The Pain In Spain Is Mainly, Well, Everywhere

Tyler Durden's picture


From Peter Tchir of TF Market Advisors

The Pain In Spain Is Mainly, Well, Everywhere




The reality is Greece is largely noise.  Greece will eventually leave the Eurozone, but not this month.  The hardliners inside Greece will realize they need some time to organize.  The markets will have spooked the hardliners outside of Greece that they should play nice for a little bit, because forcing Greece out now won’t do them any good whatsoever.

With Greece largely a sideshow at this stage, the attention is really focused on Spain and Italy.  The fact that Greece might lead the way out of the Euro is having a big impact on these countries.  That realization combined with the already obvious problems at the sovereign and bank level caused markets to sell off.  The Spanish 10 year bond is back above 6%, dropping 20 bps today, which is a significant move.  As we wrote about last Friday, there are no natural buyers, so this move occurred in an illiquid market.  There is more room to run, but moves in Spanish and Italian bonds are already starting to have a less direct impact on stocks than they did earlier in the morning.

I don’t think we will see a serious rebound in Spanish and Italian yields until the ECB intervenes.  They will need to step up and draw a proverbial line in the sand.  My guess is that won’t occur until 6.25% on the Spanish 10 year.  Once they do step in, watch out a big gap better on the bonds.  Just as there are no natural buyers, there will be no natural sellers.  The shorts will want to cover.  No one who is short is going to want to fight the ECB, at least not on their first day of purchases, so they will become buyers themselves.  The dealers will sell what little inventory they have to the ECB and will do everything they can to drive up prices and get the best execution possible on their small positions.  No Spanish or Italian bank is going to sell their inventory for a loss.  They might not be adding, but they sure as heck aren’t selling.

The first hint of ECB purchases will be a major “risk on” signal.  I don’t think we get it yet, but once we get actual purchases, or even a good rumor of purchases, I would expect 10 year bonds to gap up a point, CDS to tighten by 30 bps or more, and stocks in Spain to do a quick 2% bounce.  It will happen quickly, but I really think the ECB has too many skeletons of its own making to jump in just yet.  A bit more pain in the bond markets is still coming, but it will have less of a knock-on effect on stocks than the gap to 6% had.


Finally remember this presentation? Yeah... It was right.


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GetZeeGold's picture



What a freakin minute here.....wasn't going green suppose to save them?


Chief KnocAHoma's picture

Can you say Trojan Horse? In line with unstated and non-official US foreign policy, TPTB on our shores are determined to not allow any region to rise and form a power base.

Those libtard Eurotrash socialist thought they could rival the fucking dollar...hah! We said we'll see about that... then doctored the books to get greece into your party and sold you a bunch of fucking worthless mortgages.

So what we blew up the rest of the World, at least we didn't allow anyone to rise to challenge us... so take that bitches.


4shzl's picture

Spain, shmain.  CA's economy is larger than Spain and this where we are:

SACRAMENTO – State Controller John Chiang today released his monthly report covering California's cash balance, receipts and disbursements in April, showing monthly revenues came in $2.44 billion below (-20.2 percent) the latest projections contained in the Governor's proposed 2012-13 Budget.

"The task of crafting a credibly-balanced budget has been made more difficult by a nine-month revenue shortfall of $3.5 billion," said Chiang. "Without a timely, financeable budget plan, the State will be unable to access the working capital needed to pay its bills later this year."

The greater part of the April shortfall was caused by personal income tax receipts, which came in $1.96 billion below (-21.5 percent) projections. Sales taxes were also down by $445.8 million (-54.4 percent). Corporate taxes were also down, coming in $142.7 million (-9.3 percent) below projections.

Year-to-date through April, total revenues were down $3.5 billion (-5.1 percent) from estimates in the Governor’s proposed budget. Leading that disparity was income tax, down $2.7 billion (-6.2 percent). Sales tax missed estimates by $411 million (-2.7 percent), and corporate tax receipts were down $464 million (-7.0 percent).

The State ended last fiscal year with a cash deficit of $8.2 billion. The combined current-year cash deficit stands at $19.2 billion. Those deficits are being covered with $12.8 billion of internal borrowing (temporary loans from special funds) and $6.4 billion of external borrowing.

Where's our IMF rescue?  Where's our ECB or LTRO?

kridkrid's picture

The numbers there are remarkable.  The wheels are quite literally coming off.  Some numbers are easy to fudge... GDP, unemployment, CPI... but the "rubber meets the road" numbers... not so much.  Tax receipts... rubber meet road... or fly meet windshield.

