BULLS RETREAT: "Investors gave a thumbs down to Spain's planned bank bailout, setting off a global market rout that puts the country and the euro zone in a dire position."

As I said yesterday at Silvio Canto Jr.'s radio show, the bailout proposal still leaves too many aspects open, particularly interest, maturity, amount, and most notably, whether it'll have seniority over current debt issued. That is, whether current bondholders would have to wait in line until the bailout is paid back. If it does have seniority, current and future bondholders are screwed and therefore the debt problem will continue: no one will want to take more bonds, and those who have them now will try to offload them faster than you say "adiós". That's why yesterday, when authorities realized of this, they tried to calm investors saying it'd be pari passu, with equal preference, but the damage was done and they didn't completely believe it.

It all shows that this bailout was agreed in haste especially because the international community wants to contain the possible damage of an anti-euro party win in Greece next Sunday. In that regard, the Spanish bank bailout announcement was a firewall, announced when it only was a proposal: it was basically saying that both Spain and the Eurozone agreed that Spain would ask for it, but it wasn't a bailout in itself yet. That will happen after the two independent auditors that Spain hired to assess the financing needs of the Spanish banking system deliver their reports next week. Only then the actual figures on interest, maturity and so forth will be decided. Until that moment comes it's basically uncertainty, and this is what investors are refusing. We'll see whether they'll change when the actual terms are decided, but I wouldn't bet too much on it.