Tag Archives: Deutsche Bank collapse

A “Cat 5” Financial System Hurricane Swirls Offshore

One of the biggest benefits I get from writing newsletters (Mining Stock and Short Seller’s Journal) is that I get “grassroots Main Street” intel from subscribers.  This has led to some invavluable insights into the housing market and the general economy all over the country.

Yesterday I received this email:

Heard from a friend east of the Atlantic that things are worse than are even being reported by alternative media. I bet the only thing the banks would like more is if the Chinese took another week off! I also heard next week could be big trouble.

‎My friend’s employer is a financial institution in Europe – you can probably guess which country.  Words used were “chaos” and “possible shutdown.” Advised to buy silver as much as possible.

I tried to pull more info out of him but he was understandably compelled to pass on generalities in order to protect the identity of his friend.

Having said that, the information is consistent with what is unfolding at Deutche Bank.  It also dovetails with the systematic take-down of gold.  I’ll have more on that later today.   Interestingly, the media attention has focused on DB.  But the stock market is telling us that Credit Suisse has huge balance sheet problems as well:

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Both DB and CS have significantly underperformed the benchmark bank index since early March. The index is composed of U.S. Too Big To Fail and super-regional banks. With all the “smoke” coming from DB, it’s entirely possible that Credit Suisse is either inextricably tied to the fate of DB via a perilous derivatives counterparty relationship or CS has catastrophic problems of its own that swirling around but receiving less media attention.

The reality is that all of the U.S. Too Big To Fail banks are also inextricably tied to DB through OTC derivatives counterparty relationships. DB was excessively aggressive in underwriting exotic energy-related derivatives both in the U.S. and Canada (this comes from an inside source of mine), which means that JP Morgan and Citi, specifically among several others, are tied to DB’s fate.

As detailed here, Deutsche Bank received two bailouts from the Fed and the Government approaching $100 billion in 2008: U.S. Taxpayers Bailout DB. Without question, this is because the big U.S. banks are tied at the hip to the fate of DB.

I have no doubt that Fed is using its resources to help the German  Government and the ECB keep DB propped up for now.  I also have no doubt that there are huge hidden financial bombs at DB that the Fed et al will be unable to locate before they detonate.  I would suggest that notion is reflected in the warning above passed on to me yesterday.

Does The Attack On Gold Signal An Imminent Bank Collapse

Since August, the gold price managers – aka “the gold cartel” – have been regularly dumping a lot of paper gold onto the Comex when the Comex floor opens at 8:20 a.m. EST. It’s been their standard operating procedure for the better part of the last 15 years.  The fact that the world’s largest gold buyer – China – is closed all week for a holiday observance takes away the biggest physical market bid for five trading days, making it easier to smash down the price of gold using fraudulent fiat paper gold.

It’s hard to ignore that the events in the financial and economic system unfolding now are not unlike the events that occurred prior to the 2008 “great financial collapse,” which was a de facto western banking system collapse.  The U.S. and European economies are contracting, the housing market is beginning to crumble (see this – link – for instance), the auto market is headed south as auto loan defaults are headed north and it would appear that the middle class consumer is out of disposable income.  There are plenty of other factors that make this time around much worse than 2008, but we’ll save discussion of those for another day.

It’s also hard to ignore “quacking” coming from Deutsche Bank.  It would appear that DB is on the ropes financially.  The incessantly repetitive denials of any problems coming from Central Bankers and the DB upper brass  make the “quacking” even harder to ignore.  If it looks, sounds and operates like a collapsing bank…well, it’s probably a collapsing bank.

