Global meltdown

Spain reeling over financial fears: 'Will my money be safe?' ask customers in Madrid banks

Spain's economy was battered by a storm of bad news this week. And in Madrid, city traders and worried savers are asking where it will end.

The Telegraph,

19 May, 2012

The man's voice was scarcely a whisper, but the urgency in his tone was unmistakable.

"Will my money be safe here?" asked the customer, leaning over the counter in a central Madrid office of troubled bank Bankia.

The weary-looking cashier nodded. "Things are better now," he said quietly.

As Spain reels from a week of plunging stock markets and eurozone nightmares, everyone in the country – and beyond – will be hoping that the cashier was right.

On May 9 the government took over Bankia, the country's fourth-largest lender, in an attempt to dispel concerns over the bank's ability to deal with losses related to the 2008 property crash. Bankia is itself a clumsy conglomeration of banks with serious exposure to bad property debt.

Shares in the Bankia plummeted 30 per cent at one stage in trading on Thursday, following a report that customers had withdrawn €1bn in deposits since the Madrid government was forced to part-nationalise the bank.

Bankia released a statement in the afternoon saying that the deposit fall was simply a seasonal effect rather than a bank run. This served to stabilise the share price, but the lender still ended up losing 14 per cent of its value.

It rallied on Friday, but the bad news kept on coming.

The central bank announced late that evening that the level of bad loans on the books of Spanish banks was at an 18-year high, fuelling concerns about the financial sector in the eurozone's fourth-largest economy.

Then the finance ministry said late on Friday that the deficit could reach 8.9 percent of GDP after four of its 17 regions overshot their expected budgets.

And with Greece looking ever more likely to drop off the cliff and exit the eurozone, it is now Spain which has the unwelcome distinction of being in the centre of the euro firestorm.

As world leaders met at Camp David in the United States this weekend, Greece was officially on the agenda. But Mariano Rajoy, the Spanish prime minister, was well aware that he too was in the spotlight.

"Sentiment towards Spain is deteriorating with each passing day, mainly because of a loss of confidence in the Rajoy government's approach to tackling the problems in the banking sector," said Nicholas Spiro of Spiro Sovereign Strategy.

Credit ratings agency Moody's carried out a sweeping downgrade of 16 Spanish banks on Thursday, including Banco Santander, the eurozone's largest bank.

Outside one branch of Bankia, on Madrid's main street, Gran Via, there was a mixture of anxiety and resignation.

"It's quite scary," said a 25-year-old television producer, who didn't want to give her name. "Some of my friends are moving their money to other banks, or even other countries where they feel safer, like Germany. But I haven't really got any savings, so I'm not worried," she added with a shrug.

"I don't understand any of it," said another elderly customer exiting the bank, flinging his hands up in the air in despair.

Others were more philosophical.

"My money is even safer in here than before, now that it is backed by the government," said Eduardo, a 45-year-old advertising executive. "My wife said we should think about moving our money, but it's all irrational fears. The government won't let it all collapse." Certainly Madrid is yet to show the outward signs of economic turmoil which blight the streets of Athens.

Businesses are still open, the infrastructure is not crumbling, and the "indignados" protests against austerity measures were, last week, decidedly feeble.

What is new over the past year is the number of hawkers clad in fluorescent yellow tabards prowling the street offering to buy gold. As Spanish unemployment rises to 25 per cent – a eurozone high – with half of all young people out of work, many families are resorting to selling the family jewels to keep afloat.

At Bankia's headquarters – a huge glass skyscraper in Plaza Castilla, north of the centre, there were few people in the office on Friday afternoon.

"Many of them leave at 3pm on Fridays," the security guard said. A few besuited bankers with shiny shoes strode past, anxiously checking their Blackberries, but the black marble lobby with its bronze bust of the King was eerily quiet.

Around the corner, Arandio bar was doing a roaring trade – the discarded paper napkins and bread crumbs on the floor testimony to a thriving evening's trade.

"The bankers still come here, despite the crisis," said one waitress. "Our Friday happy hour beers are only a euro. So even they can afford that."

Most were unwilling to discuss the situation, preferring to sit outside in the sun and talk about anything but the crisis. Yet others were deep in conversation, huddled around their tables with furrowed brows, some biting their nails.

"I think there is a lot of worry about," said one financier, standing at the bar. "It's like a dark cloud hovering over us and no one knows what is coming next."

Fears about contagion from Greece have pushed Madrid's stock market to 2003 levels.

Behind the bar loomed a second huge Bankia building, designed by Norman Foster and bought by Caja Madrid – one of the banks now part of Bankia - for €815 million in 2009. At 250 metres tall it's the highest building in Spain.

And it is empty. Security guards sitting inside the vast lobby said that a few people worked in the building, but it is a powerful symbol of how Spain's property boom (construction on the tower started in 2004) has led to its current economic crisis.

