Tag Archives: Deutsche Bank

Is The Financial System On The Brink Of Collapse Again?

Craig “Turd Ferguson” Hemke invited me on his podcast series for a discussion about somewhat hidden developments occurring behind the carefully crafted western propaganda facade.

For those who have at least been able to “blow the Orwellian smoke” away from the war on gold, you’ve noticed that the Fed/bullion banks are having a lot of trouble pushing gold lower.  In fact, the current line of battle is at $1300 and I believe that barrier will soon be breached decisively to the upside.

We also discussed the ongoing “controlled demolition” of Deutsche Bank, which currently poses perhaps the biggest threat to the western financial system.  You listen to our conversation in mp3 format with this LINK or by clicking on the graphic below:

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“The comparative pittance you charge for the MSJ has already paid off quite well for me and my younger brother.” – “Bill,”  Mining Stock Journal subscriber

Deutsche Bank Is Collapsing – But It’s Not The “Black Swan”

The global financial system is close to going supernova.

Both Credit Suisse and Deutsche Bank stocks are hitting all-time lows.  Both are collapsing despite billions in Central Bank – Fed, ECB, Bundesbank, Swiss National Bank – monetary support.

Deutsche Bank had been advertising a 5% interest rate to customers in Belgium on  90-day deposits of at least 50k euros .  Bank deposits are essentially “loans” to a bank from the depositor (creditor).  This implies that the rate that DB had to pay to attract deposits is equivalent to a triple-C rated credit (although the 10-yr junk bond rates for double-B  rated bonds are around 5.5%, keep in mind that DB is paying 5% for 3-month money).   This is the unmistakable sign of a company that is collapsing.

DB stock was down over 3% yesterday on a day when most big TBTF banks for down 1% or less. It’s down another 2.8% 3% as I write this today, trading below $15/share for the first time ever.   This bank is obviously collapsing and any money manager who holds onto this stock for clients is in serious breach of fiduciary duty.  This is the 2016 version of Enron.

But it won’t be a “Black Swan” event.  The Central Bank authorities knew DB was going to collapse when Anshu Jain was fired in June 2015, literally about  2 weeks after DB’s board had given Jain even more control over bank operations.  However, the Central Banks mentioned above collectively had a year to put a “ring” around the collateral damage – i.e. the derivative counter-party default risks – that occurs from DB collapsing.

The Credit Suisse problems have been far less visible but the behavior of the stock is signalling to us that CS’ problems are on par with DB’s.  I don’t know if both banks will ultimately end up being monetized by a combination of taxpayer bailiouts (including U.S. Taxpayers) and bail-ins.  I would suggest that bail-in capital available would not even remotely address the derivatives-related liabilities embedded in the Credit Suisse’s and DB’s balance  sheets.

My point here is that – unless there’s even bigger problems hidden from the Central Banks, which have had a year now to address the DB/CS situation – a DB collapse will likely cause a sell-off in the stock market, but would not be the “Black Swan” for which everyone is searching.

I don’t know what the Black Swan is or what it will look like.  Otherwise it wouldn’t be a Black Swan, right?  What I will suggest is that the day in which the “box” with Schrodinger’s cat appears and we look into to it to see a dead cat is quickly approaching.  I would also suggest that this is why those who have been calling for a short-term wipe-out in the price of gold have been proved wrong for over two months, despite the blatant daily attempts by the Fed/ECB/bullion banks to push the price of gold lower.

This is a development that no one is talking about – but I believe that is represents a hidden slow-motion financial collapse that will soon accelerate:

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Deutsche Bank Burns – Silver Is The Trade Of The Decade

If I’m right and this is the start of what happened starting in late Oct.2008, guys like Bron and [Jeffrey] Christian and Trader Dan are going to end up looking like the biggest assholes in the world.  Although I think that trip is booked and the train has already left the station, no matter what the price of gold does.  – comments from me to some long-time colleagues

Deutsche Bank management spent Tuesday and Wednesday trying to make the case that it had plenty of liquidity and a gameplan to address structural issues.  They threw the hail Mary yesterday when they announced the possibility of using available “liquidity” to repurchase a few billion euros worth of senior bonds.  I have quotes around “liquidity” because, as I outlined in my blog post about this yesterday, DB is technically insolvent.

What has unfolded this week at the zombie bank is almost exactly the path to collapse taken by Bear Stearns.  In fact, just like he did with Bear Stearns when he issued a table-pouding, booyah screaming buy on Bear Stearns about two weeks before it collapsed, Jim Cramer was out earlier this week telling investors not to worry about Deutsche Bank and that, “the European banks have a plan. The government has a plan…This is not 2008, because they learned from 2008.”

