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Spain: The Ultimate Doomsday Presentation

Tyler Durden's picture


Since we have grown tired of variations on the theme of "The Pain in ...." (having been guilty of encouraging it ourselves), we will spare readers this triteness, and instead summarize the attached must read slidedeck from Carmel Asset Management as the ultimate Spanish doomsday presentation. Naive and/or idealistic Spanish readers are advised to resume sticking their heads in the sand, and to stay as far away as possible from the attached 54 pages, which prove without any doubt why not only was Greece the appetizer (have your UK law:non-UK Law divergence trade on yet?) but why things in Europe are about to get far, far worse, as the Hurricane shifts to its next preferred location, somewhere above and just south of the Pyrenees.

In summary, here are Carmel's five reasons why Spain's problems are worse than the market anticipates:

1. Spain’s national debt is 50% greater than the headline numbers

Spain’s debt-to-GDP balloons from 60% to 90% of GDP with regional and other debts

2. Spain’s housing prices will fall by an additional 35%

Spain built one house for every additional person added to the population during the past two decades; the fall will decrease GDP by ~2% each of the next two years

3. Spain has “zombie” banks with massive loans to developers and to homeowners

Banks have not begun to realize losses and are vastly undercapitalized

4. Spain’s economy has not stabilized and will continue to deteriorate

Spain has the highest unemployment in the developed world, one of the highest overall debt loads, and the most uncompetitive labor market in Europe

5. The EU will not have the firepower or political will to bail out Spain

Rescue fund headline numbers are misleading and count capital that is not yet committed

And here are the problems that will manifest themselves over the next 12 months:

  • Spain’s true debt burden will pass the 90% “tipping point” identified by Rogoff and Reinhart
  • Housing prices will fall further and faster than anticipated (consensus is 15%; CAM estimate is 35%)
  • Banks underestimate the residential real estate loan defaults (consensus estimate is 2.8% vs. CAM estimate of 11%)
  • Expected housing price depreciation and loan defaults will deepen Spain’s recession (additional 2% contraction in 2012 and 2013)
  • Spain will need to refinance €186.1 Billion in 2012 alone

End result: surging CDS and/or plunging bond prices, if faith in the sovereign CDS market continues to be at rock bottom lows courtesy of ISDA nearly blowing its own head off.

Full presentation:



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Sat, 04/07/2012 - 17:04 | 2325027 Schmuck Raker
Schmuck Raker's picture

Tyler's tags for this article:

I sympathize with (Intern)Tyler getting stuck with the holiday shift,

but you might want to include 'Spain'. ;)

Sat, 04/07/2012 - 17:29 | 2325050 Westcoastliberal
Westcoastliberal's picture

There is another option besides QE....a worldwide debt jubilee across the board. Let the rich eat THEIR cake; the rabble wouldn't notice any difference.  Mark my words it's coming sooner than later.

Sun, 04/08/2012 - 13:20 | 2326300 SeattleBruce
SeattleBruce's picture

Iceland started that party.  But, there needs to be a non-debt based, accountable monetary system to replace the old massively manipulated one, no?

Sat, 04/07/2012 - 17:30 | 2325052 Wags
Wags's picture

That Spanish "Green Economy" was the model for Obama & his buds

Sat, 04/07/2012 - 17:32 | 2325054 Joshua Falken
Joshua Falken's picture

Spain has more new homes for sale than the USA


Pre credit crunch property and construction made up 46% of GDP


The Spanish banks who lend on real estate are also responsible for the valuations.  In order not to crash the property market, these banks do not foreclose on delinquent mortgages but count the unpaid interest as new loans, disguising the perilious state of their balance sheets.


Since 2008, no big Spanish bank has failed and those that have failed have been ting and nationalised.


Spanish Banks and the Spanish government are worse than bust, they are fraudulently reporting how sound their financial system is; just look at the CDS rates

Sat, 04/07/2012 - 17:35 | 2325056 Joebloinvestor
Joebloinvestor's picture

I bet Ben is thinking of settling for a statue of himself in Spain instead of one at the base of the EU in Brussels.

He may not have enough paper and ink to bail out all of the EU.

Sat, 04/07/2012 - 18:31 | 2325138 putbuyer
putbuyer's picture

funny cartoon. Just like Spain complacency

Sat, 04/07/2012 - 20:39 | 2325303 xcehn
xcehn's picture

The banksters have already assigned Spain's new government. Here's how one French politician views the situation: "In a speech that played to populist fears about immigration, unemployment and the power of financial markets, Le Pen painted Goldman Sachs as an all-powerful institution that controlled entire nations as well as the European Central Bank." "Goldman Sachs topples governments everywhere," she told supporters in Lyon, southeast France."Goldman Sachs places its men at the top of euro zone countries. Goldman Sachs puts its man at the head of the European Central Bank," she went on. "In Greece, Italy, the ECB, oligarchs have taken power."

Sat, 04/07/2012 - 20:42 | 2325308 markar
markar's picture

She's the only one that can save France from the oligarchs. Sadly, like Ron Paul here her chances are slim.

Sat, 04/07/2012 - 20:50 | 2325320 Tom Green Swedish
Tom Green Swedish's picture

If I am not mistaken the unemployment data is incorrect because of the black market.  Most youth are employed in Spain working as whores etc.

Sun, 04/08/2012 - 04:31 | 2325785 Babushka
Babushka's picture

A bit harsh!

Sun, 04/08/2012 - 12:35 | 2326217 Madrid2020
Madrid2020's picture

The Spanish don't prostitute(fact).Your mother on the other hand is a worn out,"best seller!

Sat, 04/07/2012 - 22:04 | 2325402 FlyPaper
FlyPaper's picture

To compare apples-to-apples with the US, we can add ~$4.2 trillion in US State debt to our ~15.6 trillion federal bonanza = $19.8 Trillion. 

