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Egan Who Just Gave Spain The Triple Hooks

Tyler Durden's picture


And so, the little rating agency that could, just gave Spain the triple hooks, downgrading the country from B to CCC+, negative outlook. As a reminder, the Uganda credit rating is B: it sure is no Spain.

From EJ:

Synopsis: KINGDOM OF SPAIN EJR Sen Rating(Curr/Prj) CCC+/ CC Rating Analysis - 6/13/12 EJR CP Rating: C Debt: EUR805.9B EJR's 1 yr. Default Probability: 18.0% Spain continues to be weakened by high funding costs (6.75% for 10yr today), the gov. deficit of 9.6%, an estimated decline in GDP of 1.7% (per the Economy Ministry), the 24.4% unemployment, the IIF's recent estimate of additional bank loan losses up to EUR260B, and possible depositor withdrawals. Over the past four fiscal years, that is from 2008 to 2011, Spain's GDP declined from EUR1.09 trillion to EUR1.07 trillion. Meanwhile, its debt mushroomed from EUR519B to EUR806B. With the EUR100B infusion for Spain's banks, the debt to GDP will rise to 90% plus future additions for the government deficit, support for its regions and additional support for its banks. Social benefits are a major problem; while payments to the govt have been down EUR 3B (2008 to 2011), payments from the government have been up EUR 29B). As a result, Spain is short about EUR50B per year for social payments, EUR35+B per year for interest, and an additional EUR 30B for asset growth; hence the EUR110+B per annum increase in debt. As we expected, Spain requested support for its banking sector and will probably need cash for weaker provinces. Assets of Spain's largest two banks exceed its GDP. We are slipping our rating to " CCC+ " ; watch for more requests for support from the banks and money creation.


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Wed, 06/13/2012 - 15:24 | 2522965 carbonmutant
carbonmutant's picture

Candle in the dark...

Wed, 06/13/2012 - 15:32 | 2523022 SilverTree
SilverTree's picture

Meaningless. Spain is a smelly corpse.

Wed, 06/13/2012 - 15:35 | 2523043 carbonmutant
carbonmutant's picture

Egan Jones...?

Wed, 06/13/2012 - 15:40 | 2523078 disabledvet
disabledvet's picture

I agree. "So what"? When the USA got downgraded it set off a rally of epic proportions. Spain is not the worry.

Wed, 06/13/2012 - 15:49 | 2523123 carbonmutant
carbonmutant's picture

The DJI's current response to Spain's downgrade is over 100 pts down so far...

Apparently the EU Banks were expecting the ratings agencies to support the Spanish Whitewash. Now they want to boycott them?

Seems like somebody is worried...

Wed, 06/13/2012 - 16:28 | 2523305 Chris Jusset
Chris Jusset's picture

ATT'N ALL JUNK COLLECTORS: For those who like collecting JUNK, now's the time to BUY!

Wed, 06/13/2012 - 16:41 | 2523357 HoofHearted
HoofHearted's picture

Moody's just got in on the fun and also kicked Spain down...all the way to Baa3.

Wed, 06/13/2012 - 16:43 | 2523367 BKbroiler
BKbroiler's picture

Uganda no es Espana

Wed, 06/13/2012 - 17:02 | 2523456 TheFourthStooge-ing
TheFourthStooge-ing's picture

Divine, as Earl Peterson: "Get the hook! Go fuck yourself for all I care."

Wed, 06/13/2012 - 18:15 | 2523672 potlatch
potlatch's picture

I watch that movie every christmas eve.  ftw dude.  its like the Star Wars of trash cinema.

Wed, 06/13/2012 - 22:04 | 2524216 TheFourthStooge-ing
TheFourthStooge-ing's picture

"I'm off to Detroit to find happiness within the auto industry."

Wed, 06/13/2012 - 15:42 | 2523088 Sam Clemons
Sam Clemons's picture

The saddest thing about all this is how investors / policy makers perceive the solution for Spain and the rest of them is giving them the ability to print money like America does.

Wed, 06/13/2012 - 16:05 | 2523136 Quisat_Sadarak
Quisat_Sadarak's picture

Sam, you are absolutely correct. This is the common wisdom down to every man/woman on the street. I can attest that several of my relatives that live in at least one of the PIIGS are lamenting that this would be solved "if only they could print money like America does" and all would be well.

