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: Tension - (Asia-Pacific markets decline with European and US futures little changed) – Asia-Pacific markets declined due to increased US-China tensions. European and US futures were little changed.

Response to the crisis: It works, until it doesn’t - (The tax pressure rose 3 points in the last legislative period and will rise a further 3 in this one (Expansion p28) – Raising the tax pressure can be a better strategy that it seems if you then spend the tax income boosting the economy (and inflation helps). It certainly buys votes. But there is a limit. The temptation is to spend more than you collect.

Telefonica: Stick to your knitting - (Deputy PM Díaz wants to take control of the Sepi government holding company in order to control Telefonica (El Economista p5) – I have already said that the Government making an investment in Telefonica is not a good idea. It does not help Spain’s international image and will likely not result in good business decisions on the part of the company, Everything (almost) would be much better if everyone stuck to what they are meant to do.

Energy: Intentional design - (Cepsa enters losses due to the tax on energy companies and criticises its “bad design” (El Economista p15) – A tax, allegedly based on “windfall profits” that leads to a corporate doing legal business recording a loss is certainly “badly designed”. Unfortunately, there might be the suspicion that this was exactly the design.

Talgo: What’s next? - (Talgo rises sharply in the market due to the interest of a Hungarian group in launching a bid at €5/share (Expansion p4) – It is often seen as a negative that Spanish companies are taken over by foreign ones. Especially ones with proprietary technology. I do not see it that way. If shareholders, especially institutional shareholders, want to sell at a profit thy should do so. It is their fiduciary duty. But the key is to put in place an environment that allows the generation of other technology companies to take their place. And this is not taking place.

*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.