Then take the projected 2012 GDP at ~$13.3 Trillion, and our apples to apples comparison yields Debt to GDP at 149%.   (Not including LOCAL taxes, or the approximate $2.2 Trillion of unfunded pension liabilities by the states)...

If you then subtract the annual Federal Deficit of $1.1 trillion from GDP, here's what we get (assumption: Fed spending is included in GDP, so deficit spending gooses GDP by that amount)...


GDP 13.3 - 1.1T = $12.2 Trillion

Debt $15.6t + $4.2t + 2.2t = $22t

Debt to GDP:   $22t/$12.2t = 180% debt to GDP.  (give or take 10% or a trillion).  It's a fricking disaster.


Again, add: LOCAL debt, unfunded Federal liabilities, and PRESTO:  We're worse than SPAIN and right on the heels of Japan.  So why so worried about Spain?


Sun, 04/08/2012 - 18:16 | 2326677 smiler03
smiler03's picture

Because the US can print, Spain can't. (for now)

Sat, 04/07/2012 - 23:32 | 2325496 CryingBear
CryingBear's picture

Spain is fine. Stop worrying about nonsense and buy AAPL, PCLN, CMG, and GLL if you want to be a 1%ing rich republican.

Sun, 04/08/2012 - 13:23 | 2326307 SeattleBruce
SeattleBruce's picture

"a 1%ing rich republican."

Whaaaa?  You don't think there are plenty of 1% democrooks to add to your republicrooks?  Give me a HUGE break, and pull your head out of the sand. Get that weak stuff outta here!

Sat, 04/07/2012 - 23:41 | 2325511 Die Weiße Rose
Die Weiße Rose's picture

and the most glorious pink Elephant no self-denying Anglophile will ever talk about:

London the " financial Centre of Europe " the last bastille of the british failing Empire, and the United Kingdom is in Recession as we speak -

Yes, England (the not so United Queendom) is by far the worst of all indebted soverein Nations of Europe.

UK national Debt is about 10 trillion USD as we speak ! the UK has the highest gross foreign debt of any European country (€7.3 trillion; €117,580 per person) due in large part to its highly leveraged financial industry, which is closely connected with both the United States and the eurozone. 

UK is back in recession, says OECD

(By Emma Rowley 6:30PM BST 29 Mar 2012)  

Britain has plunged back into a recession, as the economy continued to shrink in the first three months of the year, according to a leading global authority. After the 0.3pc contraction seen at the end of 2011, this would signal that the UK has "double-dipped" back into Recession, defined as two quarters of negative growth.

The Bank of England should embark on more quantitative easing – its money-printing programme which currently stands at £325bn - "sooner rather than later",said Pier Carlo Padoan,chief economist at the Paris-based think-tank.

But he said the Chancellor must not relax his austerity programme, citing the low yields - interest rates - on UK government debt as a benefit. "Our recommendation is to stay the course," he said.

(10y UK Gov-Bonds yield currently 2.20%) "The UK will scrape out of this new Recession in the second quarter, the OECD believes, with 0.1pc growth".

...and with Government spending and Debt at Olympic Record Proportions,

we wish the good old leveraged british Empire of MF-England good luck...

they sure will need it selling more of those MF-Global 40:1 leveraged financial derivatives and any other of such algo-value UK deprived Junk - that brought about the 2008 Global Financial Crisis.

Now I want some red arrows please, just to show you still care...


Sun, 04/08/2012 - 08:17 | 2325920 memyselfiu
memyselfiu's picture

Hence Spain's woes- you wouldn't believe how many marginally successful people from the UK were heavily invested in Spanish real estate...

Sun, 04/08/2012 - 18:19 | 2326688 smiler03
smiler03's picture

And a lot live there, nearly 400,000 Brits live in Spain.

Sun, 04/08/2012 - 21:00 | 2326943 Madrid2020
Madrid2020's picture

The Brits(older) and Germans tend to be our  best guest.They are certainly welcome.

Sun, 04/08/2012 - 00:08 | 2325556 besnook
besnook's picture

excellent visual explanation of the euro crisis.  if you are having trouble understanding what is happening in the western world financial crisis these guys have a simple, straight forward explanation. all we are waiting for is the "oh no!" moment.

Sun, 04/08/2012 - 01:25 | 2325640 cendi229
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Sun, 04/08/2012 - 08:18 | 2325921 cullino
cullino's picture

Germany won't go along with infinite printing. They already have planned an exit from the euro.

Sun, 04/08/2012 - 09:49 | 2326021 flyme
flyme's picture

Move along, there's nothing major happening here right now.

Sun, 04/08/2012 - 11:19 | 2326115 Stock Tips Inve...
Stock Tips Investment's picture

Spain is in a very difficult situation. But the rest of Europe too. Just need to know the name of the country will be the trigger for the next big crisis. Greece will have elections in May and that country is already talk of leaving aside the Euro and return to the drachma(former Greek currency). Is said to be decreed a bank holiday to seal all tickets withGreek banks. Kicking off its new monetary order. This, it sounds crazy, has been ratifiedby the Financial Times of London.

Mon, 04/09/2012 - 00:57 | 2327283 AgShaman
AgShaman's picture

Can't they just repatriate a sunken ship full of silver....then hedge their booty on the LME thru JP Morgan?

Mon, 04/09/2012 - 14:58 | 2328935 waterwitch
waterwitch's picture

How does an individual purchase one of those 5 or 10yr Spain CDS's?

Thu, 04/12/2012 - 09:50 | 2337538 takamine63
takamine63's picture

Let me know when the green fees hit $50 at Valderrama

Tue, 04/17/2012 - 04:36 | 2350755 cnhedge
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