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"Even the bears aren't bearish enough on Spain," Daryl Jones says. If Spain doesn't fix its...

"Even the bears aren't bearish enough on Spain," Daryl Jones says. If Spain doesn't fix its many problems - huge debt, 20% jobless, overly-generous welfare payments, real estate and construction crash - it has the potential for a far worse disaster than Greece. "And that potential is still not priced into the market for their sovereign debt."
Comments (37)
  • Dan in mpls
    , contributor
    Comments (244) | Send Message
     
    And Lord knows, the market my crash yet another 100 points before it goes wild again on .....Lord knows what.
    4 May 2010, 06:26 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4013) | Send Message
     
    Spain's next. Then GB. Then Japan. Then U.S.
    4 May 2010, 06:36 PM Reply Like
  • Tack
    , contributor
    Comments (13408) | Send Message
     
    And, gosh, the whole world will just come to an end -- the "end of time." We probably won't even make it to infamous "2012."

     

    I'm surprised I haven't heard the word, "Armageddon," more times today. Market days, like today, generally bring all the doomsayers out for a convention.
    4 May 2010, 07:06 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    Spain maybe.

     

    GB, Japan and the US can just print money.
    4 May 2010, 07:35 PM Reply Like
  • astralguide
    , contributor
    Comments (90) | Send Message
     
    Sorry this kind of negative blanket comments does not help anyone. Just by your thumbing down or writing a one liner the world's economies wont fail.

     

    Please be more realistic and to the point before writing all these negativity about a better managed country Spain , than any European nation or even the United States.
    4 May 2010, 09:15 PM Reply Like
  • De Kirk
    , contributor
    Comments (10) | Send Message
     
    astralguide

     

    Look at the real estate bubble burst in Spain, it is a mirror of US of A. It has down more than 20 percents and still falling. couple their highly leverage economy, the confidence in Spain may just snap as fast as Greece.
    5 May 2010, 12:37 AM Reply Like
  • zorrow
    , contributor
    Comments (915) | Send Message
     
    "Santander, the eurozone's biggest bank, has an exposure of just €200m to Greek sovereign debt, but €3bn to Portuguese and, unsurprisingly, €24bn to government bonds issued by Spain."

     

    I recently gleaned the above information from some British investor journal ( I forgot which). My question is, "if Spain doesn't actually default on its bonds, then why would I have to worry about the health of Santander? (I'm an investor)" I'm asking a question, I don't know. Does anybody have an opinion? Should I just I just dump it here, or hold on?
    4 May 2010, 07:55 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    Spanish debt if, rates rise and marked to market will cause big hit to STD ( I assume you have that particular "Santander") balance sheet.

     

    I would not hold the stock without some protective puts.
    4 May 2010, 08:03 PM Reply Like
  • Tack
    , contributor
    Comments (13408) | Send Message
     
    Santander is one of the best-positioned global banks, with major highly-profitable operations in one of the fastest-growing markets, South America. They just reported a very successful quarter.

     

    The debt fears in Europe are taking on a life of their own, fanned by shortsellers and currency arbitrageurs. Likely, these actions will have a short-term stampede effect on shares of European and global banks, as fear overwhelms analysis.

     

    The answer to your question depends on whether you wish to try to time a trading bottom by selling now and rebuying, assuming some further contraction may occur, or just to weather the storm by holding. You might even consider adding shares at lower prices.

     

    Personally, I am bullish on Santander.

     

    Disclosure: long STD shares and short STD puts.
    4 May 2010, 08:07 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    South America was spun off with IPO last year. BSBR

     

    Many Different "Santander" securities.

