Tag Archives: Deutsche Bank collapse

The Shameless, Blatant Fraud Of Morgan Stanley’s Former CEO, John Mack

This idea that I heard yesterday, the possibility of not making their [Deutsche Bank] interest payments, it’s just absurd. The government will not let that happen…the German central bank should make a statement in support of the lender [DB]…the bank’s name is Deutsche Bank. It’s the German bank. Politically, they will stand up, if they need a safety net, and give it to them. – former Morgan Stanley CEO, John Mack on CNBC (from Zerohedge)

John Mack is the former CEO of Morgan Stanley, after Deutsche Bank and JP Morgan, one of the most Untitledfinancially unsound banks in the world.  The statement above is coming from the CEO of a Wall Street bank that was saved from extinction in 2008 by U.S. Taxpayers.  It was a move forced on the public by a Government that is controlled by Wall Street bankers.  It enabled John Mack and his cronies to continue stealing $10’s of millions from the middle class.

What set me off is the flagrant arrogance coming from a man who’s outright failures as a businessman and banker were bailed out by the U.S. Government.  This is the malicious sense of entitlement from a man who is steering Morgan Stanley back into bankruptcy.

Have we learned anything from what happened in 2008 – or from the Bernie Madoff and Enron lessons of history?  Obviously not.  Not only is the western financial system entering a collapse much bigger than that of 2008, the big banks are already lining up with their hands out and pockets open.

Currently Morgan Stanley’s ratio of assets to “tangible” book value is 13:1.   The problem is that the book value of Morgan Stanley’s “assets” is likely exceedingly overvalued and will eventually be written down at least 30% (and probably more).  This bank will blow-up if the U.S. Government allows the market to do what markets are supposed to do.

John Mack’s comment about Governments bailing out banks is nothing more that the childish appeal of a desperate man who knows the end is in sight for a bank that had failed under his leadership.

Global Economic And Banking Collapse On Deck

Always love your analysis. A friend shared with me one week of your short sellers journal and I was impressed. GLNG took an extra week after you published it but it did start dropping.  I’m very experienced in options. Just ordered it for your short picks…I don’t really need the info of how to play options… just like your research and analysis. – “Colin” – SHORT SELLER’S JOURNAL (link)

All eyes are focused on Deutsche Bank.  Rightly so, for the most part.   “As you said, Deutsche Bank is blowing up” (Dr. Paul Craig Roberts in an email to me this morning).  It was reported this morning that the bank’s CEO released a memo to employees in which he assured the “troops” that everything was fine.   Most people do not remember this but I’ve been cursed with a great memory for certain details.  Jimmy Kayne, the CEO of Bear Stearns, when Bear blew up gave the same type of pep talk to Bear employees shortly before Bear was flushed down the toilet.  Reaching even further back in the annals of epic corporate fraud induced collapses, Ken Lay gave the exact same kind of pep talk to his people right before Enron collapsed.

As the adage goes, once a rumor is denied at least three times, the fact-basis of the rumor has been confirmed.

But it’s not just DB – it’s the entire western banking system.  While DB stock was getting pummeled yesterday, it escaped everyone’s attention that Morgan Stanley stock was down over 7% as well.   Bank of America stock was hit 5.4%.  Goldman Sachs as drubbed Untitlednearly 6%.  Today Credit Suisse stock is getting hit 7.7%.   These banks all have one common denominator:  an exceedingly high degree of exposure to Euro-debt credit default swap counterparty risk.   Include RBS and Barclays on that list as well, both of which are headed for the credit default swap waste bin unless the Fed and the ECB decide to print enough digital money to keep them alive.   The most stunning collapse in stock price is perhaps Credit Suisse (green line) which had been the best performing stock among the group until mid-July.  Wonder what changed?   Nearly as a notable as CS is Morgan Stanley (dark purple), which has managed to stay out of the media but it clearly exhibiting signs of extreme underlying financial distress.  Most might not remember, but Morgan Stanley should have been one of the primary casualties of the 2008 de facto collapse but it was quietly re-monetized so that it could continue fleecing the public by raking in big fees from the huge volume of “Club Med” European credit default swaps that it sells.

It’s nearly impossible to identify the specific root cause of the obvious banking system melt-down that is occurring. By design the use of OTC derivatives  by the banks has been completely obscured and hidden from sight.   As was evident from Jamie Dimon’s admissions during the “London Whale” crisis at JPM, even the people running these banks do not have a full understanding of the magnitude and degree of risk buried in the big bank balance sheets.  Since the Central Banks get their bank-specific information from the banks, it means that Central Banks therefore do not fully understand the scope and severity of the problem either.

