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Exuberant "Reach For Yield" In Spain Leaves Retail With Up To 96% Losses
The 'relative' innocence of the depositors in Cyprus who saw their savings crushed by the hammer-blow of Germany's reality last week is, it seems, not the only hardship that the European people are suffering. In Spain, thanks to their FROB restructuring, shareholders and bondholders (including hundreds of thousands of unsophisticated 'retail' investors who were sold 'fail-safe' and 'high-return' investments) face losses (haircuts) from 96% (equity) to 36% (subordinated debt) and 61% (preference shares) following the 'bailout' of Spain's dodgiest cajas (or savings banks).
As The Economist notes, clients infamously included Alzheimer’s sufferers and at least one customer who signed by dipping a finger in ink; shareholders should know the risks but the vast number of Spaniards who bought preference shares and complex subordinated debt from their cajas often did not. For example, a Madrid court is investigating whether Bankia misled investors: many of the 350,000 retail customers who bought Bankia shares in its €3.1 billion flotation in 2011 have already seen their money go up in smoke.
Depositors were not impacted by the closings and restructurings, so Spain can argue that they are not Cyprus, but while these investor losses pave the way for bank recapitalizations; they confirm the old adage that there is no such thing as a free lunch (especially in the new normal ZIRP world in which we live).
Cypriot depositors are not the only ones suffering the aftermath of a banking bust. People who bought shares or subordinated debt in Spain’s dodgiest cajas, or savings banks, have either been all but wiped out or forced to take hefty losses. Many small Spanish investors are among them.
Four months after Spain requested a €40 billion ($51 billion) chunk of its banking bail-out funds from its euro-zone partners, on March 22nd it delivered the blow that hundreds of thousands of retail investors feared.
...
Many of the 350,000 retail customers who bought Bankia shares in its €3.1 billion flotation in 2011 have already seen their money go up in smoke. Retail investors spent an average of €6,000 each buying stock at a price of €3.75. Within a year Bankia needed a €19 billion bail-out; within 18 months it had a negative value of more than €4 billion. The shares are now trading at around 15 cents, a 96% fall on the issue price. A Madrid court is investigating whether the then Bankia chairman, Rodrigo Rato, and his executive team misled investors. They protest their innocence.
Shareholders should know the risks but the hundreds of thousands of Spaniards who bought preference shares and complex subordinated debt from their cajas often did not. All they saw were fail-safe investments with high returns. Clients infamously included Alzheimer’s sufferers and at least one customer who signed by dipping a finger in ink.
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Haircuts range from 36% for Bankia’s subordinated perpetual bonds to 61% for preference shares in Catalunya Banc.
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It’s not Cyprus: the lower rungs of the capital structure are the ones being hit. Losses for investors unlock European money to recapitalise the banks. It still ain’t pretty.
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Recrapitalized banks!
Should have read: "No such thing as a free Spider Man towel"
In these manipulated markets? Good luck!
If investors know the true risk, prices decline, and the brokers lose margin.
At least investors can always count on the rating agencies. lol
At first glance thought you said "raping agencies".
Spaniards = Gilipollas
one customer who signed by dipping a finger in ink
Goldman has a no discrimination policy on illiteracy.
In these 'markets', the risk is 100%.
I'd rather risk my money on jai alai!
Where is W C Fields when you need him.
Want to see some real shit go down. When Spanish bonds blow up, the pension funds that were seized to buy them are going to get fucking fried.
The historical avg yield for the 10 year US bond is just over 7 percent.
Spain, with 26 percent unemployment and is just over 5 percent!
These cocksuckin central banksters might think they are working magic by suppressing yield. Haha, fuckers, because the whole world can't be Japan. I will get a good laugh when the whole stinkin pile of shit blows up.
I get the overall drift of your post but will just say, what's happening is criminal, hurts millions and billions of average folk, and therefore in my book isn't that funny. Makes me royally pissed though. A lot of average people are going to be hurt badly by the blow up/dominos falling/house of cards collapse.
At some point I predict someone over there snaps. What will be interesting is watching whether that causes others to snap... and others.... etc.
Will not happen, super Mario from Frankfurt am Main will intervene
...and General Franco
"super Mario from Frankfurt am Main will intervene"
Can only plug so many holes in the dam before....
True dat.
Moar potential snappage...
"Argentina may learn at any time whether a U.S. appeals court will rule that it must pay $1.4 billion to holders of its defaulted debt, something the South American country has resisted for more than a decade.
The court in New York is set to rule after Argentina submitted a payment proposal last week that would force holders of defaulted bonds to take a steep discount on debt the nation repudiated in its record 2001 default on $95 billion. With further appeals unlikely to succeed, the ruling may be the last word on the matter."
"Argentina’s top leaders have vowed never to pay the hedge funds, which it calls “vulture” investors, that hold the debt.
Jonathan Blackman, the attorney for the South American nation, has said Argentina would default on its restructured debt if it’s forced by the panel to pay so-called vultures.
“So the answer is you will not obey any order but the one you propose?” U.S. Circuit Judge Reena Raggi asked Blackman during oral arguments in February.
“We would not voluntarily obey such an order,” Blackman said, with Hernan Lorenzino, Argentina’s minister of economy, and Vice President Amado Boudou sitting nearby."
Heh ;-)
http://www.bloomberg.com/news/2013-03-31/argentina-greek-tragedy-nears-end-as-debt-ruling-looms.html
Lots of rubber bands getting stretched to their breaking point. Once one goes, it will spread. People are just waiting for the first one to break, and it'll be like the sound of a starter's pistol.