     

    STD, SBP, SAN, BSBR

     

    money.cnn.com/2010/05/...
    4 May 2010, 08:13 PM Reply Like
  • astralguide
    , contributor
    Comments (90) | Send Message
     
    Tack I support your argument. Soon after this low cycle Spain will be one of the hot places it has been.
    4 May 2010, 09:16 PM Reply Like
  • Tommy Chains
    , contributor
    Comments (8) | Send Message
     
    Of course when the government's unemployment benefits expire for out-of-work workers, this will actually improve Spain's budget deficit.
    4 May 2010, 08:04 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    No longer dispersing unemployment benefits may help Spain's budget, but will just transfer to banks balance sheets when loans start defaulting.

     

    Not to mention possible civil unrest.
    5 May 2010, 02:24 PM Reply Like
  • ebworthen
    , contributor
    Comments (2811) | Send Message
     
    So if the formerly industrialized and now transitioning to service and information economies of the West are 70% dependent upon consumer spending; what will happen when the unemployment and entitlements evaporate and jobs don't come back?

     

    Will the 20-25% unemployed right now be hired to serve breadsticks and wine at Olive Garden to those lucky enough to have disposable income?

     

    Will this be a "recovery" that will save the home and commercial real estate markets in these economies?

     

    Are Spain and Greece and the U.K. and the U.S.A. going to hire people to build anything other than napkin tents, CDS's, and insurance policies?
    4 May 2010, 08:40 PM Reply Like
  • astralguide
    , contributor
    Comments (90) | Send Message
     
    Spain is one of the largest 10/12 major economies of the world with not only one of the largest tourism industries of Europe and the world but it is also an industrial nation. We can not compare it to Greece.

     

    Spain is a powerful nation and will manage its debt and economy better than any European nation. Spanish banks are some of the most conservative and profitably run banks of the world.

     

    All these comments are merely gossip and nonsense based on unreliable facts.

     

    I think Spain's entry into the EU in 1986 was a big mistake. It literally sold itself to Germans and let its industry be folded or ruined.

     

    Spain will succeed in managing its financials in very near future.
    By the way the problem of high unemployment in Spain is 25 years old.
    4 May 2010, 09:02 PM Reply Like
  • Tricky
    , contributor
    Comments (1583) | Send Message
     
    Hello Astralguide, I take it you are a proud Spaniard? I lived and worked in Madrid and carry fond memories of that time, so I always wish Spain well. I think Spain has more cultural willingness to fix things, relative to Greece. But it is going to be very tough. Employment law REALLY needs to be reformed, badly. BTW, I would be worried about unemployed 25 year olds because angry young men with little hope are particularly prone to violence.
    4 May 2010, 09:59 PM Reply Like
  • Jackson999
    , contributor
    Comments (468) | Send Message
     
    So how can a country like Spain be so wonderfully managed and yet have a 25 year long problem with high unemployment?

     

    1/5th of the country's workforce unemployed? Bah, that's just a minor problem. It won't have any impact on any other segments of the economy, right? Ignore it.
    4 May 2010, 10:00 PM Reply Like
  • astralguide
    , contributor
    Comments (90) | Send Message
     
    Well Spanish unemployment figures have always been a matter of discussion but they are not really factual.

     

    You may have to live in Spain for getting a proper answer. You must know that Spain receives more tourists per year than the entire population. Very large number of people work in that industry mainly in summer months. Majority of people working in its vast tourism infrastructure during peak months are not counted and considered unemployed.

     

    Finally Spanish know how to live a better life than any of you.
    Whatever the situation Spain will offer a better life than any one can know of.
    4 May 2010, 10:08 PM Reply Like
  • nightfly
    , contributor
    Comments (1017) | Send Message
     
    Wow, how did the cool-aid taste? You've obviously drunk quite a bit. Keep on believing the talk...
    4 May 2010, 11:02 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    AstralGuide,

     

    I agree that the quality of life is high. But that does not require high unemployment?

     

    Adopt the Danish system and your structural unemployment will disappear.

     

    You should not try to defend the bad with the good.
    5 May 2010, 04:07 AM Reply Like
  • Angel Martin
    , contributor
    Comments (1309) | Send Message
     
    So Spain's unemployment rate is not accurate because many people work in the underground economy (and don't pay taxes) while being officially unemployed (and collecting welfare state benefits)... sounds familiar.