Cramer has proved to be a remarkably accurate contrarian indicator on stocks just ahead of a collapse in price.  DB stock has already partially collapsed since August, falling more than 50% since then.

If you want to dismiss my view, that’s fine.  But ignoring the action in the credit default swaps is a big mistake.  The CDS on DB’s subordinated debt have gone parabolic, jumping to a spread over Treasuries of well over 500 basis points today.   Over the past week, the CDS spread on both the senior and subordinated debt of DB has gone parabolic.  This is the clearest possible signal, other than the truth from upper management, that DB is on the ropes.

CDS investors are among the smartest in the market because they tend to be closest to the real inside information at banks.   I know this because when I traded junk bonds which, prior to the proliferation of CDS, were the “smartest” eyes in the market, our desk was right next to the bank debt trading desk.  The bank debt crew always had access to internal numbers on the companies they traded.  We were very tight with the bank debt traders, if you know what I mean.

This leads me  to silver. I’l be going on record tomorrow in a podcast with Silver Doctors that silver is the trade of the decade.   Also, the LBMA silver fraud fix was the cartel’s last gasp effort to grab as much physical silver as cheaply as possible.  That silver fix event was outright theft of silver from the sellers of physical silver on the LBMA that day.

I believe, just an educated guess, that the accumulation of silver was out the necessity to make deliveries under paper obligations –  LBMA contracts, Comex futures, OTC derivatives.  I believe the looming shortage in physical silver is worse than in physical gold and last summer was an omen of what’s coming.

The ratio of price appreciation in today’s trading for gold:silver is 95:1.  A normalized GSR is 16 or lower.  The GSR hit 32 when silver was approaching its top in 2011.  My point here is that they are throwing the kitchen sink at silver right now to keep the price down as much as possible in order to limit the potential damage that is going to occur to the banking entities that are perilously short paper silver, while their counterparties are starting to pound on “the door” looking for deliveries.

We are likely transitioning into the third and final leg of the precious metals bull market.  I believe that the smart money will eschew all fiat currencies and move their capital into the best possible contra-fiat currency asset:  gold and silver.  Today, for instance, the dollar is down on a day when typically the dollar is used as a flight to safety.  Gold is up $60.   The smart money will get the train wheels rolling and the retail crowd will pile on about 2/3 of the way through the ride, paying extraordinary premiums to get physical gold and silver in their hands.

All fiat currencies are backed by nothing but promises from Governments that are leveraged up to their eyeballs.   Physical gold and silver do not have any counterparty risks as long as you do not buy them on margin and keep them in a custodial account.  The margin risk is obvious, for most people the custodial risk is non-obvious but very real.  Just ask the traders who owned physical silver in MF Global’s Comex warehouse account…

Dave, I wouldn’t be surprised if half of the JPM silver “horde” doesn’t exist and that they’ve screwed clients ala Morgan Stanley (the only mega investment bank to have been officially busted in the last 50+ years for not having customer precious metal in allocated and segregated accounts).  Ted Butler et al. have this wrong too.   It’s not clear how much fraud we’re talking about, but hey, we’re talking JPM.  – a well known market analyst and blog host and silver market expert

Glencore Mirrors The Entire Global Financial And Economic System

  • Collapsing fundamental economics
  • Plunging end-user demand for its products
  • Overloaded with debt
  • Hidden land-mines in the form of OTC derivatives

Who said “black swans” have to be hidden?   Glencore is in full view.  After a dead-cat bounce from a quick descent that took Glencore stock from 310 (pounds) to 68 in 5 1/2 months, the stock is rolling over again and headed lower:

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This isn’t just about the plunging price of copper, which is now back to its pre-financial system collapse price in 2008 and headed lower. Copper is responsible for generating only 36% of Glencore’s operating income.  This is about the plunging prices and demand for oil and all base metals.

It’s about a company (global financial system) that hides a lot of risk, debt, derivatives, corruption and fraud.  Point of example:  Glencore’s funded debt level is $50 billion and it has the capability to draw on credit lines that would take it up to $100 billion.  But the sleazebag snakeoil promoters cite Glencore as having $19 billion in “liquid” inventories so the debt number that gets quoted and widely accepted is $31 billion.   But it’s not.  It’s $50 billion.  And Glencore’s “liquid” inventory is the same base metals that are plunging in price from oversupply and lack of demand.

