The Trader wrote (and warned) about the Spanish economic implosion while the mainstream media was focusing on the Greek drama last year. With the economic collapse, despite the recent IBEX rally, austerity is now hitting across the board. Many Spaniards see moving abroad as the only possible option out of the austerity misery. This is a dangerous path for a great country. More on the subject from El Pais.
Eskilstuna is an attractive town around 120 kilometers west of the Swedish capital of Stockholm, the headquarters of car maker Volvo, and the home of Abba singer Frida Lyngstad, the brunette. Soon it will be the home of pediatrician Jorge Sotoca and opthalmologist Mercedes López, a Spanish couple both aged 32. Next February they will begin working at Eskilstuna’s hospital, which has a catchment area of 400,000 people. They have already arranged nursery care for their one-year-old baby.
Their reasons for leaving Spain are simple: “Job insecurity, uncertainty and fear about where Spain is heading, few opportunities for career growth, and the chance to give our daughter a good start in life,” explains Sotoca.
Guest post by Peter Tchir.
I liked the book. It was a good read. It is also a compelling strategy. Find something that costs next to nothing to put on with huge potential gains. The big short was the ultimate elephant hunting or lottery ticket.
The beauty of the big short is that some investors found some obvious flaws in a market. They thought the deals themselves had problems and the structure of the more complex deals was also done incorrectly. They went against the grain, they used logic and intelligence to find an opportunity, and in turn crushed it. It really is a great story and is incredibly compelling.
The problem is that things mostly trade rich, because they don’t have much value. CDS, contrary to popular opinion, doesn’t typically have big payouts. It often trades tight because most companies don’t run into trouble.
It is exciting to spot trouble, huge amounts of money can be made getting short, but it isn’t easy. More often than not, companies wiggle out of trouble and it is easy to be bled to death on carry. I like being short, it can be a great strategy, but it isn’t easy.
That to me is one of the biggest problems in the market. Investors, many of whom have underperformed, and are all looking for the big kill to make up the year. Everyone is looking for that one trade that will result in stellar returns, and as far as I can tell, most have come to the conclusion that being short is that trade. As volatility (VIX) has collapsed and stocks have marched higher, many have continued to look at CDS and the credit markets as an ideal short. “It doesn’t cost much” and “can have a huge payoff” is the rationale. To a large extent that is true, but so far it hasn’t worked.
Hardly surprising, the US aggregate income distribution is continuing the one way journey. For great reading on the US sociodemographic problems going forward, we recommend reading Emmanuel Todd. For a quicker “version”, a few thoughts bt Marc Chandler of Marc to Market.