Tuesday, December 17, 2013

You can't make this stuff up (Catalan referendum version)

A quick Google search shows that the English-language press is having a bit of difficulty understanding the structure of the Catalan independence referendum recently announced for November 9, 2014. Contrast what The Guardian, in perfect consonance with every other article I troubled to read, says about it...
 The Catalan regional government head, Artur Mas, said the vote would ask two questions: "Do you want Catalonia to be a state?" and: "Do you want that state to be independent?"
...with the more accurate Wikipedia version.
The question would be: "Do you want Catalonia to become a State?" and "If yes, should Catalonia be an Independent State?"
Now that Ibex Salad readers have that minor detail straight in their minds, I have two questions of my own to ask. Does this really mean that those who vote 'no' on the first question will be excluded from opining on the second? And if this is so, as seems to be the case, what rules will the promoters of this plebiscite use to determine which independence option - yes, or no - has won the day?

Behind this bizarre form is that one of the political parties supporting the referendum is, in fact, not separatist but wants Spain to become a federal state. The first question was included to give voice to their aspirations. But it has the effect of dividing the three competing political ideologies - separatist, federalist and centralist (being those that think the current situation is optimal) - into two groups of two. Stage one aligns the first two persuasions, as if they were one, against the last. Then, in stage two their fundamental differences come again to the fore and they face off against each other, excluding the third from the game entirely. Imagine a football championship in which Real Madrid (typically) loses against Barça, then the latter splits into two teams and fights for the championship trophy amongst itself.

Until someone steps up and definitively answers my second question, I'll refrain from coming to any conclusions concerning the not-entirely-aligned motives and strategies of Artur Mas and Oriol Junqueras.


Just in ----- Artur Mas seems to be aware of this issue. It seems, though, that he and his political partners have just decided to pass on it for the time being. "It's not what matters at the moment." (via Vicente Valles)


Saturday, November 23, 2013

Deflationary Death Spiral sighting

Something for Spaniards to keep in mind next time they come across one of their elite corps of economics journalists spewing out the standard version. 

What with CPI printing negative in October, we though that it would be in the public interest to assist the beleaguered citizens of Spain in taking full advantage of the Deflationary Death Spiral* into the vortex of which their beloved patria is about to descend. The following list of October's bad actors provides a story you can tell yourself as you - homeland be damned - hoard your money and lasciviously lust over those deals you're going to score as Armageddon arrives.

CPI Category
Rationale for delaying spending in anticipation of lower prices
I’m lining up at the Apple Store waiting for lower prices.
Let's talk next month. It'll be cheaper.
This one's got potential (too bad sales are up 34% YoY)
Vehicle parts & repairs
Spreadsheet > calculate fuel savings on 3 cylinders vs cost of repair.
Watch this week's Walking Dead.... next week.
Household Appliances
No problem. I like sushi.
Hospital services
They're offering a special on biopsies in August.
Personal articles
In the meantime, just tear up a few rags.
Household textiles
(see previous)
Sports & recreation goods
Trending > air football
Home rent
If we don't pay, the landlord'll charge us less next month.
Home repairs
Leak? No problem. Cut the mains.
Sports & recreation services
I'll exercise twice as much next month (multipurpose rationalization)
I love Benidorm in January.
Personal goods & services
Let hair grow. Call myself an indignao. (Won't work for Luís de Guindos.)
I'll hedge my insulin habit with a Viagra short.
Financial services
Cash is king, anyway.


Thursday, November 14, 2013

Warehouse 13

The graph on the left, a tad cherry picked from the famously high youth unemployment statistics and the almost entirely unnoticed (and coincident) dramatic surge in the female over-40 labour force, gives a hint as to how the oft-cited Spanish family support system appears in the INE database. The fact is that the 2.3 million job losses borne by young people between 16 and 29 years old since the end of 2007 have been accompanied by an increase in the labour force group to which their mothers belong of 1.2 million. There's a certain amount of double counting here as more than one family member goes looking for a single job.

Not that it's going to inhibit the production of pre-packaged commentaries, but we think it's worth pointing out that maybe the standard American labour market take - that participation decreases during recessions as job seekers become discouraged - doesn't exactly apply to Spain. In fact, it might be appropriate to believe that employment gains at the young end of the scale might produce an inordinately large drop in active population, and that the consequent extra decline in the unemployment rate is a Good Thing - not a fantabulous evil conspiracy designed to obfuscate the true irremediability of the situation (or, alternately, to give a boost to the credibility of the commentator noting it). After all, there is some evidence here that each job loss produced one-point-something job seekers over the course of the last six years. If you want, you can see a scatter plot of the same series here.

