Wednesday, April 11, 2012

Spain’s future depends on scale of property write downs

Investors run scared of Spain's battered banks

"The government has ruled out more state aid for a sector that comprises a motley mix of international lenders and heavily indebted local savings banks. That leaves two options: raising private capital or turning to the EU for bailout funds". Merrill Lynch are getting stressed about property prices falling further. (I thought Ms Legarde said Europe's problems were fixed last month?).

Posted by alan @ 11:47 AM (1472 views)
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7 thoughts on “Spain’s future depends on scale of property write downs

  • general congreve says:

    Oh noes, sovereign bond yields rocketing skyward again. How can this be, didn’t the monetary authorities sort all of this unpayable euro debt business out recently?

    If this carries on we’ll get systemic financial collapse and then that bloody General will be parading around wearing a smug ‘told you so’ grin, and we simply can’t have that!!!

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  • Most of Spain’s systemic problems could be quickly and easily addressed by a prompt exit from the eurozone followed by a big dose of QE from the newly liberated Spanish central bank.

    Yes, the devaluation of their new currency would result in increased prices of imports, but the economic benefits would be enormous, and the legacy of excess debt would be inflated away – the easiest solution to the problem.

    What is it about these eurozone peripheral nations that makes them blind to the obvious remedy, and soldier on with an impossible agenda..?

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  • mark wadsworth says:

    Alan, yup, see next post. I can see a theme emerging.

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  • general congreve says:

    @2 – A splendid solution, although outright default and no QE would be the more probable, the outcome would be the same, namely a repudiation of the the debt, a currency devaluation and a return to competitiveness. For the nation a total winner, but for any one with a lifetime of savings or pension contributions, not so good, but then neither would the euro hyperinflation the bailouts are storing up. Protect against both with gold and silver 😉

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  • GC

    Outright default is a measure of last resort, to be avoided if it all possible, it comes with a nasty sting in its tail..

    With regard to alternate investments, it is wise to look back 30 years, and see how a fondness for alternates (then spurred by excess inflation more than economic malaise) very painfully came unstuck.

    Right now, there is nothing to suggest that precious metals are poised to take off, whilst on the downside, there is no pressing argument to deter their prices from falling.

    Picking a good safe investment now is a hard call – I am personally indulging a potentially very lucrative project that is not entirely risk free, and demanding of a fair measure of lateral thought, which makes it enormously fun – but unfortunately also one that demands total secrecy at this stage.

    What I would say is to think outside of the box, do a little homework, and remember that who dares wins – but only if they are careful..

    ..no-one got rich through hoarding little boxes of shiny metal..!

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  • UT,
    Is it a secret plan to take Spain (or Greece, or Portugal) out of the Euro? Someone needs to devise one, although I don’t think Mme Legarde’s banker friends could maintain a secret for long enough to allow an orderly exit.

    GC,
    Are you putting all your cash into gold? Merryn (of Moneyweek) suggests a balance.

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  • Alan,

    There is a little bit of scope for profitting from the eurozone exit of the PIIGS, but that will happen after the event, rather than before.

    I have, for example, my beady eyes on a prime but poorly managed 30 hectare vineyard in Portugal’s Douro valley – which is currently owned by a company whose finances are less than solid, and will almost certainly fail in the aftermath of a euro exit.

    I am pretty certain there will be a wide-ranging ‘fire sale’ of over-mortgaged assets in the first two or three years following a return to national currencies, that will not only be bargains domestically, but also priced in massively de-valued currencies..

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