Toro! Toro! Toro!

From Bloomberg, we have Spain Property Delinquencies May Jump, Moody's Says.

The country's banks are ``well positioned'' to withstand a decline in real-estate prices, according to Moody's. The lenders are required to set aside provisions for losses under rules introduced in 2000. The capital of Spanish banks is only at risk if delinquency rates go above 5.5 percent, the report said.

After rising 178 percent between 2000 and 2006, more than any other country in Europe, Spanish home prices are being threatened as the highest European Central Bank interest rates in six years curb consumer spending, Moody's said.

Moody's said a ``hard landing,'' in which loan defaults by developers and builders exceeds 5.5 percent and house prices plunge 20 percent, is a ``remote'' possibility.

Prices rose 178% in 7 years (roughly 12% compounded annually) but a 20% drop is a "remote possibility".

Please note the circularity of the argument. Banks are not at risk because loan defaults can't go above 5.5%. Why not? "Because then they would be at risk."

Sounds like -- it can't happen because if it happens, bad things will happen; hence, it can't happen.

I'll give a dissenting opinion. Home prices in Spain are guaranteed to plunge more than 20%, and there's no chance that those loans will get repaid.

Spain is the Florida of Europe, and has an epic appointment with fate.

``We have no concern at all about the strength of the Spanish financial system,'' Deputy Finance Minister David Vegara said at a press conference today in response to the report.

Really?!?

Let's see.

Spain's gold reserves were 14.717 million troy oz in Aug 2006. Today, they stand at 9.054 million troy oz. That means, they've sold off nearly 40% of their gold reserves, and you have the finance minister giving a conference about their financial strength?

This is the biggest Spanish Bull I've seen!