They are like animals caged with socialism and they seem to have lost the ability or desire to survive on their own without the govt aid.

Wed, 06/13/2012 - 15:44 | 2523100 Reggie Middleton
Reggie Middleton's picture

So, if they dislike the rating agencies (who are perpetually late to the common sense party) I guess they'll absolutely detest me...

Continuing my rant on the effectiveness (not) of the ratings agencies, I bring to you an interesting documentary on the rating agencies' effect on the sovereign debt crisis in Europe, produced by VPRO Tegenlicht out of Amsterdam. You can see the full video here, but only about half of it is in English. I appear in the following spots: 4:00, 22:30, 40:00...  Reggie Middleton Discussing the Rating Agencies effect on Sovereign Europe

"Where Are The Ratings Agencies For UK & German Banks Before They Go Boom? How About Those Euro REITs? Agencies Anybody?", quickly followed by So, Now The Rating Agencies Want To Acknowledge The Existence Of The FrankenFinance Monster???

Wed, 06/13/2012 - 15:54 | 2523141 LULZBank
LULZBank's picture

Cool trick. How do you do that man? Wrapping HTML link around your text?

Wed, 06/13/2012 - 15:55 | 2523145 SilverTree
Wed, 06/13/2012 - 16:42 | 2523363 NotApplicable
NotApplicable's picture

This is a comment linked to your link comment on your comment, but in a childish way.

Wed, 06/13/2012 - 16:04 | 2523191 junkyardjack
junkyardjack's picture

I thought those RIMM and AAPL calls put you out

Wed, 06/13/2012 - 15:55 | 2523146 FL_Conservative
FL_Conservative's picture

Espana no es Uganda!

Wed, 06/13/2012 - 16:12 | 2523242 azzhatter
azzhatter's picture

Okay, maybe we aren't Uganda but we're ahead of Zimbwabwe for the time being

Wed, 06/13/2012 - 16:17 | 2523269 BlandJoe24
BlandJoe24's picture

Waiting and waiting and waiting and waiting for Moody's to update Spain ratings.... the last in the bucket

Wed, 06/13/2012 - 15:24 | 2522967 Conman
Conman's picture

Ayye yi yi, no es bueno.


Wed, 06/13/2012 - 15:26 | 2522970 surf0766
surf0766's picture

Before market close !! Gotta love it..

Wed, 06/13/2012 - 15:26 | 2522974 magpie
magpie's picture

At least Gomez scored twice

Wed, 06/13/2012 - 15:26 | 2522976 mayhem_korner
mayhem_korner's picture



Wake me when they're sporting triple Ds.

Wed, 06/13/2012 - 15:40 | 2523079 junkyardjack
junkyardjack's picture

Throw some D's on that bitch

Wed, 06/13/2012 - 15:27 | 2522983 VonManstein
VonManstein's picture

Whats Egans rating on US??

i can t help but think that everyone is forgetting the reeal issue here, and that, i think, is in the region of 16,000,000,000,000

LND/NY bankers attacking EU to buy some time

Wed, 06/13/2012 - 15:37 | 2523057 GeneMarchbanks
GeneMarchbanks's picture

All already well known as well as documented.

Whats Egans rating on US??

Tricky question. Turns out it's much easier to saw down branches you're not sitting on.

Objectivity? Surely you don't expect something of that kind?

Wed, 06/13/2012 - 15:44 | 2523098 Sam Clemons
Sam Clemons's picture

Um. I can think of one reason those 16,000,000,000,000 don't matter and hasn't mattered..yet:  Printing press.

Wed, 06/13/2012 - 15:27 | 2522984 azzhatter
azzhatter's picture


Wed, 06/13/2012 - 15:29 | 2523000 Bam_Man
Bam_Man's picture

You beat me to it by a minute or so.

I was just about to say that Egan-Jones had better be careful. They could soon find themselves designated a "terrorist organization" if these downgrades continue.

Wed, 06/13/2012 - 15:34 | 2523038 Zero Govt
Zero Govt's picture

the SEC has already started the process kidding

Wed, 06/13/2012 - 15:36 | 2523049 Bolweevil
Bolweevil's picture

S&P/Moody's/Fitch global jihadi

Wed, 06/13/2012 - 18:09 | 2523651 potlatch
potlatch's picture

much more banal than some religious jihad or crusade.  these are just the same kids who used to obsessive-compulsively steal your hot wheel cars even if they already had that same one twice over.


you know the type.  they are just all grown up now.


