Category Archives: Financial Markets

Short All Bounces In Deutsche Bank Stock – It’s Still Insolvent

Deutsche Bank has never had as safe a balance sheet in the past two decades and there is no basis for media speculations on clients leaving.  –  DB CEO, John Cryan in Bloomberg

So John, are you willing to make those statements under oath?  The funniest  report I saw today was that Deutsche Bank gave Tesla a $300 million credit line to fund Tesla’s vehicle leasing program (LINK).   No wonder DB is insolvent.  It’s willing to lend against collateral that spontaneously combusts.  Not to mention the fact that Tesla back-end loads the terminal value of its vehicles on its leases in order the minimize monthly lease payments.  Whoever approved that deal at DB is smoking strong weed.

Rumors about Justice Department multi-billion dollar fine settlements do not fix big bank insolvency. DB was insolvent before the Justice Department mortgage securities fine was conceived. Any legal fines levied by any Government will end up in line with the rest of Deutsche Bank’s creditors. Unless, of course, Grandma Merkel and her band of merry thieves agree to bailout the technically bankrupt bank. But that won’t occur until DB stock is well below $10.

We saw this same trading with Enron, Bear Stearns and Lehman when those stocks approached $10. I was short and made a lot of money on Enron and Bear – and I held my shorts through rumor-driven bounces in the stock like the one propelling DB’s stock today.

This trading activity with the stock is designed to trigger aggressive short-cover buying which enables position-dumping by the big boys who are still heavily long DB stock. The rumor that drove DB stock over $13 was tweet from a French press agency which “confirmed” that the DB was near a settlement with the Justice Department for $5.4 billion instead of the original $14 billion levied. A short-while later the French press agency back-pedaled on the assertion.

The more relevant information to consider is the signal being flashed in the market for DB’s credit default swaps.   The cost of insure DB’s junior bonds for one year surged to 625 basis points today.   This inverted the “curve” for the cost to insure DB’s bonds, as the cost to insure the bonds for five years was 505 basis points.   The same is true for one yr. vs. five yr. swaps on DB’s senior debt, which were trading at 270 basis points vs 241 basis points respectively:   DB Stress Signal Reemerges – Bloomberg

A credit default swap the costs over 600 basis points to purchase is analogous to a triple-C rated U.S. corporate bond.  Company’s with the “triple-hook” credit rating in the current insane financial system are semi-dead corpses with electric stimulation paddles being applied in an attempt restart the heart.  These are bonds that have a greater than 70% chance of eventually defaulting.   In other words, investors who are willing to pay over 600 basis points for one year of default protection on their DB junior bond position believe that the risk of DB defaulting in the next 12 months is exceptionally high.

If the German Government was not lurking in the background, these credit default swaps would be priced at well over 1000 basis points over the equivalent Treasury yield.  On the other hand, DB CEO, John Cryan, stated on Friday that DB’s balance sheet is safer than at any point in the past two decades.  That at least the third time DB liquidity rumors have been denied and we know what that means…

I don’t know if this reminds more of Jim Cramer pounding the table on Bear Stearns stock at $62 shortly before it plunged to $2 or Lehman CEO, Richard Fuld, proclaiming that Lehman had billions on highly liquid assets about 5 weeks of ahead of the stock plunging to near-zero (graphic from Zerohedge):

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“Political Correctness Is Tyranny With Manners”

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The United States is on the frontier of Aldous Huxley’s “Brave New World.” Full force propaganda, political/social correctness, “safe spaces,” everyone on Field Day gets ribbon”…the list goes on. Huxley’s vision is characterized by a society in which the population has been converted into standardized zombies. Starting with the educational system, children are educated in a way which shapes their self-image appropriate to their socioeconomic caste; critical thinking and individualism is discouraged. Sound familiar?

A colleague of our’s today remarked that “these markets are nothing more than another form of propaganda used as political/geopolitical tools.” Hard to argue against that considering every economic report issued by the Government is intentionally manipulated for purpose of brainwashing the public into thinking that the economy is doing better than everyone thinks. Remember, no criticial thinking allowed.

In this latest episode of the Shadow of Truth we dive into these issues full-throttle, including a brief discussion on the incipient rebellion brewing:

The Financial System Is On The Cusp Of Collapse

DB stock is now in a full panic sell-off as I write this.  It just hit another new all-time NYSE low on by the heaviest volume ever in the stock since its 2001 NYSE listing.  It’s currently down almost 10%.  No doubt the Central Banks will try to bounce it.

Deutsche Bank may well be the scapegoat this time around just like Lehman was the scapegoat in 2008. Central Banks in collusion can prevent just one bank from collapsing. It was the co-collapsing of AIG and Goldman Sachs that prompted then-Secretary of Treasury, ex-Goldman CEO Henry Paulson, to put in motion the bailout of the U.S. and European banking system.

