Surprise! Spain, Bulgaria and US Growth – Good news for everyone!

Spanish Bond “relief” and US jobless claims “surprise”.

OK someone tell me, is it me or the headline writters who are living in a parallel reality?

First Spain – the “relief” according to the aritcles I’ve consulted all agree, is because Spain had ”no trouble’ selling its 10 and 30 year bonds. All the print was about how great the bid to cover ratios were. What seems not to have merited mention, attention or even any thought, is how much interest the Spanish had to agree to pay, in order to sell this debt.

The 10 year jumped 0.8% up from only a month ago to stand at 4.864%. While the 30 yr jumped even more in only a month, up 1.2% to stand at 5.9%. That’s more than the high street rate on many UK mortgages! Keep up those rates of increase and Spain will be able to rub shoulders with Greece in the Pariah’s corner.

And how is Spain going to pay this rate for 10 and 30 years? Well let’s see – what rate of growth is Spain looking at? Well just this month the Spanish government downgraded its own growth estimates down to 1.3% growth in 2011 and 2.3% the year after. And these are estimtaes like drunk people estimate how good they are at driving. Believe them if you want to.

Think back to the Greek saga. Remember how the rate of borrowing crept up and then up some more, gradually gathering pace. Until – Oops – maybe we do have a borrowing problem and maybe we do need the ECB to be our ONLY AVAILABLE lender.

Now of course Spain will say, ‘but we did sell our debt’. Which promtps the question, if Spain is really heading for a borrowing lock-out who would want to buy this debt and why? Good questions. And the answer is you would want to buy this debt because it carries a very high yeild (interst rate) AND there is a guarenteed sucker waiting to buy it from you – the ECB. The ECB bond buy-back policy means bond buyers WILL continue to push the rate up and up and then sell the bonds into a secondary market which is itself back-stopped by the ECB which therefore gives everyone a buyer of last resort to carry the losses when the music stops.

But in the financail press none of this gets a mention – its just a “relief”. Yeh I bet it is. Relief that the public funded gravy train is still rolling.

Talking of Debts, little talked about. Bulgaria. Not a big player or debtor for that matter. But the level of debt among Bulgaria’s private companies is suicidal. Bulgarian companies owe 100 Billion New Bulgaria Leva (BGN) which is about 50 Billion Euros. Now this isn’t some owing money to others. This is everyone owing everyone else. They are all in debt – businesses banks – everyone. Every one a debtor and not a solvent soul in sight.

On top of which the Bulgarian Regional Development Agency – you just have to love these people – from Portugal to Bulgaria ‘Reginal agencies’ are a disaster area. – anyway Bulgaria’s has revealed it too is hugely in debt. It has sheepishly admitted it owes 280BGn/140 Billion euros and wait for it… 200 billion of the debt is ‘partially unsecured’ while the remaining 80 billion is ‘totally insecured’. Which is like a climber telling you he is roped in for safety – but then mentions he doesn’t bother with all that fuss and bother of tying the other end on to anything. Just leaves it dangling. Quicker that way.

And can anyone remember from a recent post who is the biggest lender in Bulgaria? GREECE. Smiling yet? I am. Manically.

Those Greek Bankers really do deserve special banker mentions don’t they! So the Greek banks will be asked by the Bulgarians to extend more lending. The Greek bankers will take a leasurely stroll around their empty vaults and say, ‘what?!’ The Bulgarians will say – but, if you cut off our lending we’ll all go bankrupt. To which the Greeks will respond by throwing their arms around them in brotherly solidarity and understanding and cry out, “I know! Isn’t it awful?”

Which awfulness brings me to US unemployment figures. Which went UP. And this news was somehow such a surprise to the financial media and to Wall Street. Who woulda thunked it? US unemployment went UP and not down. And with the economy doing to so well. I mean House starts fell off a cliff 10% down last month alone because no one can affrod one and anyway there is a medium sized tidal wave of foreclosed and short sale housing stock coming on to the market. So, really, who could have known?

You know I’m willing to bet that in a couple of months people will be really surprised when the strikes and massive wage increases (from 30% to over 100 and more ) going on in China right now, ‘unexpectedly’ cause costs margins for Toyota and Honda and the entire computer industry to eat in to their waffer thin profits. Either prices will have to go up for the comsumer or profits at the manufacturers will go down. Or both! and everyone in the media will somehow manage to be surprised.