Spanish Band-Aid hasn't stopped the blood
The weekend bailout deal makes it so the nation's banks are not teetering, but it does not address the bigger issue.
Why doesn't anyone ever consider anything permanent relief? Why doesn't anyone say, "This is not a Band-Aid, this is the real thing"? Why can't anyone say "This puts it all past us, it is what we have been waiting for"?
Isn't that what's on your mind? Aren't you getting upset that people don't just say, "This Spanish bank bailout is what the markets are looking for, and we don't have to worry anymore"?
But there is a reason, and it has to do with the deep nature of all the issues involved and their inability to be solved piecemeal.
First, each country has a twofold problem. They all have banks that are teetering because no one trusts them to stay afloat. And they have nations that must issue debt constantly to pay their bills.
The Spanish deal this weekend makes it so the banks are not teetering. It does not address the sovereign bonds at all. Even after the $125 billion injection into the banking system, the Spanish bonds don't seem more attractive than they did before.
The only real natural buyers of Spanish bonds to date have been Spanish banks. They own more than half the Spanish bonds out there. We don't know anything about which banks are getting what and at what rate. All the Spanish banks have immense amount of debt issued themselves to fund their operations. Do the debt holders get bailed out as these banks do Citigroup (C)-like recaps and dilute the equity? Or is this like TARP, where the banks take a federal preferred and then pay it back over time?
We don't know.
Now, I am not saying that this is all a big waste of time. This money should stop the runs on the banks that were happening but not being acknowledged. That's a positive and a big one. It is why we rallied last week on the notion of a bank recap.
But still, it did not give us natural buyers of Spanish bonds. In fact, I worry that all that will happen with the $125 billion is that the banks will use it to buy more Spanish debt.
What we needed was something that also addressed the sovereign debt side, not just the bank debt side, because anything that addresses only one segment is just a Band-Aid or a tourniquet or whatever non-substantive-measure analogy you want to take.
We needed a new institution with fresh capital that would buy the sovereign bonds from countries trying hard to cut their deficits while not choosing to lend to those who don't. We needed a cordon on those that don't get their act together -- think Greece -- and a welcome mat to those that do.
So while this action might keep the depositors from running to other countries, it does not cause investment in Spanish bonds that needs to be made while Spain gets its act together.
Simultaneously, with an actual entity to buy Spanish bonds, the entity must also spur some growth that will then raise tax receipts and turn a vicious cycle down into a virtuous cycle up where we think, hmm, Spanish bonds yielding 6% versus U.S. bonds yielding 2% -- I will take that chance, knowing that both the government and the currency are solvent.
We didn't get that either.
Now, where would we all be wrong and the situation/solution be good enough? If there were suddenly demand for all of the bad loans and vacant property that these banks own. Perhaps they can use the fresh capital to make it so the bad loans are taken off their balance sheet. Perhaps there is such a plan that we do not know about.
But without something that spurs growth, that creates a reason to buy Spanish government bonds, and that makes you feel that Spain is investible with private capital, all we have is something that might forestall runs on Spanish banks if the Greeks establish a government this weekend that wants out of the euro.
That's all it really does. It stops one horrible thing -- bank runs -- from happening ahead of the Greek elections. That's good. It's one piece of the puzzle. But the puzzle is huge and is still not being addressed.
You simply have to ask yourself two questions when you are trying to figure this stuff out. One, would you now take your capital and buy Spanish bank stocks? And two, would you now buy Spanish banks?
I will give you the short answer: I wouldn't even put a deposit in a Spanish bank, let alone buy the stock of a bank or buy a Spanish bond.
It's just not worth the risk. Until it is, we are not out of the woods. We just keep the lines from forming outside one of the nine remaining Spanish banks.
That's not what turns a stock market around in this country. It just keeps it from going south. For now.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.
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The Pain in Spain will return again and again until two specifics are addressed... job recovery and family-sustaining incomes that revitalize housing values, bolster municipal revenues and generate the mindset of prosperity. Forget "complex financial instruments" they only do a few any good and generally lead us exactly where we are today. Every currency unit printed now simply undermines and debases what was previously printed. None of it courses through the economy so it is debt like cancer, not debt that lifts up what isn't. A friend of mine said-- all this hoop-la about Europe is masking the REAL crisis... an America that isn't what it used to or needs to be for the whole world. I agree. Our best hope is that Jamie Dimon returns from Washington this week with a mandate to charge off the $700 Trillion in derivatives and make sure the next dollar he deals with is made out of paper, has a President on it and a watermark of legitimacy. The days of paper pushing and button pressing are fully over. Trust is back in vogue. There isn't a lot that qualifies yet... it's a rally everyone on Earth wants and needs right now.
It all comes down to one thing...are you tired of the rich getting all the bailouts and us working men getting nothing? Take a look at what I found and see why the rich are trying to hide this for themselves. G00GLE the term ' CRAZY CASH TEACHER ' all one term and click the first site. Go right to the 'PENNY STOCK' page to see what the rich don't want you to know. It is time your family lives the good life and this will help. THIS IS AMAZING!!! THIS IS A MUSSSST SEEE!!!
to know what he's talking about - after it is so clear - he's the one who never saw the crash coming - who are all these people pushing and pulling at us - one day up - the next day down - who pays them? This of course is never going to work. 25% unemployment - leads to trouble in the streets. Not only is it not the long term solution, it is an indicator of how over inflated the market is- a gambler's paradise. Crammer is no leader - just a follower
Lending $100 Billion to Spain is like taking investment advice from Cramer----as USELESS as teats on a bull.
It is just more $ they will never be ale to pay back and the Socialist morons in Europe will never accept austerity untill they starve to death because noone will send them food they can't pay for and are too lazy to grow themselves.
Let's see everyone is broke except the Federal Reserve who can prints monies at will.
let me guess the Federal Reserve will prints up some more fake monies and buy Spainish debt and Spanish bank stocks.
just going to make the coming collapse that much worse
soon we are going to be paying $1,000,000 for a loaf of bread and think it's a bargain.
so on friday cramer says if something happens over the weekend stocks will rally..........
he said if nothing happens we will give back all or most of last week's gains..........
this morning with futures surging he arrogantly said that something happened and the usa is the place to be
shortly after this genuis call the market opened and tanked
so...........wtf is is cnbc doing giving this guy air time?
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All hail the bull market, which ended the week with a big rally. But it also is starting to look a little like 1987, which suffered an epic blow-out.
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