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LTROver

Tyler Durden's picture




 

It will come as no surprise that the Spanish 'experiment' with the euro is not going well. Spain now relies more heavily on the ECB than at any time and today's bill auction sums up all that is wrong about our financial markets when an event that absolutely should be expected to be a non-event (a sovereign nation selling a small amount of short-dated debt) becomes a catalyst for algorithmic excess. In perhaps the greatest analogy for today's auction, Micheal Cembalest pronounces "throughout my career, central banks having to buy or finance sovereign debt to avoid a debt crisis was like going to the prom with your sister: there’s something very unnerving about it, even though it looks normal from a distance." It did not take long for the honeymoon following LTRO2 to end and despite today's exuberance, Italian and Spanish equity markets (as well as financial credits) have collapsed as Spain's sovereign risk has skyrocketed. While Spanish bank holdings of Spanish govvies, ECB lending to Spanish banks, and Spanish credit risk are surging so is one other much more worrisome fundamental trend - that of corporate non-performing loans. Dismissing the dichotomous relationship between consumer and residential delinquency calmness relative to unemployment's explosion (much as the market has in its pricing of bank stocks), the JPM CIO remains underweight Europe arguing that while contrarian calls are often the most profitable, this time being underweight European equities is the gift that keeps on giving.

 

The 'explosive' moves in Spanish risk and reliance on the central bank...

And the relative collapse in Spanish and Italian equity markets post-LTRO...

But, just as we have the BS BLS and the Census Bureau to deliver non-sensical data to confound the logic of what is going on in markets, the residential and consumer loan delinquency data in Spain seems questionable at best while corporate loans are tracking unemployment in their surge higher...

 

The other thing that’s rocketing higher in Spain: non-performing corporate loans (see chart). Interestingly, as my friends at Hamiltonian pointed out to me recently, consumer and residential delinquencies are flat, despite a surge in unemployment. I recommend taking this data with a giant grain of salt, given what one would normally expect. Markets are doing exactly that, which is why Spanish banks trade at less than tangible book value; a bit less than 1.0x for BBVA and Santander, around 0.5x for the domestically-focused Cajas. Note: Caixabank recently purchased Civica at around 0.35 times book value.

 

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Tue, 04/17/2012 - 14:07 | 2352165 Scalaris
Scalaris's picture

Jackson Hole bitches. 

Tue, 04/17/2012 - 14:11 | 2352174 Temporalist
Temporalist's picture

That would be pronounced "Yaksthon" if you were Casthillian.

Tue, 04/17/2012 - 14:16 | 2352197 idea_hamster
idea_hamster's picture

"like going to the prom with your sister ... did not take long for the honeymoon to end"

How long does a honeymoon with your sister last, anyway?  Yuk!

Tue, 04/17/2012 - 14:24 | 2352232 catacl1sm
catacl1sm's picture

depends on how hot she is...

Tue, 04/17/2012 - 15:18 | 2352398 Clowns on Acid
Clowns on Acid's picture

depends if you get lost on the Applachian Trail....

Tue, 04/17/2012 - 15:35 | 2352460 ACP
ACP's picture

LTROver like MC Hammer?

Yes, Jackson Hole is another thing to wait for...interesting how the host state is preparing for financial armageddon.

Tue, 04/17/2012 - 14:11 | 2352179 navy62802
navy62802's picture

The "periphery?" When the hell did Italy become "the periphery?"

Tue, 04/17/2012 - 14:11 | 2352180 Jason T
Jason T's picture

Everytime I pay my electric bill here upstate NY, which goes to NYSEG, which is owned by Iberdola, a spanish utility company, with $43 billion in debt.. which means basically that a Spanish Bank owns my electric company, which has a monopoly mind you... regulted to make sure it's profitable at least.. I am transfering a bit of my household earnings to a Spanish bank and some executives of Iberdola in Spain.

 

When banks can issue money and buy assets like this, you do have to question what the deal is with this kind of system.  

Ideally, I would prefer my retired neighbors, who may have worked for NYSEG durnig their working years, owned shares of NYSEG them selves and collected nice dividends.  But nope.. the bankers want to own everything.  TJ you were so right.

Tue, 04/17/2012 - 14:16 | 2352201 slaughterer
slaughterer's picture

Mario has developed other ways to LTRO the periphery without calling the BuBas attention to it.   

Tue, 04/17/2012 - 14:18 | 2352211 carbonmutant
carbonmutant's picture
Egan-Jones downgrades Spain
Tue, 04/17/2012 - 14:41 | 2352282 navy62802
navy62802's picture

Not even front-page news anymore.

Tue, 04/17/2012 - 14:20 | 2352220 ekm
ekm's picture

Something that is created out of nothing, that is rejected to be exchanged with real goods and services, will inevitably go back to nothing.

In other words, Flow is what matters, not Stock.

Tue, 04/17/2012 - 14:34 | 2352255 Paul Atreides
Paul Atreides's picture

Dear Spain,

Stop selling bonds and issue government created money.....oh excuse me I have a knock at the door...

Tue, 04/17/2012 - 15:09 | 2352378 Thamesford
Thamesford's picture

Yo hablo LRTO?

No, soy habla Q-ease

 

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Tue, 06/26/2012 - 03:08 | 2560690 david9821
david9821's picture

Ideally, I would prefer my retired neighbors, who may have worked for NYSEG durnig their working years, owned shares of NYSEG them selves and collected nice dividends. But nope.. the bankers want to own everything. TJ Ideally, I would prefer my retired neighbors, who may have worked for NYSEG durnig their working years, owned shares of NYSEG them selves and collected nice dividends. But nope.. the bankers want to own everything. TJ you were so right.you were so right.........Soccer Balls | Soccer Jerseys | soccer shoes | Soccer Cleats | Football boots

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