There’s no doubt that the recent take-down of gold and silver  – especially today’s – is inextricably connected to some sort of financial system disaster brewing.  In today’s Shadow of Truth, we discuss the massive hit put on gold and reasons why it’s likely an operation implemented to prevent gold from alerting the public that a potentially catastrophic financial hurricane is swirling around “offshore.”  After all, it is hurricane season:

This email from one of Dave’s Mining Stock Journal subscribers is yet another indication that something ugly is unfolding with Deutsche Bank:

I have a very good friend who has been a financial market professional for almost 40 years. He’s very knowledgeable about the monetary system and the general state of the world economy. Last week, he was in Europe on business. His trip ended in Brussels, so he flew home from there on Saturday (this past weekend). He has zillions of frequent flyer miles, so he always travels in First Class. As he flew home this past Saturday, he noticed that there were a bunch of people in his section, and they were travelling as a group. Based on conversations he could overhear, it seemed that they were heading to the US for some sort of an emergency meeting about Deutsche Bank. One woman connected with the group approached my friend (under the mistaken impression that he was part of the group). She started to thank him for being able to get free on such short notice to attend the meeting. She didn’t say where the meeting was going to be held, but she did briefly mention the name of the group with which she mistakenly thought my friend was travelling. Unfortunately, he can’t recall the name, but it sounded like it had something to do with the EU. My friend let her rattle on for about 45 seconds before he politely informed her that he was not part of the group. The lady turned beet-red and clammed up immediately!

Gold & Silver Slammed At Comex Open: Something Bad Is Coming

This is starting to smell a lot like 2008.  By nearly all private sector reported economic data series, the economy is starting to tank hard.  Just today the employment component index of the NY ISM manufacturing report plunged at its fastest pace in history and hit a 7-yr low.  A bevy of private sector reports yesterday showed similar trends.  Most notably construction spending fell in August – vs. a .7% gain expected.  It was the second month in row construction spending declined after a big downward revision pushed July into a decline vs. June.  Construction spending is now contracting for the first time in 5 years.

But there’s an even bigger problem to throw in the mix.  It’s called “Deutshce Bank.” Despite inexorable pleas to the market by CEO, John Cryan, DB is exhibiting ALL of the characteristics displayed by Lehman in the months leading up to Lehman’s collapse.  If DB were forced to undergo an independent – and by independent I mean non-Central Bank, impartial outside third party – audit and a bona fide mark to market of its off-balance sheet “assets,” the bank would be catastrophically insolvent.  As it is now, the stock market values DB stock at just 26% of DB’s stated “book value.”  It’s true book value is likely negative by at least few $100 billion.

Just for the record, I did “back-of-the-envelope” mark to market analysis on the balance sheets of Lehman, JP Morgan, Washington Mutual and Wells Fargo at the beginning of 2008.  This was before I had a blog but I had shared my work with Bill “Midas” Murphy’s Le Metropole Cafe.  My work showed that each one of those banks were hopelessly insolvent if accurate mark-to-market accounting would have been enforced on those banks by the regulators.  Wash Mutual and Lehman collapsed that year.  JP Morgan and Wells Fargo also would have collapsed if the Government had not ripped over $800 billion away from taxpayers and gave it to the big Wall Street banks plus Warren Buffet’s bank.

Deutsche Bank is at least as underwater as each of those banks – and probably more underwater than Lehman and Wash Mutual combined.   If the western Central Banks can’t find all of the hidden skeletons in DB’s derivatives closet and clandestinely monetize them, DB will collapse.

Gold is being taken down just like it was in 2008 ahead of some type of systemic disaster coming at us.  Gold hit $1020 in March 2008 just as Bear Stearns was collapsing.  It was taken down even more during the summer, ahead of Lehman’s collapse.  These events should have pushed gold over $2000 back then.  Gold eventually almost did hit $2000 by late 2011.  The same price management effort is being implemented now and the elitists will do their best to keep gold from broadcasting a loud warning signal to the markets that something is wrong.

Unfortunately, if the masses were allowed to see gold’s “canary” die in the “coal mine” behind the elitists’ “curtain,” it would enable the ones paying attention to get their money out of banks and other monetary custodians before their money is vaporized by whatever financial hurricane is brewing.