     

    The CDS rates provide a preview of where this story is going.
    5 May 2010, 12:05 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4013) | Send Message
     
    Sovereign debt is a huge problem. There will be another Bretton Woods to sort out the coming defaults/devaluations. The derivative exposure to the debt is on an order of magnitude of 30 to1. This has led many to predict a deflationary spiral. Others calmly predict monetization and hyperinflation. With nothing backing the fiat euro, dollar and yen, I say eventual hyperinflation because the politicians will never take the pain of deflation. A new monetary standard will evolve from the wreckage. Things will eventually reset and we can all move on.
    Disclosure: Cash and gold.
    4 May 2010, 09:14 PM Reply Like
  • Tricky
    , contributor
    Comments (1583) | Send Message
     
    The Old Testament called for "Jubilee" every 99 years, where all debts are forgiven. Maybe we need one of those. :-)
    4 May 2010, 09:54 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    You're definitely wacky. Inflation rates have trended downward (the core US inflation is now 1%) and you are will worrying about your imaginary hyperinflation.

     

    All because you know a little economics, but think you know a lot ...

     

    A little knowledge is a dangerous thing.
    5 May 2010, 04:10 AM Reply Like
  • ebworthen
    , contributor
    Comments (2811) | Send Message
     
    HAHAHAHAHA....I love it...you gave me a good belly laugh...and you are right on.

     

    People forget nationalism and culture and identity; starting with the family, moving to the religion, then the community, region, state.

     

    When the sh*t hits the fan people won't support the Euro or the IMF or their local bank or politician but their family and their tribe.

     

    Cash and gold indeed.
    5 May 2010, 10:24 PM Reply Like
  • Anthony Alfidi
    , contributor
    Comments (598) | Send Message
     
    In other words, nothing can save the euro. The next domino to fall - Spain or Portugal - will require cash that neither the IMF or the rest of Europe can provide after committing to help Greece.

     

    Hello deutschmark. We didn't think we'd ever see you again.
    4 May 2010, 10:11 PM Reply Like
  • Tack
    , contributor
    Comments (13408) | Send Message
     
    The printing press can save the euro, just as it can save any debt situation in which the borrowings are in the same currency as the lender. It's a "willingness" issue, not a "possibility" issue.

     

    Too many people throw around the word "default" without understanding that it's very difficult --virtually impossible-- to force any country into default when their borrowings can be covered with their own currency (or in this case, the EU's common currency). If any EU member is permitted to default, it will be by choice of the EU, not because it's impossible to fix it. The second they decide to flip the switch on the euro printing press, and deficiency can be papered over.

     

    P.S. The situation for the U.S., or any of its states, is identical.
    4 May 2010, 10:25 PM Reply Like
  • Tack
    , contributor
    Comments (13408) | Send Message
     
    Obviously, the import of my comment appears lost on the "voters."

     

    It's simply that when creditors and borrowers deal in the same currency and one of them owns a printing press, nobody on the outside can "force" a default. It's at the option of the creditor.

     

    Also, it doesn't mean that printing money endlessly is good or desirable or doesn't have other adverse side effects; it just means defaults cannot be imposed.
    5 May 2010, 07:36 AM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    excellent observation and spot on about "printing money" while the EU can use the printing press to kick the can down the road the bigger question is will they and what are the ramifications if they do, I mean EU members have to meet certain fiscal criteria to become and stay a member, if the EU prints money to solve its or an individual members problem then wouldnt that render all member contracts worthless and therefor the entire premise for the EU worthless as well making the EU and its Euro unreliable
    5 May 2010, 07:55 AM Reply Like
  • zorrow
    , contributor
    Comments (915) | Send Message
     
    I probably don't get it; but I think I can live with a papered over deficiency, since we're all dead in the long run anyway. I think it beats the alternative of dissolution and chaos. (Although that Jubilee idea sounds as good as anything else I've heard.
    5 May 2010, 08:07 AM Reply Like
  • Tack
    , contributor
    Comments (13408) | Send Message
     
    That question is not dissimilar to what the U.S. would face with individual state deficits, even though EU members are independent entities. The real question is how much "printing" they (Germany & France, basically) can and are willing to absorb.

