Alright boys this might be the trade of a lifetime

Deutsche's gap in equity is nearly 20 times Germany's yearly GDP

Do you think they have the capital to bail out Deutsche? I dont. Too big to fail is just a meme, too big to bail out definitely isnt

agreed.

let it burn!!! let it burn

Sorry if I may sound uneducated, since I'm not a financial expert desu, but... Is there no real possibility of Deutsche being bailed somehow?

I saw you mentioned that the costs are around 20 times Germany's GDP, but what about the other banks in Europe? Are they too small? What about abroad? What if a lot of banks/governments come together?

They must have some back-up plan if shit hits the fan, right?

global GDP is 75 trillion or so

Deutsche's derivatives exposure is roughly 75 trillion and their gap in equity is roughly 74 trillion

They dont even need to go fully bankrupt to bring down other banks as well. JPM, GS, Barclays, BNP, etc. are all overleveraged at roughly the same 40x over their value in assets

There might be anywhere from 250 trillion to 500 trillion in financial derivatives that could evaporate as a result of Deutsche going under or getting a bail out.

In order to bailout Deutsche, Germany would have massive fucking inflation, like 1930s levels. They would have to print so much fucking money to save them.

>Italy
>Collapse

Excuse me?

Nothing of the sort ever happened.

considering the majority of germans don't own real estate or financial assets (inflation protected asset classes), the fury of the german people would be immense

it would be the rise of the fourth reich. there is no option but for DB to be shut down

the new yorker jews know what they're doing

You what?

it's not just the deutche, they all are completely fucked. deutche is in a fucking free fall desu.

european economy is a fucking joke and euro certainly will not last infinitely. you have major european countries like spain, france and italy with youth unemployment something like 70% =D

just concentrate mostly to dollar and dow. maybe some asian indecies and yen. 10-20% max at europe

>Britain exiting the EU is also looking like an increasingly likely outcome from their referendum which would fucking shatter the Euro so badly it would destroy continental europe.

betting markets don't seem to think so - currently on betfair it is 1.24 for 'IN' and 5.2 for 'OUT'

in the (increasingly unlikely at the moment) event there is a brexit though then short DB would be worth a punt

>Deutsche Bank is also the largest FOREX trader in the world, so keep in mind what that will do if they go bust.

this also isn't true... in fact they were recently overtaken in terms of spot FX volume by a prop firm spun out of a UK hedge fund

are you fucktards talking about the brexit impacting the euro? think about it for 2 goddamn seconds

nope... I'm talking about the chances of brexit occurring. maybe read my post properly numpty

britains exit is highly unlikely, they will rather choose to go down the toilet with european crisis. people are let to believe that uk needs eu, but the truth is excactly the opposite. eu needs uk to survive. that's why bryssel will do everything they can to keep britan in eu

>Deutsche's derivatives exposure is roughly 75 trillion and their gap in equity is roughly 74 trillion. They dont even need to go fully bankrupt to bring down other banks as well.

This will only happen if they run out of money to the point of default, so DB's investment rating gets downgraded to total junk-tier and their stocks plummets to 0. AND there's no buyer/investor to help them with the liquidity.

If some investor will step in before that and take over/back this bank up then it will calm the markets and prevent the insolvency + stop the short-selling. At this point the investor doesn't have to put up 75 trillion immediately. Freddie Mac/Fannie Mae were also insolvent in 2008. The US government bailed them out without buying all their toxic assets immediately.

You only need these big trillions if you allow DB to collapse, like Paulson did with the LehmanBros. THEN you need to cover up the losses, which will be caused by DB collapse.
Like the AIG went insolvent right after Lehman went down in 2008. Then Paulson and Bernanke had to run to the Congress and frighten them up to get the "damage control money" (a.k.a TARP) to stop the chain reaction from spreading. Instead of just bailing LB in the first place, which would have costed ~60 billion, instead of TARP's 700.

So it's far easier and cheaper to back up the ailing bank before it goes belly up. Which is probably the plan of the German government - a preventive bail-out/government back up. The alternative is a chain reaction of bankruptcies and a global financial meltdown.
Merkel and the ECB just don't have any other alternative.

