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Spot The Spanish Reality
Having recently pointed out Draghi's worst nightmare, we thought the anti-thesis of hope over reality that is occurring in European "markets" was worth pointing out. Spanish sovereign bond spreads have collapsed this week to their lowest (least risky) in 30 months at a mere 229bps. The total and utter disconnect of this supposed 'free market' based measure in the face of nothing but terrible Spanish data is entirely without precedent...
Today's retail sales beat is the latest 'outlier' being heralded as supporting the disconnect - of course, that is until seasonal adjustments remove all the gains and reality sets back in.
While many expect Spain to emerge from recession in Q3 2013 (and we assume that is the 'hope' trend being extraploated), it is clear, as SocGen notes, that internal consumption is expected to stall through H2 2013 and push Spain back into recession in Q1 2014...
Via SocGen,
...despite the small improvement in unemployment in Q3, to 25% vs. a previous 26%, the labour market situation is still too poor to stimulate domestic demand in the short term. As before, we see the 2013 real GDP in negative territory at -1.0%, with more amendments to government expenditure items expected.
As the Bank of Spain pinpointed in its latest economic report, government consumption and specifically employee compensation is yet to be adjusted. We thus expect the impact on GDP to kick in early 2014 and bring Spain back to recession.
Chart: Bloomberg
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Cyprus was bullish because it demonstrated that bad loans don't matter when you can just cover your losses from customer accounts.
I wish I could make a clever/worthwhile/pithy comment to this story but I am still try to wrap my head around the Santelli/Fama clip!!!
I've watched Fama's interview from Cyprus so I'm dealing with idiocy on multiple fronts.
It's quite simple really...no big deal...I will incur debt, lots of it...on one side of the balancesheet i will have this debt, i will then proceed to spend the money like a drunken sailor and offset the debt on the other side of the balance, however when the time comes, i will pass on the debt to my children and wipe it clean from balance sheet cuz they love me. Problem solved for me. Santelli can't understand rationale academic thought
Huge volatility in 2014 for european banks...
"Spanish sovereign bond spreads have collapsed this week to their lowest (least risky) in 30 months at a mere 229bps. The total and utter disconnect of this supposed 'free market' based measure in the face of nothing but terrible Spanish data is entirely without precedent..."
I disagree. The market for Spanish sovereign bonds has changed in a fundamental way. The phenomenon has a name: repatriation
between 2007 and 2008 they were held by foreign hands in the tune of 50-55%
now foreign hands have only something around 30-35%. and when the debt is mostly in national hands... think Japan
Good points.
But this is the Euro currency and Spain does not have much control of the Euro or EU politics.
Interesting times.
so you mean the others aren't interested? strange ideas you seem to have about us europeans
What do you disagree about? That Spain's banks and government aren't insolvent any more because they hold they hold one another's debt?
Yeah right, think Japan. You know, Spain with its massive account surplus, low unemployment and strong industrial economy is just like........Japan.
LMFAO
Do you believe in perfect markets or in markets with their own peculiar psychology? This market now speaks mostly Spanish and sees Spain with different eyes. And the massive amounts of bonds that have changed hand begs the question what kind of hands held them, before. Or if the flow will continue
Spain does indeed have an account surplus, since June 2013. Not massive, no. Yet it's there, earning them kudos points - which translate politically into definitive ECB and peer nation support. That's how this game is played
And it's - as it can be currently witnessed - particularly well equipped, historically, culturally and family-structure-wise, to the problems of a high unemployment
Tenemos que pedir prestado más dinero,
Para estimular la demanda,
Para que se crean puestos de trabajo,
Y la prosperidad se produce,
Entonces tenemos que pagar fuera nuestros préstamos.
Por siempre y para siempre, en su santo nombre. Amen.
....Dios que llamamos BCE, aunque quisieras que se nos desparezca el dinero, por favor, haz que se aumenten los sueldos de los banqueros que tanto lo merecen. Santificada sea la peseta. Cambio.
BCE=ECB
Bullish for equities
I you're long solar plays it sure is. I do remember seeing a plan to turn Gubaltrar and "the other side" a huge hydro-electric project "with more than sufficient energy to power all of Europe" if constructed.
I just see Spain claiming Gibraltar back. And so pissing off the Brits. Old story, the Spaniard have this claim sewn in their flag since quite a while...
Who needs them. Let's start our own new world order based on constitutionally based open source software.