Wednesday, October 5, 2016

Don’t listen to this ISRAELI scumbag. Deutsche Bank is Kaputt!! Probably. But no one knows that its derivative book is really fucked.

This is getting to be a habit. Previous late summer holidays by this correspondent coincided with the run on Northern Rock, and subsequently with the failure of Lehman Brothers. So the final crawl towards the probable nationalisation of Deutsche Bank came as no particular surprise this year, but it is tiresome to relate nevertheless.

The 2015 annual report for Deutsche Bank runs to some 448 pages, so one rather doubts if even its CEO, John Cryan, has read it all, or has a complete grasp of, for example, its €42 trillion in total notional derivatives exposure.
Is Deutsche Bank technically insolvent? We’d suggest that it probably is, but we have no dog in the fight, having never either owned banks, or shorted them. And like everybody else we assume that some kind of fix will soon be in – probably one that will further vindicate exposure to gold, both as money substitute and currency substitute. Professor Kevin Dowd, asking whether Deutsche Bank ist kaputt, suggests that the bank’s derivatives exposure is difficult to assess rationally; the value of its derivatives book
“is unreliable because many of its derivatives are valued using unreliable methods. Like many banks, Deutsche uses a three-level hierarchy to report the fair values of its assets. The most reliable, Level 1, applies to traded assets and fair-values them at their market prices. Level 2 assets (such as mortgage-backed securities) are not traded on open markets and are fair-valued using models calibrated to observable inputs such as other market prices. The murkiest, Level 3, applies to the most esoteric instruments (such as the more complex/illiquid Credit Default Swaps and Collateralized Debt Obligations) that are fair-valued using models not calibrated to market data – in practice, mark-to- myth. The scope for error and abuse is too obvious to need spelling out.”
[As Compass Point’s Charles Peabody exclaims “I defy any analyst to tell me what that {derivative} portoflio is worth.”]
Watching ‘The Big Short’ again over the weekend, it seems as much like the shape of things to come as a witty, if poignant, documentary about a historic failure of common sense. Nobody learns anything. It is eight years since Lehman Brothers failed, and the financial system, especially in Europe, would seem to be in no better shape now than it was back then, going by the health of some of the region’s major banks, and also Barclays. This also means that of this correspondent’s quarter century career to date in asset management, at least a third of that period, and probably closer to a half, has seen the industry in a state of acute crisis. The universal onset of crisis fatigue amongst market participants may, then, account for the mood of general complacency that has so far accompanied Deutsche Bank’s slide towards insolvency if not yet outright irrelevance.
“Never let a good crisis go to waste,” Winston Churchill allegedly said. But Europe, for one, squandered all of those eight years. This is just one of many reasons why we voted Out. With luck the UK will manage to extricate itself from the EU chamber of horrors before the roof finally falls in.
On the fifth anniversary of Lehman Brothers’ bankruptcy, itself six months after the bail-out of Bear Stearns cited in the transcript above, Michael Lewis, author of the original ‘Big Short’, was asked in an interview with Bloomberg BusinessWeek whether he thought the company had been unfairly singled out when it was allowed to fail (given that every other investment bank would then be quickly rescued, courtesy of the US taxpayer).
His response:
“Lehman Brothers was the only one that experienced justice. They should’ve all been left to the mercy of the marketplace. I don’t feel, oh, how sad that Lehman went down. I feel, how sad that Goldman Sachs and Morgan Stanley didn’t follow. I would’ve liked to have seen the crisis play itself out more. The problem is, we would’ve all paid the price. It’s a close call, but I think the long-term effects would’ve been better.”
A month from now, we’ll publish our new book: ‘Investing Through the Looking Glass: a rational guide to irrational financial markets’. It covers en passant the Lehman crisis, of course, but also the much wider financial landscape: a multi-decade bubble in debt for which Deutsche Bank may yet serve as the terminal pin, the fundamental and seemingly intractable problems with bankers, central bankers, economists, fund managers, and the financial media. Few prisoners are taken. Few deserve to be. Lest this sound like a counsel of despair, ‘Investing Through the Looking Glass’ also offers practical and pragmatic suggestions for protecting and growing scarce investor capital amid the concurrent waves of deflation and inflation crashing against one of the most challenging financial environments that anyone alive has ever seen.

Deutsche Bank shares seesaw as speculation of a DOJ settlement grows

CNBC - ‎1 hour ago‎
German markets news publication Der Platow Brief said on Tuesday that Deutsche Bank was looking at a settlement of $4 billion to $5 billion by end of October with the U.S. Department of Justice (DOJ). The newsletter, which was reported by Reuters, also ...

