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: Risk on - (Asia-Pacific markets were mixed with European and US futures up) – Asia-Pacific markets were mixed although there are signs of a return to risk-on stances. Futures for Europe and the US were up.

Response to the crisis: More for less - (Bank of Spain calls for direct aid to vulnerable households rather than generalised fiscal help (Cinco Dias p20) – Bank of Spain is stating the obvious. Aid should be provided for those that really need it, as it could be used more efficiently (and cover the needs better). Generalised subsidies are inefficient but politically attractive as they “benefit” a larger number of voters. And giving extra money to those voters is likely to fuel inflation.

European funds: Fast and bad is a bad combination - (The European Parliament sees bureaucratic obstacles to the use of European aid and calls for greater agility (Expansion p24) – The deployment of the Next Generation funds seems to be a shambles. This is not just about a slow roll-out of the funding but about how the money can be best spent to fuel long-term growth. Spain already had a major benefit in the past from joining the Euro and lost the plot in a real estate bubble. Hopefully this may not be the same this time. And if the approach is not good, agility only makes it worse. I have doubts.

Grifols: Captain leaving the ship - (The share price falls 10% after the exit of the Chairman (Expansion p10) – It is always difficult to judge why people make decisions. But the exit of a CEO at a time when the market has doubts about a former growth idol is not good. Especially as this comes after the announcement of a cost cutting drive. “Growth” companies depend on investor confidence. This does not help.

Macro: Not good - (Supermarkets see a 4.5% decline in sales in January despite the cut in VAT (El Economista p5) – A 4.5% MoM decline in sales (volume) sounds really negative, as we are talking about mainly food sales. There had already been a strong shift in favour of cheaper food items due to the impact of inflation. And the cut in VAT had only a symbolic impact on purchasing power. So, volume sales declining is a very negative indicator.

*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.