alfathoughts: September 2013

Saturday, September 21, 2013

The yard is on fire

Unsurprisingly, the yard was full of straw and dry debris and searing heat . Now nobody knows how to turn it off because there is very little water in the house , just a few buckets that are committed to the garden to save some of the very poor harvest. The surrounding neighbors have wells , but never gave them permission to extract from them a single drop of water. And not because they are bad people or unsupportive , no, but because their crops , and therefore their survival also depend on what is in those wells. The drought in the region for five years , and cruelly dented the welfare of families in this area , more and more poor , on the outskirts of the big city .

How is it possible that Cypriot owners of this farm have allowed such an accumulation of dry straw and debris in his yard ? Did not they know that an accumulation of that size was reckless ? It was only a matter of time that caught fire and endanger the other neighboring farms . The flames can reach a wingspan that with the strong wind and the dryness of the atmosphere , can easily spread throughout the periphery , threatening even some neighborhood of the capital. The Cypriot farmer has thought of all possible options , and has called for a Russian acquaintance who has a big pot of water. But this is not what is making it easy and want to take advantage of their desperate situation : He has hinted that a change of water trucks take it to establish a nightclub , a brothel , at home , by the corral , and that the young farmer's daughter serves drinks at the bar . The farmer is distraught face , but for now are still arguing over the phone and neither has hung .

Alternatively , the other farmers , the mayor, the sheriff and to the very minister discussed in the capital , so crazy and screaming like so many previous occasions , the measures to be taken . They run in all directions, like a anthill in a state of emergency . Bringing water from the town center to outlying farms is not viable , since the mayor refuses point blank to spend their water resources off the miseries of the periphery. The alleged to have amassed so negligent , careless and reckless in their dried droppings playpens are a tinderbox today . And not without reason . But the fire is still burning and flames and quite visible from the capital .

The fire is unforgiving , and the laws of physics , such as the market , are relentless . Some farmers blame the damn fire the damn drought, damn damn mayor or minister, ignoring their negligence and that the weather conditions are the same for everyone in the city and the outskirts . Maybe that's the problem. The city dwellers enjoy a dry, warm and sunny in their pools , because its flammable products are well distributed , stored, controlled and provided with a fire extinguisher handy. But in the suburbs, with their bad habits and lax , need another wetter climate . A climate that does not threaten their miseries heaped in their playpens and allow them to survive long term , despite their bad habits.

When farmers moved to settle in the periphery of the city, believed that everyone would benefit from this proximity . They believed that everything would be advantages , like going to the cinema in town on Sundays , shopping , and some did business with the city sightseeing visiting their farms from time to time . But did not consider the disadvantages : The hot and dry climate of the city perjudicba its agriculture , and fewer farmers could afford to go to the movies or shopping in the city.

What advantages does so for those families have moved to the dry climate of the periphery of the big city ? And what advantages available to citizens outside to have some farmers that require them extremely dangerous water to quench your fire ? It is true that farmers bought in enterprises of the city their agricultural tools , but increasingly have less money to spend in the city . And it is also true that for a few years, residents of the capital to the periphery could go to buy local products. But today the risk of fire spread throughout the periphery , which could also reach some areas of the city , and generates too many tensions between them . Perhaps , in a fit of unprecedented determination , the Cypriot authorities the farmer banished once the fire has consumed his house , but that does not prevent other neighboring pens catch fire soon. It is only a matter of time.

Today no one knows how it is to fight fire Cypriot farm or may take much longer to get the water to control it (and no one wants to turn it off) , and it is not known if it will be time to prevent its spread to a neighboring farm . What is certain is that it will not rain and the weather will torrid . By the time the yard on fire doors remain closed for the past 5 days to contain a blaze unnecessarily higher each passing minute . Because they know when a yard is closed , but you never know when it will open . All have in mind an old Argentine farmer that something similar happened , but nobody wants to talk about it now . At the end of the day , despite the fire and destruction , the aesthetics of Mad -Max still remains something away from this metropolis and its periphery .

The 2 big lies of Montoro on the new tax on deposits

Well as we know details about the new tax " Montoro " which will tax bank deposits. Come straight to the point :

1) You have no collection effort , for that the tax rate set to tax banks by deposit volume and move between 0.1 and 0.2 percent , sun type " very moderate" for this tribute .

    Comment Gurus : In November of 2012 the volume of deposits in Spain was 1.47 billion euros. Aplicad between 0.1% and 0.2 % and it will leave the state with this tax raise very moderate rate between 1,470 and 2,940 million euros extra. Not bad for being a tax that has no tax collection eagerness

2 ) No tax on depositors , nor is it going to be , but it is another tax on banks.