Even if you are unsure about just one of the possible triggers that could cause the EU to collapse theres still a lot of others that are nearly guaranteed

Did some more digging

Deutsche had billions of dollars in Volkswagen and Audi.

J U S T
U
S
T

Fantastic info, OP. I'm a former forex trader that jumped ship when the fed -finally- rose interest rates for the first time since fuckwhen.

I'm looking to get back into the game and this info is invaluable, thanks. I made dosh riding the euro down last time.

Got any idea for a good pair to watch the euro crash and burn from? I'm thinking EURAUS or EURNZD - any country that doesn't directly export to Europe might be good. The spike in gold prices may cause AUS to rise in value, which may make EURAUS pretty choice.

Australia was fairly safe from the 2008 crash if i remember correctly

China has big ties to europe so stay away from the Yuan

this thread is too grown up for me. learning a lot though. keep it up Veeky Forums.

all you need to know is

AHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

ITS ALL OVER
ITS HAPPENING

AHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

Betting for the apocalypse is a losing game. A hedge fund manager once told me: the market has predicted 9 out of the last 5 recessions.

Yes, DB's situation is bad. However, it's isolated. Should you simply short DB? Maybe -- however, since 2008, there have been many provisions implemented that would prevent a bank's total failure (most importantly, the OLA).

OP how do I get smart like you?

>isolated
>many provisions implemented that would prevent a bank's total failure
calling bullshit

The only change since 2008 has been the implementation of circuit breakers. A pause of a couple minutes isnt going to fucking magically turn around a multi-trillion dollar behemoth from collapsing

Nothing has fucking changed that will stop another financial crisis.

I have like 75% confidence in my prediction desu

Shorting DB seems like a good idea but i have no idea what happens to its price if it gets bailed out. Shorting JPM and Barclays and other big banks is a pretty big gamble since its sort of taking a guess that they own a lot of these bad shadow financials.

What kind of books do you read OP? I'm wondering, where does DB get the money to have 74 trillion in derivatives?

How is it not isolated? What other massive bank is in NEARLY as much shit as DB?

And no, I don't believe that the reforms since 2008 have been perfect. But I do believe they are strong enough to prevent the financial system's collapse via domino effect. That was quite literally the only thing Dodd-Frank got right, because it's a solely reactionary piece of legislation.

As for regulation outside the US, I'll be frank -- I have no clue, and I'm not convinced that you don't either.

Derivatives work on margins. You never pay full value for a derivative. So for 74 trillion dollars worth of derivative instruments, they likely spent 10% or less of that, over many years. Some derivatives (like options) can just be ignored if they become worthless, while others (such as futures) can be damaging to the holding party.

Banks do not record derivatives on their BS. You couldn't say that DB is worth 74 trillion dollars thanks to their cache of derivatives.

Be aware that if 2008 repeated Australia would not be immune as we were last time.
In 2008 we had a budget surplus for the first time ever, made off the back of the mining boom which has since exhausted itself and we are now in budget deficit.
That and our housing market is insanely over inflated as it is.

Wait, how does that work? I buy an options contract from you for €20, on an underlying asset of €100. Now I have €120 in derivatives, is that what you mean?

You'd have $100 in derivatives, I believe. The $20 counts as part of the $100.

I may be wrong -- someone feel free to correct me.

So this is what allows DB to own 74 trillion dollars in derivatives, without actually owning that much money?

Just basic economics stuff. I'm not really all that special. Hazlitt, Volcker, Friedman, Mankiew, Burry.

They dont have the money to make the 74 trillion in derivatives. Its over leveraged.

If i had to take a guess on how that number grew to be so large i would say it probably happened in the same exact way as the 2008 housing market bubble happened. Deutsche bought billions in credit swaps of european countries bad credit and debt and then created insurances to back up these loans then insured their insurances and so on and so on. Its basically a giant fucking meme that generates money through closing costs and bullshit fees for the bank, but if shit hits the fan theyre fucking finished.

I'm not sure anybody actually knows how the fuck these things work.

i thought derivatives are usually all or nothing?