     

    It's always been my contention that the real beneficiaries of the EU are the high-value-currency markets (i.e., Germany and France), not the low-value markets, like Spain and Italy. By keeping those countries, and what would have been "cheap" currencies" tied to the euro, Germany/France prevent their manufacturing costs and export prices from being undercut, as would occur routinely, absent the euro. This is an enormous benefit to Germany/France, and one that justifies a degree of "foreign aid" to maintain.

     

    One sees lots of comments about "kicking the PIIGS out," but, the real risk to the EU is that the PIIGS, themselves, realize that they've been had and decide to go it alone and re-establish themselves as cheap places to invest. If this happened, then, Germany'France all of a sudden have a new bunch of "Mexican" low-cost producers hatched around their periphery.

     

    Germany/France will go a long way to prevent that.
    5 May 2010, 08:15 AM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    Makes one wonder why EU members are not seeing or discounting the manipulation benefits to Germany and France at the expense of other members, current and potential members must see a benefit beyond the obvious manipulation you speak of, sooner or later the serious consequences of coop and one currency will be evident, it seems the EU could be a casualty of this global recession
    5 May 2010, 08:59 AM Reply Like
  • astralguide
    , contributor
    Comments (90) | Send Message
     
    Secretly there is a lot of discussion on getting back to pre-euro world. As Tack noted the real beneficiaries have been France and Germany and probably mostly Belgium/Holland. Rest of the lot especially the Mediterraneans are the losers.

     

    If this crisis is not dealt properly we can expect a bit of conflict soon or probably a regression. Politically and economically diverse nations can not have one currency frankly. It is like All Latin America using USD, even though that may be the coming future.

     

    At the end this whole thing may become from financial to political and when and if that happens we are in a big shake.
    5 May 2010, 04:49 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4013) | Send Message
     
    Printing away debt is default by other means.
    5 May 2010, 06:26 PM Reply Like
  • davidbdc
    , contributor
    Comments (3158) | Send Message
     
    What I don't follow in all of these European debt problems is that it shouldn't be too difficult to correct.

     

    Greek public wages have gone up something like 12% over the past couple of years (if what I've read is correct). Just rolling that back to previous levels would create enough cash flow to support the debt payments. Further changes to the retirement age and pension schemes create cash to pay the debt down.

     

    I think there is a cultural event taking place. Westerners' in general have to come to grips with the fact that 1. They are rich in comparison to the rest of the world and 2. They aren't going to see gains from here - and might see some regression.

     

    Thats all this really is IMO - people who want to live better than what they can afford. Its not difficult to fix - its just math - its really about telling people the truth about their living standards.
    4 May 2010, 10:13 PM Reply Like
  • Mikymikye
    , contributor
    Comment (1) | Send Message
     
    Thanks for your sharing. Spain next, and US turn will come soon.
    ____________
    www.softwareoutsourcin... >software outsourcing<
    4 May 2010, 10:28 PM Reply Like
  • mgcolin
    , contributor
    Comments (117) | Send Message
     
    If the Euro survives these sovereign debt crises (Iceland, Greece, Spain, Portugal, Ireland), Germany and France step-up, the market can go 30% higher. If the Euro collapses - Germany and France decide to go-it-alone, then the markets could drop 40%. I bet the Euro survives this round... Market peaks back at 14,000 or so, then another black swan or two (sovereign debt again, oil crisis, US/Europe commercial real-estate, Goldman collapses, china bubble collapses) and drops all the way back to 2009 lows.
    5 May 2010, 12:27 AM Reply Like
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