    Comments Gurus : Let's see , maybe the citizens if we are foolish , but the banks I'm afraid not . Net profit of the whole Spanish system in Spain in 2011 was 5,351 million euros. ( In 2012 has been extremely low by Bankia ) . Does anyone believe that the banks are not going to pass a tax to customers that they can get to eat up to 55 % of profit generated in 2011 ? Well obviously not believe anyone , so you can go and as I prepared to see a little increase fees or you fall a little return on deposits. I hardly will notice , but at the end of the year, Volya , between 1,470 and almost 3,000 million euros to be flown out of the pockets of depositors to state coffers and collected by banks.

How we told you yesterday , I'm starting to prefer being Cypriot and I stick a saber of 6.75 % once, to be Spanish and I might be cooking like a frog to put that in a pot and go up little by temperatures slightly not notice that being cooked alive and jumped .

87% of Spanish savers prefer advice in bank branches

The 87% of savers resorted mainly Spanish bank office last year for advice for their investments, compared with 54% who did so in 2011, according to an opinion poll by the Institute for Market Studies (IEB) and Inversis .

The study, which is included in the annual financial advice, shows that 97% plus of the Spanish resorts to some advice when making decisions about their money, and in most cases, that is, the two-thirds going to do more than one type of advisor.

According to data obtained by the IEB, 36% of respondents with more than 20,000 euros available for investment uses a unique method of counseling, 25% used two methods before making an investment decision, another 25% use three views and only 10% using the four methods discussed.

The Basques are those who maintain strong relationships of trust with their financial advisors, as the study points out that 23.8% confident "long, fully", while 42.9% expect "pretty heavily". On the opposite side is Valladolid, where 42.9% of savers say they do not trust "nothing at all".
Comment Gurus:

'After the preference shares, subordinated and other crap, 87% still in his office advise among bank? Sometimes I think that we deserve what happens to us.

Did you just hire ADSL ? Put an alarm within 1 year if you happen to pay double

ADSL ads are not transparent in their pricing, and easy to understand. Besides, the most attractive offers apply only for a few months , usually twelve so that after this first year the bill may increase by 80 % . What to do to not overpay ? Be informed to take control of the situation.
1st maneuver

When an operator informs us their charges for ADSL, usually through a large number of very visible in their propaganda . For example , ADSL + Mobile = 19.90 euros . But this figure is not the total of what you pay but only DOWNPAYMENT ( 1).

To find out what we will pay in total will still have to add :

    (2) REGISTRATION FEE , between 0 and 30 €
    (3) ROUTER PRICE generally 0 €
    (4 ) FEE ONLINE , between 13 and 15 €
    ( 5 ) VAT , currently 21 %

For example , this month the offer Jazztel Savings Pack 100 offers :

Make this calculation for each offer that interests us before hiring is essential to choose well.
2nd maneuver

But we still will be another maneuver to do to avoid losing money : not to stay longer than the duration of the initial promotion , ie go before the quota runs low. As Olivia explains Feldman , co -founder of HelpMyCash :

    " The operators exploit the passivity of many customers to increase fees up to twice , once past the initial promotion . In addition , the user must remember that companies with lower initial offers are the more their prices rise after "

Thus, it is a matter of being attentive to the end of the first term ( using electronic alerts , for example) and use a comparator ADSL to know what our next operator before they change rates.

Otherwise, very cheap deals first as Jazztel can go from an average price of € 30.17 per month the first year to € 54.33 after . In the case of Vodafone , after the first year is spent € 14.9 to € 24.9 . With Orange , you go from € 11.95 to € 25.95 . In the case of Ono , the shift is from € 19.9 to € 31.9 . And Movistar , which would generally be the most expensive , would have the least difference : € 29.9 € 34.9 once after the first year . *

This means that after the first year , Jazztel increases its share to 80 % , Orange 52% , 43% Ono , Vodafone Movistar 33% and 11%. It then checks that it is a practice carried out by the five major carriers in the country and that companies with more attractive offers are those who suffer the greatest price increase after the first year of contract.

* Offers are Jazztel ADSL compared to 30 MB, 20 Mb ADSL Vodafone , Orange ADSL 20 Mb, 30 Mb and Ono Movistar Internet VDSL 30 Mb

The price of housing in Spain is overvalued by 15 %, but could fall to 35%

The price of housing in Spain continues overvalued by at least 15 %, but could fall to 35% , according to a report by the Economic Situation Observatory (CEO ) of the Instituto Juan de Mariana on housing prices and rents .