These things are like chasing shadows. They're not real tangible assets, theyre fucking contracts written by lawyers made to be intentionally overly complicated

Because other banks own trillions in derivatives from Deutsche. If they end up being like tranche opportunities or some bullshit then those banks are fucked too. We have no fucking clue what the fuck are in these 75 trillions and honestly neither does deutsche

Exactly. It's all bullshit until the gains or losses are realized.

I don't know DB's derivatives make-up, but if the majority of derivatives they are holding are non-binding (as in, if they go bad, they're not required to pay up), then OP's envisioned "disaster" will not happen.

That said, I don't know shit about DB's derivative composition.

There are many, many types of derivatives. Some binding (CDSs and Futures), some non-binding (Options). If DB held a majority of options (and other non-binding derivatives) and a diversified minority of binding derivatives, I would not worry about them.

Yes, derivatives are very shadowy. The US GAAP is one of the biggest causes of the recession by allowing bank's to so casually report their derivative holdings without paying any mind to composition.

Well if Deutsche Bank is scrambling to stop the federal reserve from raising interest rates i think we can assume these things are pretty fucking bad. Theyre trying to ensure the same conditions that allowed them to build up a metric fuck ton of derivatives in order to save themselves. As soon as interest rates rose in 2007/08 all the investment banks fucking imploded.

Basically nothing has changed since 2007. I have no reason to believe otherwise that these are safe investments because the exact same conditions that caused risky investments in the first place have remained and actually become more prominent across the world.

businessinsider.com/deutsche-bank-on-the-federal-reserves-negative-feedback-loop-2016-5

We the big short now

We can also assume that if deutsche is losing fucking billions of dollars every single year and is under fire from the SEC for their bullshit trade then there is no fucking way that whatever they put money into was a safe investment. Theres no fucking way. Deutsche did exactly the same shit its been doing since way before the 08 crash with even riskier credit swaps. On what fucking planet is credit swaps based on the debt of Spain and Greece a good investment?

DB -- and any smart bank -- wants IR low in almost any situation. When money's cheap, money flows. When money flows, you make more money. Simple. I don't think them wanting low rates is a sign of anything.

I don't think there's any way to know how safe or unsafe their investments are.

I feel like a dumbass, defending the solvency of the banks just like many blind bankers did back in 2007. That's the problem -- it's all so hazy that, unless you're on the inside, you can't forecast anything.

If you operate with the assumption that DB is still buying and selling dogshit, then I see your points in the OP. But it's never just that simple.

Are they losing money on realized losses on derivatives? Or is it just from their poor operations?

Well its hard to say exactly because they just lost an SEC case in which they were found guilty of hiding realized loses from 2012-2013 on their balance sheet

I assume the -7 billion is from normal operating procedures as the bank seems really set on changing the operating structure of the entire firm to regain control over its branches but we have no idea just how much theyre losing in realized derivatives because they have been found guilty of hiding

This was fucking yesterday
sec.gov/news/pressrelease/2015-99.html

> they just lost an SEC case in which they were found guilty of hiding realized loses from 2012-2013 on their balance sheet

Pretty damning.

What do you think will trigger their demise? I'm sure they're currently bleeding from unrealized (and now realized) losses, but what event will utterly destroy them? Housing bubble, Brexit, something we're not seeing?

June 15th Federal Reserve meeting to discuss the possibility of raising interest rates

if theyre going up then Deutsche is fucking finished. Theres been a pretty strong hypothesis that raising interest rates has been the catalyst for the dot com bubble, housing market bubble, and if rates go up this year, it will be the catalyst for this bubble.

Brexit is a loose cannon for deutche right now. The Euro will most likely be damaged and a lot of banks are going to have a hard time with paying fees for operating in London if they do decide to leave.

A nation defaulting on their debt is also a candidate. Greece especially. The refugee crisis is eating away at a lot of nation's money right now.

