More Spanish Stats

Spain retail sales up 1.4% y-o-y through June. Chart at Extra Lettuce.

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Ibex Salad Visits Qorreo

Guy Hedgecoe, the publisher of Qorreo (whose banner tops our sidebar), has kindly asked us to make a contribution to his periodical. Entitled 'Spain’s cajas bank on reform', it makes some attempt to comment on the recently instituted profound reforms of the laws governing Spain's troubled cajas de ahorros.

Interested readers can check it out by clicking on the image above.

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Recent Spain Economic Statistics

Three updated charts at Extra Lettuce...

June industrial price index - up 3.2% y-o-y, compared to +3.8% in May.

Annual % change hotel guests registered - domestic +4.7% y-o-y, foreign +7.6%.

12-month sum of hotel guests registered - domestic 45,894,000, foreign 33,362,000.

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May Mortgages

The INE has released May mortgage statistics.

Briefly...

Total number of new mortgages originated in the Spanish banking system (light blue) maintain its mild uptrend from the beginning of the year. The 12-month total (red) has dipped. We suspect this reflects the disappearance of the May, 2009 spike that marked the recovery from that winter's generalized credit woes. Expect this to repeat again this autumn. There was another bout of panic in the summer of 2009.

The average amount loaned (orange) continues to bounce around in its normally volatile fashion. Its 12-month average (green) declines - again reflecting the same phenomenon as above, plus a probable continued mild diminution in house prices.

The total amount loaned (gray, dark blue) also bears witness to a continued, if light, pressure on prices.

As usual, the chart is posted at Extra Lettuce.

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Touring

Some questions left after the finish of this year's Tour...

How close was Alberto Contador to passing out from exhaustion at the end of the really mediocre time trial that snagged him the honours?

Will he be so ambitious in the spring schedule next year?

Is Fabian Cancelara the first to break 50 km at the hour mark in the TT since Miguel Indurain?

Exactly how many bike lengths did Mark Cavendish open up on Alessandro Petacchi in the final sprint of the race... 6? or 7?

Exactly how near is he to hitting 85 kph at that point?

Will Andy Schleck learn, before next year, that when you shift from 39-11 to the big ring, the chain might not make the leap and will get jammed between the chainrings - costing you a minute and a half?

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And So it Begins

Expansión is reporting that JC Flowers has signed a letter of intent, dependent on due diligence now being undertaken, to buy 450 million euros of convertible bonds of the newly formed IPS, Banca Cívica. Despite the fact that conversion cannot take place before some point in 2012 (and that it is not stated exactly what percentage of the company they are buying), the bank - formed by the 'cold fusion' of Caja Navarra, CajaCanarias and Caja de Burgos - it is foreseen that the investor will be present on the board of directors.

Will Bronte Capital be next?

The Banca Cívica press release is here.

Yes, readers. We know the flip side of all this is that maybe they don't like what they see - and they walk.

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Dark Matter

Two events within the world of science have caught the writer's eye this week.

1). The discovery of the giant star pictured on the left;

and

2). The confirmation by the BBC news website of the Spanish real estate universal constant - one million unsold new homes - fixed, unchanging and immutable since at least December of 2008.

We suppose that the 334,175 new residences that have changed hands since then fall under the heading of 'dark matter'.

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And Now, in Real Life

To continue on from yesterday's piece...

The same source, Expansión, this morning has published the actual yield of yesterday's BBVA issue of cédulas hipotecarias. For all the fury of '195 over mid-swaps', it turns out to be 3.5% - about 80 bps over similar duration Spanish government debt.

More astute readers will note that embedded in this differential is the opinion real money has on the weighting sovereign default risk should have in any bank stress test - or on any outstandingly malignant future for the Spanish real estate industry. They are both approximately zero.

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The Thaw Begins (perhaps)

It's been since at least mid-May that Spanish financial institutions were said to be locked out of the wholesale credit markets. This situation has begun to change. Various news sources (here's one) are reporting that BBVA has placed 2 billion euros - double the amount initially targetted - of covered bonds with a three year maturity. Buyers were apparently from...