Slight typo in this article - Bankia Chairman's name is actually Rodrigo Raton.
Rather Rodrigo Rata (ratón = mouse, rata = rat)
Really? Roger Rat?
Who would have suspected.
Were the squid and john paulson involved? I guess the norway teachers finally wised up?
The Bankia HQ looms over Madrid and can be seen from most parts of the city,
Its almost taunting the Spanish people,
It's the Spanish version of Anglo Irish Bank, and the people hate it,
It's gonna burn, just watch,
So after the world's producers are completely brought to ruin by the world's financiers... And said financiers have accumulated all of the money... What will they spend their money on, having killed the gold laying goose?
Or will they simply sit in their counting houses and count it...
Why, finish the final touches on the Tower of Babylon, of course, and then lessen the grip and return to sound monetary policies, though only for the duration that would be required to bring up a new gold-laying goose. :)
Obviously, the situation in Spain and many Spaniards are very complicated. Worst of all is that this situation will worsen over before it gets better. For many years, the Spaniards have lived a reality that was not theirs. They acquired a standard economic unsustainable over time. The Socialist government spent more than it had as income and the Spaniards consumed more than debian. The result is a bankrupt country.
So you are saying Spain was like the entire rest of the world?
pods
This kid is spanish and is regurgitating PP MSM guilt-tripping arguments currently used in Spain. "Listen, populace, we must not stand up to the EU because we (or better still, the PSOE) lived like kings and now we have to pay back, it is our just retribution and we should accept it with shame, too". This is supported by anecdotal evidence, ignoring that the standard of living for the middle classes decreased notably in the past decade.
The indoctrination is so bad that I can now detect Spaniards posting in sites in up to 5 different languages.
O/T Joke of the millenium> Obama Proclaims April the Month to Teach Young People ‘How to Budget Responsibly’ | CNS News
April Fools joke, I guess.
Bankia is in the news again.
Excellent. :)
Bankia, a bank with a 268 billion euro market value if you look to the stockmarket...
and is worth.... minus 4 billion...
PEOPLE WHO BUY THAT SHIT ASS STOCK DESERVE TO LOSE IT ALL!!!
INVESTING IS NOT GAMBLING AND EXPECTING A BAILOUT!!
If Bankia blows, Europe is in a big DoDo...
People suffering even-later-than-early-stage-Alzheimers are capable of carrying on a seemingly coherent conversation or signing their name to piece of paper.
I'm for making the ignorant or greedy pay for their ignorance or greed.
However, I would have few reservations about demonstrating the very worst capacities of man that I have witnessed on such thieves, even though the mere recollection of such events can still literally turn my stomach after decades of experience.
The whole world has become a casino. Only the house, the banksters, win consistently. How long will the losers, the vast majority, tolerate their impoverishment?
More fluoride and more prozac is needed urgently.
They don't call them "muppets" for nothing!
they got corzined bitchez. hahahahahahaha!
well... that's just capitalisme and how it is supposed to work.
You invest and you can lose.
and as those are common people, they won't get a taxpayers bailout. That's only for the elite...
Does this mean I wont get that 380% return on those bonds the banker promised me?
no... but the banker got his bonus for selling that crap to you! Feel better already?!
At least there's one Happy Soul in all of this. :)
So how do you day "poof, it's gone" in Spanish?
pods
puf se haha idioto
Dirty Sanchez Perforación Anal
Bankers and 'Financial Advisors' only exist to steal 'extra' money from gullible retailers. It's a nice business because as the current crop of suckers learns their lesson by losing all their 'extra' money, a new cohort comes of age and takes their place. If people haven't learned now (and in Spain, of all places!) they never will. Power to the snake-oil salesman without conscience who can continually harvest the suckers.
like the girl said: the beer in this bar makes my pussy sore, i'll have a whisky instead.
I believe it's called "Doing God's work"
Not only did the 350,000 bank account holders have their insured deposits get Corzined into bank debt they also have the deep satisfaction of knowing the will have to pay their share of the €41 billion ( and growing) Euro bank bailout fund their government has guaranteed.
Bankia got any depositors left? Because after, "Haircuts range from 36% for Bankia’s subordinated perpetual bonds to 61% for preference shares in Catalunya Banc." come deposits on the seniority ladder. LOL
These are the same Spaniards who got rooked on that STAMP INVESTMENT scam some years ago.
I see a trend.
The Conquistodors are spinning on their pointed hats.
All I have to say is what some here have been saying for a long time. Get your fucking money out of the EU banks. OOP's too late capital controls!
The Spanish Finance Minister said a week ago last Friday he was going to put a levy on the total amount of deposits in Spanish banks. A bit different in Spain from Cyprus - this time the local bankers will be working in cooperation with a somewhat-less-than-honest national government. Either way, savers will have less money as governments in debt decide they need it more. Savers and asset holders in Spain, Italy, Greece and Cyprus should all be concerned, especially ex-pats. See more on this at:
http://tinyurl.com/cedrumy
The quote in the previous comment: "he was going (Montoro) to put a levy on the total amount of deposits in Spanish banks"; IT'S BLATANT A LIE. Cyprus is like a little town in a little State in the USA with two little banks with 700,000 inhab. Because the size, because the GDP, because the much bigger banks, Spain is protected via the FROB and the ESM and because the EURO as we know it, for sure it will disappears. What Dijsselbloem said to all Europe about the template is like a nosedive in his new chairman rookie nomination.
"Want to see some real shit go down. When Spanish bonds blow up, the pension funds that were seized to buy them are going to get fucking fried." from Banksters above.
Same shit is going to happen here in the good old USA. Wait and see.