A sharp fall in the Euro caused by political instability or terrorist attacks might also do them in but i'm not 100% on that one.

so if you short them and what youre saying actually happens youre going to be more worried about what and when youre going to get your next meal. essentially what would happen is a full on purge where money doesnt mean shit

I'd rather live as a lion for a single day than 10,000 as a lamb

Deutsche Bank price manipulation

of all the shit DB does, i dont think that is one of them

so you're okay with having a high number in your bank account just for the sake of it being a high number since it has become worthless?

came out wrong. what i meant was you'd want to be "rich" when it will literally mean nothing to anybody except you?
also what im more worried about is the chinese government is currently regulating the yuan and claiming it is worth more than it really is.

they devalue the yuan and say its worth less than it really is because its better for their exports to the US and europe

we're not going back to the fucking stone age, it'll just be a really bad crash.

they are fixing it at a higher rate though
what im wondering is if they stop regulating it and the yuan becomes almost worthless compared tot he dollar the US could pay back the debt it owes to china easily right? or am i wrong? i dont really follow forex

also what you are describing would essentially be a worldwide depression.

>That and our housing market is insanely over inflated as it is.

Ah yeah, that would be fucked by a global financial upheaval. I've changed my recommendation to a EURGLD pair if you can find one. My last broker had one, hell they even had one for buttcoin. Why trade currencies with one another when you can just directly trade gold?

Great thread btw guys. I'll be watching intently come the June meeting.

>if they stop regulating it and the yuan becomes almost worthless compared tot he dollar the US could pay back the debt it owes to china easily right?

Opposite. If the Chinese government drops its currency regulations (which it totally can't afford) and lets its currency float then the Yuan will skyrocket against the dollar. This will make most US debt worthless to the Chinese, which they hold in mass.

i didnt set the dinner table, im just looking for my own silver spoon.

Honestly i have no idea what is preferable when it comes to the chinese

I think its probably better to let the yuan rise over time so the US economy can slowly become independent of cheap chinese imports but china isnt going to allow that to happen

so it would be good for the yuan to skyrocket?
also i thought the yuan would drop if they deregulated it since theyre keeping it fixed higher than what it is actually worth

Last I heard, they're keeping it lower than it's actually worth to stay competitive in an anemic global market. It's been like that forever. They doubled down recently and devalued the Yuan twice or so last year against the dollar because the dollar kept rising and they didn't want to follow it.

However, they've hit such a bad recession lately that it wouldn't surprise me if the Yuan is currently overvalued. The truth is that the Chinese set and regulate their own crony economic figures - nobody truly knows what is going on over there.

So we have a coin toss here: heads if it's undervalued, tails if it's overvalued. I'm betting heads because the Chinese have more to gain by it being undervalued than overvalued.

Holy shit people are retarded itt

>What is netting derivatives
>74 trillion equity gab
>DB is largest FOREX trader
>$7bn loss is recurring

Nobody here knows anything about FIG valuation, please stop posting this shit.

Bong here. Leave seems to be gaining lots of momentum.

>What is netting derivatives
already realizing loses
>74 trillion equity gab
derivatives are liabilities and DB only has 1.6 trillion in assets. If their derivative exposure is correct, then they do have an equity gap in the 70 trillions. You could also meme your way out of this and say its a cash hedge flow but that doesnt really change much of anything.
>DB is largest FOREX trader
its one of them.
>$7bn loss is recurring
yeah im sure that -500%+ loss in profits and -480%+ loss in EPS will buff right out

>FIG valuation
pic related

looks great senpai, i should totally buy DB now because i totally misinterpreted how financial institutions earn money

I hope so. Cameron is doing the 'leave' voters a giant favor by mentioning war and terrorists regarding the Brexit.

> If the UK leaves the EU the chances on war will increase!

Niggu whut?

"Deutsche Bank AG has reached settlements in lawsuits over allegations it manipulated gold and silver prices, lawyers for traders of the commodities said in court filings."

I have put all my savings into physical gold and silver as well as bitcoins and canned food, just to be safe.

I don't think the banks, as we know them, will survive the next crash.. Maybe i am just paranoid..

source:
bloomberg.com/news/articles/2016-04-13/deutsche-bank-settles-silver-price-fixing-claims-lawyers-say

what the actual fuck is happening at this bank?

