Skip to main content

Spanish Debt Issues

There is a lot of talk about Spanish sovereign debts recently. I came across a research paper which I think is very useful for me and wish to share it here. This is taken from www.fundsupermart.com, an online fund broker where you can purchase funds form various fund managers. This portal provides some research and comparisons and it is essentially a self service portal.

From the chart provided, we can see that there is a problem for Spain to service their debts for the next 4-5 years if the debts are not re-structured. With this kind of risk, no sane investors would want to risk their money to buy Spanish bonds. They can only turn to European central bank for bail out. The blue arrow is a fictitious line I draw assuming re-structuring is going to happen. Essentially, they have to move the payment of capitals into next 5-20 years to be affordable. In addition to that, they can't make additional loans. This is just taking a very simplistic view of the situation. To have that happen, what will the people on the ground have to endure? How can the economy be revived without new funds pumping in? At the end of the day, a big brother (or a group) is required to save them. Sponsor them during the difficult period. The people on the ground will have to adjust to different level of standard of living over next 5-10 years.

Bad debts will have to be written off gradually. Productivity has to increase. Hand outs will have to be reduced.

Comments

Popular posts from this blog

Stock Price Trend - Continuation Pattern

Here is the truth about stock price trends: it tends to follow something called continuation pattern. Price trends once established, will tend to continue in it direction. This is similar to the law of physics. Taking at look at the current market, you will notice that indexes like the S&P 500, Dow Jone or Nasdaq Composite are in down trends. Depending on the type of investor or trader you are, you many want to remember this law by heart and constantly reminding yourself about this law. Some people don't like to use the terms bull market or bear market because they think that they are versatile traders and they can make money in either up trend or down trend. For, me, there is no harm in using any terms you want to describe the market as long as you have great discipline in your investing or trading strategies. I tend to use the words investing and trading interchangeably because in both cases, they are all about speculation. The difference is probably in the time horizon that ...

Professional Investor's advice, market hype etc.

This is an article that I read on 26th September 2012. It has been over a year now and I suddenly remembered. I'd posted this last year with some other predictions from CNBC etc. During then, I was very fascinated listening to these experts. They are so confident and so logical. I always admire their ability to "read" the market and manage hundreds of millions of dollars of other people's money. So of them managed billions of dollars. Then I thought what if they ever go wrong? Won't they lose a lot of money? So, I think it would have been interesting to remember what they said and then we verify later. On 26th September, the S&P 500 index closed at 1433.32. One year went on and it went up another 19% from there. Below is S&P 500 over last one and a half year. As we can see, the market has still been a bull. Over the one year period, the S&P 500 index did correct itself. However, it was a