Deutsche Bank Brings Too-Big-to-Fail Quandary Home to Merkel

Bloomberg - ‎3 hours ago‎
“There's a good chance if Deutsche Bank were to go under there would be a series of bail-ins that would affect not just the German economy and the German financial system, but the entire European financial system as well,” said Megan Greene, chief ...

Europe stocks higher; Deutsche Bank in focus; Pound hits 31-year low on Brexit fears

CNBC - ‎20 hours ago‎
Deutsche Bank's share price went on a roller-coaster ride last week on the news that it would have to pay $14 billion to settle with the U.S. Department of Justice. But a report on Friday by AFP suggested this could be reduced to $5.4 billion. Talks ...

Deutsche Bank shares recover on support from clients, rivals

Reuters - ‎18 hours ago‎
Germany's largest bank has been engulfed by a crisis of confidence after the U.S. Department of Justice (DOJ) last month demanded up to $14 billion to settle claims that Deutsche missold U.S. mortgage-backed securities before the financial crisis.

Deutsche Bank's rally is gaining steam

Business Insider - ‎3 hours ago‎
Shares in Germany's biggest bank, Deutsche Bank are continuing to rally on Tuesday, extending gains into a second day, and fighting back against the huge losses seen in recent weeks. Around 8:50 a.m. BST (3:50 a.m. ET) Deutsche's stock is trading up by ...

Deutsche Bank shares choppy with no DOJ settlement deal in sight

CNBC - ‎Oct 4, 2016‎
The perception is that Deutsche Bank needs to raise capital following the proposed settlement from the U.S. Justice Department (DOJ. The bank has repeatedly defended itself over recent weeks, however, telling CNBC that there is "no reason to worry" and ...

Op-Ed: Deutsche Bank — The world's greatest contrarian trade?

CNBC - ‎Oct 3, 2016‎
Deutsche Bank itself has even admitted that there's a "perception issue" and analysts who delve deep into the financial figures of the bank have highlighted its large amount of so-called "level 3" assets. These are assets that are highly illiquid and ...

Delamaide: 'Deutsche Bank moment' still a risk

USA TODAY - ‎17 hours ago‎
WASHINGTON — Reports last month that the U.S. Justice Department had floated the idea of a $14 billion fine for Germany's largest bank sent world stock markets into a tizzy. Deutsche Bank, the flagship of Germany's financial sector, has been ...

CDS Markets Add to Deutsche Bank Gloom

Wall Street Journal (blog) - ‎21 hours ago‎
Deutsche Bank AG has been under fire for quite a while, but a recent milestone points to more bad news for the German lender: While very unlikely, some investors are now seriously considering the possibility of it going under. However slim the chances ...

Deutsche Bank's Troubles Touch a Nationalist Nerve

Bloomberg - ‎Oct 3, 2016‎
The International Monetary Fund warned three months ago that Deutsche Bank posed a potential systemic threat to the global financial system. Today the problems facing Germany's largest lender are fueling a different kind of risk: that of a growing ...

European stocks end higher as Deutsche Bank, UK shares pop

MarketWatch - ‎19 hours ago‎
European stocks on Tuesday leapt to their highest level in nearly two weeks, as Deutsche BankAG shares resumed their recovery, while British blue-chips got a boost from the pound's drop. The Stoxx Europe 600 SXXP, +0.84% rose 0.8% to end at 346.10, ...

Opinion: Deutsche Bank needs a bail-in — here's how it could be done

MarketWatch - ‎19 hours ago‎
It is correct to say that Deutsche Bank DB, +2.70% doesn't have a liquidity crisis, and that even if it did, the Bundesbank could provide it with unlimited liquidity. But liquidity alone doesn't guarantee a bank can continue to operate in the long run ...

Deutsche Bank and Pearson help European shares rally

Reuters - ‎19 hours ago‎
LONDON, Oct 4 European shares advanced on Tuesday, with Germany's Deutsche Bank hitting a two-week high following steep losses and the world's biggest education company Pearson gaining after encouraging comments by Morgan Stanley. Pearson ...

Deutsche Bank is fighting back

Business Insider - ‎Oct 4, 2016‎
Shares in Deutsche Bank, Germany's biggest bank, are fighting back on Tuesday after returning to trading following Monday's holiday in Germany. German investors enjoyed a three-day weekend to celebrate Reunification Day, but Deutsche's shares hit the ...

Here's how things could really go wrong for Deutsche Bank

CNBC - ‎Oct 3, 2016‎
Such can be the case in the fickle financial marketplace, particularly in a case like Deutsche's. The bank has some valuable tangible assets on its balance sheet — Postbank, Deutsche BankAsset Management and a stake in China's Huaxia Bank, to name ...

Deutsche Bank shares slip in settlement race

Reuters - ‎Oct 3, 2016‎
FRANKFURT Deutsche Bank (DB.N) shares resumed falling on Monday after recovering from a record low at the end of last week, as hopes faded of a swift deal with U.S. authorities over a multi-billion dollar penalty. The German lender is throwing its ...

