The global equity markets are in meltup mode again. Many of the European profits are still strong, but the melt has eaten away at much of the gains stateside. I want to take this opportunity to reiterate that I am still quite bearish on much of the situation in Europe. Let’s glance at the credit markets, major banks and the state of sovereign indebtedness in Spain.
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As you can see, Spain’s 3-year CDS spreads are the highest they have ever been. They are significantly higher than they were during the entire Lehman (LEHMQ.PK) fiasco, and they are even higher (or at least comparable) than they were right before the EU/IMF trillion dollar bailout package was announced in conjunction with threatening those who dared to speculate against Spain’s fiscal health.
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Looking at the funding requirements Spain will have in the near future, even with the IMG/EU bailout, it looks as if there may be a restructuring in Spain’s future.
Of course, all of this stress is bound to manifest itself in Spain’s banks. As the market has picked up on this (luckily, after many BoomBustBloggers had positions in) Banco Santander (STD) and Banco Bilbao Vizcaya Argentaria (BBVA) have paid the price. Speaking of STD …
 13:50 The Octopus Known as Banco Santander: This is a very interesting, if not highly controversial documentary. The European version of the Squid, the Octopus!!!! As my readers know, We Have Warned, and the Fissures Are Widening in the Spanish Banking System. A quick snapshot of Bancco Santander:
I have made our position on Spain clear through a complete forensic review of the state’s finances for subscribers: Spain public finances projections 033010. An excerpt from this subscription document (subscribers, reference page 2) shows the euphoric, yet highly unrealistic optimism upon which Spain has built its fiscal austerity projections.
(Click to enlarge) As suggested in the document, if one refers to the blog post Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!, you will find that not only has Spain apparently fabricated a fairy tale of potential prosperity based upon the projections of the IMF and EC, but the IMF and EC have been nothing but fairy tale projections themselves. I have been bearish on the Spanish banking system since January of 2009 (reference Reggie Middleton on the New Global Macro – the Forensic Analysis of a Spanish Bank ), and after a trip to the Costa del Sol by way of Málaga during the boom times are shortly thereafter, the reasons should be most obvious. We now have a rash of new Spanish bank and sovereign research which has returned between 300% and 400% over the last few months.
(Click to enlarge) Needless to say, as the situation in the EU deteriorates upon the widespread dissemination of the knowledge that BoomBustBloggers have been trading off of for quarters now, I feel the options will spike in value significantly.  04:58 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Relevant subscription material (subscribe here): The Sovereign Debt Crisis: The Complete Analysis A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf A Review of the Spanish Banks from a Sovereign Risk Perspective – professional Banks exposed to Central and Eastern Europe Spanish Banking Macro Discussion Note Sovereign Contagion Model – Retail (961.43 kB 2010-05-04 12:32:46) Sovereign Contagion Model – Pro & Institutional Euro Bank Sovereign Debt Exposure Final -Retail Euro Bank Sovereign Debt Exposure Final – Pro & Institutional Sovereign Debt Exposure of European Insurers and Reinsurers (Empty 2010-05-19 01:56:52) Spain public finances projections_033010 UK Public Finances March 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure: Author short STD
