More Eye-catching Pictures

Scooped up from this pdf by the venerable Random Spaniard, the pair of charts on the left provide considerable grist for the gossip of the grumbling class. They show, respectively, foreign investment in Spain and Spanish investment outside its own borders. Notable are the following features:

1). It appears that investors from other countries did not jump onto the euphoria balloon that dominated the domestic economy until it was beginning to deflate. The spike in direct investment begins in early 2007 and ends about one year later. Note that this period coincides with the demise of a very long period of enchantment with the Spanish stock market (the blue line in the graph).

2). Also worth mentioning is that direct foreign investment in Spain has not gone negative, settling down (as of last February) at levels last seen in 2004.

3). After a very long period corporations primarily reinvesting profits outside of the country (duly noted at the time by the press), Spanish direct investment in foreign countries has turned negative. The plummet from 100 billion euros to less than zero in two years is simple remarkable.

4). In the direct foreign investment account, Spain is currently a net beneficiary for what looks like the first time since 2004.

5). It's possible that, at least until very recently, the net loss of investment in the cartera component - representing market-traded assets - represents the flight away from the euro that has characterized much of the financial crisis.

We asked, by the way, readers to contribute their guesses as to the cause of Spain's resilient goods export sector. One has done so through an entry at news.cat - he believes the numbers are falsified by the government.

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Export Anomaly

It's often thought that the best way to deal with anomalous data points in a series is to label them "outliers" and ignore them completely. Removing thus the 16.3 billion euro April 2008 spike in Spanish exports we find that the three highest historical levels for this measure of activity are (inflation-adjusted):






Sep 2008 14.98 billion
Jan 2008 14.93 billion
Mar 2010 14.81 million

Not including negative items like unemployment, this item is (strangely given that Spain's principal problem is lack of international competitiveness) possibly the only one currently hovering near historic maxima.

Explanations invited in the comments section.

Balance of trade, by the way is at levels, although decidedly negative, not seen since summer of 2004.

Charts courtesy Extra Lettuce.

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Old News and New

Carried fairly widely was yesterday's news that the Bank of Spain was increasing the provisioning requirements for banks with respect to properties accepted in lieu of debt. One of the results was BBVA losing 3.4% over the first hour and a half of trading this morning. This was before reality took hold and punters, knowing that this bank had already voluntarily done just that in February - and that its shares had then taken a rapid 15% drubbing in the process - bid the stock up 4.6% by noon to just shy of yesterday's high. Our take on all this last February (and which just maybe had something to it) was that the bank was thinking of longer term market share and proactively putting the screws to those cajas that were not solvent enough to do the same. A nice list of these savings banks, the weakest appearing at the top, appears at the end of this piece in today's FT Alphaville.

What seems, however, to have completely escaped the attention of the wagging and wagering classes is this week's inexorable rise in the yield of the Spain 10-year bond. Closing last Friday at 4.11%, it is currently paying 18 bps more - this following its adamant refusal to drop below 4 in the wake of the announcement of the eurozone rescue package.

There might be something interesting there, folks.

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Extra Lettuce

We've had a moment to put some effort into a project that's been brewing for a while. Extra Lettuce is a blog dedicated exclusively to presenting graphs related to the Spanish economy.

The selection is currently a bit limited, but will expand over time (we hope). Suggestions as to content are always appreciated. They can be left, with the appropriate url, in the comments box of either blog.

The feed link is here or new entries can be accessed from the sidebar.

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The May 25 Selloff

Having broken through 9,000 points and recovered to close above both on May 7 and today, that level is looking like a line in the sand for the Ibex 35. As the seizure of Cajasur - and its negative implication for Spanish banks - seems to be listed first among the list of guilty parties behind today's European selloff, a closer comparison of those two dates might be in order.



The big drags on the index over the last 18 days have been energy transmission, construction, one junior bank and, by virtue of its weighting, Telefónica. The big banks, on the other hand, have saved the Ibex from the ignominy - reserved for the Paris index - of being the worst performer on the continent.