Yesterday it was reported that the rate the Fed charges the banks to borrow collateral surged to its highest rate in 7 years – LINK. The rush to borrow collateral was no doubt prompted by OTC derivatives-related counter-party collateral calls. A collateral call is like a margin call in a stock account. This occurs when a derivatives trade goes south for an entity that is on the long side of the derivatives bet – a bet that Deutsche Bank won’t default, for instance – and the counterparty to that trade demands more collateral to be posted in order to insure that the bet can be paid off if the “long side” loses.

Now multiply that concept across thousands of derivatives trades involving hundreds of hedge fund and bank counterparties totalling $100’s of trillions. It does not take too many collateral calls before counterparties and Central Banks run out of collateral that can posted against these OTC derivatives margin calls. That’s happening now.

This is 2008 redux – only this time the damage inflicted by derivatives counterparties collapsing will be much worse because the size and scale of the problem is much larger.

Deutsche Bank is at the center of focus, but there’s no question that U.S. Too Big To Fails are in similar financial condition.  If that’s not the case, then why won’t Fed unwind the “QE” that created the $2.3 trillion in bank “excess reserves” sitting at the Fed?  Pull this rug out from under Goldman, JP Morgan, Wells Fargo, B of A etc and the entire U.S. banking system will collapse.   But that will happen at some point unless the Fed cranks up the printing press again.

Deutsche Bank may well be the catalyst that throws a “spark” that lights the fuse on $100’s of trillions of financial weapons of mass destruction.  It was just reported that DB’s hedge fund clients are rushing to draw all excess cash held at the bank.  That’s how the run begins.   DB’s stock is down 8% right now on 33 million shares.  This is 3x the 10 day average trading volume and over 6x the 90 day average – with 2 hours left in the trading day. It’s as if someone turned on the light in the kitchen and the cockroaches are running for cover.

Make no mistake, DB is not the only big bank in trouble right now.  I have no doubt the phone wires between the U.S. and European Too Big To Fails are sizzling.  This is also the reason the manipulators have been throwing a “scorched earth” attempt to push gold and silver lower.  Again, this is just like 2008 when the manipulators took the price of gold down from $1020 to $700 – right before the entire banking system de facto collapsed.

Deutsche Bank may well be the “canary” but the “coal mine” is the banking system – European and U.S. – and there will be plenty of dead birds before this is over.

For additional insight on the DB saga, see Eric Dubin’s:  Deutsche Bank Is Imploding.

Orwell’s “2016:” The System Is Completely Rigged

It is what it is – and what “IT” is, is that we’re living in the vision of the future laid out by George Orwell 70 years ago.   The markets are rigged, elections are rigged; Congress is completely owned by wealthy corporations and individuals;  the power of the Oval Office is owned by wealthiest and most ruthless corporations and individuals:  Wall Street Big Banks, Big Oil, Big Defense, Big Pharma and Big Tobacco.

Most Hillary Clinton supporters know she defines the word “criminality,”  but will vote for her as a vote against Trump.  Think about how absurd that it is.   The system is so completely rigged that even individual thought-process has been hijacked.

Looming on the horizon is a massive financial system nuclear melt-down.   It’s not a question of “If” but of “when.”  It looks like Deutsche Bank will be the catalyst that triggers the daisy-chain of hidden nuclear financial bombs.

In today’s episode of the Shadow of Truth, we explore the degree to which the rigged financial, economic and political system is approaching an event of collapse:

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The Debate Verdict: The American Public Loses

Lester Holt was an absolute embarrassment to the debate moderation profession.  At times it seemed as if Trump was debating Holt and Hilary.  I have to believe even Donna Brazile was blushing on Lester’s behalf.  – Investment Research Dynamics

The only winners in last night’s debate were Trump and Clinton. Win or lose, Trump is getting free advertising for his business organization. He may not be spending much on his campaign, but he’s getting $10’s of millions worth of free corporate promotion.

Hillary win or lose is getting a “Get Out of Free Jail” pass for the numerous felonies she’s committed, some of which are punishable by death. If she loses, Obama will undoubtedly hand her a blanket pardon. How do we know? Because Hillary’s capos have already received pardons.

The losers last night were American public. Notwithstanding the fact that 99% of the viewers skipped Monday Night Football and were watching to see whether or not Hillary would pass out again, neither candidate offered any definable ideas for preventing what is now the inevitable collapse of the United States.

