Monday, July 4, 2016
The Economy: "Analyst: Deutsche Bank Insolvent; Value now MINUS €300 BILLION; Before Derivatives!"
"Analyst: Deutsche Bank Insolvent;
Value now MINUS €300 BILLION; Before Derivatives!"
"Deutsche Bank is "insolvent" according to an analyst who says the bank is worth negative €300 Billion and when Derivatives are factored-in, the Bank is worth almost negative €1 trillion! Move the clock ahead 7-1/2 years for Lehman Brothers and insert a second scale for the comparison to D-Bank.
Click image for larger size.
The chart has many similarities in the descent path. However, many differences exist. Lehman was a mortgage bond event. Deutsche Bank is a universal banking system event. The German bank is not only three times larger than Lehman Brothers as a financial firm, but D-Bank is deeply involved globally in all manner of rotten arenas like the PIIGS sovereign debt, ['PIIGS' An acronym used to refer to the five eurozone nations, which were considered weaker economically following the financial crisis: Portugal, Italy, Ireland, Greece and Spain.] the LIBOR interest rate market, [LIBOR is a benchmark rate that some of the world's leading banks charge each other for short-term loans. It stands for London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world.] the entire Euro Monetary Union derivative foundation, the paper corruption of the Gold market, the Interest Rate Swap machinery for USTreasuries, diverse Junk Bonds, the European energy market, Russian Mafia investments in London, and much more.
The Germans did not wish to acquire Bankers Trust in 1998, but they did on cabal orders to set up an off-shore outpost for bank derivative management. Selling Bankers Trust to a foreign bank removed all the shady dealings from US Banking Laws and Auditor oversight. Now, those derivatives might be blowing up in a central location at the D-Bank HQ. They are even vulnerable to Russian Mafia for losses in London side ventures, the motive for at least a couple JPMorgan bankers taking "flying lessons" off the top floors of office buildings in London Centre. Other unauthorized human wingless flights were to cover up JPMorgan's derivative losses.
Sharks are circling, as the Deutsche Bank stock takes almost daily plunges in the share price. Combined with the Credit Default Swap (CDS) rise, a liquidity challenge would mean a sudden bankruptcy event. Reports continue that the big German bank has been on death watch almost forever. "No matter how bad it was before co-CEO Anshu Jain was fired, it has to be worse now" claims a former insider.
Analysts summarize their asset risks, extensive as they are. DB has very heavy asset/loan exposure to emerging markets, energy, peripheral European credits (like Greece, Italy, Spain), commodities, the Glencore mining firm, and leveraged finance (known better as high yield). Critics are always quick to point out the $60-$75 trillion in derivatives on their books.
Although DB made a big production out of a $6 billion writedown loss taken in its third quarter, $5.8 billion of that amount was a writedown of goodwill and intangibles. Considering the DB exposure to the collapsing asset sectors listed above, this oversized goodwill writedown is truly shocking. Goodwill losses are admissions for having severely overpaid in acquisitions and buyout deals. No asset supports the investment, pure vapor or bad judgment, thus called Goodwill, which on the balance sheet looks better than Dumbass (not to be confused with Donbass, the Ukraine province). Analysts at Investment Research Dynamics estimated that the EUR 1.53 trillion of overall financial assets and other commitments on the books, they should be written down by at least 20%.
Hence, conservatively, DB could go on course to write down EUR 306 billion of its impaired assets. Simple calculation on the back of a napkin means a writedown of that magnitude would leave D-Bank with a negative net worth of EUR 238 billion. This is conservative!
The analyst concludes, "In other words, DB is technically insolvent. When I did this exact same analysis in early 2008 on JPMorgan, Lehman, Washington Mutual, and Countrywide, my writedown estimates turned out to be exceedingly conservative. I would wager anything that my analysis above is exceedingly conservative by a factor of two. Keep in mind this entire analysis does not include DB's derivatives. It is fine with me if DB management wants to puff up its image by taking a few billion [Euros] of liquidity that it technically does not have and buy back some of its debt. I could care less. But anyone who is not selling their stock is a complete moron. The only thing demonstrated to me by DB's bond buyback bravado is that investors learned nothing from 2008/2009, and bank upper management and directors are even more corrupt now than they were eight years ago." Harsh words, but based in reality. See Investment Research Dynamics (HERE). The bond buyback is a lure for suckers to buy the stock, so that insiders can exit at better prices. Such is an old trick.
In January and February of this year reports surfaced that JPMorgan and Goldman Sachs had arrived at the Deutsche Bank offices. They were allegedly doing their shark routine to pick over the available assets. Word from insiders is they reviewed the books, selected some worthwhile assets, made lowball bids for them without competition, and left the D-Bank site with nothing but rotten matter on the books. Maybe they would be obligated to pick up some rotten assets at the same time, taking a shot for the team. Their arrival signaled a late stage event, before a failure is announced. It is possible that a breakup into seven smaller financial entities may take place. The process is very complex, made more challenging by the interwoven parts with other big Western banks in several asset classes. Just like with Lehman Brothers, to see JPM and GSax on the scene is a death knell.
When DB goes under, it will make the 2007-2008 financial collapse look like a hiccup. The DB collapse will be a financial Tsunami that sweeps around the planet, plowing-under everything it ever touched, worldwide, until the entire global banking system is wiped out. That will be the start of a global DEPRESSION which will make the 1929 market crash and "Great Depression" seem wonderful. If the analysts are right, all this happens THIS YEAR. Unless, of course, the powers-that-be can do something small to divert attention: Like start another World War. Because, folks, another World War is the ONLY thing big enough to distract from what takes place when DB fails. Watch for it."