Pro traders are starting to worry that if the worst case scenario plays out – Spain could damage the market as badly as the collapse of Lehman Brothers.
That may sound dramatic but new developments out of Spain have been equally dramatic to say the least.
Specifically, the pros are focused on comments made by Treasury Minister Cristobal Montoro who sent out what's being described as a 'distress signal' in a radio interview about the impact of his country's banking crisis on government borrowing, saying that at current rates, financial markets were effectively shut to Spain.
"The risk premium says Spain doesn't have the market door open," Montoro said on Onda Cero radio. "The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt."
The pros find that kind of commentary concerning, if not downright scary. They say in the days ahead, everyone in the market will have to keep an eye on these events.
Although the pros hope that EU officials learned an important lesson from the collapse of Lehman and won’t allow another crisis to devolve in the same way, esteemed money manager John Stephenson, says investors need to be prepared for the worst.
And he says the worst case scenario could be every bit as bad as 2008.