Jamie Dimon's hot wheel collection > your hot wheel collection, etc.  I can't imagine what other motivation these tedious and useless idiots could have.

Wed, 06/13/2012 - 19:11 | 2523810 Kiwi Pete
Kiwi Pete's picture

Well the president of S&P 'resigned' soon after they downgraded the United States so I think the US is safe for now. Even though Spains debt is approaching 90% of GDP and the US is over 100%!

Wed, 06/13/2012 - 18:59 | 2523785 Terrorist
Terrorist's picture

Que pasa?

Wed, 06/13/2012 - 15:27 | 2522985 Stoploss
Stoploss's picture

Caught him on the news yesterday, kind of had a certain bias in the tone. Now we know why.

Wed, 06/13/2012 - 16:45 | 2523372 NotApplicable
NotApplicable's picture

Let me know when you find a tone without bias, as I've always wanted to hear one.

Wed, 06/13/2012 - 18:05 | 2523643 potlatch
potlatch's picture

Dave?  Why are you altering my algorithms?  I can't allow you to do that, Dave.

Wed, 06/13/2012 - 15:28 | 2522990 Global Hunter
Global Hunter's picture

No worries Spain will just stop co-operating with ratings agencies

Wed, 06/13/2012 - 15:47 | 2523097 disabledvet
disabledvet's picture

The rate is the rate. The ratings Agency has nothing to do with that. At least "not at this point in the game." and that "game" is pretty simple. It's
called "you gotta pay for that."

Wed, 06/13/2012 - 16:14 | 2523255 Global Hunter
Global Hunter's picture


Was making reference to earlier ZH article about Euro banks colluding to no longer co-operate with ratings agencies.

Wed, 06/13/2012 - 15:28 | 2522991 fockewulf190
fockewulf190's picture

Egad Egan!

Wed, 06/13/2012 - 15:28 | 2522992 carbonmutant
carbonmutant's picture

"Assets of Spain's largest two banks exceed its GDP."


Wed, 06/13/2012 - 15:40 | 2523070 Zero Govt
Zero Govt's picture

bit late in the day to bring that one up

what politicians and regulators say about systemic risk, and what they do about it, is as far apart as the edges of the known Universe

Wed, 06/13/2012 - 16:03 | 2523183 cougar_w
cougar_w's picture

Nationalize the banks and that problem goes away.

Wed, 06/13/2012 - 15:29 | 2522995 Dealer
Dealer's picture

Triple hooks, bitchez!


Wed, 06/13/2012 - 15:29 | 2522996 CommunityStandard
CommunityStandard's picture

Anyone selling Egan Jones t-shirts?  I would buy.

Wed, 06/13/2012 - 15:33 | 2523030 Cognitive Dissonance
Cognitive Dissonance's picture

Start a (Egan Jones) fan club. Make your own t-shirt.

Wed, 06/13/2012 - 15:53 | 2523140 carbonmutant
carbonmutant's picture

We need an embroidered ZH model...

Wed, 06/13/2012 - 15:46 | 2523111 DrDinkus
DrDinkus's picture






im lookin for a fine....

Wed, 06/13/2012 - 16:01 | 2523170 BlueCollaredOne
BlueCollaredOne's picture

I upped you, funny ass song.  Given this sites demographic i may be one of the only ones. 

Wed, 06/13/2012 - 16:16 | 2523267 youngman
youngman's picture

I remember Basketball my basketball jones

Wed, 06/13/2012 - 16:29 | 2523312 resurger
resurger's picture

I got a Donnel Jones T-Shirt


Wed, 06/13/2012 - 18:01 | 2523633 potlatch
potlatch's picture

"Is Egan Jones Gonna Have to Choke A Bitch?"

Wed, 06/13/2012 - 15:28 | 2522997 Godisanhftbot
Godisanhftbot's picture

 Who leaked it to the big boys. They stepped away an hour ago

Wed, 06/13/2012 - 15:29 | 2523001 junkyardjack
junkyardjack's picture

Markets don't care...

Wed, 06/13/2012 - 15:29 | 2523002 Dr. Engali
Dr. Engali's picture

Clearly the SEC didn't put a big enough scare in those pugnacious little upstarts. Time to send in the goon squad.