Lastly, I don't have any trouble convincing myself that the giant warehouse of human availability known as 'the unemployed' is operated on a FIFO basis - first in, first out. In order, the collapse of the building industry hit participants like this:
1). Illegal, undocumented labour
2). Part-time
3). Temporary
4). Full-time permanent
Cruel and unsatisfactory as it may be, recoveries work in reverse order. We know that most official jobs created recently have been of type 2 and 3. The reader can rest assured that the two negative prints at the end of the chart tell us that there's activity in the grey market as well.

A multitude of binary beings populating the noise-o-sphere will likely come to the conclusion that I believe that everything is really alright. It's not. Obviously. I am not threatening your credo.

Also, the invaluable Chris Dillow gives us a couple of object lessons in the interpretation of labour force stats. They can be read here and here. Worth the effort.


Thursday, November 07, 2013

Get back to me in the spring

Readers might want to fix their gaze on September 2012 in the following charts. Some comment waiting to be made about throwing a VAT increase into the midst of the worst summer of economic news since the dawn of Spanish history.

And another about the utility of annual rate-of-change stats in the wake of unusual circumstances.

[Short version - wake me up next April.]


Monday, November 04, 2013

That which cannot be known

On the good news front, it's now November and there's still no sign of the Ministerio de Fomento’s 2012 estimate of Spain's unsold new housing stock. On the bad, there appear to be at least a couple of organizations that persist in painting themselves into the corner that has hopefully caused Fomento to abandon the effort forever – and have produced commentaries extrapolating results based on the same corrupt methodology through to the end of last year.

Standard & Poors is the latest to fall into the trap, apparently having decided that there remain 635,000 new residences begging to be bought. Worse yet is a study highlighted by a recent English article in El País. Produced by the nationalized bank Catalunya Caixa (presumably authored by former risk control staff reassigned to less dangerous tasks), the report adds insult to injury by including maybe 150,000 owner-built flats and houses to Fomento’s already impossibly large inventory. Their version, shown in the chart on the left grabbed from this infographic, would have it that there remain 810,000 – a number virtually unchanged since the end of 2008.

Experienced readers will forgive us for going through this all again.

Fomento, the Spanish Ministry of Public Works, distinguishes between ‘new’ and ‘second hand’ homes by the time that has elapsed since they were completed by their promoters. It’s that simple. It works as long as sales and new construction are moving along at more or less the same pace. But the collapse in new building since the end of 2007 is now causing the statistical aberration we foresaw last January. Comparing first half house sales from Fomento with the corresponding March to August period from the Instituto Nacional de Estadística (with its different, if also problematic, rules), the difference is in the order of 40,000 units – the INE reporting no less than 2.75 as many as Public Works. Assuming two years to build and allowing two years to sell, we can guess from housing starts at the number of new sales Fomento will be recording through 2016. Starts, to give an idea of how ridiculous this will be, in 2012 reached a grand total of 26,425.

To be fair, the INE methodology has its snags also. They define new as the ‘first inscription’ in the property registrar records. With so much of what is for sale being the product of bank debt-for-equity swaps, it would be interesting to know which column those properties are listed under.

Simply, if the bank took them back after the building was completely - including the appropriate legal documentation – finished, the transfer of any flats they end up with will constitute the ‘first inscription’. Subsequent sales to the public will be booked as second hand. The original dation in payment that got the place into the bank’s hands is not counted in sales figures, but rather subsumed under a mysterious and undetailed ‘other’ category in the property transfer records.

With bank-controlled inventory absolutely dominating the market, the 150,000 new home sales recorded by the INE over the last 12 months does no justice to the situation either. What percentage of the 166,000 second hand transactions in the period that should be otherwise assigned we have no idea. Keeping in mind that banks and cajas started cancelling debt in this way as early as 2006, and continue to do so today, it can be safely said that it is large.

Clearly, there are some things that (unless you're a PE fund buying in after having had unrestricted access to a Spanish bank's real estate book, say) cannot be known  But we’ve seen estimates of new housing stock as low as 450,000, and wouldn’t be surprised if it were less.