Today gold was smashed right when the Comex floor opened.  This is standard operating procedure:

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In the first 30 minutes of Comex floor trading, 3.2 million ounces of paper gold “bombs” were dropped on the Comex. Currently the Comex is showing that 2.5 million ozs of gold have been made available in Comex custodial vaults for delivery. Naked short-selling of futures contracts this extreme only occurs in the gold and silver markets. If selling of this magnitude relative the amount of underlying available for delivery occurred in any other commodity, the CFTC would immediately investigate. Not so in gold because the CFTC is part of the elitist team that is charged with price management of gold.

The common “muscle” reaction to a day when gold, silver and the mining stocks are down as much they are now is to sell and run.  But this is the wrong reaction.  If you want to do something to try and protect what’s your’s, days like today are when money should be removed from banks – especially Deutsche Bank – and moved into the precious metals sector.  This may not be the bottom – but it’s close enough for Government work.  If you liked mining stocks in early August when the HUI index hit 284 , you should love them now with the HUI at its 200 dma.   The HUI has nearly completed a 200 day moving average correction.  It might go lower from here but you’ll never pick the bottom.

I use Goldmoney (Bitgold) to accumulate gold on days like today – because I can buy fractionals of an ounce at price that’s close to spot.  I moved a fair amount of cash from my checking account into my Goldmoney account today:  GOLDMONEY/Bitgold.

Deutsche Bank Will Collapse Without A Bailout or Bail-In

Currently the fate of Deutsche Bank is the most discussed topic in the financial markets. The stock price is rumor-driven, the most recent of which were unsubstantiated rumors of a settlement with the Justice Department that drove the stock up 14% last Friday. As it turns out, the bank has not yet initiated face-to-face settlement discussions.

The gyrations of this stock are like the exaggerated “wobbles” of a spinning top right before it drops the floor (or table-top). Make no mistake, DB will collapse absent a bailout by the German Government – likely in collusion with the Fed, ECB and BoE – or a bail-in by creditors, including depositors.

The cost to buy credit protection on DB’s junior debt moved up to a new record high today. Certainly the OTC derivatives market is not convinced that DB CEO, John Cryan, is being forthright in his pleas to the market proclaiming that everything is under control. Judging from the timing of similar remarks make by Bernanke in reference to the mortgage market and by the CEO’s of Bear Stearns and Lehman, DB could be just a few months away from total collapse.

I wanted to share my comments on DB that I included in my weekly Short Seller’s Journal, released last night:

On Thursday last week, DB hit another new all-time low – $11.19 – intra-day Thusday. It closed that day at $11.48, another new all-time low close. Miraculously, a new rumor hit the tape on Friday in which a French media organization tweeted out that the Justice Department and DB agreed to settle the $14 billion mortgage fraud fine levied earlier this month for $5.4 billion. The stock shot up in frenzied short-covering to close @13.09, up 14% from Thursday’s all-time low close. Of course, the French news source back-pedaled away from the certainty of its tweet later in the day.

The false rumors are intentionally dropped on the market to incite hedge fund short-covering. There is still a lot of “big money” trapped in big positions in DB stock. The short-covering activity creates a bid into which insiders and those connected to insiders can unload big positions. Over 70 million shares traded on Friday. This was 3.5x the 10-day average daily volume of 21.8mm shares per day and more than 10x the 90-day average volume of 6.9mm shares per day. In other words, Friday’s activity enabled a lot “trapped” longs to move closer to the exit (unload their positions).

A much better indicator of what’s going on “behind the curtain” at Deutsche Bank is the report that several hedge fund clients of DB’s withdrew any excess cash held in custody at the banks. This fact was confirmed by the CEO. The other indicator is the cost in the derivatives market to buy default insurance on DB’s bonds. On Friday – even after the French media rumor was floated – the cost buy 1 year default protection on DB’s junior bonds soared to over 600 basis points. To put the cost of this in context, the 1-yr rate on U.S. Treasury bonds is 59 basis points (0.59%).

