Sabtu, 07 April 2012

The Worse and Worst case views for Spain....

Spain: The Ultimate Doomsday Presentation

Tyler Durden's picture

Since we have grown tired of variations on the theme of "The Pain in ...." (having been guilty of encouraging it ourselves), we will spare readers this triteness, and instead summarize the attached must read slidedeck from Carmel Asset Management as the ultimate Spanish doomsday presentation. Naive and/or idealistic Spanish readers are advised to resume sticking their heads in the sand, and to stay as far away as possible from the attached 54 pages, which prove without any doubt why not only was Greece the appetizer (have your UK law:non-UK Law divergence trade on yet?) but why things in Europe are about to get far, far worse, as the Hurricane shifts to its next preferred location, somewhere above and just south of the Pyrenees.
In summary, here are Carmel's five reasons why Spain's problems are worse than the market anticipates:
1. Spain’s national debt is 50% greater than the headline numbers
Spain’s debt-to-GDP balloons from 60% to 90% of GDP with regional and other debts
2. Spain’s housing prices will fall by an additional 35%
Spain built one house for every additional person added to the population during the past two decades; the fall will decrease GDP by ~2% each of the next two years
3. Spain has “zombie” banks with massive loans to developers and to homeowners
Banks have not begun to realize losses and are vastly undercapitalized
4. Spain’s economy has not stabilized and will continue to deteriorate
Spain has the highest unemployment in the developed world, one of the highest overall debt loads, and the most uncompetitive labor market in Europe
5. The EU will not have the firepower or political will to bail out Spain
Rescue fund headline numbers are misleading and count capital that is not yet committed
And here are the problems that will manifest themselves over the next 12 months:
  • Spain’s true debt burden will pass the 90% “tipping point” identified by Rogoff and Reinhart
  • Housing prices will fall further and faster than anticipated (consensus is 15%; CAM estimate is 35%)
  • Banks underestimate the residential real estate loan defaults (consensus estimate is 2.8% vs. CAM estimate of 11%)
  • Expected housing price depreciation and loan defaults will deepen Spain’s recession (additional 2% contraction in 2012 and 2013)
    • Spain will need to refinance €186.1 Billion in 2012 alone
    End result: surging CDS and/or plunging bond prices, if faith in the sovereign CDS market continues to be at rock bottom lows courtesy of ISDA nearly blowing its own head off.

    and.then as we see what Mark Grant has reported , the worse case above is actually debacle - lite...

    Fighting With Spanish Windmills, Or How Spain's Debt/GDP Ratio Is Double What Is Reported

    Tyler Durden's picture

    From Mark Grant author of 'Out of the Box and Onto Wall Street'
    Fighting With Spanish Windmills
    When I first attempted to find a more realistic debt to GDP ratio for Spain, Belgium, Italy et al I did it on a stand-alone basis; no inclusion of their European liabilities. When I approached Germany, given their size and importance in the EU, I focused upon their liabilities to the European Union. Several institutions have since asked me to consider the total liabilities for each country as every nation in the European Union has national debts as well as debts for their percentage of ownership for the EU and the European Central Bank. Using the combination of national liabilities and any nation’s percentage of EU/ECB liabilities one then could ascertain a final and complete picture of a real debt to GDP number that, unlike the Eurostat data, would be inclusive of sovereign guarantees, contingent liabilities and their responsibilities to the EU and the ECB. This schematic then would tell each of us what a given country actually owed so the total reality could be assessed for judgment.  Given that Spain is currently in focus and that nowhere that I have ever seen has there been an accurate national debt coupled with Spain’s European debt schematic; I have decided to provide you one.
    “What I said about the economic side of the Inquisition supplies an explanation which will occur at once to the reader. It was a question of the division of the spoils. Sixtus IV and his successors greatly disliked the Spanish Inquisition because all the confiscated wealth remained in Spain. The Popes raised a little by receiving at Rome appeals -- those humane and beneficent appeals -- from the sentences of the Spanish Inquisitors, and remitting penances for a money-payment. But the Spaniards retorted by refusing to recognize the Pope's dispensations, and there was an unholy struggle.”
                                              -Joseph McCabe, The Story of Religious Controversy
    The Data
    Spain’s GDP                                                $1.295 trillion
    Admitted Sovereign Debt                                 $732 billion
    Admitted Regional Debt                                   $183 billion
    Admitted Bank Guaranteed Debt                     $103 billion
    Admitted Other Sovereign Gtd. Debt               $ 72 billion
    Total National Debt                                         $1.090 trillion
    Spain’s Liabilities at the ECB                           $332 billion
    Spain’s Cost for the EU budget                       $ 20 billion
    Spain’s Liabilities for the Stabilization Funds   $125 billion
    Spain’s Liabilities for the Macro Fin. Ass. Fund $ 99 billion
    Spain’s Guarantee of the EIB debt                  $ 67 billion
    Spain’s Total European Debt                           $643 billion
    Spain’s National and European Debt                $1.733 trillion
    Spain’s OFFICAL debt to GDP Ratio                     68.5%
    Spain’s ACTUAL Debt to GDP Ratio                  133.8%
    “Yes, they have tricks up their sleeves and multiple methods of presentation and by multiple people. Yes, they give us an illusion with the appearance of truth but we are better than that and far smarter than they have calculated. I give you truth without illusion and regardless of their contentions; we can differentiate between reality and the fantasy that they weave for their own dark purposes.”
                                                                    -The Wizard

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