The OCE first calculated in 2007 the magnitude of the ' housing bubble ' in Spain and concluded that housing prices were overvalued by 40 % .

From the highest point of the ' bubble ' , housing prices have fallen new construction 24% , " so that if in 2007 it was necessary to adjust prices about 40 % lower in 2012 that margin would have been reduced by 15 %. "

According to the Institute , the " slow" price adjustment can be attributed largely to a "late , ineffective and misguided set of policies to hinder rather than accelerate this process ." For the center , the strategy followed by the banking sector is "particularly detestable " .

"Although progress has been made in this regard , the fact is that , on the one hand , are incomplete and , on the other, disappointing , for example regarding the Sareb " he asserted the institution , which considers that the ' bad bank ' seems to be having an opposite effect , " because instead of acting as a catalyst for market , accelerating the price adjustment , is serving to the contrary."

The CEO has highlighted in its report that the "slowness " of the Spanish setting contrasts with the "fast" setting other European countries also experienced ' real estate bubble ' as Ireland, where prices have fallen more than 50% from their highs .

Comment Gurus :

In respect of housing prices I recommend watching this video in which Borja Mateo ( an industry expert ) gives his opinion without mincing words about what you expect to happen to the price of housing in Spain

Saturday, September 14, 2013

Holders of preferred stock will suffer BMN remove up to 60 %

Holders of preferred shares of Banco Mare Nostrum ( BMN ) suffer remove up over 60 % according to the hybrid resolution plan that has generated the Fund for Orderly Bank Restructuring ( FROB ) .

In addition, the FROB said considering the negative net asset value of the entity, which is estimated at 12.378 million euros, and the total nominal value of outstanding ( excluding own portfolio balances ) of hybrid capital instruments and subordinated debt amounting to 449 million euros , the amount they will receive the headlines is also "superior to what they would receive on a liquidation scenario .

Specifically , BMN buy back their preference share issues with a take off from a range of 27.1 % and 60.7 % , depending on the issue, which pay cash for immediate subscription and payment in new shares of the entity. This will cut up to 70 % in case of an FGD emission Caja Granada , according to the agency led by Antonio Carrascosa .

In the case of perpetual subordinated bonds will take them off from 70 % to almost 38 % , while for term subordinated debentures with maturity date prior to January 1, 2016 , there will be a rebate of 10% and reinvest cash amount in a bank deposit.

The FROB controlled entity shall be a capital by a cash amount of EUR 347.89 million to meet management action hybrid capital instruments and subordinated debt through the issuance and circulation of 259 , 62 million shares of EUR 1 par value of 0.34 euro premium.

BMN aid received by 1,645 million euros. Specifically , received 915 million euros through the issuance of convertible preferred shares subscribed by the FROB , whose conversion occurred on February 19, 2013 , and another 730 million euros through a capital increase subscribed also by the FROB .

Banco Mare Nostrum ( BMN ) , is society, born in 2010 , which forms the SIP of the merger of four savings banks : Caja Granada , Caixa Penedès , Sa Nostra and Caja Murcia .

This is the detail of the cash amount to be received by holders of preferred shares as consideration for the mandatory repurchase of its values

Mortgages . Falls the number , amount and falls are more expensive

The number of mortgages on homes reached a new low in March to stand at 16,270 , down 34.1 % from the same month of 2012 , according to figures released Tuesday by the INE .

The annual decline in March, with which the mortgaged strung and 35 consecutive months of decline is much more pronounced than in February, when the mortgaged homes fell 7.5%.

In addition , the total number of mortgages on homes ( 16,270 ) is the lowest in any month in the comparable historical series , which began in 2003 .

The tax benefits associated with home ownership ended on January 1 and that has affected housing sales operations , which have come back negative and , therefore, the number of mortgages that are on this types of properties .

The average value of the mortgages on homes reached in the third month of the year, 96,676 euros, 6.7 % less than the same month of 2012 , while the borrowed capital was reduced by 38.5 % year on year , to the 1572.9 million.

In monthly (March to February ) , mortgages on homes fell 32.8% , the largest decline in the past five years. The capital borrowed for the mortgaged recorded a monthly decline of 37.2 %, registering also its biggest decline since 2009 .

In the first quarter, the number of home mortgages accumulated a 17.5% decline compared to the same period in 2012.


The average interest rate for residential mortgage loans was 4.49 % against 4.33% a year earlier .

According to INE, the average interest rate on mortgage loans of savings banks was 4.68 % and the average term of 20 years . As for banks , the average rate was 4.64% and the average term of 21 years.