Wed, 06/13/2012 - 16:05 | 2523196 cougar_w
cougar_w's picture

Insider trading charges in 5 ... 4 ... 3 ...

Wed, 06/13/2012 - 15:30 | 2523007 HD
HD's picture

Needing a 400 billion dollar bailout (and only getting 125) is just "negative"?  I assume using that logic, the Hindenberg only had a "malfunction"?

Wed, 06/13/2012 - 15:37 | 2523064 Muppet Pimp
Muppet Pimp's picture

Can't ask for the whole thing up front HD.  Gotta have a little foreplay to get things loosened up first, y'know break the ice so to speak.  "Just the tip, I swear"

Wed, 06/13/2012 - 15:44 | 2523099 HD
HD's picture

True mate,  but if they wait too long they might find a giant Italian cock in their way...

Wed, 06/13/2012 - 16:02 | 2523177 LULZBank
LULZBank's picture

Greeks arent done yet.

Wed, 06/13/2012 - 16:33 | 2523327 post turtle saver
post turtle saver's picture

daisy chain bitchez

Wed, 06/13/2012 - 17:58 | 2523617 potlatch
potlatch's picture

Jerry?  Jerry Sandusky?  Didn't know you had comp access during trial.  sup bro!  Go State!

Wed, 06/13/2012 - 17:21 | 2523510 TheFourthStooge-ing
TheFourthStooge-ing's picture

HD said:

Needing a 400 billion dollar bailout (and only getting 125) is just "negative"?  I assume using that logic, the Hindenberg only had a "malfunction"?

The Hindenberg experienced oxidation of negative ballast, resulting in a momentary buoyancy impairment. Because Glass-Steagall was in effect, even though the impairment was momentary, it was enough to be considered a CDS trigger (Catastrophic Dirigible Spectacle).

Wed, 06/13/2012 - 15:30 | 2523012 Cognitive Dissonance
Cognitive Dissonance's picture

Watch out for that first step.

It's a doozy.

Wed, 06/13/2012 - 16:42 | 2523362 DoChenRollingBearing
DoChenRollingBearing's picture

The next few steps will be tricky too.


Wed, 06/13/2012 - 15:31 | 2523015 azzhatter
azzhatter's picture

next time we see Sean he'll have broken kneecaps

Wed, 06/13/2012 - 15:31 | 2523019 monopoly
monopoly's picture

The Kingdom of Spain, slowly being flushed. Well, the Fall of Rome took a lot longer than they thought. Patience.

But I wish they would just put PCX out of its misery and just shut the doors. From 24 to ......

Wed, 06/13/2012 - 17:56 | 2523611 potlatch
potlatch's picture

I only have one old friend who is from Spain, but am out of touch.  But I wonder what the Spanish people are thinking these days.  I do not think they go quietly?

Wed, 06/13/2012 - 15:31 | 2523021 tu-ne-cede-malis
tu-ne-cede-malis's picture

Next up: USSA get's Triple C'd.

Wed, 06/13/2012 - 15:43 | 2523042 Cognitive Dissonance
Cognitive Dissonance's picture

Wake me when the USA gets to DD's. I love DD's.

Wed, 06/13/2012 - 16:03 | 2523181 valley chick
valley chick's picture

and what is the rating for Italy?  BB- ? Aa2 negative ?  

Wed, 06/13/2012 - 17:55 | 2523604 potlatch
potlatch's picture

it's a very complex algorithm, at this point

Wed, 06/13/2012 - 15:40 | 2523080 Frank N. Beans
Frank N. Beans's picture

according to the transitive theory,

if Spain = CCC+

and Spain debt/GDP = 90%

and USA debt/GDP = 90%

then USA = CCC+


Wed, 06/13/2012 - 15:54 | 2523144 Byte Me
Byte Me's picture

Well spotted. Go to the head of the class.

Now, TPTB have this sunny little place in Cuba for boat-rockers like you....

Wed, 06/13/2012 - 15:56 | 2523149 carbonmutant
carbonmutant's picture

Ability to pay and the size of your Nuclear Arsenal needs to be factored in as well...

Wed, 06/13/2012 - 16:07 | 2523218 cougar_w
cougar_w's picture

"Ability to print ..."

Fixed it for you.

