3 US Stocks Likely to Withstand Eurozone Troubles

As problems in Spain mount, keep these stocks on your radar

Bearemy Glaser 6 June, 2012 | 12:53PM

With things relatively quiet in Greece as politicians there gear up for the upcoming election later this month, investors have turned their gaze to Spain as worries about that country took centre stage. Spain is farther away from the precipice than Greece, but its problems are still acute and could very well spill over into the global financial system. Investors looking for safety might be hard-pressed to find it anywhere, but over the long haul, companies with great competitive advantages and solid balance sheets are likely to hold up better in a crisis than more speculative names and other seemingly safe assets.

Spanish Concerns Mount
Spain's banking system is in a tough spot. The banks are quite wobbly because of the burden of bad loans, an increasingly skittish deposit base that is looking to move cash to more stable banks in Germany and elsewhere, and a bleak economic outlook. The highest-profile case has been Bankia (BKIA), which Spain has now partially nationalized and is now planning to sink about EUR 19 billion into in order to keep the institution afloat. 

If this were the only payment that needed to be made, this news wouldn't be that worrying. But bailouts have a funny way of multiplying. The core weakness of the banking system can't be addressed until the core of the European problem is addressed. Until depositors are confident that Spain isn't going to leave the euro, they are going to keep seeking safer ground, and without more certainty the Spanish economy is unlikely to improve anytime soon. And it isn't even clear that Spain will be able to raise the money needed for all of the future bailouts. More loans from the International Monetary Fund (IMF) and others might be needed. Investors are rightly worried that the banking system will become a black hole that will just further compound existing sovereign debt problems.

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About Author

Bearemy Glaser

Bearemy Glaser  is the worry-prone alter-ego of Morningstar markets editor Jeremy Glaser. Each week, Bearemy shares what's topping his list of concerns.

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