The 93.8 % of the mortgages in March used a variable interest rate , compared to 6.2 % fixed rate. The Euribor is the type of reference used in the creation of adjustable-rate mortgages , specifically 84.1 % of new contracts.

For mortgages with registry changes , in March totaled 22,628 , representing a decrease of 13.1%. In housing, the number of mortgages modified their conditions fell by 9.7 %.

Considering the type of change in conditions , in March there were 18,415 innovations (or modifications within the same financial institution ), with an annual decrease of 15.8 %.

The number of operations that changed entity ( subrogations creditor ) was 3,464 , or 18.8 % more than in March 2012. Meanwhile, in 749 mortgages changed the owner of the mortgaged property ( subrogations debtor ) , 40.7 % less.

Of the 22,628 mortgages with changes in their conditions recorded in the property records for the month of March, 39.8 % were due to changes in interest rates. After the change of conditions, the percentage of fixed-rate mortgages fell from 5.6 % to 3 % , while the rate mortgages increased from 93.7 % to 96.4 %.

The Euribor has the largest percentage of variable rate mortgages , both before and after the change . After changing conditions, the average loan interest on fixed-rate mortgages fell 0.43 points and in the case of variable rate mortgages fell by 0.72 points.

State of the housing bubble in the World

The Economist, we re-submitted his paper analysis to compare in that situation are real estate prices in many parts of the world.

To determine whether a country estate prices are overvalued or undervalued basically used two indicators. The profitability of rental housing on the purchase price (sort of PE ratio for the real estate) and disposable income per person needed to buy a home.

Apparently we would have good news, since many of the countries that experienced a housing bubble would have already made ​​the necessary corrections and other prices would be on the way. For example, in USA and Japan will real estate prices right now would be cheap as indicators of The Economist. In other countries such as Spain or the United Kingdom, prices still overvalued, but far from the levels we had a couple or three years, we would be talking about that for example in Spain missing fix prices between 15% and 16% , so little by little we get to bottom.

Countries could consider that are in bubble mode ... attention to Canada, Australia, Hong Kong, Singapore and to a lesser extent, France and Sweden.

In the past year where prices rose more was in Hong Kong with +24.5%, which was more in Spain fell -7.7%. Other places where the housing market is significantly priced up are South Africa + 11.1%, Brazil or India +12.8% +10.7%.

And the market right now seems closer to see how it would burst your bubble Canada, where home sales fell 15% in March and where surveys indicate that only 15% of Canadians plan to buy a home in the next two years, the lowest level in the last 20 years.

Holders of hybrid CEISS Bank could suffer maximum take off between 70 % and 80 %

The holders of hybrid instruments and subordinated debt could suffer remove CEISS Bank which would range between 69.86 % and 79.87 % , which ultimately depend on whether integration is embodied in Unicaja entity , according to the resolution plan hybrid management communicated the FROB .

The cuts would come to 79.87 % in the case of a special issue of subordinated debt and would apply if the agency led by Antonio Carrascosa participate in the shareholding of Banco CEISS , given that the European Commission requires an additional cut so that this participation is not less than 50 % stake in the entity. This would be the value of reinvestment , as the FROB .

If the entity resulting from the merger of Caja Caja Duero Spain and integrates with Unicaja , removes it would reach a maximum of 69.86 %. This discount proceed repurchase value . " For the computation of the 50 % stake will be taken into account shares issued as those arising from the exchange of the ' coconuts ' ( convertible bonds) to be delivered to holders of hybrid " explains the FROB .

CEISS Bank has an outstanding principal amount of hybrid instruments and subordinated debt of more than 1,400 million euros. However, the discounts would be 10% on some issues, they would reach almost 40 % if the FROB must participate in the state.

Financial sources have told Europa Press that must be borne in mind that the merger between Banco Unicaja CEISS and is close shut , so that in the time that is done , the cuts " would not be so hard" as the resolution of the FROB brand . "It is expected that these cuts are more similar to repurchase prices reinvestment value " , have been added .

Just a week ago , the supervisor agreed to amend the resolution plan CEISS Bank in order to incorporate the supply of Unicaja Bank to seize this entity. The European Commission did the same at the beginning of this week.

The plan kept the amount of 604 million euros of public financial support provided in the initial plan CEISS Bank . This aid has been implemented by subscribing contingent convertible bonds (cocos ) by the FROB issued by that entity , so capitalization reached levels set by Europe, which implies not nationalization .

The Commission ranked CEISS Bank in the ' Group 2 ' to be a bank " capital deficit could not meet privately without state help the deficit ' .

Recommendations of the bank to keep ... Customer .