Instead, the debate for the most part circled around whether or not Trump pays taxes or supported the original Iraq war. Trump never did press the issue of the Hillary’s 33,000 deleted emails after referencing them in response to her boorish request for his tax returns – I think we all would like see what’s in those emails:

Perhaps the biggest disgrace and most serious assault on the viewer intelligence is when Hillary Clinton regurgitates the fraudulent Government economic statistics as evidence that the Democratic political agenda has made the country better over the last 8 years. If she truly believes that the unemployment rate is 4.9% then she’s the only person amongst everyone watching who buys into that insidious lie. More likely whe’s using that fraudulent statistic for the purposes of political expedience. “Let them eat cake, for godsakes.”

The easiest pitchfork for Trump to throw at Hillary on the jobs/economic front is to point out that it was Bill Clinton’s “strong dollar policy” that triggered the massive exodus of U.S.  manufacturing to China.  No one can debate that point.  NOT coincidentally, the policy was pushed hard by Walmart – one Bill’s “Padrinos.”

The easiest step toward job repatriation and a balanced trade deficit would be to eliminate the Fed and let the U.S. dollar drop a lot lower vs every other fiat currency. That’s a no-brainer.  Abolishing the Fed should be Trump’s number one platform because that act in and of itself will begin to fix a lot of problems.

The debate failed on all fronts. What was promoted to be politic’s version of an Ultimate Fighting duel turned out to be the Kindergarten version of “No, YOU have cooties.” Neither candidate is fit for the Presidency.

The three conclusions that can be drawn are:  1)  your vote does not matter;  2)  the time spent watching the debate is regrettably 100 mins of my life that I’ll never get back; and 3) The United State as we know it is doomed.

Famous Last Words – Deutsche Bank: “We Don’t Need A Bailout”

“[The] share price is low but that is not what is worrying us and that is not what we are looking at. What is really important to us is our credit story which is very strong, it is fundamentally strong.” – Jorg Eigendorf, head of communications at DB on CNBC (sourced from Zerohedge)

“The credit story is strong?”  To begin with, I’m not sure what the head of communications is doing on bubblevision talking about “credit.”  If he understood the meaning of the words he was regurgitating from script, he would not have made that statement if he were under oath.

From a German politician (as reported in Zerohedge):  “you can’t compare Deutsche Bank with Lehman. The bank is in a position to get out of this situation on its own.”  As the adage goes:  A rumor is confirmed as fact once that rumor is denied three times by politicians…

DB stock is down over 7% today.  It’s likely the primary reason that the SPX is down 13 points as I write this (that plus the dismal new home sales report).  DB stock has hit another all-time low.  DB has lost 51% of its market value this year.  The BKX bank stock index is down only 4% this year.  The relative performance isn’t just a red flag, it’s a “code red” five-alarm danger signal.

Here’s the biggest indicator that DB not only has credit problems, but its assets are significantly overvalued by its auditors and internal financial people:   DB’s stock market capitalization is 30% of it’s book value – i.e. DB trades at less than 1/3 its book value.   The amount of cash on DB’s balance sheet is nearly 7x greater than its market cap.

There’s no telling just how catastrophically insolvent DB is because we can’t look at its off-balance-sheet “assets,” which are primarily very risky OTC derivatives.  I also do not believe that DB is the infamous “black swan” because we all see it coming – especially the Central Banks.

But at some point some counter-party to DB is going to ask the bank to post more collateral against some type derivatives contract.  That’s when the fun will begin.  My bet is that right now the Bundesbank – with help from the Fed – is helping DB reinforce its collateral positions.   But if DB’s stock keeps dropping, the collateral calls will likely intensify and come from places that are hidden from even Central Bank view.

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As I was writing this, DB stock has been continuously hitting new lows.  Note the huge increase in monthly volume in the graph above (yellow box).  That’s institutional investors jumping off the sinking Titatanic into life rafts.  There has not been any insider share activity in the last 12 months because insiders don’t own any shares, other than a meaningless amount of unvested compensation shares.

Something ominous in the financial markets is unfolding behind the “curtain,” off-balance-sheet and out of the view of anyone who might care to know the truth.  DB’s balance sheet is a weapon of mass financial destruction in and of itself.  But the hidden financial bombs a DB blow-up will trigger is what the market should really be worried about…

IRD On Kennedy Financial: Janet Yellen Is A Complete Embarrassment

Predictably, the FOMC once again fell flat on its face with regard to its continuous threats over the last month to hike rates. Despite the politically motivated rhetoric about the strengthening economy and tight labor market flowing from Yellen’s pie-hole, the fact that the Fed is afraid to raise rates just one-quarter of one percent tells us all we need to know about the true condition of the economy.