In terms of U.S. Corporate bonds, any company that has to pay 6% to borrow money for one year is likely headed toward bankruptcy. Think about the rate you are paying on your auto loan, if you have one. It’s probably in the 2-4% range. The derivatives market has determined that lending money to Deutsche Bank is riskier than lending money to you…

Turkey is not taking over DB and DB was technically insolvent before the Justice Department threw a $14 billion mortgage fraud fine at the bank. Too be sure, if a settlement is announced, I recommend shorting DB after waiting for DB to spike up on that announcement. Too be sure, eventually the German Government, likely in conjunction with the ECB and the Fed, will be forced to bailout DB.  DB’s derivatives holdings alone are several times larger than Germany’s GDP.  And that’s the liabilities that are visible.  I can guarantee that, having worked on a trading desk that often hid positions from internal regulators using derivatives, that DB has a lot of unknown skeletons in the closet.  I guarantee that.

This up/down rumor-driven trading in DB stock is exactly like the trading that occurred in Enron and Bear Stearns. I shorted Enron in the $40’s and covered it at $12. I covered too soon obviously because of spike-ups on rumors that occurred as the stock approached $10. Same with Bear Stearns, which I shorted in the $20’s. If/when a bailout occurs, it won’t happen until DB stock is well below $10 if not $5.

As for the hidden skeletons lurking underneath DB’s published financial statements, here’s another one that popped out and it’s just the tip of the iceberg:  Deutsche Bank Charged Over Paschi Accounts As Legal Hits Mount – Bloomberg.   If you read the article, you’ll note that Monte Paschi used derivatives trades with Deutsche Bank to hide losses from previous derivatives trades that DB stuffed into the Italian bank.   This is exactly the type of activity I witnessed going on at Bankers Trust before DB bought BT.   Then DB took the same operational algorithm and increased the use of it exponentially.

If you bank with Deutsche Bank, you need to get all of your cash out of any accounts there immediately – unless you don’t care about money.   In fact, other than loans you have from Deutsche Bank, I would close any accounts you have with the bank, including and especially any assets held with its wealth management group.

There will be no justice served to the people who made $100’s of millions in compensation from DB (see disgraced former CEO, Anshu Jain) through fraud – fraud which has and will result in $100’s of billions of wealth destruction.  But you still have time to step-aside and watch the fireworks show from the sidelines.

The Fall of the House of Fraud (And Peak Corruption)

Peak Corruption represents the terminal phase of any business, social system, government or collective entity of any kind. Peak Corruption is absolutely and by definition the end of the road.  – Guest post by Stewart Dougherty

Guest post by Steward Dougherty –  The United States has transitioned from a Republic, to a Democracy, to a Crony Capitalist Oligarchy, to its present state: a thinly disguised Monarchy.

This monarchy is ruled by the the American House of Fraud, the nation’s Royal Family. The House of Fraud is populated by a small group of individuals who live like kings and queens by systematically plundering the wealth of the nation.

While members of Royal Families are typically linked by blood, the members of the American House of Fraud are linked by psychological characteristics. To become a member of the American House of Fraud, one must demonstrate exceptional levels of greed; sanctimony; power-lust; shamelessness; compulsion to control; love of wars-for-profit; lack of conscience; self-righteousness; egomania; and superciliousness: in other words, psycopathy.

The mantra of The House of Fraud is: “Never Enough.” No matter how much money they plunder, no matter how many people die in their wars for profit, no matter how much havoc they wreak, it is never enough for them. Their ethic is this: For starters, we want it all; then we want more. They represent a bottomless pit of need, and therefore, they create an endless curse of looting, chaos, destruction and death.

The House of Fraud cannot survive, because the people can no longer afford to maintain it. Already, it has financially and spiritually destroyed the American Middle Class, and this devastation spreads and becomes more acute every day.