Theres comes a point where you no longer want to be right about your predictions

>I have put all my savings into physical gold and silver as well as bitcoins and canned food, just to be safe.
maybe thats not the best idea right now but hey if you feel safe doing it then fine.

Fuck this bank. Holy shit.

Please elaborate, I think we are all interested in how best to hedge against this absurd situation.

i have no fucking idea man.
Gold is probably the best option along with shorting stocks of big european banks

bitcoins are likely still just a meme even if all the banks collapse again and canned food is just excessive

This is uncharted territory i'm sure. I dont have all the answers.

ft.com/fastft/2016/02/11/deutsche-bank-cds-hits-new-highs/

Now I am not a financial specialist but I am guessing that this is bad, especially the fact that they are buying that much Junior CDS.

zerohedge.com/news/2016-02-11/deutsche-bank-back-5-year-cds-soar-record-high

>Gold is probably the best option along with shorting stocks of big european banks
I fear that shorting stocks will be made illegal as we saw it in China last year and during the financial crisis of 2008.

My best bet is on old school "store of value" gold and silver coins.

source:
sec.gov/news/press/2008/2008-211.htm

yeah its pretty bad

nothing like that is nearly guaranteed, you've made some good points re DB but you're overegging some of them a bit

things like claiming brexit is looking increasingly likely when it clearly isn't (possible but not likely at the moment) and discounting the intervention of the German govt is undermining your argument a bit

*if* brexit did occur then yes I think you'd have a much stronger reason to short DB

>things like claiming brexit is looking increasingly likely when it clearly isn't
but it is

Also im not entirely sure the german government even has the ability to bail out the bank

what is your evidence for brexit looking likely?

both the EU and our own government will never allow us to completely leave the EU.

if they don't get the answer they want, they will find a reason to call another referendum. if that fails then they will have some bullshit "negotiation" and stay in the EU while pretending we have left

one more terrorist attack and theyre out.

people want to control their own security. Europe is scared shitless.

Is it smart to move money out of Euro banks and turn it into bitcoins/eth? Or is it just as retarded?

move money out of european banks but crypto currencies are still a meme

dont bite. Save for something you think is much safer

>Deutschebank buys credit default swaps for the consumption engines of the Eurozone: Italy, Greece, Ireland, Spain, Portugal
>Germany refuses to allow the aforementioned consumption countries rebalance their economies towards production, while raising German consumption to compensate for the rise in production elsewhere in the Eurozone
>Deutschebank gets left holding the bag and the blame
>Bonus gifts: As the German financial structure becomes insolvent and the German government is powerless to stop it, the Euro cracks into its constituent economies and currencies again

Bravo, Merkel. You finally killed the banks...too bad you also sentenced Germany to years of high unemployment and increasing debt. On the plus side, Heinrich's loss is Vasiliki's gain.

I'm german, how bad will this hit me

I would expect German unemployment to peak at 9% and stay at around 7% for years.

There are no refugees, 0, on Spain. Thanks for sharing your insights though.

>Theres been a pretty strong hypothesis

What? How can there be a strong hypothesis about something that hasn't happened yet? Go back to pol.

Banks don't go bankrupt, they get bailed out by the government. Where have you been the past 5 years?

> (You)
>already realizing loses
Lie. Look at their asset and liability side. You simply don't know what you are talking about.

>derivatives are liabilities and DB only has 1.6 trillion in assets. If their derivative exposure is correct, then they do have an equity gap in the 70 trillions. You could also meme your way out of this and say its a cash hedge flow but that doesnt really change much of anything.
>$70 trillion
>Trillion
Jesus Christ just stop posting. These are notional, unnetted amounts. They say nothing about their actual position and exposure. You are completely ignoring assets as well.

>its one of them.
They are #4 rn

>yeah im sure that -500%+ loss in profits and -480%+ loss in EPS will buff right out
Check the operating results you utter mong.

Please stop posting. You don't have the slightest clue about any of this.

What am I even reading?

The balance of trade within the Eurozone has been out of whack since 2005, and those particular chickens are coming home to roost.

