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

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

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

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

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

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

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

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


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

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

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

  1. Blood rack, barbed wire
    Politician’s funeral pyre
    Innocents raped with napalm fire
    Twenty-First Century Schizoid Man

    Death seed, blind man’s greed
    Poet’s starving children bleed
    Nothing he’s got, he really needs
    Twenty-First Century Schizoid Man

  2. Great analysis….the inevitable collapse cannot be halted by head of comms, the CEO or d*ckwad politicians. DB is toast. Death by Debt.

  3. Notes From Underground: Merkel’s Boner, Take Two

    It seems that 108 years is enough time to pass to relive history. For those who are not sports fans, Merkle’s Boner is a famous mistake made by New York player Fred Merkel, who didn’t touch second base and was called out erasing the “fact” that the New York Giants had beaten the Chicago Cubs. The major GAFFE led to the Cubs beating the Giants and the CUBS moving to the World Series where they defeated the Detroit Tigers for their last World Series championship only 108 years ago.

    Today we have the Cubs in first place and another MAJOR BONER, this time by a different Merkel, German Chancellor Angela Merkel. In a Bloomberg article on September 24, reporter Patrick Donahue cited a piece from Focus Magazine that said Chancellor Merkel “ruled out any state assistance for Deutsche Bank.” This is a major “boner” on the part of Frau Merkel for it shows a severe lack of understanding about the financial implications of her false stance on appearing to side against bailing out a financial giant. The Chancellor’s words will ring HOLLOW if in fact Deutsche bank has to come begging for state support to secure its existence.

    The systemic importance of Deutsche Banks would render the Lehman debacle a mere accounting error.

    Deutsche is PROBABLY the most leveraged institution in the world and if it failed the reverberations would rock Tokyo, China, London and Wall Street.
    Every financial actor has exposure to Deutsche Bank rendering Merkel’s political posturing an act of colossal stupidity, especially as the global economic system is in a highly fragile state.

    ECB President Draghi must have sighed in disbelief as his “guardian angel” jeopardized the entire ECB effort at creating the backdrop of “whatever it takes.” Time magazine named Chancellor Merkel its person of the year in 2015 but I will nominate her as the FOOL of the decade for failing to understand the global financial system. I GUARANTEE THAT DEUTSCHE WILL BE BAILED OUT BY THE GERMAN POLITICAL SYSTEM.


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