If I didn’t despise the fact that Yellen has been an incompetent political hack originally inserted into the Federal Reserve system as a political tool since her first tenure as an economist at the Fed in 1978, I would almost feel sorry for her. But the fact that she can stand in front of the public and read off of a sheet of paper scripted with lies about the state of the economy forces me to despise her as much as I despise the entirety of Washington, DC

This analysis of Yellen underscores my view that Yellen is either tragically corrupt or catastrophically stupid:  How Yellen Rationalizes Financial Bubbles

Phil and John Kennedy invited onto their podcast show to discuss the FOMC, Yellen, Gold, Deutsche Bank and some other timely topics:

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Global Supply Of Gold Tightens After Barrick Mine Closure

An Argentinian judge has ordered an indefinite suspension of mining at Barrick’s Veladero gold mine in Argentina due to a serious cyanide leak.  To underscore the severity of the situation,it is being speculated that Barrick’s mine manager – who is no longer working at the site – has fled to Canada to avoid any possible prosecution.

Lawrence Williams provides a good analysis of the situation here:  LINK.   However, it is also worth reading an article in the Buenos Aires Herald, which reports that the Government has filed a complaint against Barrick:  LINK.

This is an interesting development because the Valedero mine produces 10% of ABX’s 6 million ounces per annum – or 17 tonnes.  This represents approximately .6% of the annual global gold mine production.

It’s not clear how long this mine will remained close.  Certainly longer than the couple weeks that Barrick CEO, Kelvin Dushnisky, asserted after making light of the issue at the Denver Gold Forum.

In the opinion of this blog and the Mining Stock Journal,  Barrick is a corporate abortion of a company and should be avoided at all costs as an investment.

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The Short-Sell Report On First Majestic Silver Is Fraudulent

In my last issue of the Mining Stock Journal (Sept 15), I featured trading opportunities in three large-cap mining stocks plus I explained why a recent buy recommendation from the National Inflation Association was a nothing more than a pump-n-dump operation.

Although the sell-off in AG stock was attributed to a highly negative report issued by Kerrisdale Capital, the truth is that the recent price correction in AG is a function of AG revising its full-year production outlook lower plus the correction in the overall sector. In fact, the short report issued by Kerrisdale – headed by a sleazy financial operator who was recently busted for a DUI and cocaine possession – was nothing more than a fraud-filled hit-job:

I noticed several problematic errors in his analysis. In fact, Adrange’s thesis and conclusion is an analytic disaster. I don’t know whether or not this guy has any experience with mining stock analysis but it was clear to me that he does not know what he is doing in this sector. Perhaps the most glaring error – in fact I have to wonder if it was intentional for the purposes of supporting his thesis – is that in valuing AG vs. other miners based on resources, he only uses measured & indicated resources. This is outright incompetence or fraud, or both.Mining Stock Journal, September 15, 2016.

I further lay out the case for why the current sell-off in AG stock is a great buying opportunity plus I recommend two other large-cap stocks (note: the Mining Stock Journal primarily focuses on relatively unknown junior exploration companies).

The NIA recently was promoting a junior mining stock with which I was not familiar. I did some research on it and had discovered that the NIA had been promoting it. The basis for the “strong buy” was entirely incorrect data presented. In fact, the assertions and data presented were either a product of unintentional incompetence or intentional misrepresentation.  I explain in my analysis:

The bottom line with the NIA report is that is almost entirely inaccurate and full of hyperbole. It’s clearly a report that was designed to facilitate a pump and dump operation. If you own this stock, take advantage of the recent move in the stock triggered by the NIA, and fueled by stock-trading chat board childishness, and unload your shares. I don’t want to assert that this company is a sham, but if it has any intrinsic value, it’s far below 10 cents/share.

In the next issue of MSJ, I’ll be featuring a little-known silver exploration company trading well below $1 that, in the words of the CEO, will eventually be $10-15 stock (Canadian $’s). After reviewing the story with CEO yesterday, I’m amazed that this stock receives almost no attention, even on trading chat-boards. You can access MSJ with this link, which includes receiving all the back-issues (via email):  Mining Stock Journal Subscription.

China Buys More Gold While The Fed Prints More Paper

About a week ago, Reuters reported that Russia’s second largest bank, VTB Bank, had agreed to supply 15-20 tonnes of gold to China over the next 12 months.  VTB also plans on increasing the amount of gold supplied to China over time, up to 80-100 tonnes.  Without a doubt, the PBOC’s demand for gold now exceeds the 450 tonnes produced by China.  This agreement with Russia underscores that view.

At the same time, it was apparent from yesterday’s post-FOMC presser with Janet Yellen that the Fed is backed into a corner with regard to its options on monetary policy.  Anyone who believes that rhetoric about a “stronger economy” and a “tight labor market” has a calcified brain.   Unless the Fed intends to let the financial system collapse, the only option left is to print more money.

We discuss both of these developments in this latest episode of the Shadow of Truth:

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