Wednesday, December 28, 2011

Not open for business

The chart on the left - also a permanent fixture in the right sidebar - shows the monthly number of residential mortgages registered in Spain as a percentage of actual house sales. It's our proxy measure of credit availability in the Spanish economy.

Calculating from the November mortgage report from the INE, this figure currently stands at 98.71%. Almost inconceivably, fewer mortgages than sales as banks shore up balance sheets by not lending money.

A five-year moratorium on the implementation of Basel III might be a thought.


Monday, December 19, 2011

Closet economics

Oh good!!! Edward's back... and just in time for Christmas.

After a seemingly endless absence, Edward Hugh has started pumping them out again at A Fistful of Euros (as well as all the usual slew of content farms, we suppose). In his latest he has it that Finland, rather than being a card carrying member of the Hanseatic League, is in fact a Closet Peripheral.

Readers may wish to slog through the usual several thousand words on just about everything under the sun - including the apparently astonishingly high 19-point spread of government bonds over 10-year Dutch debt. Others might want to save themselves the bother.

The above chart may assist this latter group.


Airing out the shorts

On the left, this year's Banco de España Christmas card. José Guardia thinks it depicts 'Two guys about to let another drop in the abyss...'.

We think it's just a pair of central bankers hanging a bond short out to dry - and right appropriate in light of the latest action. The Spain 2-year now yielding 275 points less than on November 25th.

H/T Trebots.


Saturday, December 17, 2011

All euro, all the time

Noting that the FT Alphaville opinion that the success of this week's Spanish bond auction can be exclusively and entirely attributed to the collateral policies of the ECB has now osmotically converted itself into gospel truth via information suppression utilities like Google...

The Tesoro posts their statistics with a couple of months of lag, so it will be February before we can know what the retail contribution to this week's debt auctions was. In the meantime, with numbers current through October, there is already some indication that our domestic political, non-end of the euro, take might have merit.

The chart shows individual holdings of government debt at month end since January 2010. Readers should note that the PSOE government - knowing full well that polls showed them being slaughtered - announced, on July 29th, that elections would be advanced from March 2012 to November. The certain prospect of the removal of Zapatero and his party's replacement by the PP (not to mention lush yields) brought the local money out as soon as the homies got back from the beach.

Readers with good memories might remind us to update this in the future.


Thursday, December 15, 2011

Goodwill to all debt

Way back in October of 2008, we penned a piece based on our conversation with a worried Spanish architect and property developer. Despite his being a socialist sympathiser, his belief was that a right wing government would do wonders for the domestic investment climate in Spain. If, as seems probable, Tuesday's immense retail demand for Spanish letras carried over to today's auction of longer term obligaciones then our friend's assessment is proving itself to be prescient. This week's auctions are the last prior to the new PP government, with its historically strong mandate, taking office next Monday.

The Spanish Treasury this morning completed its 2011 bond issuance schedule - gross value of 93 billion euros - on a relatively optimistic note. The mishmash of 4-year, 9-year and 10-year paper, originally targeting 3.5 billion euros took in a tad over 6 billion. Yields, with bids-to-cover of 1.5 to 2.2, were such as to force down their approximate secondary market counterparts between 20 and 35 basis points.

The big beneficiary of this, and Tuesday's auction of letras, has been the crucial - at least in its role as a gauge of confidence - 2-year. Its yield, at 3.75 percent, is down 85 bps since Monday close.

Whether or not the move has legs to get the payout down to the mid- to low-3's characteristic of much of the past year is yet to be seen, but the results seem to suggest an overwhelming domestic vote of confidence for Mariano Rajoy.

Of course, we might be mistaken. FT Alphaville concludes that today's auction results are further proof of how bad it all is in the eurozone.


Tuesday, December 13, 2011

Take a number

Curiously, last week we were going post a short piece on the writer's wife's recent trip to the Bank of Spain. We didn't, and now wish we had. It would have gone something like this:

After accompanying her recently retired brother down to Alcalá, 48, following his decision to invest in the following week's issue of letras, she remarked that:

At 11 AM, he was assigned ticket number 260 for the retail window and that number 152 was the last number called;

and that almost everybody in line was noticeably old - this in the eyes of someone pushing 60.


Eight days later, Expansión reports:

The Treasury issues more than the announced maximum in the face of strong retail demand.