Further down the Paseo de la Castellana, inside Spain's stock market – housed in a neoclassical palace – five or six traders leant against the pillars, looking at screens. The trading is done online now, but some of the more old fashioned traders still like to come in and work from there.

The world markets were in turmoil, but the screens kept on flickering in silence.

The traders just stood with their hands in their pockets and watched.

Outside, a beggar sat with a sign: "I am 54 years out of work and unemployed. Please help. Don't laugh – it could be you."

Share a thought for the world's rich

World’s Richest Lose $33 Billion As Facebook Debut Stalls

The world’s richest people lost a combined $32.8 billion this week as concerns over a possible Greek exit from the euro area pushed the Standard & Poor’s 500 index to its biggest weekly loss since November 2011.

Bloomberg,

19 May, 2012

Mexican Carlos Slim, 72, lost the most during the week, as shares of his Mexico City-based telecommunications company America Movil SAB fell 4.38 percent. Slim, who lost $4.1 billion, remains the world’s richest person with a $65.5 billion fortune, according to the Bloomberg Billionaires Index.

Facebook Inc. (FB) co-founder Mark Zuckerberg, 28, became the 26th richest person on Earth after the world’s most popular social network raised $16 billion in an initial public offering May 17. The company’s shares stalled in their public debut May 18, rising 23 cents above the IPO price of $38. Zuckerberg is worth $19.4 billion.

“Given the hype and excitement, people expected it to be a lot higher,” Herman Leung, an analyst at Susquehanna Financial Group, said in a telephone interview from his San Francisco office May 18. “This is similar to Google. The company will not get the benefit until they start proving themselves as a public company.”

The S&P 500 fell 4.3 percent to 1295.22 during the week as Greece failed to form a government and Moody’s Investors Service downgraded 16 Spanish banks, citing a recession and mounting loan losses. The S&P 500 is down almost 9 percent since April 2.

Gates, Buffett

Bill Gates ranks second on the index with a net worth of $59.1 billion -- $6.4 billion behind Slim. Gates’s nest egg dropped 4.4 percent as shares of Redmond, Washington-based Microsoft Corp. (MSFT) fell 5.45 percent during the week.

Berkshire Hathaway Inc. chairman Warren Buffett, 81, is the third richest person in the world. His fortune fell $1.1 billion to $44.6 billion. On May 17, Berkshire agreed to pay $142 million for Media General Inc.’s 63 community-focused newspapers.

“I think there is a future for newspapers that exist in an area where there’s a sense of community,” Buffett said at Berkshire’s annual meeting in Omaha, Nebraska, on May 5. Berkshire shares fell 2.4 percent this week.

Facebook Debut

Most of the fortunes of Zuckerberg’s Facebook co-founders remained unchanged Friday in New York trading. Dustin Moskovitz, 27, who started Facebook with Zuckerberg from their dorm room at Harvard University, owns 133.7 million shares of the company’s Class B stock worth $5.1 billion.

Eduardo Saverin, 30, has a $2 billion stake. According to a regulatory filing dated May 17, he owns 53.1 million shares of the company.

Co-founder Christopher Hughes, 28, fell short of becoming a billionaire. He owns about 22 million shares of Facebook, according to a person familiar with his holdings who asked not to be named because the matter is private. His stake is worth $840 million.

Hughes, who bought the Washington, D.C.-based magazine the New Republic in March 2012 for less than $5 million, has more than $100 million in cash and real estate after selling some of his Facebook hoard, according to data compiled by Bloomberg.

Sean Parker, who persuaded Zuckerberg to move to California to focus on the company full time in 2004, owns 66 million Facebook shares worth $2.5 billion.

Facebook’s chief operating officer Sheryl Sandberg, 42, who was lured from Google in 2008, owns 27 million shares, including 25 million restricted stock units that have vested. They are valued at $1 billion.

Arnault Wealth Reduced

The net worth of LVMH Moet Hennessy Louis Vuitton SA (MC) chairman Bernard Arnault was lowered $15 billion on the index May 17 because of the way he owns his stake in the world’s largest luxury-goods company.

France’s richest man, 63, controls 46.5 percent of LVMH’s share capital, according to the 2011 annual report of the Paris- based maker of Louis Vuitton handbags and Moet & Chandon champagne. That figure includes 5.55 percent of LVMH shares held by Arnault, and a 40.9 percent stake of the company owned by publicly traded Christian Dior SA. (CDI)

Arnault only owns 70.4 percent of Christian Dior, according to French regulatory filings. The remaining 29.6 percent of Dior is held by outside investors. While he controls all the voting power of Dior’s stake in LVMH, his economic interest is less than the figure reported in the LVMH annual report.

Arnault’s new net worth calculation represented the biggest wealth re-evaluation since March 5, when Bloomberg began tracking the fortunes of the world’s richest people daily. He is worth $23.5 billion.

The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York and listed in U.S. dollars.