Furthermore, over 30% of Glencore’s EBIT is derived from what the Company lables as its “marketing” business.  But this is the legacy business that was originally Marc Rich’s commodities trading company.   It’s a corrupted commodities trading and brokerage business. That means it’s riddled with hidden counter-party risks and derivatives.  We don’t know the full extent of Glencore’s risk-exposure in this area because this an area that global financial regulators give financial firms a lot of breathing room with which to cover up the truth using insidious accounting schemes.  But what I do know for sure is that you can rip and toss out any of the research reports indicating the Glencore’s derivatives exposure is limited to $5.2 billion.   The real number is multiples of that.

With 50 billion (pounds) in funded debt and not including hidden off-balance sheet skeletons – Glencore’s debt to market capitalization (13 billion pounds) is nearly 4:1.  That is an extreme degree of leverage for a volatile, commodities-based business which is headed into an economic depression.

Glencore is a microcosm for the entire global economic and financial system.  Including and especially the United States.  And here’s the kicker.  Deutsche Bank is Glencore’s largest creditor.  We can also very safely assume that Deutsche and Glencore are counterparties to a vast web of derivatives contracts.   I’m sure Deutsche has also tried to off-load credit exposure thru the use of credit default swaps with hedge funds and other shadow banking participants.  But who are those counterparties and how is the risk of default on this “insurance” Deutsche has likely “purchased.?”  Glencore has the possibility of taking down Deutsche Bank, which in turn would take down the entire German system.

The rest will flow from there and there will be a lot of blood, including and especially in the United States.

Just like with Glencore, the true degree of ongoing economic collapse and financial risk exposure has been papered over with both QE and more debt issuance.  It won’t take much trigger a financial nuclear explosion.

I would suggest that this is why the Central Banks and the relateve propaganda machine have shifted into full-gear in their effort to prevent the price of gold from engaging in unfettered price discovery.  I would also suggest that this is why the U.S. conducted a highly visible Trident nuclear missile test along the west coast, in full view of Russia and China.

Glencore Stock Got Smoked Again Today

All we need now to pound the final death-nail into Glenron’s stock is for Cramer to issue an “all’s clear, time to load up on Glencore stock” call on Mad Money.

Down 4% on no meaningful fundamental news:

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Glencore has announced that it plans on “liquidating” some of its inventory in order to pay down its debt. Again, this article referenced Glencore’s debt load as $30 billion. But as I demonstrated with a graphic from Glencore’s financials, the Company has $50 billion in debt outstanding:

GlenronCF Debt

The $30 billion debt number is the number that Wall Street pimps and the financial media want market to believe, even though this number assumes that Glencore can sell its inventory at current market prices. Well, I’m hearing a lot of “noise” about this, let’s see it happen. If I were running a commodities hedge fund I would be shorting copper, zinc and iron ore futures ahead of this alleged inventory liquidation.

I think this report out of China is likely what spooked the markets and triggered the sell-off in Glencore stock – Steel demand evaporating at unprecedented speed:

On Wednesday, the deputy head of the China Iron and Steel Association warned that demand for the ferrous metal was waning fast. “China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed. As demand quickly contracted, steel mills are lowering prices in competition to get contracts,” Zhu Jimin, deputy head of the China Iron & Steel Association, said on Wednesday at a briefing in Beijing.

Glencore is a commodities-based debt and derivatives roach motel.  I would not be surprised if a lot of funds/banks with long-side exposure to Glencore credit default swaps – as in, Deutsche Bank – start shorting the crap out of Glencore stock to try and hedge their leveraged exposure to Glencore.

And with the global economy – including the United States – quickly sliding into a nasty recession, I can’t wait to see what kind of nonsense spews out from December’s FOMC zoo gathering to justify another rate-hike deferral.

Extreme Gold/Silver Manipulation And Potential Financial Collapse

Doc from Silver Doctors invited me back on to his weekly market wrap to discuss the extreme manipulation in the precious metals market.  In addition to the massive imbalance between paper gold/silver and the above ground available for supply for delivery should a lot more  paper longs demand delivery, the potential exists for the mother of all short squeezes in gold  and silver.

We also discuss India’s current  demand, which is misunderstood and subjected to highly misleading media reporting by the likes of Reuters, Bloomberg and the World Gold Council.  I explain why this is the case and why India gold demand is significantly higher than is currently reported.

Other topics include the why Glencore could potential an OTC derivatives catastrophe and potential black swan events that could appear before the end of 2015:

Impending Systemic Financial Insolvency

Suffice to say, whatever happened went far beyond what might be considered normal in terms of end of quarter window dressing. It’s impossible to tell, but it may have been related to Glencore and its counterparties (banks and other commodity traders?), or to increased mar-gin calls on derivative trades. The timing is also thought provoking given the recent announce-ments regarding write-offs and capital raisings from Deutsche Bank and Credit Suisse.  – Paul Mylchreest, “Do Central Banks Need A Plumber? Part 2”

I suggested in a blog post last week that the extraordinary “outlier” amount of reverse repo transactions conducted by the Fed with its system member banks beginning in mid-September went several standard deviations beyond the amounts used in quarterly bank “window dressing” maneuvers.

