

OK we did the Spain thingy ……whats next ?

Morocco here we come……………

Anybody see a general pattern here ?

Give them modern toys in exchange for debt……..

When the country has lost all redundancy you pull the rug from under it.

Its the Ceausescu gambit played over and over again.

This is where Irish “austerity” or surplus is ending up.

Its money without a political input.
So therefore we don’t use money.
We use capital tokens.

The $ post 1922 was the first modern global (petro) currency.
The Euro is their perfected abomination.

Ask yourself why the core snake of the 70s did the wage deflation thingy………so that it could export oil inflation elsewhere…..i.e. to Ireland , Spain etc.
These societies are now completely destroyed……….its time to move on to greener pastures.

The dangers of now fully privatized money is seen all around us.


Fri, 01/04/2013 - 15:03 | 3123115 walküre
walküre's picture

How long before Morocco becomes Egypt? The French are ruthless. Always have been. I think anal stuffing is a French invention. Maybe they're building the ghettos in Africa so that they can send the peripherique back home.

Fri, 01/04/2013 - 13:09 | 3122526 NotApplicable
NotApplicable's picture

Those limits upon the Fed? Like all abstract beliefs, they are subject to continual revision, otherwise known as being "X being priced-in the market."

So all they do is to play the delay game, knowing that (thanks to TINA) conventional wisdom adjusts to the inevitable "next step." So, by the time it comes to pass, it's already in the past. After all, "We had to do something!!!"

The Daily Bell properly refers to this as "directed history."

This is why I've no doubt that eventually the entire yield curve will be flattened, and any  marginal market functions will be yet another facade.

Fri, 01/04/2013 - 13:11 | 3122532 horseman
horseman's picture

The FED made the statement on reducing QE to give the ratings agencies a reason not to down grade.


Fri, 01/04/2013 - 13:17 | 3122558 Quinvarius
Quinvarius's picture

Tonight after the close, there is high probability we are getting one.

Fri, 01/04/2013 - 13:19 | 3122559 SmoothCoolSmoke
SmoothCoolSmoke's picture

Let's see now:

1. Spain (Greece) goes bust

2. Spain (Greece) has to borrow a shitload of money from the ECB.

3. Other EU members are pissed about lending Spain (Greece) the dough.

4. There will be various votes by Spain (Greece) that will shove it all up the Banksters collective asses if they go a certain way.

5. ZH will drool over how the vote(s)  by Spain (Greece) will screw the Banksters and collapse the worldwide CB ponzi.

6. The Spanish (Greeks) will vote to take the money ("it's close!").

7. And so, the Can will be Kicked by Spain (Greece).

8. "Nothing has been fixed!" ZH will scream.

9. And the SP will go up 100-200 points.

Do I have this about right?

Fri, 01/04/2013 - 13:25 | 3122597 CrashisOptimistic
CrashisOptimistic's picture

You do not.

It required 2 years and a few hundred billion Euros to get Greece to its current place -- that is off the front page for 4 months or so.

Spain's numbers are so much bigger that 2 years will not be available to work out the nearly 1 Trillion Euros that will be eventually needed to put Spain in the same off-the-headlines-for-4-months configuration.

Greece was small potatos and it almost took the EU down.  Spain and then Italy are in a different league.

Fri, 01/04/2013 - 13:43 | 3122684 Tirpitz
Tirpitz's picture

"Spain's numbers are so much bigger..."

True, but does this really matter? After all, this game without end in sight ain't about the PIGS countries or their debts or their economies. It is purely another well-concealed bankster bailout of the reckless Northern financial money casinos on the back of the entire citizenship. Insofar the suggested outcome may well materialize.

Fri, 01/04/2013 - 13:55 | 3122753 LawsofPhysics
LawsofPhysics's picture

Look at history (especially in Europe), it will not matter until the supply lines break.  Some things never change.

Fri, 01/04/2013 - 15:25 | 3123242 SmoothCoolSmoke
SmoothCoolSmoke's picture

Look at Japan.  Ctrl-P for 20+ years.... and still Top 10 in standard of living.  Think Europe (and the US) cannot stall things just as long.... or longer?

Fri, 01/04/2013 - 16:45 | 3123574 LawsofPhysics
LawsofPhysics's picture

A few countries (that still make things people want, like japan), can get away with it, the earth cannot.   It takes real work and resources to get anything done.  When the capital and resources invested fall below the capital recovered and the cost to replace those resources - GAME OVER.    Japan is still providing a valuable service to customers around the globe.  Extract the same logic to the earth. Tell me who are our off-world customers and what technology or resources are they giving us in exchange for our labor and resources?

