Take 5 and come back tomorrow
First of all, let’s be clear. The following is not investment research/advice.?And, as such, it involves no investment recommendations. These are my thoughts on Spanish equity issues, which I find relevant. I share them freely (and not just as regards price). As always, I am only trying to help. Please read the rest of the “discomplainer (*)” at the end of the article.
Market environment: China, again - (Asia-Pacific markets rise with European and US futures up) – Asia-Pacific markets rose on a cut in Chinese interest rates. European and US futures are up.
Response to the crisis: Don’t let your left hand know what your right hand is doing - (The EC proposes to maintain the fiscal rules suspended another year due to the war) – There is a certain sense in this kind of approach, as the economy (i.e. people) are vulnerable. And there are already too many strains on EU internal harmony. But the ECB is trying to control inflation from the demand side (as it can do little about the supply side) by contemplating higher rates/no bond purchases (note the “contemplating”) and governments using a higher fiscal impulse would not help. This business of not letting your right hand know what your left hand is doing may be very biblical. But it is not terribly efficient, except in terms of attributing the blame (the ECB was the bad individual and the governments the good individuals).
Prisa/Telefonica: Missed opportunity - (Telefonica sells a 7% stake in Prisa (out of its total of 9%) to a group of Spanish investors) – It is very difficult to know what is going on in media stocks. Their stock in trade is drama, after all. But Telefonica selling almost all of its stake in Prisa seems to be missed opportunity (although maybe it did not have one). Having a hugely loss-making investment in Prisa (although that is largely water under the bridge) is likely to have created all sorts of worries for Telefonica top management, well and beyond any lobbying benefits. This is the type of situation where if you are going to make a move, go the whole way. Selling “most” of the stake does not really help things. You’ve already taken the loss, but you are still involved. No longer being involved was presumably the target, I would have guessed.
Banks: Just do it better - (The banks sharply boost the weight of their own products in their fund portfolios) – Banks trying to sell more of their own investment products (rather than those of third parties) makes a lot of sense given the relative return. It also helps that in crisis situations correlations go to 1 (i.e. it does not really matter how good the fund manager is, returns are likely to converge, at least in the short-term). But it would be really good if banks understood the concept of delivering the best product possible all the time (especially in bad times) as the best marketing policy (and some of the bank fund managers are exactly that).
Macro: Eating into household spending - (The Funcas panel lowers the expected growth of GDP in 2022 to 4.3% (-0.5pp) and raises the expected CPI to 6.9%) – I have already said this several times (bear with me), but things do not look good in 2022. It is not just about the actual fighting war in Ukraine. ESG was already pushing inflation higher, and fossil fuel producers do not look like they want to help people who want to put them out of business. And then there is food. Inflation of the kind we are seeing eats into household spending (sorry for the pun) and central bank attempts to control inflation will not make that better.
*The above information has been read/understood/summarised/evaluated/copied as well as I could to provide a guide to Spanish equities, given available timing/intellectual constraints, and I accept no liability for misreading and/or mistranslating the original copy as set out in my previous article (which I urge you to check, as I am only trying to point you in the right direction, I hope). As for what you may decide to do, after reading the above, please contact your legally approved provider of investment advice on Spanish equities.?