Could Spain Damage Markets, Like Lehman?

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.

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“Absolutely it could well be the next Lehman – the debt Spain has is greater than Greece, Italy and Ireland combined,” says Stephenson, portfolio manager at First Asset Investment Management.

Stephenson doesn’t even think the scenario is all that far-fetched. “The EU is made up of countries that speak different languages and historically don’t get along,” he reminds. In other words, there's no love lost between nations and politics could trump all else; leaders may have no choice but to allow Spain to default.

Again, the Fast pros aren't saying that's the most likely scenario, but they do believe it needs to be factored into your decisions.

If you’re wondering how to position, Stephenson says, “I’d be in cash and dividend paying stocks such as Comcast , AT&T, Verizon, Enbridge and Transcanada so you get paid to wait.”

Fast Money trader Stephen Weiss largely agrees. “I, too, an 90% in cash,” he adds.

And Stephenson tells us, if the worst case scenario plays out, the S&P could drop another 25%.

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Posted by CNBC's Lee Brodie

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Trader disclosure: On June 5, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long WFC CALLS; Pete Najarian is long MS CALLS; Pete Najarian is long INTC; Pete Najarian is long JOYG CALLS; Pete Najarian is long SBUX; Pete Najarian is long COP; Pete Najarian is long PEP; Pete Najarian is long FB; Stephen Weiss is long AIG; Stephen Weiss is long QCOM; Stephen Weiss is long AMTG; Stephen Weiss is long VZ; Stephen Weiss is long T; Stephen Weiss is short MT; Stephen Weiss is short JCP; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Steve Cortes is long QQQ; Steve Cortes is long SVU; Steve Cortes is long SBUX; Steve Cortes is long EURO/BRITISH POUND CROSS

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