Herro Says Deutsche Bank Jitters Create Investor Opportunity

Bloomberg - ‎22 hours ago‎
Herro, who doesn't own Deutsche Bank shares, called the Justice Department's request “really unacceptable,” echoing remarks by CEO John Cryan who has said he expects U.S. authorities to bring the settlement in line with other lenders. In an interview ...

Traders watching for clues on Deutsche Bank, Fed policy

CNBC - ‎Oct 3, 2016‎
"Specifically, tomorrow I want to see how Deutsche Bank performs," said Quincy Krosby, market strategist at Prudential Financial. She is also watching for the impact to the market from financial stocks and oil prices. The U.S.-traded shares of Germany ...

Deutsche Bank slowly infecting other European banks: Newsletter publisher

CNBC - ‎Oct 3, 2016‎
He said Deutsche Bank's falling share price, what he called its faulty business model, its large derivative book and Europe's negative rates all contribute to the current volatility. According to Pal, the Justice Department's proposed fine is just one ...

Deutsche Bank highlights big problems for small hedge funds

CNBC - ‎Oct 3, 2016‎
Press reports have intimated liquidity concerns were instrumental in driving the estimated 10 hedge fund clients to withdraw business from Deutsche Bank. The creditworthiness consideration has been of even greater concern for hedge funds given events ...

Will the Crisis of Confidence at Deutsche Bank Spread?

Knowledge@Wharton - ‎17 hours ago‎
Global capital markets are being pressured by the travails of Deutsche Bank, one of Europe's largest investment banks, and there is yet no clarity on when the coast will clear. The bank's stock has plunged to all-time lows as concerns about liquidity ...

Deutsche Bank's Appetite for Risk Throws Off Its Balance

New York Times - ‎Oct 2, 2016‎
Those worries calmed down somewhat late last week as Deutsche Bank's shares rose after reports that the bank may be close to cutting a deal with the United States Justice Department regarding the fine it must pay for selling toxic mortgages during the ...

The 4 scariest charts from Deutsche Bank's dramatic sell-off

CNBC - ‎Oct 3, 2016‎
Shares of Deutsche Bank have been on a wild ride in the last two weeks with a proposed $14 billion settlement for the U.S. Department of Justice raising concerns on its capital position. The German banking giant insists that it has a "comfortable ...

Why a Deutsche Bank settlement won't solve the real problem

CNBC - ‎Oct 2, 2016‎
On Friday, Deutsche Bank's U.S.-listed shares jumped 15 percent after the AFP wire cited a source as saying the bank may be nearing a $5.4 billion settlement with the DOJ, a big discount on the original penalty suggested by the DOJ. CNBC has not ...

Intertek and Deutsche Bank help European shares to advance

Reuters - ‎Oct 4, 2016‎
However, HSBC cut its target price for the bank, forecasting challenging conditions for the banking environment and adding that Deutsche Bank might lose revenues due to the short-term lack of confidence. Shares in Intertek rose more than 4 percent, the ...

Deutsche Bank is a perfect example of an essential part of markets that's disappearing before our eyes

Business Insider - ‎Oct 3, 2016‎
Deutsche Bank CEO John Cryan addresses the bank's annual general meeting in Frankfurt, Germany, in May 2016. Reuters. Deutsche Bank's stock is down yet again on Monday as the turmoil rocking Germany's largest bank continues into a second week.

Deutsche Bank has made some new investment banking hires

Business Insider - ‎Oct 3, 2016‎
Deutsche Bank has made some new hires in its tech investment-banking and financial institutions groups. The firm has hired Brian Pitz as cohead of internet investment banking coverage, according to an internal memo from global tech, media, and ...

European stocks close barely higher; Deutsche Bank, Brexit in focus

CNBC - ‎Oct 3, 2016‎
Frankfurter Allgemeine Zeitung reported at the weekend that Deutsche's CEO John Cryan would be in Washington this week for annual IMF and World Bank meetings, and other senior Deutsche Bank executives would join him to negotiate a settlement with ...

Deutsche Bank, ECB and Confidence in Crisis

Daily Reckoning - ‎21 hours ago‎
This comes in the face of massive questions of solvency for Deutsche Bank. Since 2008, up until now, news coming out of the bank (and for the system as a whole) have been “relatively” uneventful. So why is it now being questioned as a bank of vital need?

Deutsche Bank offers a tough lesson in risk

Financial Times - ‎17 hours ago‎
This is the chief lesson of the market turmoil surrounding Deutsche Bank. Yet there is also a host of further lessons: the approach taken to punishing banks for their failings is more like firing a blunderbuss than a rifle; and it is still hard to ...

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