A few weeks ago , during a private conversation with the director of a well known private bank based in Madrid, we talk about a topic I think is worthy of this reflection shaped post . That was pretty much the conversation :

The banker in question I came to ask what we were supporting our clients' assets more conservative. He was referring to the parts of financial portfolios that are not likely to be placed in bag , since volatility is not usually let investors sleep peacefully . Decorated indiscreet question by arguing that in this year 2013 is living your life more complicated in terms of investment recommendations to their clients.

I asked him if he really seemed this year more difficult and complicated than the second half of 2011 . Surprisingly he said yes , because he said , " all assets are expensive (sic ) " .

Obviously referring to bonds in general, as I prefer not to think that this directorazo also referred to the bag, knowing that there are excellent companies at derisory prices (eg Russian oil ) , and that there are investment fund managers that Cheap business succeed consistently investing . His concern mingled with confusion between risk and volatility (I recommend rereading Why call him when they mean Volatility Risk ? . Anyway, this reasoning was left too loose , this and any banker , however director who is , and I assume correctly that what he meant is to find alternatives to fixed income equivalents developed in the traditional Old Normal, in which the bank has been supporting life.

His existential question was where to shelter the money from your customers used to have low volatility in exchange for small but steady increases in their portfolios , repeating over and over: " .. is that now all assets are expensive .. " . Actually what worried him was to find an alternative to German Bunds (no risk of permanent losses ) but minimally decent yields , which igualasen at least inflation. Although that is pasture real long-term inflation , believe not asking for more .

This revered manager recognized me - only in small committee - that the Spanish fixed income , and generally peripheral , not enough risk premium paid to its customers, to offset the risk of permanent loss is assumed in these issuers insolvent . This recognition for its part, is progress that honor , if not because it debases the fact reserve it for " privacy" , and do not explain it and explain its employees to all Customers , as would be expected in all ethical and honest advisor .

What happens is that , not knowing how to find a clear alternative , most lucid bankers (because most anchors still believe that peripheral bond is secure) prefer to stick with traditional guidelines obsolete , rather than recognize their uncertainty and disability , which Customers can make them lose . And that is what we seek to avoid at all costs, because he recorded with blood and fire as they reached the banking world , some still beardless .

The said manager told me that longed for the time when the risk premium was 500 points (! ) , " Because at least at the time the return paid in part the intrinsic risk of default on peripheral bonds " (! ) . I replied that although the risk premium multiply x2, x3 or x4 ever performance to compensate the risk taken its Customers. And I had to remember that we were talking about their customers more cautious , since your initial question was where to shelter the money of shareholders more conservative. How could then consider taking the risk of Spanish bonds , even though they had high returns in portfolios whose obsession should be the long-term preservation of any ultimate loss ? No risk premium , 'I said , however high it may be, to compensate accept a permanent loss to such customers. He grudgingly acknowledged and automatically returned to his existential doubt a mantra : "So where can you get eses money, everything being so expensive? "

My answer was clear and concise . These more conservative profiles should invest exclusively in fixed solvent , even though the circumstances of this New Normal force us to take it to greater volatility . And the creditworthiness of issuers of both countries and companies , is currently only in certain emerging economies. It is true that investors must take swings in their prices much higher than they paradoxically have American or European bonds (not peripheral ) . But the security of payment at maturity is the North than ever ( and now less than ever) should lose more conservative investors . Unfortunately today rentiers must choose between the regularity of income and investment security .

The banker argued that some of its customers would not understand these price swings , and who only feel comfortable with lower volatilities as developed fixed income , despite its insolvency makeup. I replied that indeed our work of all consultants , mentalizing is so patient and persevering to our customers , to understand that no longer serve the investment parameters of Old Normal, where security was synonymous not only certainty to avoid permanent loss , but also of low volatility. And now we must prioritize the safety of not suffer unrecoverable losses , to the low price fluctuations and yields .

Something misplaced argued that , if he did that , several customers would leave to other entities whose bankers are prometiesen the placidity of old, even if only a dangerous illusion. And that would serve the business to the competition on a silver platter ... At this point I had to spit out something that bothered him to hear: " It is better to lose to Customers Customers ' money ." I also told him that putting the interests of investors in the long run will also benefit the financial institution. I know it sounded like Mandarin and I sinned from naive to try to save his soul , but I like to think that if only briefly , saw the light.

The house sales fall 24.7% in the first quarter and the price suffers a setting of 16%

The house sales recorded a fall of 24.7% in the first quarter , while average price per square foot suffered an adjustment of 16% , according to the General Council of Notaries .

For floors , reducing the number of operations was 25.1 % yoy , down from 17.3 % in the price per square meter.

