Spanish Piggy

Position: Short Spain (EWP)

 

I have been getting a lot of questions/emails today about Spain (I wrote negatively about it in my Early Look note this morning). Hopefully the “speculator” fun-cops over in the left wings of Europe don’t come after me. I am but one man, with an innocent chart and mouths to feed.

 

When it comes to size and scope, at $1.6T in GDP Spain’s economy is approximately 4.7x larger than that of Greece ($338B in 2009). There are 46.7 million people in Spain versus 11.3 million in Greece. That’s a lot of people who are likely offended by being called a Spanish Piggy.

 

When it comes to balance sheet and deficit problems however, the financial data doesn’t lie; politicians trying to put lipstick on it do. At 11.4%, Spain’s deficit to GDP rivals that of the USA’s and over $654 billion in public debt is pushing up against a worrisome risk manager’s level of 44% of GDP.

 

Because I am focused on these mathematical realities doesn’t make them new. That said, I am also very respectful of the fact that the last time the obvious risks implied by Spanish leverage started to freak people out, stocks went a lot lower than where they are currently trading.

 

In the chart below, you can wrap your head around the risk/reward of being short Spain’s stock market. Since the most recent YTD low established on February 5th, 2010 on Spain’s IBEX 35 Index at 10,103, Spanish stocks ripped the shorts for an expedited +9.4% rally. We short sellers of piggies call that an entry point.

 

We are using our intermediate term TREND line of resistance at 11,385 (red line in the chart below) as our risk management line. You can also use that as your stop loss level if you think there is risk that this Spanish Piggy can fly higher. With a Global Bubble in Bailout Politics forming, anything can happen…

 

KM

 

Spanish Piggy  - spain


SECTOR SPOTLIGHT | Live Q&A with Healthcare Analyst Tom Tobin Today at 2:30PM ET

Join us for this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more