Death is everywhere
There are flies on the windscreen
For a start
Reminding us
We could be torn apart

Death is everywhere
There are lambs for the slaughter
Waiting to die
And I can sense
The hours slipping by

GetZeeGold's picture



Appropriate theme music inserted here.



kridkrid's picture

If the world does end, I'm partial to this theme music...


Dr. Engali's picture

   +300    One of my favorite pieces....and a good movie too.

Buckaroo Banzai's picture

Holy shit-- sales tax confiscations down by 54%???? That is an implosion.

Quintus's picture

"Some numbers are easy to fudge... GDP, unemployment, CPI... but the "rubber meets the road" numbers... not so much."


Correct.  A good accountant can create fake profit for you without too much effort, but faking cashflow is much, much harder.

Not all numbers should be trusted equally.

kridkrid's picture

And it's not by accident that the macro numbers we sheeple are fed are the big ones that are easy to fudge.  Remarkable.

cranky-old-geezer's picture



The numbers there are remarkable.  The wheels are quite literally coming off.

Same thing happening across America and Europe, economy slowly collapsing, proven by dropping income tax revenues, dropping sales tax revenues, the real numbers they can't spin to make things look good.

Anyone have a chart of federal income tax revenue since '08?   Steep downward slope I would guess.


Thomas Anderson's picture

California needs to overhaul it's State Constitution to end the legislative deadlock, and gradually phase out or have some sort of check and balance to counter bad voter decisions on Propositions.  With direct democracy Propositions, voter's will tend to vote out of selfish interest over sound policy, or become influenced by special interest ads.  Limit propositions to laws, not taxation/spending.  Hard to argue in striping power away from the individual and reducing their liberty and voting rights that have been enjoyed for their entire lives.  California would be best served as a Republic controlled by the legislature with simple majority to pass spending/tax bills, and reduce the Ancient Athens style of direct democracy.  Maybe one day we can experiment and find a system where direct democracy will work not only in a state but on a national level as well.

GeneMarchbanks's picture

'Where's our IMF rescue?  Where's our ECB or LTRO?'

Firstly, you have the FED. Secondly, I'm sure Pete can tie that story in with Spain. He is very talented.

Leopold B. Scotch's picture

Yes... And it is the Fed that feeds the IMF anyway.

midgetrannyporn's picture

California doesn't matter, only Wall Street matters.

Oh regional Indian's picture

California is the Garden of Eden.

It's where the AAPL tree grew.


Cole Younger's picture

"Where's our IMF rescue?  Where's our ECB or LTRO?"


where is the austerity plan? Where's the cuts in spending?

California officially has 11% is likely allot higher..People and business's are leaving the state..Don't sweat it though, Face Book IPO will save the day...

GMadScientist's picture

"It included $12.5 billion in spending cuts, with a 10 percent cut in take-home pay for some state employees and deep reductions in social services. "

STFU, stupid.

Cole Younger's picture

It's not enough obviously...They can cut government employee's off the pay roll permanately and get rid of the social programs alltogether. Enforcement in immigration laws would save the state 11 billion a year in incaceration, schools, and medical...

GCT's picture

Cole you forget the voters in California got what they voted for.  Moonbeam set this system up when he was governor last time.  I did not vote for him then and now I no longer live there.  Best decision I ever made leaving a great state that is now a third world country.

donsluck's picture

Dear GCT, the weather is GREAT. There is skiing, surfing, backpacking, birds singing in February. We don't miss you. The biggest problem with CA is too many people. Once again, we don't miss you.

cbxer55's picture

CA ranked #50, the worst for its business atmosphere. So not only are people pulling up and leaving, so are businesses. CA has held that distinctive position for seven years running. ;-)

Bet you don't miss them either, huh asshat. Texas ranked #1 for its business atmosphere, for 8 consecutive years. Want to guess where business that leaves CA goes. And here in OK, we rank #11. Boeing just moved a big part of their business here last year, some 500 high-paid people. Most of them moved here with the business. Some did not. Good luck to them.

I lived in CA for 26 years. Do not miss it at all. Most especially when here, every day, I can legally pack a sidearm. Good luck with that in Commiefornia.

