The news today is (among other things) the failure of the Spanish regional lender Caja Sur. Funny, but it wasn't much news until the last hour or so of trading, where it got blamed for a sudden 1% downdraft in stock prices (about double that in some financials).
Bulls are quick to note that Caja Sur represents only 0.6% of total Spanish banking deposits - "a drop in the bucket". And that is true. I suspect even our overtaxed FDIC could manage putting down a bank with that much. But it was, demonstrably, a drop in a very unstable bucket, as the reaction illustrates beautifully. And beyond actual price action, note how newsworthy this event was treated as by the media.
Bull and bear markets are primarily functions of popular psychology. The fixation on bad bits of news, even if they are small, is a sign of the change of the over-arching trend. Quite a difference from "yes, we can!", ain't it?
And this is doubly bad news for financial firms, where leverage makes reputation everything - if you appear not to need money, the public will lend it to you, but if it appears you do need money, the depositors will flee.
In the long run, this is probably good news for Spain - as their socialist system becomes more and more demonstrably unsustainable, they will abandon it, and get more sensible about other things. I had taken Spain off of my 'to visit' list a while back, but after all this dust settles, it is shaping up to be a Fine place for a vacation!
Disclosure: Short, or holding puts, on things that move
A drop . . .
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