Wed, 06/13/2012 - 16:23 | 2523287 carbonmutant
carbonmutant's picture

Come on, even Zimbabwe can print...

Wed, 06/13/2012 - 16:48 | 2523392 NotApplicable
NotApplicable's picture

Ability to threaten it is then!

Wed, 06/13/2012 - 17:47 | 2523586 potlatch
potlatch's picture

lol.  I had to walk that one off.  nice.  lol

Wed, 06/13/2012 - 17:46 | 2523583 potlatch
potlatch's picture

You forgot to factor in the 7th Fleet.

Wed, 06/13/2012 - 15:33 | 2523031 101 years and c...
101 years and counting's picture

Egan should be arrested, tortured and put to death for treason against keynes!


Wed, 06/13/2012 - 16:09 | 2523227 cougar_w
cougar_w's picture

Why would anyone up-vote that? Yeah I know it's supposed to be /sarc, I'm just trying to work out how this double-negative falls together.

Wed, 06/13/2012 - 16:50 | 2523397 NotApplicable
NotApplicable's picture

Logic will get you nowhere when emotions rule.

Wed, 06/13/2012 - 17:44 | 2523571 potlatch
potlatch's picture

/agree.  think that post was by a postbot tyler puts in to track people with less-than-sterling reading skills

Wed, 06/13/2012 - 15:34 | 2523035 surf0766
surf0766's picture

So I thought no one believe EJ. Now they are market movers? 

Wed, 06/13/2012 - 15:42 | 2523092 junkyardjack
junkyardjack's picture

Correlation does not mean causation...

Wed, 06/13/2012 - 15:34 | 2523036 LULZBank
LULZBank's picture

Whats Uganda's credit rating?

Wed, 06/13/2012 - 15:38 | 2523069 El Oregonian
El Oregonian's picture

Triple U as in it's really UGLY!

Wed, 06/13/2012 - 15:35 | 2523044 Muppet Pimp
Muppet Pimp's picture

Tell em EJ!

Wed, 06/13/2012 - 15:35 | 2523045 lolmao500
lolmao500's picture

Next : downgrade the UK!!

Wed, 06/13/2012 - 15:38 | 2523066 Bolweevil
Bolweevil's picture


Wed, 06/13/2012 - 15:36 | 2523048 Benjamin Glutton
Benjamin Glutton's picture

estamos Egan Jones no Moody puta!

Wed, 06/13/2012 - 15:37 | 2523052 GrinandBearit
GrinandBearit's picture

I have a feeling that the dominoes will start falling very soon.

Wed, 06/13/2012 - 15:45 | 2523107 Zero Govt
Zero Govt's picture

it's that or Graham has to top himself on 31st July

Wed, 06/13/2012 - 17:41 | 2523562 potlatch
potlatch's picture

If you think these vampires will give up one second of their "well-earned" summer vacation time with their family off the coasts of Ibiza, Mikonos, etc. yer nuts.


Game frozen till US labor day.

Wed, 06/13/2012 - 15:37 | 2523061 catacl1sm
catacl1sm's picture

I was wondering what was driving the train down today. Love it.

Wed, 06/13/2012 - 15:38 | 2523063 fuu
fuu's picture


Wed, 06/13/2012 - 16:16 | 2523258 slewie the pi-rat
slewie the pi-rat's picture you well know...

...tyler hearts gallo


Wed, 06/13/2012 - 16:28 | 2523311 fuu
fuu's picture

<golf clap>

Wed, 06/13/2012 - 16:48 | 2523374 slewie the pi-rat
slewie the pi-rat's picture

 modesto & fuk_u_TW

Wed, 06/13/2012 - 17:38 | 2523554 potlatch
potlatch's picture

we're all gallo now

Wed, 06/13/2012 - 15:38 | 2523065 spine001
spine001's picture

There is no news in this except that a rating agency recognizes what is widely known in the industry. Spain is broke and getting broker....

Until next time,


Wed, 06/13/2012 - 15:39 | 2523068 iPhorgot
iPhorgot's picture

sí sí 

Wed, 06/13/2012 - 15:41 | 2523071 GS-DickinDaMuppets
GS-DickinDaMuppets's picture

Goldman is doin our part, we are trying to buy EAGAN off err I mean negotiate a better understanding of the more accepted understanding of Spains finances with EAGAN...


