Is Anybody Paying Attention?

One could be excused for thinking that a couple of events this week might have had wider market repercussions than today's late day selloff. After all, they touch on what still remains the heart of the matter - asset values.

1). Ferrovial announced the sale of Gatwick Airport for 1.5 billion pounds* - about 20% below the low end of their prior estimates of what it might have drawn;

2). Savings giant, Caja Madrid, sold its near 3 percent share of Bankinter at 7.72 euros a share - a bit over 4 percent below the previous day's close.

In the first case, FER has shed (coinciding quite nicely with our taking of a long position, thank you) about 6 percent. The other large infrastructure builders and managers have dropped between 3 and 4 percent since then - with the exception of OHL, which has taken a hit for announcing a new stock issue.

In the second instance, BKT itself has dropped over 9 percent. The remaining domestic banks on the index are flat to off 2 to 3 percent.

The market may be blithely dealing with the issue of real estate values on a case-by-case basis, but the Banco de España is certainly not. Partially reversing an early decision to allow banks and cajas to reduce provisions on properties taken back in lieu of debt to 10 percent of assessed value, the Spanish central bank and financials supervisor has now doubled that for such assets that remain on the books for more than one year. Worse, new assessments will be required to come up with the number.**

An article in today's El País suggest that, aside from the obvious of ensuring that they all are shoring up against continued economic sluggishness, bank governor Miguel Ángel Fernández Ordóñez may be turning up the heat on the regional savings banks to come up with plans to amalgamate into larger, more cost efficient entities - at the cost of throwing a wrench into the workings of the local cartels. More adversely affected by the property crisis than their bank cousins, many will have trouble raising the capital to comply with this new order.

*In case anyone was wondering, proceeds from the sale of Gatwick will not be going into new investments. They will be used to pay down debt incurred in the past pursuit of future growth. Anyone expecting the rebirth of economic expansion of any consequence should keep that in mind - the monotonist outcome in the flesh.

**A side effect of this might be more weakness in property prices, especially where the small cajas are the dominant lenders - like along the Mediterranean.

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