By any officially accepted accounting measure one wishes to use, the House of Fraud has completely bankrupted the United States. Rather than admit this and reform itself, it has doubled down to loot every remaining private asset it can get its hands on before the already failing economy enters a new, more deadly phase of disintegration.

Every Royal Family needs a bank, and the Bank of the House of Fraud (BotHoF) is known as the Federal Reserve System. The BotHoF has a mono-mandate: to facilitate the maximum amount of national and global looting by The House of Fraud, without outright destroying the global economy that produces the money it steals. It views itself as an evolved, intelligent parasite: one that does not kill its hosts, at least not for as long as possible. It fully recognizes that at some point, hosts must die. By then, it expects to be “Good to Go,” with all the plunder it requires, for the then time being. The job of the BotHoF is to keep the Looting Machine in excellent mechanical condition, and the Looting Fields fertile.

The stock in trade for The House of Fraud is corruption. Corruption greases its wheels, and serves as its prime enabler. As the plundering by The House of Fraud has exponentially increased, it should come as no surprise that so has corruption.

Corruption has become so pervasive and endemic throughout the United States that it has pervaded high levels of virtually every government agency and bureau, which are now overtly politicized, scripted, subverted, co-opted and compromised.

The curse of American corruption has been growing for many years, but never more so than in the past eight. It is no coincidence that the nation’s debt has exploded at the same time, as they are direct reflections of each other.

The recent orgy of fraudulence has brought us to what we term: Peak Corruption. The United States is now at its breaking point, and can no longer afford the astronomical costs of fueling the political, banking, military, pharmaceutical, and other related engines of looting and corruption.

A deal exists between the Bank of the House of Fraud and the Washington, D.C. political establishment. The deal is this: the BotHoF will supply the politicians with however many dollars they want, as long the DC establishment agrees never to interfere with the BotHoF.

This means that the BotHoF cannot be subjected to any legitimate forms of Congressional oversight, special investigations, audits, or other types of control or review. Other than certain members of the Royal Family of the House of Fraud, no one is permitted to pull back the curtain and examine the hidden workings of the Great BotHoF. As philosophers know, secrecy has always been the workshop of the Devil.

Both parties have gladly accepted this deal. Accordingly, the BotHoF is permitted to operate in total secrecy, creating and distributing however much money it wants to whomever it wants on whatever terms it wants, and to control and divert the wealth of the nation in whatever manner it decides, in its own personal interests, without any oversight or limitation whatsoever.

This is astounding, given that the BotHoF has commandeered not its own, but rather The People’s money. Absent from every single action taken by the BotHoF are the best interests ofThe People.  Which is exactly what they want. The BotHoF acts in the best interests of the Royal Family, not those of the RF’s subjects.

The BotHoF manages what has been known as the “dollar.” We believe this is an old term that no longer applies, because the current dollar bears no resemblance to what a dollar was intended and used to be. New realities require new words to describe them. Our view is that the central counterfeiters at the BotHoF now issue Dollwhores, a currency that has been recklessly pimped into epic profusion, which will result in a demographically guaranteed population explosion. The abbreviation is: Dws (Dollarwhores).

The debt of The House of Fraud fast-approaches Dws 20,000,000,000,000. (Twenty trillion.) This debt does not include the net present value of the nation’s unfunded, contingent liabilities (i.e., Medicare, Social Security, government pensions, veterans’ benefits, disability payments, subsidized health care, and so on, ad nauseum), whose burden is conservatively estimated to be between Dws 150,000,000,000,000 and Dws 225,000,000,000,000, a sum that grows by trillions of Dws every year.

These amounts are so gargantuan that they are far beyond even the capability of Ph. D.’s in economics or statistics to conceptualize, model, forecast or understand. Monetarily, fiscally and economically, we are flying blind; no one has any earthly idea about the true, ongoing dynamics of the current system or what factors could destabilize and/or destroy it, despite what they might tell you and want you to believe.