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Attention Grabber

As an example of the odd mediatic times in which we live, a news search for 'Cajasur' reveals the following partial list of newspapers that have carried a story on the seizure of that Spanish caja de ahorros:

The New York Times;

From Bahrein, the Gulf Daily News;

The Malaysian Mirror;

The Sydney Morning Herald.

Standing out in this selection was the NYT's lead-in sentence:

Weaknesses in the Spanish financial sector were exposed over the weekend when the central bank was forced to rescue CajaSur.

None of the others, however, failed to mention that Cajasur represented 0.6% of Spanish domestic banking assets. Another calculation reveals that the 550 million euros to be injected into this savings bank (following 569 million in 2009 losses) is 0,55% of the funds earmarked for this kind of eventuality by the Banco de España via the FROB.

Of greater interest will be to find out why the administrators of Cajasur - the Roman Catholic Church - chose death before dishonour by refusing to amalgamate with the larger, and very solvent, Unicaja. The line that they were defending the outsized paycheques of their employees just doesn't do it for us.

By the way, we've removed Greece from our eurozone bond charts on the right. The mess that country made of the scaling...

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10-year Bond Auctions

Results of Spain 10-year bond auctions since June, 2008.

Triumph of the Shrill

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News Sources for Spain

A couple of websites of interest that have come to our attention recently...

Quickly picking up most of what appears in these pages is English-language news aggregator, News Now. The link to Spanish news is here. On the left sidebar, one can further differentiate the content as 'politics', 'economy' or 'sport'. A very good effort.

The blog Cajas y Bancos quickly reports on relevant news and gossip in the Spanish financial industry. Of interest to many would be its rapid posting of financial results from all sectors and its regular reports on the progress of consolidation among the cajas.

The drawback for many of our readers is that is written in Spanish, so we tested a Google translation on an item concerning the fusion of various savings banks into 'Banca Cívica'.

They know well the Civic Banking Group carried jewelry. Is it? This smells like that in 3 or 4 years CAN be converted into a large box at the cost savings to absorb the business of others. Time to time.

Sorry for that one, but the Google machine did get the gist of paragraph 2:

For the record, these two words is impossible for them to go together: banking + civic.

For a very interesting American take on Banca Civica, readers shouldn't miss this piece from FinancialBrand.com.

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Max Headroom's Secret Love Child

Pick Your Poison Cherry

It's early in the day and results are not final, but first returns indicate that the 0.1% annual decrease in Spanish core CPI is more interesting news than the accompanying 1.5% increase in the headline number.

Spain’s Core Inflation Turns Negative for First Time - Business Week

Spain Consumer Price Inflation Rises In April - Daily Markets

Aside from the pertinent observations that could be made concerning the very tenuous relationship between information and what is claimed be such by the press, it is interesting that - as various reports are attributing this morning's rout in European stock markets to the Spanish core inflation figure - gold futures are trading up about one and a half percent.

This Google news search will keep the reader apprised of the progress of this winner-takes-all debate.

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Collateral Damage

The look on María Teresa Fernández de la Vega's face says it all. After all, she is going to have to quickly convert all that skill at emitting platitudes and spouting good news that she has developed as President Zapatero's official spokesperson for the last six years to the task of explaining fiscal reality to a socialist polity that continues to think nobody has to pay for Spain's share of this decade's debt paradise.

The reader might take a moment to imagine the government's position. Faced with the bond market's visceral reaction to a preposterous rumour that a 280 billion euro bailout package was being prepared for Spain (carried by Le Figaro, leading us to believe it was placed by someone in a high place wishing to give this country a test ride in the new world order), the Spanish contingent returned from the weekend's Ecofin get-together knowing that the days of diálogo social and consenso were over.