Despite the coming apart of everything euro, with a 3.1 bid-to-cover the 12-month yield, at 4.08 percent, was 112 bps lower than last month's issue. The 18-month yield dropped 107 bps to 4.25 percent - b/c of 5. The total issue was expanded from 4.5 billion euros to just shy of 5.

Yields of all maturities reacted by coming down in the secondary market - the 2-year by 31 points.

Big losers in all this are the banks and their 4.5 percent term deposits.

And, speaking of banks, rumours abound that the large collection of ratty former cajas, Bankia, is actively seeking an amalgamation with either BBVA of CaixaBank. Prattle from the couple of bank managers that we're on friendly terms with has it that, within 'a couple of years', there won't be more than '4 or 5' retail financial institutions operating in the country.

We're not exactly sure about the timeline, but the general gist is pretty realistic.


Sunday, December 11, 2011

What's in a metaphor?

A regular has popped in with a comment on our prior post. Referring to Heidi Moore's osmotic twitter utopia, he or she notes that osmosis has the added benefit to a journalist or blogger of not requiring any input of energy. To which we add:

1). That osmosis takes a place across a semi-permeable membrane - one which only permits the entry of small, simple and commonplace molecules from the solvent side into the realm of the larger, more complex, and perforce rarer, constructions on the solute side.


2). The end result of unconstrained osmosis is that the complex fluids on the solute side become virtually indistinguishable from the primordial, lowest common denominator stuff emanating, for example, from Twitter.

A heartfelt thanks to Candide. But does Heidi know that she nailed it?


When news is the news

Atlantic Wire's series, 'What I Read', features seasoned Wall Street reporter Heidi Moore - inadvertently informing us as to why the probability that news reporting (and its parasite spawn, the noise-o-sphere) will provide anything that merits the title of 'information' is so abysmally low.

'Twitter is absolutely the first and last thing I do every day to check news. I always dream that a perfectly curated Twitter feed will just allow the most important news to osmose into your brain,...'

'When I retweet I look for stories that are retweeted multiple times, so I follow a lot of news publications. Generally, if I see an article in my feed once I may not click on it right away but if I see it twice I will.'

Apparently, the primary challenge facing journalists in the internet age is to ensure that their names become attached to the viral trend du jour.


Sunday, December 04, 2011

On which date will the euro die?

Trevor has nicely narrowed down the possible answers to this theological mystery.


Saturday, December 03, 2011

Unemployment - Spanish style

The writer, in his other life as an olive grower, currently finds himself in the novel (and at first nerve racking) position of having to organize and work with an almost entirely new team of pickers - only one of which he had known previously. The culprit behind this was the government decree published on July 22nd that reversed the two year-old decision that had given Romanians full EU rights in Spain. Seeing as this legislation was specifically created to give a statistical boost to the paralysed PSOE cartel that governs an equally paralytic Andalusian economy in the runup to March elections, we'll avail ourselves of the opportunity to talk about the miserable Spanish unemployment situation.

On the social strife front, it's worth noting that work stoppages protesting government policies have almost all been on the part of functionaries - specifically medical personnel, school teachers and prison guards. These people are the 'haves', not the 'have-nots' - who are shown in the green and yellow lines on the left.

Muddying the economic issue considerably is the fact that two of these three groups have, and avail themselves of, full recourse to the 'societal benefit' argument behind which to conceal whatever portion of their complaint is purely the protection of their own interests.

A rather curious defence of this apparent unwillingness of some government employees to even consider the possibility that they might have to make a sacrifice comes from the next chart. The age group assigned the colour red will not be well represented in the ranks of the placard bearers, but many of those who are - especially the blues and the purples - will be the parents of that lot and are providing them with financial support.

This does nothing to justify the apparent fact that the entire system is upside down. The 25 to 34 year-olds should be contributing to the soon to be tapped pension plans of that swelling group approaching retirement - not the opposite.

As an interesting aside, the graph on the left shows the progress of unemployment rates as a percentage of recent up cycle minima for various countries. Two things, to us, stand out.

First would be that the Spanish 23 percent UR is worse, but not overwhelmingly so, than the American 10 percent if one considers that 2007 or 2008 figures represented full employment for both countries and then measures the unemployment rate with respect to those years. There's a comment here on the assumed cross-cultural portability of statistical series.

Secondly, the bars at the bottom right of the chart - representing the same calculation for Germany, France and Italy - seriously cast doubts on the long term benefits of economic cycles driven by uncontrolled real estate prices. The latter three countries did not undergo property bubbles. The first two did.