This chart is from NowAndFutures.com , an excellent website with lots of information. In blue we have the Nikkei 225. It is very slowly following the script, which is an A-B-C with the C as an expanding diagonal (wedge). Each leg in that wedge is itself an a-b-c and we are about to complete the b in the third leg down. This one need not go to the trend-line. Eyeballing it would suggest something like 4000 would be just fine.

The green line is more interesting. Remember when the Emperor’s palace gardens in Tokyo were supposedly worth more than the State of California? After rising at least 100% the index drops by more than 60%. Roughly, over ten year periods, the value of real estate is cut in half and this is on an island and they are not making anymore of it.

Applying this wisdom to Spain one can conclude that things could get a lot worse. Going into the real estate peak, Spanish banks lent roughly an additional 700 bln. to this industry, on top of the 200 bln. already outstanding. If, for the sake of argument, values were to drop by 1/2 as well, the banks (or caja’s) would  stand to lose about 350 bln. Euros. The 100 bln. Euro package, with or without subordination, directly or indirectly, is 250 Euro short. Will there be an encore? By the way, Spain external debt is about 2.2 trillion.