I received several emails, of course, suggesting I was wrong and that the all-time record amount of reverse repos was de rigueur.   Rather than write a blog post explaining why the “de rigueur” view is wrong, I was able to discuss the entire reverse repo process on Jay Taylor’s “Turning Hard Times Into Good Times” radio show:

The big spikes in reverse repos is designed to put collateral in the financial system which can be posted against losing derivatives trades.  As everyone knows, there has been highly problematic collateral shortage in the market for several years now as a result of Central Banks vacuuming up all the sovereign-issued paper for the purpose of being able to refer to Central Bank money printing as “QE.”

This shortage of collateral is a big problem when events occur that cause volatility in the OTC derivatives market.   While banks have access to the collateral of Central Bank balance sheets, non-Central Bank system financial entities do not (hedge funds, mutual funds, insurance companies, pension funds, etc).   But these are the entities that are often on the losing side of derivatives trades.  Thus they need collateral to post for margin.

Through the “magic” of hypothecation, banks can borrow collateral from the Central Banks (primarily the Fed) via the reverse repo operations and then hypothecate that collateral into the general financial system as needed.

UntitledTo be very clear about this, the timing of the Glencore stock plunge and the beginning of the spike up in reverse repos in mid-September is unequivocally not a product or natural random probabilities.   Especially when we find out a few weeks later that Deutsche Bank – a big lender to Glencore – seems to be “walking the financial plank.”

And, furthermore, Black Rock issues a public statement calling for markets to be “turned off” during times of high volatility.  Make no mistake, Black Rock is probably one of the most systemically dangerous financial institutions out there now.

And, perhaps the strongest signal in the market place that the Fed is terrified of an event that could crash the markets is the continuous and blatant intervention in the stock market.   The divergence between the valuation of U.S. stocks and underlying fundamental economic reality has never been greater in the history of the United States.

Deutsche Bank’s Balance Sheet Is Toxic Waste

Deutsche Bank has $1.5 trillion of declared asset value on top of $67 billion of net worth.   But a large portion of its assets are loans and related financing vehicles and trading positions connected to Glencore, VW, the energy sector, emerging market companies, high yield and a highly unreliably valued net derivatives position.  It Deutsche Bank has “mismarked” the value of all these assets by just 5% its net worth is wiped out.

It’s more likely that the bulk of its assets are overvalued by at least 20-30%.   And that’s in the context of the current financial and economic environment – both of which seem to be quickly deteriorating.  In other words, DB is technically insolvent.   I performed a similar analysis on some big bank balance sheets in late 2007/early 2008 and my model predicted the collapse of Countrywide, Wash Mutual and Wachovia. All of the big Wall Street banks should have collapsed but we know how that ended.

The present situation doesn’t remind me of 2008 right before Lehman blew up.  It is more like 2008 x 10.  The hidden ticking time bombs in the global financial system are significantly greater than what was ticking 2008.  And the fraud and criminality used to cover it up, along with the propaganda devised to promote the idea that the economy is recovering, is many times more worse than it was in 2008.

Craig Hemke of TFMetalsReport.com me invited onto this podcast show to discuss Deutsche Bank’s latest “fluffed up” $7 billion “intangibles” write-down, which didn’t even scratch the tip of Deutsche Banks real “iceberg” of financial toxicity.

You can listen to this discussion at here:   Deutsche Bank And The Coming Global Financial Catastrophe

A friend of mine with connections at DB told me yesterday that his sources describe Deutsche Bank as a toxic junkyard of chaos and complete unaccountability.  In my opinion the German Government/EU will eventually either have to print money and monetize DB or its demise will trigger Lehman x 10.

Something Blew Up In The Global Financial System

Earlier this week I suggested, based on the sudden big spike up in Fed reverse repos in mid-September that there was some kind of derivatives accident that required the Fed to flood the global financial system with Treasury collateral, which is used to satisfy derivatives margin calls.

This was likely connected to everything that has cratered in value since June 2014, when the price of oil crashed:    high yield bonds, industrial commodities, emerging market currencies, biotech stocks, Glencore, Volkswagen and now Deutsche Bank.

Glencore was originally said to have $30 billion of debt.  However, that number did not include the $50 billion in bank credit lines outstanding plus an undetermined amount of unsecured trade finance deals.  The total exposure to Glencore debt by banks and investors is now estimated to be as high as $100 billion – LINK.

