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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4 thoughts on “Short All Bounces In Deutsche Bank Stock – It’s Still Insolvent

  1. All I know is that I upgraded probability of WWIII starting within next 12 months to 60%. What has happened in Syria by itself should collapse entire global financial system already. On top of that, now both India & Pakistan are at each other’s throats, and both of them possess nukes.

  2. Germans have got no choice , but to rescue D.B
    They are not going to risk total collapse of their economy .
    The Justice Department knew about it , that is why they didn’t care , where money was coming from.
    I think they trying to keep people on their side , if there was financial collapse, people would turn against banks and governments. That is why they kicking the can all along.
    They will try to blame most probably Russia and keep people on their side , that is why we should watch Syria.

  3. I didn’t realize until now that Monday is a public holiday in Germany, the German Unity Day remembering West Germany & East Germany re-joining in 1990. Needless to say, ALL banks including Deutsche Bank are all closed till Tuesday morning. Unlike Bear Stearns & Lehman, Deutsche Bank has a big retail presence in Germany. Whoever wanted to get their cash out of this bank’s accounts had their chance on Friday, there’s no telling what will transpire by Tuesday morning. Majority of German sheeple will be busy “enjoying” the long weekend, combined with Oktoberfest in places like Munich, with not the faintest of clue about magnitude of what’s to hit them.

    Either Merkel & her crony cabinet are playing a game of chicken claiming all bailouts are out of question OR bail-ins may need to be instituted before Deutsche Bank opens Tuesday morning. (Will be very late hour Monday night in US timezones.) Eagerly waiting @ the edge of the seat for next 2 days to see what happens.

    October Surprise?
    Oktoberfest?

  4. In an insanely twisted way, tied to above:

    For the next 5 days, pray for Julian Assange’s life. I don’t care which god you pray to, or if you even believe in/pray to any god. Just pray for Julian Assange’s life. The “other” October surprise that’s supposedly coming down the pipeline this week (rumor mills are in overdrive) is so huge, ALL of Bushes-Clintons and Obamas are implicated. At least in most people’s (that are alive today) lifetimes, these 5 days could transform America & the world. Julian Assange isn’t even American. But he might end up being the greatest American patriot. (Kind of like Thomas Paine, the greatest American patriot who wasn’t technically even an American.)

    Assange was at 1st going to give public press announcement from balcony of London Ecuador embassy, on Tuesday morning. Now he canceled it & will appear by video link on Wednesday morning in Berlin, Germany instead. He said before that it didn’t matter if he was killed. He had safely distributed cryptographic keys around the world, such that truth would get out even after he died. Irrespective of this claim, just pray for Julian Assange’s life.

    I don’t know short of declaring war on Ecuador and/or razing the Ecuador embassy in London to the ground, what the bankster cabal can do to stop the oncoming onslaught. An outright global false-flag event and/or kickstarting WWIII in Syria seem like other plausible options for them.

    ?!?!

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