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: Few changes - (Asia-Pacific markets saw small fluctuations with European futures up and those for the US flat) – Asia-Pacific markets saw small fluctuations despite the US rally on the back of hopes of interest rates having peaked and a calming down of worries regarding the financial sector. European futures are up and those for the US flat.
Response to the crisis: Paying for the sins of our fathers - (Social Security reform will boost pension payments as percentage of GDP to 17.5% in 2050 (Social Security deficit of 4.84% of GDP) (Expansion p30) – The calculations have been made by the Fedea foundation. The explanation is simple, pensions are indexed to the CPI, which means that expenditure will rise much faster than income, especially as no provision has been made to control spending. Attempts to control the deficit via rising payroll tax is also likely to have a negative impact on economic growth/employment/wages, thus also negatively impacting on the deficit. The reform is basically a way to buy votes today, with the cost being charged to future workers/pensioners.
Banks: The beauty of small deposits - (Households withdraw €18bn in deposits through February (to €986.2bn in February) in search for higher yields (Expansion p24) – Deposit flight is a touchy subject these days. However, in the case of Spanish banks the declines have been relatively modest (even the corporate deposits “only” declined by €22.9bn), with loan/deposit ratios below 100% and with household deposits being relatively sticky given that they are quite atomised and mostly within the amount covered by deposit insurance.
Labour market: Transparency is good - (The Independent Fiscal Authority (Airef) believes that the unemployment rate is not representative of reality, boosting the number of “real” unemployed workers by 1m (Expansion p32)/Social Security affiliation rises on the back of contracts with lower weekly hours (Expansion p32) – The Independent Fiscal Authority’s aim to provide more realistic unemployment figures does it credit. Not counting workers who have given up on finding a job, those on furlough and those on part time contracts who would like to have full time jobs flatters the unemployment figures, but provides little in the way of useful information regarding the real estate of the labour market. The same is true of counting “jobs” rather than hours worked. Boosting jobs with lower hours is just spreading the same amount of work over a larger number of workers.
Prisa: Sooner better than later - (Postpones to 2025 the sale of Santillana (valued at €1.4bn) (El Espa?ol) – The Santillana educational products division remains the jewel in the crown for Prisa and its sale remains the best way to reduce Prisa’s debt. On this basis, postponing the sale of Santillana does not sound like good news, although if there were an improvement in the market/economy it might be brought forward, especially as the source for the postponement is an executive incentive scheme.
*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.?