To put this in perspective, Enron had $13 billion in debt at the time of its collapse.  Moody’s continued to assign a triple-A debt rating to Enron until shortly before it filed for bankruptcy.  I mention this to illustrate the unreliability of “expert” hear-say analysis.

With Glencore the hidden OTC derivatives skeletons are likely much more lethal to the financial system than has been estimated.   Just ask AIG and Goldman Sachs about that.

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I would suggest that the record spike up in reverse repos and the plunge in Glencore stock, after it had previously lost 56% of its value since the beginning of May, was not coincidental.

On that list of asset sectors that have imploded in price, Glencore has exposure to industrial commodities, oil and EM currencies.  It also is exposed to the price of silver and gold.  Ironically, its precious metals assets seem to be getting by far the most attention from potential buyers (royalty stream investors) as a source of cash.

But Glencore is only part of the story.  Today Deutsche Bank announced a $7 billion quarterly loss from impaired asset write-downs litigation reserves.  Some reporters have suggested this was “kitchen sink” event in which Deutsche Bank piles all of its potential losses from bad investments and business lines into one quarter in order to make its results going forward look better.

But there’s no way a “kitchen sink” maneuver will come even remotely close to covering DB’s exposure to toxic assets.   For starters, the bank has heavy exposure to Glencore.  It also is the largest lender to Volkswagon and Volkswagons suppliers. It also has rather  large exposure to emerging market currencies and related derivatives.

Deutsche Bank, at $75 trillion in holdings, is the largest derivatives player in the world now.  This amount of derivatives is 20x greater than the GDP of Germany.   And that’s DB’s “net” exposure.   As counterparties default, that $75 trillion blossoms at a geometric rate. Deutsche Bank is too big for the German Government to bail-out without implementing Weimar-era money printing.  It’s balance sheet is a nuclear cesspool of toxic assets.

The $7 billion charge to earnings this quarter is unequivocally not  “kitchen sink” accounting gamesmanship.  It was either wishful thinking by upper management – not likely – or it was the result of a concerted effort by the bank to put out a shock-value number that reflected the expectation by analysts and investors that DB would have to admit to a large loss this quarter given the nature of its assets. I would suggest that it a mere fraction of the true mark to market losses sitting on and off DB’s balance sheet.  For me it’s a number so unrealistic that it’s silly.

As of its June 30 “interim” financial report, DB had $1.51 trillion in assets supported by a razor thin $67 billion of book value.  That’s 22x leverage.   This number does not reflect a realistic assessment of the value of its derivatives.  At 22x leverage, DB’s balance sheet in and of itself is massive OTC derivative.  

DB is not only now the lethal sovereign risk of Germany, it is the sovereign risk of the entire EU. Whereas Bear Stearns the Lehman triggered the Great Financial Collapse in the U.S., Deutsche Bank could potentially trigger the collapse of the global financial system.

The graph above is evidence that a massive monetization operation was implemented by the Fed in mid-September in an effort to contain the damage from something big that has blown  up behind the facade of fraud that has been erected over several years by western Central Banks and their Too Big To Fail appendages.

All Ponzi schemes eventually fail.  The global financial Ponzi scheme, of which the U.S. financial system is the largest contributor, will end in some sort of financial Apocalypse…

A Conversation With Financial Survival Network: The Collapse Is Accelerating

Kerry Lutz of The Financial Survival Network invited me back on to his podcast show to chat about what’s going on in the financial markets, the housing market and the overall economy.

The body count is starting to mount on Wall Street. Both co-ceo’s of Deutsche Bank were unceremoniously dumped. Massive layoffs to follow there and HSBC and elsewhere. Massive manipulation of gold and the stock market?  The Dow Transports has had a major divergence.

As I’ve discussed on this blog, the Orwellian media disinformation has intensified in the last six months, as has overall market volatility in the stock, credit and commodity markets. I believe these are signals that the elitists are becoming more desperate to cover up the epic amount of wealth transfer from the middle class to those who are in a position to extract that wealth – big corporate insiders, wealthy elitists and corrupt politicians.   It’s also a sign that they are losing control of their ability to control the markets.

Something deep and dark has transpired behind the Orwellian “curtain” used by the elitists to hide the inner workings of the financial markets, especially with regard to big bank balance sheets and OTC derivatives. What’s happening right now reminds of the movie “Jurassic Park.” You can hear and feel the monster coming but you can’t see it yet and you don’t know it will pop up in your face or how big it is

You can listen to the podcast conversation here:   Did A Derivatives Bomb Just Explode?