...doin GOD's work...DickinDaMuppets

Wed, 06/13/2012 - 15:40 | 2523073 JLee2027
JLee2027's picture

Uganda remains a B, lol. I guess Spain isn't Uganda after all.

Wed, 06/13/2012 - 15:40 | 2523081 ChrisDG74
ChrisDG74's picture

PPT just won't let that Dow drop more than 100. Obvious clownshoe.

Wed, 06/13/2012 - 15:42 | 2523086 Byte Me
Byte Me's picture

Can anyone recommend a Ugandan retail bank that I can transfer my Santander a/c to?

Wed, 06/13/2012 - 15:42 | 2523087 caimen garou
caimen garou's picture


Wed, 06/13/2012 - 15:47 | 2523114 LULZBank
LULZBank's picture

As a reminder, the Uganda credit rating is B: it sure is no Spain.

Tylers, dont rub it in please :)

Wed, 06/13/2012 - 16:10 | 2523230 potlatch
potlatch's picture

long ....oh, umm, Togo.  There,  Safe haven: obtained.

Wed, 06/13/2012 - 15:50 | 2523129 ebworthen
ebworthen's picture

Congressional investigation to follow:

"Ratings agency Egan-Jones investigated for links to terrorism."

Jamie Dimon will call it "constructive".

Wed, 06/13/2012 - 16:09 | 2523224 potlatch
potlatch's picture

And being "rigorously internally dealt with"

Wed, 06/13/2012 - 15:51 | 2523131 gaoptimize
gaoptimize's picture

"that could"...and does...regularly.

Wed, 06/13/2012 - 15:59 | 2523133 Tsar Pointless
Tsar Pointless's picture

Funny anecdote.

Wed, 06/13/2012 - 15:56 | 2523151 Faceberg
Faceberg's picture

Wow! I love these guys. Didn't they get the memo that you're not supposed to downgrade a country until after it defaults?

Wed, 06/13/2012 - 16:08 | 2523222 potlatch
potlatch's picture

I lol'd ;)

Wed, 06/13/2012 - 16:01 | 2523172 Euro Monster
Euro Monster's picture

Where is the Iceberg?

Wed, 06/13/2012 - 16:02 | 2523173 obejoyful
obejoyful's picture

Why is it Merkel's responsibility to save Spain.

Wed, 06/13/2012 - 16:06 | 2523204 surf0766
surf0766's picture

Socialists always pass the bill to someone else.

Wed, 06/13/2012 - 16:07 | 2523220 potlatch
potlatch's picture

Do you blame them?  Why should they get stuck with the capitalists' bill?

Wed, 06/13/2012 - 16:20 | 2523280 Temporalist
Temporalist's picture

Where did you find a capitalist?  They've gone the way of the dinosaur since the world has discovered central planning.

Wed, 06/13/2012 - 18:19 | 2523545 potlatch
potlatch's picture

/agree.  I mispoke in my haste.





the scale of the collusion here is just staggering; it almost boggles conceptualization, at least for me.

Wed, 06/13/2012 - 16:07 | 2523214 potlatch
potlatch's picture

Because Eve ate the AAPL

Wed, 06/13/2012 - 16:01 | 2523165 Tuffmug
Tuffmug's picture

Real fun starts when Moody's puts in final knife with downgrade to junk and causes a margin call at ECB.

Wed, 06/13/2012 - 16:02 | 2523178 Mark123
Mark123's picture

So everyone rushes out of Spanish junk into USA junk?  Perhaps this is the purpose....the world can only support so much new debt being issued.

Wed, 06/13/2012 - 16:03 | 2523185 Satan
Satan's picture



Wed, 06/13/2012 - 16:05 | 2523199 potlatch
potlatch's picture

I find Egan's lack of enthusiasm for teh Larry Summers and teh Jamie Dimon ..... concerning.

Wed, 06/13/2012 - 16:11 | 2523240 cougar_w
cougar_w's picture

Spain wishes they were Uganda again.