According to notaries, these adjustments take place after a final quarter of 2012 marked by the rise of trades , which resulted from the change in tax treatment of housing , which was a temporary advancement in the purchase decision .

Specifically, the number of sales in March stood at 21,012 operations , representing a drop of 31.1 % internual , while the price per square meter recorded a drop of 10.2 % to 1.196 euros.

In the case of flats , the number of transactions fell 32.3% , with a price of 1,322 euros per square meter , 10.5% lower than a year earlier.

Meanwhile, the number of mortgage loans fell 27 % in the first three months of the year compared to the same period last year .

Furthermore, in the case of mortgage loans for the purchase of a property , the setting was 35.1% in the first three months of the year.

This fall , as notaries , registers slight increase year after the fourth quarter of 2012 (+5.5 % ) , the result of the surge in real estate purchases in the latter part of last year.

With March data , the set of mortgage loans registered a 35.1% yoy fall , fit to be moderated to 25.8 % if the rate of change is made on the seasonally adjusted series . The average amount of such loans in March stood at 108,615 euros , representing a drop of 19.8 %.

Finally, the formation of new companies registered a growth of 4 % in the first quarter , while the average capital of such companies fell by 10.4 % yoy. In March there was a slight drop in the formation of new companies (-5.8 % yoy ) and a further reduction in their average equity of 6.3 % year on year to 17,841 euros.

Lawyers warn Bankia preferentistas not to sell the shares if they want to sue

The Association for the Defense of Financial Institutions Harmed ( Apdef ) , formed by seven law firms in Catalonia, Madrid and Valencia, has alerted all customers affected by Bankia preferred not to sell the shares if they have pierced want to present lawsuit.

" If they sell or will accept the sale agreed and validated by the exchange and then must show no lawsuit ," said told Europa Press one of the lawyers of the association , Francesc Garcia.

Garcia has detailed Bankia has changed in preferred shares to 1.35 euros a share , a price that today is already 70 % lower , which means that those affected have already lost this amount , "no a miracle will not recover the value , "said .

The Apdef currently has more than 600 requests to file proceedings against Bankia , which has already submitted 250 in various courts in Catalonia , six of them with favorable results for the claimants , the value of the 600 claims amount to about 35 million euros.

The association had raised to file a lawsuit to request the annulment of the purchase of shares in Bankia of all persons who acquired in July 2011 for false advertising , but eventually they will individually.

According to the lawyer has materialized in this case there is no error in the information about the product , if not misled about the financial realities of the company in relation to their actual numbers in July 2011 , " if Bankia had explained what his situation economy, people would not have bought shares , "he explained Garcia.

And, according to Apdef , Bankia was not transparent on the equity when it went public in July 2011 , and sold the shares to 3.75 euros when its true value was 0.77 euros.

Analyzing Audasa bond issue

We few days seeing some ads on TV about ENA bond issue , specifically what are issued € 193 million in obligations AUDASA ( Atlantic Highway Concessionaire Spanish , SAU ) . How ever there is a minority investor placement must ask why not a debt placement as the small size of AUDASA not between institutional investors.

Toll revenues depend on the number of vehicles using the infrastructure daily and the number of users is directly related to the economic situation and community of Galicia where it operates .

The evolution AUDASA activity along the year 2012 has been characterized by a negative trend in traffic levels as a result of the deepening economic crisis affecting Spain . A general situation contraction of economic activity . The AUDASA toll revenues in 2012 are reduced from last year by 8.7 % , reaching 132.4 million euros. This was due to a decrease in traffic charging 12.48% on average , partially offset tariff revisions approved with effect from 1 January 2012, which was 3.29%. The average daily traffic (ADT ) of the set of all operating segments was tolled 19,568 vehicles ( 22,359 vehicles during 2011 )

Audasa has chosen not to include a profit forecast or estimate . No wonder , in the fall of 2012 , we know that the Spanish toll roads have recorded the worst start to a year in terms of traffic volume for the past 16 years , since the last January accounted for an average of 12,414 daily users , down 10.7% over the previous year and the lowest figure for the month since 1997 . All indications are that 2013 will be even worse.

Audasa 's main asset is the Atlantic Highway called the grant was awarded on August 17, 1973 . The route of the motorway is 219.6 km, extending from El Ferrol to Tuy Portuguese border . It is a mature asset quality and whose concession expires in 2048 .