Germany - 25%
France - 15%
Great Britain - 12%
Asia - 18%
Switzerland - 8%

...leaving 22% for Spanish and 'others'.

As an aside, the Expansión article linked to above makes the negative assertion that the 195 bps over mid-swaps represented a 'doubling' of the yield with respect a La Caixa 6-year issue of three months ago. We're willing to stand corrected, but it seems that the writer of the piece misses the point on a number of counts. First, this is not a 100% increase in yield. Without knowing the reference figure, there is nothing to surmise concerning the interest rate to be paid. Second, today's issue consisted of cédulas hipotecarias - covered mortgage bonds - whilst the other was of cédulas territoriales - packaged loans to government administrations. This is a different and presumably less risky product (though some very vocal wags might claim otherwise). Third, one of the characteristics of the eurozone credit chaos of the last several months was that swap and benchmark spreads at the short end widened more than at the long. But the yield curve did not, to our knowledge, ever become inverted.

It would be nice if, one day, 'they' would start reporting actual yields alongside the calculation of the difference between two moving targets.

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Recent Spanish Economic Statistics

Recent charts posted to Extra Lettuce include:

1). June CPI - +1.8% vs. 1.5% in May;

2). May industrial orders index - +12.2% year-on-year vs. 4.3% in April;

3). May economic activity indices - services +4.5% y-o-y vs. 1.7% in April. Industry +8.8% vs 5.3% in April.

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Too Big to Fail

News this week is the astronomical increase in ECB loans made to Spanish financials in June - up by about half month-on-month and the country now taking up over 25% of the European total. Beginning with the reasonable premise that Citi was saved, and WaMu not, because of relative size, one can now easily imagine that collateral-friendly window remaining open for something approaching forever.

Great news for Kingdom of Spain guvvies.

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Time Warp

Spanish house prices have risen 270pc since 1995...., After seven [interest rate] rises to 3.75pc, the bubble is bursting.

- Ambrose Evans-Pritchard, The Telegraph, 30 July, 2007.

Wishful thinking lingers, but the harsh truth is that the (sic) Spain's housing crash has barely begun.

- ibid, 11 July, 2010.

Indeed.

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Alpine Spectacle

We guess that we weren't the only ones wondering if that lead Cadel Evans had on Alberto Contador and Andy Schleck going into today's stage wasn't a matter of concern to these two. When the Australian fell off the back of the pace set by Dani Navarro, the two contenders jumped all over it. Schleck and Contador attacking 8 kilometres from the top of the Col de la Madeleine! What a spectacle those two guys put on.

A great sideshow was Samuel Sánchez's descent from the same peak. A case study in how that's done.

Despite all the above, we still don't like the way Contador looks on the bike this year.

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May House Sales

May Spanish house sale figures have been released by the INE. Notable, as expected by this writer, is the continued (but not increasingly so) depressed state of the market.

In order, however, not to paint an undesirable situation worse than it is, it is worth paying attention to the continued uptrend in total sales. This is mostly fuelled by transfers of second-hand residences which, at least on 12-month total basis, are showing a marked recovery from last spring's lows. That they fell considerably more than new sales from the beginning of the series through 2009 is probably attributable to the effects of off-plan purchases of new homes finally being delivered and making it to the registry. That they've recovered in nominal terms would be related to greater pricing flexibility that individual sellers have relative to promotors. The end result - continued mild downward pressure on prices. In any event, current statistics for new homes no longer suffer from the lag evident in earlier years.

Interesting are reports that the prices of raw land, materials and construction labour (earlier mentioned here) have fallen so much that those builders and promotors still with access to capital are giving serious thought to starting new projects. Under current conditions, these can be brought to market cheaper than even the discounted prices presently demanded for existing projects. Perhaps that explains this new development from Taylor Wimpey,

If this kind of thing catches on, it will be real bad news for anybody holding late boom stock. Of course, there would be winners, too.