Fri, 01/04/2013 - 13:44 | 3122690 SmoothCoolSmoke
SmoothCoolSmoke's picture

We shall see.  KTC + ctrl-P has yet to fail.  That is a fact.

Fri, 01/04/2013 - 13:57 | 3122762 LawsofPhysics
LawsofPhysics's picture

Pretty shallow, location matters.  I'd say the failure of printing is well documented throughout history in a number of locations.  

Fri, 01/04/2013 - 14:04 | 3122798 lucas991
lucas991's picture

I hope you realize that with 1 trillion euros you can pay all of Spain's debt in full and cover two years of deficit assuming it stays around 8% of GDP...
I just see a bunch of people here making numbers up and pretend that they know what they are talking about... 

Fri, 01/04/2013 - 14:31 | 3122926 LawsofPhysics
LawsofPhysics's picture

Simple as a flower.  I'd rather not assume anything at this point.  Remind us, what's the unemployment like in Spain again?

Fri, 01/04/2013 - 18:47 | 3124088 lucas991
lucas991's picture

I'm not saying the situation is good or anything, I just have a problem with people making stuff up and throwing random figures.

Sat, 01/05/2013 - 18:00 | 3125846 auric1234
auric1234's picture

What difference does it make? Not enough trees to print all the FIAT? Just issue new notes, like 2000 EUR note. Problem solved.


Fri, 01/04/2013 - 13:20 | 3122573 kito
kito's picture

Anybody want to wager that spain bondholders profit this year? I say business as usual and spain wont be putting anybody on their knees this year except their own citizens.......

Fri, 01/04/2013 - 15:12 | 3123160 walküre
walküre's picture

Portuguese bond holders booked a 60% profit in 2012. The Portuguese seem pretty tame compared to the Spaniards. The Spanish are well educated about banking and finance mischief. Unintended consequence of the Spanish Civil War and the Franco regime.

The anger in Spain is directed at international banks, bankers and politicians. That's lacking in Greece. The Greeks are busy blaming Germany or IMF for example for refusing to keep paying. The Spaniards have figured out that any austerity on their part is just prolonging the paydays for the elite.

Fri, 01/04/2013 - 15:15 | 3123181 laozi
laozi's picture

There is no way to know when the avalanche will begin its slide. So you might be right.

Fri, 01/04/2013 - 13:22 | 3122585 BigPerm
BigPerm's picture

“And it is a mark of prudence never to trust wholly in those things which have once deceived us.”
                      -Rene Descartes

Was he talking about gold here?

Fri, 01/04/2013 - 13:35 | 3122646 Tirpitz
Tirpitz's picture

Rather governments, gods and globalists.

Fri, 01/04/2013 - 13:41 | 3122676 philosophers bone
philosophers bone's picture

No he was talking about the Fed.

Fri, 01/04/2013 - 13:27 | 3122603 ReptilianSlaveMaster
ReptilianSlaveMaster's picture

I am collecting 40,000$ in benefit claims as we speak and will be spending it all on hookers and drugs tonight. God bless America

Fri, 01/04/2013 - 15:13 | 3123168 walküre
walküre's picture

That's one big party or you're overpaying for the service and experience.

Fri, 01/04/2013 - 17:10 | 3123776 TPTB_r_TBTF
TPTB_r_TBTF's picture

at that price,

the services are most certainly,

all orifices included

Fri, 01/04/2013 - 13:28 | 3122608 Dareconomics
Dareconomics's picture

Spain will need to finance around €240bn, which is €33bn than the government claims and the MSM blithely repeats.


Fri, 01/04/2013 - 13:32 | 3122629 MyBrothersKeeper
MyBrothersKeeper's picture

Most of "scaling back" talk at the Fed was done by the Hawks.  But it's worth noting, however, that exactly ONE of those hawks has voting power in 2013. The hawks have been at odds with the prevailing mindset at the Fed but considering their lack of voting power I wouldn't expect the printing/bond buying to discontinue anytime within the next year. As I said in another post, just the talk of scaling back can influence people out of fixed income or prod some into buying a home sooner than later.  In my opinion, that is the goal.  Unless the doves talk about scaling back QE I wouldn't hold my breath.

Fri, 01/04/2013 - 13:33 | 3122639 Tirpitz
Tirpitz's picture

"... and that the amount of financing that will be demanded will cause rancor in the fiscally disciplined nations."

In both of them?

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