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The Spanish Guitar

Posted: Wednesday, April 18, 2012 3:46:29 AM

Rank: Advanced Member
Groups: Member

Joined: 7/15/2011
Posts: 67
Location: Chicago, IL
Monday was another down day for the S&P500, but a rather pleasant day for the Dow. Caterpillar and Shitibank had nice rallies going – for a while. Both finished well off of their highs. AAPL and GOOG on the other hand were slammed all day long. Are they in a race to see which will reach $500/share first?

On a more positive note for the markets in general, this was the fourth heaviest exchange volume of the year. Perhaps we may are headed towards more practical levels?

But even the bright spots on the valuation and volume horizon, it can’t hide the black cloud that is Southern Europe. With another European Central Bank bailout eminent, it’s the same old tune. Unfortunately, this time it’s a louder instrument.

The Greek lyre has been replaced by a cacophonous Spanish guitar. Yes, Spain will be the next member of the Eurozone to beg for a financial bailout. Spain’s bond yields are now perilously close to the 7 per cent level that forced Greece, Ireland and Portugal to come singing their “woes is me, we ain’t got no money” song to the ECB.

The problem is that Spain's €1.1-trillion economy is twice the size of the previous three bailout victims put together. It seems Spain was “mistaken” about their debt levels. The Wall Street Journal reported that Spain’s Debt/GDP ratio is closer to 135% than its “official” 68.5%.

It’s so bad in Spain that their inept federal financiers have to bail out the even more inept autonomous regions. Some regions have failed to pay public service contractors for months and now the Spanish central government has offered credits to help pay those debts. It’s the equivalent of the federal government bailing out say Michigan or Mississippi and telling Texas and Florida they have to clean up the mess.

Trade well and follow the trend, not the so-called “experts.”

Larry Levin
President & Founder - TradingAdvantage
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