Two things are certain: 1) The debts of the House of Fraud can never, ever be re-paid in anything other than the equivalent of Reich’s Marks or Venezuelan Bolivars; and, 2) The members of the Royal Family of the House of Fraud are fully aware of this, particularly its bankers. Everything they tell you to the contrary is a deliberately concocted lie specifically designed to facilitate ongoing looting.

There is no way on this earth that any entity, including The American House of Fraud, could ever have run up existing and unfunded debts of this magnitude and then loaded them onto the backs of the citizens had a nation-destroying deal not been in place between the BotHoF, the Royal Family and the Washington DC political establishment. These insiders have enjoyed monumental windfall profits by privately cashing in on that deal.

No financier in his or her right mind would lend Dws 20 trillion to an already bankrupt entity producing nothing but massive annual, additional losses (deficits); with zero prospects whatsoever, according to its own business forecasts, of producing ten cents of surplus at any time in the future; having no turnaround business strategy whatsoever other than to spend much more money on programs already experiencing massive losses, and to launch new programs massively in deficit on their start dates, heading deeper into financial oblivion from there; and with no capability whatsoever of re-paying even one penny of its debts, ever.

Peak Corruption represents the terminal phase of any business, social system, government or collective entity of any kind. Peak Corruption is absolutely and by definition the end of the road.

Today, evidence bombards us from every direction that Peak Corruption has become a giant wrecking ball laying waste to to everything that made America great in the first place. It is destroying once trusted and trustworthy government institutions and bureaus, reducing them to reputational and dysfunctional rubble; it has structurally destroyed the productive aspects of the economy, whose capital has been looted by the Royal eleech (and no, they no longer deserve the term “elite,” which connotes positive accomplishment and distinction); it has turned politics into a frenzy of pay-for-play parasitism and greed; it has turned markets into manipulated fantasies intended to create false illusions of economic normalcy and prosperity; it has fomented wars-for-profit on an unimaginable scale, where entire nations are bombed for years on end while tens of millions of citizens become homeless, hopeless scavengers; it has financially destabilized a majority of American families, although they haven’t seen anything yet; and it has propelled so much smoke, dirt and ash into the air that it is no longer possible for the people to see their future, with any kind of clarity or reassurance.

But rising from the ashes of the destruction they have created is some good news, too: the Peak Corruption wrecking ball is indiscriminate, and is also destroying the House of Fraud, even though the HoF is using every weapon it owns, such as the Mainstream Media, to continue operations and delay its fall.

The Alternative Media has awakened tens of millions of people worldwide, and grows stronger every day. People are coming to realize that the problem is not them, but what is being done to them. And that they must act now if they are to have a future worthy of themselves.

We specialize in Inferential Analytics, a powerful forecasting method we have developed over a period of 15 years. We have never before seen so many of our measures indicating severe stress. We wrote this article to tell you that, so you can think about these issues, and take the steps you believe you need to take. If there is interest, we can provide more prescriptive information in this regard, so feel free to leave a comment if you wish.

In early November, there is a referendum on the future. If the people once again swallow the propaganda and outright lies pounded into them by the House of Fraud, then we project quickening systemic deterioration leading to extreme instability and sharply reduced opportunity. Peak Corruption simply cannot be maintained as an ongoing method of operation. If the people begin to reject the establishment agenda that is destroying them, this would be a positive development that should at least halt the expansion of the enormously destructive plague of Peak Corruption until additional actions can be taken to reverse it.

The House of Fraud has had a good run, siphoning trillions in plunder from the people during its reign. If it comes to complete ruin thanks to its own excessive, self-destructive greed plus the awakening of the people, we need not lose any sleep over the fates of its denizens. They will be just fine, though undeservedly so.

Stewart Dougherty
October 2, 2016

Stewart Dougherty is the developer of a privately-held, principles-based forecasting methodology named Inferential Analytics. The unique IA model assesses monetary, fiscal, financial, market, social, political, empirical and anecdotal factors to get a glimpse of tomorrow, today. He has 35 years of management, corporate strategy and business development experience. He is a graduate of Tufts University (MA) and Harvard Business School (MBA).