The current issue of debentures is made to pay debt issuance by euro 193 million due this June 2013 . I enclose have evolved as income and cash flows of AUDASA between 2011 and 2012 and do our forecast a fall in revenue for 2013 . Although throughout the concession, up to 2048 , it appears that AUDASA afford to pay its debt , the risk faced by investors in the current issue of AUDASA obliogaciones is that between 2013 and 2023 ( when their doom debenture ) the company does not generate enough cash flow to pay the principal of all releases due in this period of time.

This means investors are bond issues, are at risk of AUDASA not be able to refinance its debt maturities .
Who is the owner of AUDASA :

We leave the scheme who are AUDASA owners . The ultimate owners are: PEAR is a vehicle Investment Citi Infrastructure Partners, we also have a number of old savings banks, as Kutxabank , NCG , CAIXANOVA CajAstur and Sacyr with 15.51% . AUDASA belongs to ENA Infrastructure is in turn belongs to Itínere and is part of the investors mentioned above.
Audasa property

The issue has AUDASA ENA joint guarantee , although it is noted that AUDASA is a significant part of the income of ENA ( Audasa accounts for 68 % of financial revenues ENA )
Bond Issuance AUDASA

The nominal amount of the offer covered by this document is 193,000,000 euros, represented by obligations 386,000 nominal value of EUR 500 each. Among the major underwriters are Bankia , CaixaBank , Banco Popular, Caja3 , SpreadCo and Bankinter . The minimum is 1 to subscribe obligation nominal value of EUR 500 .
Interest rate obligations AUDASA

The nominal interest rate (coupon ) applicable to the issuance is 5.20 % annually. The nominal interest rate shall accrue from the June 26, 2013 and until the final redemption of the issue , ie June 26 202 3

Interest payments will be made annually in arrears , on December 15 of each year and on the date of redemption .

The first interest payment date will take place on December 15, 2013 and the last on June 26, 2023 , ie , coincides with the date of redemption .

Annual Coupon value = 500 x 5.20% = 26.00 euros

The IRR is 5.20 % (including tax flows of savings income would be 5.29% for a tax rate of 21%, from 5.09% to a rate of 25 % and a 4, 99 % to a rate of 27 % ) .
Summary :

I personally would not invest in a 10-year bonds , which may be difficult to sell in the secondary market or we can see that the price may fall if the required return to rise to the Spanish bond to obtain a yield of 5.20 % active one whose incomes are falling and to be refinanced in order to return the debt principal .

Afins 5% return on investment for the 190,000 affected seven years later

Afins The receivers of the 190,000 affected offer the option of recovering the 5% investment and continue with the process seven years later, it was announced in a statement Adicae .

As explained , the administration is finalizing the mass mailing of 190,000 letters to all concerned to offer this option, " you back a philately of dubious value and exit the process , an absurdity, since it has been demonstrated the financial nature of the entity and that those affected were not intended to buy stamps " .

Once ordered, payments are expected to begin in the months of November and December this year. Specifically , of the 2,207 million euros Afins has retained only return 110 million.

Adicae has reported that it is preparing an information campaign in Spain in order to reach the greatest number of people affected with the aim of increasing the mobilization and organization of those affected, " will continue to increase until politicians get a way out of this embarrassing situation " .

For the association , the return " of a paltry 5% after seven years of fraud outbreak shows the delay and futility of the judicial process ." " The ineffectiveness of these processes shows insolvency is covered in a system that is not designed for that amount of creditors ," he asserted .

Therefore, the organization has called " a real solution against the manifest failure of the rule of law which gives an account of 470,000 victims , 10 judged sterile , zero charge and zero solutions." Adicae has proposed to the Government and the parliamentary groups a solution for the State to acquire the rights to those affected in the bankruptcy process through its purchase by the Official Credit Institute (ICO ) .
Comment Gurus

For in the end if they prove that the Forum and Afins business was not so different from the bench. Capturing short-term savings of investors to invest in long-term assets unrealizable . Some bought stamps and other bricks . While managers are paid and distributed succulent salaries and bonuses.

Choose : Low volatility or Solvency

This week our friend Marc Garrigasait published (which incidentally has just launched a new fund called Panda Agriculture & Water) , this article Cotizalia which includes the Interactive Chart I link at the end , although somewhat outdated and inaccurate , it very revealing of how is the courtyard of the global solvency .

Some voices like Bill Miller begin to dare to say what I have been warning for years in articles like " The Flight to Quality of Solvency " : that the risk has seized what had traditionally been considered the Sancta Sanctorum of the safety , or fixed income countries and most developed companies . And that includes , of course, all products guaranteed by the bank ( as companies with balance sheets that are broken ) , from the deposits to the debt of the entity in any form or structured more or less Machiavellian .