That fact alone should be enough to frighten anyone paying attention out of the banking system and into the relative safety of precious metals.

I was chatting with a close friend of mine in NYC.  He lived with me through the turbulence at Bankers Trust (Proctor and Gamble derivatives lawsuit, Long Term Capital exposure, etc).  He stayed on and worked at Deutsche Bank and then at Lehman.  He knows when something is irrevocably wrong at these banks.  His comment to me this morning was that “something is blowing up behind the curtain in the banking system and it has to be the derivatives.”

Of course, the reason the derivatives are blowing up is because the underlying credit instruments from which they are “derived” are melting down as well.  We know about energy, industrial commodities and high yield – all of which the banks above have heavy exposure – but I would also suggest that auto loans and mortgage paper (luxury housing bubble pops) are starting to crack hard too.  Banco Santander has been one of the more aggressive auto finance lenders and its stock has is down 50% since April and down 38% since early October.  Capitol One down 25% since early December.

The message is clear:   the credit markets are beginning to accelerate in their collapse.

 

Housing: “Business Is Slowing Down – Quickly”

There has been no improvement in underlying consumer liquidity conditions. Correspondingly, with no fundamental growth in liquidity to fuel increasing consumer activity, there is no basis for a current or imminent recovery in the housing market. – John Williams, Shadowstats.com

The title quote is from a supplier to the homebuilding industry in south Florida, which had been one of the hottest housing markets in the country.  He said his business has suddenly fallen off a cliff and development projects that had “been on the board” have been postponed indefinitely.  Isn’t it a lot better to get information about what is going on at “ground zero” in the housing market rather than from some snake-oil salesman who bills himself as the National Association of Realtors’ chief economist or the sleazeballs on the financial “news” networks?

Make no mistake about it, regardless of the degree to which you want to put faith in the “seasonally adjusted, annualize rate” home sales reports generated by the National Association of Realtors and the Census Bureau, the housing market is a 10 mile train skid on a nine mile track.

Something is blowing up big time in the banking system.  Everyone is talking about the interminably collapsing price of Deutsche Bank stock, but Bank of America, down only 2% right now, was down as much as 6% earlier today – same with Citi.  The price plunge in these banks occurred in absence of any news reports or events that to which the sell-off could have been attributed.

The BKX bank stock index is down 25% from its high in mid-July:

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While the entire U.S. financial media/community seems to be obsessed with the sell-off in Deutsche Bank stock, I’ll note that Barclays stock is down 50% from its 52 week high and Citigroup and Bank of America are down over 33% from their 52 week highs.   Because of the incestuousness that has developed in the monstrous derivatives market, all of these banks are genetically connected.   It’s really irrelevant which bank blows up first because when one goes, they’ll all go.

I am tying together housing and the big banks because the Central Bank money printing has reincarnated the housing bubble Frankenstein and the big banks – via the catastrophically massive Ponzi derivatives scheme – have been the transmission mechanism of printed money into the housing market.

The unexplained 25% collapse in the bank index is telling us that the financial system is melting down and that’s the most direct evidence that it’s not just a Deutsche Bank problem.  Perhaps DB is merely 2016’s “Bear Stearns.”

The entire global financial system, including and especially the U.S., is headed for a collapse that will be worse than what occurred in 2008.  In fact, it will be nothing more than an extension of an unavoidable collapse back then that was deferred with QE and Taxpayer money.  The concerted Central Bank move to take interest rates negative are telling us that the QE rabbit is no longer available to pull out of the hat.  Negative rates are telling us that the skidding train mentioned above is on the 9th mile of that skid.

A colleague of mine called me today and told me that he’s been monitoring the housing market activity on the west coast of Floriday, a previously white hot housing market.  He said inventory is up about 15% from year end he is getting a constant flow of “price reduced” emails. I am seeing the same thing and getting the same number of “price reduced” emails from the MLS-based website I use to track the Denver market.  And a reader posted this comment yesterday about Las Vegas, which also had been red-hot market for home sales and buy-to-rent schemes:

Supply is building quickly (no pun intended) and sales are in the toilet. Housing in going to be one of, if not the lead horses that take this economy down. A friend of mine who lives in L.A. and lives in Vegas 3-4 days per week for business, just rented a furnished luxury two bedroom condo with all utilities including cable and internet for $1250 per month. He also said that there were many choices available in the Las Vegas area. We are just at the beginning of the end.