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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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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Gold: Something Is Melting Down In The Global Financial System

Deutsche Bank is the financial system’s “Hurt Locker”  – Investment Research Dynamics/Kranzler Research

It’s been well documented that the $/yen has been the “lever” by which the Federal Reserve and the U.S. Treasury ( via its Working Group on Financial Markets) has been manipulating the stock market higher and keeping a cap on the price of gold.  Craig Hemke of TFMetalsReport.com has done a brilliant job documenting and commenting on this dynamic:  It’s All About The Yen.  I would recommend looking at his archives to see the historical context of his work.

The yen has been depreciating vs the dollar at a rapid rate since October 2012.  NotUntitled coincidentally the SPX embarked on a nearly uninterrupted upward move that took it from 1099 in early October to its all time high of 2130 in May 2015.  The Untitleddirectional correlation between the USD/YEN and the SPX was highly conspicuous, if not an outright signal of official market market intervention.

Starting in early August, however, the $/yen began to break down technically, as the yen began to appreciate vs. the dollar – primarily in big “waterfall” chunks.  Not coincidentally, the SPX began to “tip over” at about the same time.  Yesterday the $/yen plunged briefly below the key 110 level, closing at 109.78.

Untitled1Today (Wed, April 7th) the dollar crashed another 1.4% the yen.  For clarification, a 1% move in a currency is considered to be a huge move.  As you can see from the 1yr $/yen graph to the left, the $USD has depreciated in value quite rapidly vs. the yen.   There has not been any event-Untitledspecific news that would be causing the rapid depreciation of the dollar vs. the yen.  In fact, the current narrative from the Fed, White House and media is that the U.S economy is doing well and the Fed intends to hike interest rates at twice in 2016.  Conversely, Japan’s economy is contracting and Bank of Japan continues to flood the system with liquidity.  If anything, the dollar should be rapidly appreciating vs. the yen.

The only conclusion we can draw from this is that something has blown up in the global financial system which caused unpredictable instability in – and loss of control over – the Fed’s manipulation mechanisms.

I believe the likely culprit is Deutsche Bank.   As I have commented on several times previously, Deutsche Bank’s balance sheet is a ticking financial nuclear time bomb.  It’s theUntitled financial system’s “Hurt Locker.”  Since March 11,  Deutsche Bank stock is down 25% despite the inexorable move higher by the S&P 500.  DB is down 9% in four trading days this week.  Despite the Fed’s attempts to monetize DB’s derivatives (I will document in another blog post), DB’s stock is telling us that DB’s financial condition is melting down.

This is likely the reason that gold has been a stellar performer for the past three weeks despite the general expectation that the bullion banks were in a position to smash the precious metals once again.  But every attempted downward manipulative hit has been met with aggressive buying.   What makes the trading action in gold all the more remarkable is the fact that India’s gold importing activities have ground to halt since the country’s jewelers went on strike March 1st.

This is an unmistakable message from the market that something potentially devastating has occurred behind the western Central Banking “curtain.”

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Deutsche Bank Is A Complete Joke

That place has been on death-watch forever. However bad it was before Anshu Jain was fired, it has to be worse now.   – Former insider

Deutsche Bank stock has popped 6% today and the move was attributed to an announcement in the Financial Times that DB was looking at buying back several billion in senior bonds in the market at a discount – Financial Times

Before I get to the bond buyback farce, it’s safe to say the jump in DB’s stock is fully attributed to the rumor floated in Europe that the ECB was going to consider buying big bank stocks in an effort to shore up the appearance of a “healthy” banking system. Furthermore, DB has been relentlessly sold and shorted since the beginning of 2016, down 31% in 25 trading days.  It was due for a technically-driven, dead-cat, short-covering bounce.  Central Bank intervention rumors being the perfect catalyst to frighten hedge fund computers into covering shorts and moronic perma-bulls into buying the dip.

