"Club Med" Dominates the Pre-Market

• Joshua M Brown
• February 4th, 2010

Greece, Italy, Portugal, Spain - also known derisively in the Euro Zone as Club Med these days, are once again in focus this morning.  And it ain't about sunshine and topless beaches.

From Bloomberg:

Spain’s IBEX Index dropped 2.2 percent to the lowest level since August at 10:19 a.m. in London, Portuguese credit-default swaps jumped to a record and the Budapest Stock Exchange Index declined 1.4 percent, the most in two weeks. Greek two-year bonds tumbled, with the yield rising 9 basis points to 6.57 percent. Futures on the Standard & Poor’s 500 Index slipped 0.6 percent. The dollar strengthened against all but one of its 16 most-traded peers.

Traders I talk to mostly dismiss the notion that a Grecian or Spanish default will mean anything to US markets.  I'm somewhat conflicted.

For starters, I see the dollar upticking with every nasty headline about Club Med's unemployment data or commercial real estate or CDS rates or sovereign debt.  The other concern I have is that as small as Greece and Portugal really are, I have yet to see any of these types of crises truly be contained.  And Spain is not small.

The Greece thing is being waved away like subprime was in 2006-2007, like it's a distant bout of unpleasantness that no one really wants to hear about right now.  We know how that turned out.

So are Greece and Spain the Subprime and Alt-A of 2010?  If we pull on those loose threads, does the entire sweater unravel?

Source:

Portugal, Spain Lead Worldwide Decline in Stocks (Bloomberg)

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