GMadScientist's picture

They could ramp up taxes on a small handful of large multinationals in CA and close the budget gap at a whim; look at the historical percentage of the tax base that comes from corps over the last 20 years.

The slop-jockey bond-pushers of the CA Repugnicant party doing favors for their golf buddies have had a "vested interest" over the last decade too. Never met a bond measure they didn't like (and front-run, tax-free).

Wake's not the powerless Mexican you should be worrying about, slick.


blunderdog's picture

    Enforcement in immigration laws would save the state 11 billion a year in incaceration, schools, and medical...

Yeah, that virtually-impossible "enforcement" is free, right? 

Thomas Anderson's picture

I can now breath a sigh of relief thanks to FB and their generous tax contribution of a nickel a year for the foreseeable future.

Gene Parmesan's picture

Don't worry - the federal taxpayers will inevitably be there to pick CA up off its worthless ass as needed.

unununium's picture

More of those federal dollars and dead soldiers come from California than any other state.

youngman's picture

Sales tax revenues was a big miss...54.4%....that does not sound like the consumer is back and spending....or is it the black market....I feel sorry for Chiang.....he will be BBQ´d....

Bwahaha WAGFDSMB's picture

Or they're not paying sales tax on online purchases.

bshirley1968's picture

You can bet Obama and Ben are pumping dollars into California through various channels, or that cesspool would have already gone down the drain.

What a frickin' JOKE!  Shame a state as great as CA can't get some real leadership.  We will never know how great CA could have been because it became infested with cockroaches and other parasites.

Global Hunter's picture

those shortfalls are HUGE, yikes.

cossack55's picture

To answer your question, they are all in Greece, Italy, Spain, France, UK, Ireland, and the Portos.

azzhatter's picture

We don't need no steeenking budgets

Chief KnocAHoma's picture

Fucking blue state... idiots.

WillyGroper's picture

blue/red, what's the difference?

donsluck's picture

Blue states provide taxes, red states spend 'em (and whine incessantly about too many taxes). Idiots indeed.

Sauk Leader's picture

I read an article about why people hate california. some fun stats, but the quotes from Californians have the reason.

“No one knows anything about Delaware. No one has a clue about Wyoming – but everyone knows California,” said Dowell Myers, a professor of policy planning and demography at the University of Southern California. “Its visibility is really high.”

There’s some good news for California — at least if you’re a female Democrat. Women were less likely than men to rate California as unfavorable, and there was a massive partisan gap. Democrats love California; Republicans can’t stand it. The opposite is true of Texas.

“I’m sure that for a lot of purple America the extra red Texas and blue California may seem a little far out there,” said Roger Salazar, a political consultant in California.

But whatever the reason, most Californians took the news that their state was the least popular in stride.

“They’re just jealous,” Salazar said.


Buckaroo Banzai's picture

"There’s some good news for California — at least if you’re a female Democrat."

"Good news"-- that's rich. Is there a more clueless, insane, or dangerous species than liberal american females?

Cathartes Aura's picture

Christian Conservative Zionist men perhaps?

y'know, the ones who make the wars happen?  or their counterparts in the financial class?  or their overlords in the globalist camp?

sheesh, you're clueless arent't you. . .

jez's picture

Those deficits are being covered with $12.8 billion of internal borrowing (temporary loans from special funds) and $6.4 billion of external borrowing.


Who the hell is lending $6.4 billion to these clowns? They can't manage money, their budgets and projections are toilet paper, they dig themselves deeper in the hole every day. I wouldn't lend 'em a cent, I don't care what collateral they're offering.


Where's our IMF rescue?  Where's our ECB or LTRO?


Indeed. For that matter, where is your self-sufficiency?

Buckaroo Banzai's picture

Who is funding these clowns? Criminals. California municipal bonds are a wonderful money-laundering vehicle.

markar's picture

No worries. Facebook IPO will produce $billions for the state coffers.

ElvisDog's picture

monthly revenues came in $2.44 billion below (-20.2 percent) the latest projections

Hah, that's funny, because every single, fucking time the actual revenue comes in (unexpectedly) under projections. CA is going to be one interesting petri dish when the tax increases don't raise revenue anymore and real cuts have to be made. It's going to be education unions vs health unions vs police/firefighters vs transfer payments to immigrants. Bring on the Octagon....

francis_sawyer's picture

Not everybody gets to be Audrey Hepburn...

fonzannoon's picture

At the end Peter sounds just like every other junkie waiting for the next hit.