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Money Talks

Courtesy of the new and vastly improved CNMV search engine, the reader can take a look at the communication from Deutsche Bank in which the Spanish market administrator is asked to rectify ...the short postions remitted by DB to the CNMV since June 10, which were all incorrect for not having included in the calculation... the value of all financial instruments in the portfolio. Therefore, it is asked that the CNMV remove from the public register those communications.

Searching further back, it appears that the CNMV actually did just that. But the DB communication regardless details the positions initially reported - including the impressive percentages of outstanding shares involved.

The communication can be seen here. And the new CNMV news feed can be subscribed to here.

Meanwhile, departing from the base premise that bullshit walks*, the reader might consider placing a few disintegrating euros on Uruguay for Saturday's match. Currently 4:1 at William Hill.

*Of course, in real life June 10th was exactly the worst date to be getting on the short-Spain bandwagon - as the vertical red line shows on the chart of BBVA on the left. On the other hand, the communication of a non-existent 1.71% short position did provide a lovely opportunity to get off - if one were prescient enough to be inclined to do so at that time. Readers should feel free to draw their own conclusions.

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Long, Hot Summer?

Who says that summer is boring?

First this week, we have the interesting rumour that the People's Bank of China had taken up a full 9 percent of Tuesday's wildly successful (ignoring details like yield) 6 billion euro syndicated Spanish 10-year bond emission. Then today, President Zapatero announces a considerable revamping of the legal framework in which the cajas de ahorros operate. First, to recap a few pertinent details concerning this sector of the Spanish banking industry...

1). The cajas are not-for-profit organizations - charities, in effect. Operating surpluses must be redistributed in the form of grants to worthy projects or pure investments;

2). They cannot issue voting equity. The result of this is a near total dependence on deposits and wholesale markets for their capital.

When the changes proposed by Mr. Zapatero are approved by congress (apparently having already been informally blessed by the opposition PP) these savings banks will be able to sell up to a 50 percent equity stake in themselves. The shares will have voting rights but will not entitle holders to representation on the board of directors.

Couple this with the status of 'bank' enjoyed by the 'institutional protection schemes' under which many cajas have recently amalgamated some operations and Spain is approaching a de facto privatization of these once-sacred regional cows.

Our wild guess is that the first to tap equity markets will be Caja Madrid - alone and/or in conjunction with the giant IPS now being created with Bancaja and several small regional players.

As an interesting aside, the proposed legislation also allows any given caja to renounce its current status as a financial institution by converting itself into a charitable foundation. Presumably (although this is yet to be seen), this reversion to their 19th century roots would deprive those which choose this course of certain financial supports. Deposit insurance immediately comes to mind in this regard.

Another fine bit of info appearing this week... it appears that last month Deutsche Bank misreported the degree to which it had shorted Spanish equities in the midst of May's chaos. Their declared short position in BBVA, for example, of 1.7 percent (592 million euros, to be exact) appears to have been fruit of them not being able to distinguish clients' funds from their own. Add to this the very curious admission that the figures were not even properly calculated. It seems they were also having trouble distinguishing between net and gross. Germany... again.

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Profligates 1 - Prudents 0

Something in there about not having the right game plan for the circumstances.

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Who's Hot and Who's Not

These four comunidades autónomas, Andalucía, Cataluña, Madrid and Valencia, house 58% of Spain's population. The chart compares population share with similar for numbers of bankruptcies and mortgage foreclosures.

The sources for this are court proceedings statistics from the CGPJ website and population stats from the INE.

Figure are totals from first quarter 2007.

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How to Punt

With the same counterparty, we made two bets last summer...

1). That Lance Armstrong would not start the Tour de France;

and

2). That Bradley Wiggins would not be on the podium three weeks from now.

We seem to have lost the first.

As an aside of no particular importance, we did not like the way Alberto Contador looked in the Dauphiné.

Those expecting a replay of last year's rant will have to settle for this selection.

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The Market's Opinion

Above, the loonie - resource currency par excellence. Below, the S&P 500.

The double-dip argument has its fans.