That is, the rules have changed and what was safe, now risk a lot. Because remember that the risk of investing in an asset of a bond issuer is insolvent permanent loss , unrecoverable . And developed economies are sitting on a bubble of public and private debt is a fearsome Debt Bomb . Whoever says that is a policy spread unfounded fear , is a liar, a naive, lazy, mediocre , a daredevil or a cocktail , explosive course , several of these ingredients.

Unequivocally determine where is the Solvency in the New Normal now is of vital importance , since less inclined heritage to the high volatility of the stock market should be supported in fixed investments , but whose creditworthiness is undoubted . Otherwise, the more fearful and cautious investors who choose to avoid the oscillations of actions by placing their money in fixed-income securities and other products "guaranteed" , would actually putting your money at risk of permanent loss , or unrecoverable losses . Just ask the Argentine bondholders or Greeks , who never recovered or recover their losses , unlike stockbrokers in those same countries .

Does this mean that only find safety in equities ? No. equities , per se , does not determine its intrinsic risk . It may be safe or risky , depending on the success we have at the time of analyzing the actual value of the shares purchased , different pricing . And to make sure our returns outperform the market in the long term, we must invest in the best fund managers equity investment in the world, as we have repeated ad nauseam on various items.

Only then can we consider investing in equities as safe, ie no risk to suffer permanent losses , only temporary. This phenomenon forces us to take short-term losses potential, called volatility , and has nothing to do with the risk - of - final losses , which is what should concern you more every investor . Therefore, even assuming potential losses in the short term , equities is more than ever a refuge to consider to preserve our heritage .

However, not all investors or portfolios entirely necessarily have to be willing to suffer the volatilities own equities. Because there is still , thankfully , a part of the planet with debt issuers solvent, ie safe . And these are not other so-called emerging countries and companies , whose volatility is today riding the traditional fixed the old and the bag. In other words, we must also assume potential short-term losses , but more moderate than equities, and recoverable in periods somewhat shorter .

Why solvent is emerging debt that developed ? Well obviously because its debt is lower and its economic growth is greater . So their balance sheets , whether countries or companies are healthiest . And do not forget that a lower current indebtedness , with increasing economic figures also imply about future growth and therefore future solvency , even higher (up to abuse and mismanagement of their governments or managers lead them to our own situation , unfortunately but even today with a tour ahead enviable and very profitable ) .

Just as , conversely , an issue more debt , for example in Spain , condemning our future generations to recession and tax suffocation . In other words , that the vicious circle in which they are mired European peripheral economies , and to a lesser extent other developed economies , it is instead a virtuous circle in an emerging economy and growing , be it a country or a company. And those assets emerging fixed income solvents , despite falling prices possible we may suffer in the short term , are the main shelter ( along with a good portfolio bag) that investors should look for in these times.

Take perfect example what is happening in this 2013 : So far this year the U.S. bond funds have lost ( by reducing expectations accommodative policy -QE - American ) approximately between 1% and 2 % . And the emerging fixed income funds have fallen approximately between 1.5 % and 3 % in the same period. However, the Solvency of U.S. bonds is much lower than that of emerging fixed income , not to mention the political risk posed by a decision of the Fed that are absolutely determinants of price traded U.S. bonds . In contrast, emerging debt (provided you choose properly managed funds ) solvency is its main value .

It is true that in periods like the current volatility and it is higher in 2013 are down more, but the short and medium term, we prefer to give all our money to all creditworthy issuers , despite price fluctuations suffer short term. And we must remember that today coupons still emerging debt paid are higher than developed, so that the past performance and expected future is much greater than in the saturated bond developed countries.

Obviously also other assets can be a true refuge , such as real estate investments also growing markets ( emerging ) , or more speculative physical precious metals ( eye promises the role of metals , which starts trading with discount to the physical metal ... but that deserves another article) . But beyond this, we will enter recklessly in Apache territory and balls bombastic debt issuers , which should soon be ahead of the estates of those who do not evolve and take the leap towards Solvency in this New Normal.

Only the desperate search for the Solvency North should be our these times we face . And who , fleeing the volatility and potential short-term losses , feels recklessly in deposits and bonds developed , will actually risk losing forever a good part of his fortune .

I leave you now with the promised graphic Juguetead Marc's article with him and notice the evolution of public and private debt of individual countries . And keep in mind that the figures for Greece are obviously wrong , and those of Spain are not updated with the bailout of the banks, and we did reach 100 % of GDP and rising ... At first glance no one would escape our money will be invested in debt safer countries closer to the left axis and bottom , which essentially coincide with calls emerging economies . I recommend to watch out especially in the evolution and current situation in Russia :