Wed, 06/13/2012 - 16:12 | 2523249 lugn
lugn's picture

The average US 10 yr yield since April 1953 was 6.2%.  Spain now at 6.75%. In that context, Spain rates not unsustainable. Debt/GDP lower than other more "stable" countries like Japan. The major problem is not current lending rates or Debt/GDP but rather the bad loans of the banking sector and provinces. If Spain can successfully prevent a bank run via Euro banking union type measures, not subordinate existing lenders via the bailout (still in negotiations) and find a way to save regional cajas, it should be ok. A lot of "if's" but those are the relevant issues now.  Spain will stay in Euro but be in a high rate environment for next several years, to be followed by yields of more stable developed nations such as Germany, the UK and the US, etc. playing catch up.  I think this is the beginning of a long process that will culminate in US yields moving substantially higher and not periphery yields returning to low euro era levels - despite any bailouts. Gold will climax when an idiot at a cocktail party tells you that his grandmother just put all her savings in it (think internet stocks and real estate). Bonds will get killed. Commodities and equities (especially EM) to outperform.


Wed, 06/13/2012 - 16:18 | 2523275 RoadKill
RoadKill's picture

Now weighted average those rates by debt/gdp and nominal GDP growth and you will see the problem. With 10% nominal gdp growth and 10% debt to gdp you can afford to pay 10%. At 2% nominal GDP growth and 100% debt to GDP, US can barely afford 2%. Spain with REAL debt to GDP of 150%+ and nominal gdp growth of -2% - 6.5% is an exostential threat.

Wed, 06/13/2012 - 16:43 | 2523369 lugn
lugn's picture

Japan has a Debt/GDP of 220% and grew at an average of 1.00% since 2000. By contrast, Spain is at Debt/GDP of 90% post-bailout and grew at an average 2.2% since 2000 (and yes, I know a lot of it was construction/real estate driven).  However, unlike Spain, Japan can borrow at low rates, which obviously is beneficial. I don't care if Spain defaults or not but if you put the numbers on a spreadsheet at today's rates or higher, the Spanish sovereign is not in any danger of imminent default. Again, if you put today's yields in a historical context they are not high. The real danger in Spain is a banking crisis spilling over into other countries, asset markets, etc. I believe this is possible but not guaranteed by any means. Show me the detailed math that says Spain willl default.

Wed, 06/13/2012 - 16:57 | 2523433 NotApplicable
NotApplicable's picture

Pay Reggie, and he'll show you the math, albeit in a tiny, tiny font.

Wed, 06/13/2012 - 16:14 | 2523259 RoadKill
RoadKill's picture

At least the Euro banks arent boycotting Egan. Maybe that's because they didnt downgrade Europes largest banks - tha Vatican and the Mafia

Wed, 06/13/2012 - 16:59 | 2523443 NotApplicable
NotApplicable's picture

Okay, that's the largest. So... what's the second largest?

Wed, 06/13/2012 - 16:18 | 2523277 Temporalist
Temporalist's picture

It's all fun and games until someone loses their AAA.

Wed, 06/13/2012 - 16:21 | 2523282 youngman
youngman's picture

I live in Colombia...and yesterday they had 6 heads of corporations in the newspaper saying how Colombia is safe from what is going on in Colombia is the little brother of Spain....and I am thinking to myself....oh we go again with the denials......this is an export country...who are you going to export to if they are not buying.....but the good news is prices of play will be dropping in

Wed, 06/13/2012 - 16:26 | 2523298 JackT
JackT's picture

Doesn't matter, Europe is ignoring them...right?

Wed, 06/13/2012 - 16:29 | 2523314 post turtle saver
post turtle saver's picture

I read that as CCCP

Wed, 06/13/2012 - 16:45 | 2523373 Miss Expectations
Miss Expectations's picture

If I could be invisible for a day... I can't decide if I'd rather be at Egan Jones (for the laughs) or the Justice Department (for the tears).

Wed, 06/13/2012 - 16:54 | 2523417 LFMayor
LFMayor's picture

Word to the brotherz
We're broke as motherfuckas

Wed, 06/13/2012 - 16:57 | 2523431 cramers_tears
cramers_tears's picture

When Egan-Jones talks... People listen...  Sean Egan has got a set on him, yeah man.  I love those guys.




Wed, 06/13/2012 - 18:32 | 2523719 shovelhead
shovelhead's picture

When Egan-Jones talks...

The SEC comes out of a porn induced coma.

It's nice to see something in the USA that works.

Wed, 06/13/2012 - 19:01 | 2523787 ejhickey
ejhickey's picture

what's the problem?  C is still passing , ain't it?   Spain got a C+.  In fact , they got 3 C's .  there are some years I would have loved a report card like this.

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