>zerohedge.com/news/2016-05-14/liquidity-problems-deutsche-bank-offers-5-yields-if-depositors-lock-their-money-thre

>Liquidity Problems? Deutsche Bank Offers 5% Yields If Depositors Lock Up Their Money For Three Months

i'm welcoming the meltdown like any other guy, bust last time i bet on a big collapse euro/bank/sovereign, I got my asses handed to me big-time. that was in 2011. five years later, the can is still successfully being kicked down the road.

Only zerohedge can take some meaningless marketing gimmick and turn it into an incoming bank run

The earlier post is just a bunch of conspiracy bs with zero proof. Germany has a net negative trade balance in the €-zone. Doesn't really fit your narrative, does it?

>Bravo, Merkel. You finally killed the banks...

Merkel doesn't control these things, it's mostly the responsibility of the ECB and the DBB (the central bank of Germany). It's like saying Dubya killed Lehman Brothers in 2008. Politicians don't know shit.

>one more terrorist attack and theyre out.

There will be no brexit, no matter what, it's completely out of question.
No government in the entire EU wants that to happen and they will make sure it won't happen. Same thing like previously with the independence referendum in Scotland.

>I'm a former forex trader

You claim to be a forex trader and you aren't aware that DB was in trouble last couple of years, really? The scandal with DB's gold price manipulation was all over the place, even the MSM reported on that.

>I'm german, how bad will this hit me

It won't affect you, because nothing is going to happen - your government/the ECB/some ad-hoc "stability mechanism" will provide the necessary liquidity if this will be necessary. They won't allow DB to fail. Period.

This.

it isn't... like I said check the current betting market odds - they're still strongly pointing towards remain. this is the stuff that is undermining your argument. Brexit is possible but claiming it is 'increasingly likely' is flawed as you've got no evidence for that given the current market view (not to mention polls, which are perhaps less reliable).

that isn't evidence of it being increasingly likely - there is one month to go, there might be a terror attack then there probably won't - big mass shootings aren't monthly incidents. Even if there is it won't necessarily sway the votes, it could but there have already been terror attacks in the build up to the referendum and they didn't sway polls or markets much

Some good stuff but also a lot of bullshit.
- Brexit won't happen, the round of intimidating speeches started by Obama, followed by ECB, FMI and EU will scare voters toward "stay"
- DB had 7 billions losses last year because of settlements and will probably have to pay more this year but it is also generating revenues with many business divisions.
- Stock is already very low, probably worst market to book ratio of all listed financial institutions
- Main financial institution and big employer in Germany

Bottom line is: DB is in terrible shape and might even go bust but I don't think there is a big chance of this happening in the near future given its still strong political influence.
Even if Brexit happens, the effect on DB will be the same as for the other EU banks in London i.e. negligible.

Just because they're notional and unnetted doesn't mean there isn't any potential credit/ counter party risks. The same could have been said about Lehman before it went bust. It depends on their actual exposure in these transactions and it can potentially wipe them out in extreme conditions. With declining credit / equity valuations and rising litigation costs, it makes their solvency seem questionable in case an extreme situation arises.

The odds are fairly slim for any of this to happen unless the market severely moves against them.

Even if you wanted to play a short on DB, there would be no way in hell you could do it on the retail level.

Lehman was going down because it had no liquidity and couldn't access the Fed window because it wasnt a bank holding. This is not the case for DB because ECB would provide unlimited liquidity.
Also, Lehman only went down because a lot of its assets were actually garbage.

Unless there is another event like the housing crisis, DB isnt going anywhere, and even then it would never be a liquidity issue because the ECB will jump in without hesitation. It would have to be a shit ton of foul assets, which is just not the case.

Your argument with counter party risk doesnt even make sense if you are arguing for DB to be at risk. DB is not its own counterparty and its not more exposed to certain assets and certain counterparties than the other big banks are. As a matter of fact, if you think DB is the weakest of the BBs, it will have the lowest counter party risk of them all.

DB's problems are within operations and litigation fees, so please stop spouting your garbage about derivatives because you clearly know nothing about that stuff.