My Eye Remains On Spain

Japanese Stocks Decline Ahead of Bonds Sales in Spain, France

“Stocks are falling after rising a lot yesterday,” said Kazuyuki Terao, chief investment officer of RCM Japan Co. RCM oversees about $138 billion globally. “They are declining ahead of the Spanish bond sale because people are cautious.”

The benchmark Nikkei 225 (NKY) has retreated about 7 percent since March 27 on renewed concern about Europe’s debt crisis and signs of economic slowdown in China and the U.S.

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.2 percent today. The gauge dropped 0.4 percent in New York yesterday as bellwethers Intel Corp. and International Business Machines Corp. posted the slowest sales growth in more than two years as the European slump weighed on orders.

Debt Sales

Shares declined as Spain and France plan to raise as much as 13.5 billion euros ($17.7 billion) in debt today as Spanish Prime Minister Mariano Rajoy’s struggles to meet deficit targets and the French presidential elections drive up yields.

Non-performing loans in Spain as a proportion of total lending jumped to 8.2 percent in February, the highest level since 1994, from less than 1 percent in 2007, the Bank of Spain said yesterday.

The Nikkei 225 Volatility Index added 2.8 percent to 19.89, indicating traders expect a swing of about 5.7 percent on the benchmark equity gauge over the next 30 days. Trading volume was 14 percent below the 30-day average.
My view:

Spain remains my focus in this global sovereign debt crisis.  While some view this as a European problem, they underestimate the interconnectedness of the world's banking system.

Bad loans in Spain mean pain everywhere.

Higher yields on Spanish and French debt mean a growing risk off trade hurting both stocks and commodities.

This summer the bond market vigilantes just might have their way with southern Europe plunging the continent into a near depression like state similar to the 2008 crisis.

My investment strategy remains constant despite the vain attempts to kick the can even further down the road.

Precious metals are the anchor to the strategy, along with cash, and inverse stock plays.


  1. You can say what you want, but in the end the Central Banks and politicians win. As long as the deflations forces remain in place.

  2. I'm not precisely sure what you mean Manuel.
    In my view, politicians will only "win" until the people get fed up enough to throw them out, along with the crazy concept of central banking.

  3. Now it is me that don´t understand. What do you mean with throwing them (the politicians) out? You mean we won´t have politicians governing us? Who else can govern us in democracy? People from outer space?

    What "crazy concept of central banking"? Is there any other alternatives? I don´t know them. Maybe you have a better alternative.

  4. I do not mean that we should get rid of democracy. In my view there is a flaw in demoncracy, particularly in the US, Canada & Europe. Politicians campaign on the premise of giving one group "more" of something. They do this by borrowing money in the bond market to pay for their overspending and by deflating the currency's value through inflation. This is a terrible flaw if people think they can vote themselves benefits by transfering tax dollars from others.

    This loophole in democracy must be closed which will result in smaller government and in the US a large reduction in the size of the military.

    Ridding ourselves of central banking is one of the early steps in this process as it is the primary tool for creating inflation.
    Historically speaking, central banking is a fairly new concept, existing sporadically since the late 1600s.

    In the US, we are on the third manifestation of a central bank, this one called the Federal Reserve. The two previous examples were the First Bank of the United States (1791-1811) and the Second Bank of the United States (1816-1836). In between central banks, there were periods where no central bank had a control of the money supply.

    It is my view that to establish a democracy that is not fatally flawed, specie money (dollars backed by gold or gold and silver) is essential to prevent the corruption we now see everywhere.

  5. I agree with you that a smaller government is a good thing, all over the world, not only in the USA. In an ideal world, the aim of every government should be to make themselves superfluous over time. An impossibility...

    The military unfortunately are a necessary evil, like toilets and lawyers. :-)))
    Yes, I agree that they should be made smaller.

    But as long are there are very strong deflationary forces, like now, I think that printing money can be a good thing, as long as it is kept within reasonable limits, of course, and only while those forces remain.

    Yes, politicians make promises based on money that are not theirs. It is taxpayers´money. And they manage it almost always very bad.

    Well, the human race is not perfect, so the world is not perfect. Everybody makes mistakes, even God made a lot of mistakes. I can pinpoint some of them. :-)) The secret is to minimise them.

    PS. Before the existence of central banking there were also "money factories". The only difference is that they had other names. And somebody must have the control of the money supply. No, I don´t trust God, much less Jesus, on that matter. :-))


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