Have Cake - Eat It, Too

Attracting a touch of attention is the announced sale of Santander's 32.5% stake in petro-minnow, Cepsa, at 30 to 35 euros a share - this being around 50% below Monday's close. That's what happens when you want to bail out of a listed company so illiquid that, according to Reuters' numbers, it would take 2,066 average trading days for SAN to accomplish the same through the exchange.

If Santander completes the deal, the company stands to pocket something just shy of 3 billion euros. Now, it is possible that Emilio Botín is going to use this money to stave off bankruptcy. But we sincerely doubt that this is the issue. However, John Hempton's stellar piece today on the sublimely beautiful win-win situation the big losers find themselves in today does give us a hint as to what a bank with cash, or cheap and available credit, can accomplish in today's environment.

Everybody knows that the nearest thing to heaven is to be owed money by a reliable debtor in times of disinflation (or, dare we say it, price deflation). As such, it is wonderful. But if the reader adds on the newly discovered risk premium a lender can charge - here, for example - because cautious is definitely the groovy and contrite thing to be and because the world economy is 'collapsing', 'falling off a cliff', or undergoing any of a series of B-movie metaphors that many of the modern learnèd now feel are acceptably scientific conclusions to be drawn from economic data*, he or she will get a clue as to how the game is, unfortunately, won right now.

*Speaking of win-win setups, none is better than that enjoyed by diseminators of histrionics in times of stress. If we were to assure the reader that 'we are going to hell in a handbasket', and then back it up with skyrocketing unemployment figures and tanking GDP stats, when it is all over we stand zero risk of being wrong. On the one hand, it's purely a judgment call if such took place. On the other (and in the event that we were forced to admit to ourselves that it didn't get as bad as we thought), we can always say that it was never meant to be taken literally - and that the reader was an idiot for believing it.

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