Let’s first examine this notion of a bond buyback.  The first item that will be pointed out by Wall Street puppets is that a bond buyback would enable DB to book accounting gains, thereby padding net income and book value.  But the idiocy of this logic is that gains recognized from buying back bonds at a discount are 100% non-revenue, non-cash generating events.  In fact, a bond buyback is a use cash – it further erodes the liquidity of the entity buying back bonds or stock.

In addition, if DB were to buy back its bonds in the market, why on earth would it pre-announce this?  The only result this accomplishes, other than a brief surge in foolish optimism issued by perma-corrupt stock analysts, is to trigger front-running into DB’s bonds thereby increasing the overall cash cost of the bond buyback.

DB’s announcement was first reported in the Financial Times.  You’ll note the FT asserts that “banks can generate capital gains my buying back bonds at a discount to their face value.”  However this is highly misleading because the only “gains” generated are a non-cash generating accounting “gain” that is now permitted.  It was an accounting change that was passed after the 2008/2009 collapse which gave banks the ability to fabricate net income for the purposes of padding their retained earnings and therefore their book value. It’s nothing more than legalized fraudulent accounting.

Curiously, Reuters referred to DB’s announcement as an “emergency buyback plan on senior bonds.”

The FT alludes to DB having 220 billion euros of liquidity reserves with which to use for a bond buyback.  However, glancing at DB’s latest balance sheet, I can only find 102 billion consisting of 27 billion euros in cash and cash due from other banks plus 75 billion euros in interest bearing deposits with banks.  Notwithstanding the risk embedded in “cash due from others” plus “deposits” with other banks, if DB truly had 220 billion euros of “reserve” liquidity, we would not be having this conversation, DB’s senior credit default swaps would be trading at +100 spread instead of +250, it’s subordinated CDS would be trading at +200 instead of +450 and the stock would still be well above $20 instead of staring down the barrel at $10.

But let’s take a closer look at DB’s overall balance sheet, something which clearly no Wall Street analyst or financial bubblevision moron has ever experienced.   DB’s latest balance sheet from 9/30/15 shows “total financial assets at fair value” of $881 billion euros; 71 billion euros of “assets available for sale; 428 billion euros in “loans:” and 153 billion euros in “other assets.”  All told it reports 1.7 trillion euros in total assets, leading to a declaration of 68 billion euros in “total equity” (book value).   That’s an eye-watering leverage ratio of 25x.

Now let’s take a look at the quality of the assets listed above.  DB has very heavy asset/loan exposure to emerging markets, energy, peripheral European credits (like Greece, Italy and Spain),  commodities, Glencore and leveraged finance/high yield.  And course there’s the 60 trillion or so in derivatives.  But we are leaving that out for purposes of this analysis.

Although DB made a big production out of the 6 billion write-down and loss it would take in its third quarter, 5.8 bilion of that was a write-down of goodwill and intangibles.   Considering DB’s exposure to the collapsing asset sectors listed above, this 5.8 billion write-down of what amounts to thin air anyway is nothing short of shocking.  I would conservatively estimate that the 1.53 trillion euros of financial assets + for sale assets + loans + other assets should be written down by at least 20%.   That would imply that, conservatively, DB could write-down its assets 306 billion euros and likely still be overstating the value of its total asset base.  A write-down of that magnitude would imply that DB has negative net worth of 238 billion euros.

In other words, DB is technically insolvent.  When I did this exact same analysis in early 2008 on JP Morgan, Lehman, Wash Mutual and Countrywide, my write-down estimates turned out to be exceedingly conservative.   I would wager anything that my analysis above is “exceedingly conservative” x 2.

Keep in mind this entire analysis does not include DB’s derivatives.  It’s fine with me if DB management wants to puff up its image by taking a few billion 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 into this rally 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 8 years ago.