Blind-sided by the possibility that Mr. Zapatero was actually doing something - thus killing their plan to allow him to self-immolate in the approach to 2012 elections - the right-wing opposition PP's first reaction to the president's announcement that civil service salaries are to be cut an average of five percent was to close ranks with the trade unions and IU (no bother that this party is the living vestige of the Spanish communists) and declare that ZP was trampling on the 'social rights' of Spaniards.

The two pictures on the left will help the reader imagine a barricade of burning tires manned by UGT leader Cándido Méndez and ex-PP minister, Eduardo Zaplana.

This morning, Zapatero was meeting with the above Mr. Méndez and the head of the other big national syndicate, Ignacio Fernández Toxo. The president is not seeking consensus and will not be backing down. If, however, he feels like he's losing ground in the fight that's sure to ensue, he can always threaten to sic Leire Pajín on them.

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Zapatero Wakes Up

Opposition politicians expecting to be able to rake President Zapatero across the coals as he pronounced over the economy in congress this morning were broadsided by his announcement that...

1). Public service salaries will be reduced 5% as of June and frozen in 2011;
2). 2011 pensions will be frozen;
3). The birth subsidy of 2,500 euros will be suppressed in 2011;
4). That regional development subsidies will be eliminated;
5). etcetera.

Aside from the obvious point that the Zapatero has finally given up on his belief that effective crisis agreements can be reached with sectoral representatives, it is interesting to watch the impressively incompetent opposition leader Mariano Rajoy as he attempts to claim that these measures are erroneous because they were not initiated sooner.

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Thundering Herd

Taking a wild guess as to what side of the trade the bulk of participants were on going into the weekend's Ecofin meeting...



Of course, now that all the blog-o-sphere's true believers find themselves forlornly fixated on the limp remnants of what was a really stupendous erection, FT Alphaville suddenly decides to report a more measured analysis of the Spanish position in the swine firmament.

Surprised?

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You Wanted to Know Whom to Blame?

We were going to post something on how the 'short Europe' bubble got blown out of the sky this morning - as of this moment EUR/USD up 2.5 cents, Ibex 35 up 13%, Santander up 22%, etcetera ad nauseum - and how anyone who found themselves holding a sure-fire short in BBVA over the weekend as it opened up 17% might consider reviewing their policy of cueing trades off the monolithic one true religion that the blog herd converts itself into at the merest mention of the word 'Europe' (or worse, 'PIGS').

Thankfully, Yves Smith has saved us the bother of searching up myriad quotes and references by allowing Naked Capitalism to publish a post entitled, 'Ryskamp: German Greek Bailout Legislation, TARP 1.0, and Hitler’s Enabling Act'.

That kind of demagogic, hot-button rubbish, dear reader, is what one is forced to resort to when facts threaten to interfere with an editorial stance that has garnered both a wide readership, a book contract and more than a small amount of fame as a pundit of merit.

Those wishing to get ahead of the curve might consider getting long Zyklon B. Let us know how that works out.

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Monday, Monday

At about 9:20 a.m...

Ibex 35 - +7%;

BBVA - +16.8%;

Number of stocks still on auction - 27.

The smell of burning fingers in the morning.

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Vacuous Leadership

We recall looking on in amazement at the actions of George W. Bush in the aftermath of the World Trade Centre attacks. Here was a president given a situation with which he could have entered into the annals of eternal greatness who instead used it as a pretext to carry out a personal vendetta against a political leader whom he loathed.

The reader might also look at Germany and Angela Merkel in the context of the Greek - and possibly eurozone - disaster currently unfolding and ask him or herself exactly why the industrialized world cannot come up with competent political leadership in the 21st century.

Closer to home, Spaniards might be wondering something similar about President Zapatero.

On the brighter side, anyone concerned that we were falling into an economic abyss will find solace in the 106.5 million dollars that Picasso's Nude, Green Leaves and Bust fetched at auction on Tuesday.

Agricultural pursuits are currently dominating our ever-increasingly limited attention span. Ibex Salad will resume normal service shortly.

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