Deutsche bank (DBK) shares dropped to fresh new lows with the various news
announcements, as well as a feeling that Germany will not be capable of bailing
out the bank. The imminent outcome for DBK is 'bankruptcy' while the world
will have to bear the brunt of the fallout from all of the complicated 'derivatives'
which are being held by Deutsche Bank.
DBKs' outstanding 'derivatives' exposure is 20x the German GDP and 5x the
Eurozone GDP.
Amongst all of the chaos, DBKs' head of currencies trading and emerging-markets
debt trading, Ahmet Arinc, has left the company which is the most recent
negative news to impact the banks' financial status. Traders slammed the
stock by more than 6% during that trading session, to touch intraday lows
of $12.5 after which the stock recovered marginally to close at $12.97.
Germany will not be able to bail out DBK:
The latest bank which might require a bailout is the Italian
lender Banca Monte dei Paschi di Siena which is the worlds' oldest
bank. The European Central Bank warned that the Italian bank is holding
dangerously high levels of bad debt.
Italy wants a bailout for Monte Paschi, however, the Germans are opposing
any such move. Wolfgang
Schaeuble, the German Finance Minister, stated in a news conference,
in Berlin, that Italy intends to stick to the banking-union rules, as was
conveyed to him by his Italian Counterpart, Pier Carlo Padoan.
Italian Prime Minister hits back at Germany:
However, Italy did not wait before hitting back at Germany and it came from
none other than the Italian Prime Minister, Matteo Renzi.
Mr. Renzi stated that "the difficulties facing Italian banks over their
bad loans are miniscule by comparison with the problems some European
banks face over their derivatives." He reminded the Germans that there
were other European banks which had much bigger problems than Monte
Paschi, in an indirect hint towards DBK.
"If this non-performing loan problem is worth one, the question of 'derivatives'
at other banks, at big banks, is worth one hundred. "This is the ratio:
one to one hundred," Renzi stated, reports Reuters.
More troubles ahead for DBK:
The bank is likely to lose its'
place in the STOXX 50 index, according to analysts at Societe Generale. The
bank will face renewed selling pressure as the index funds will have to reposition
themselves, post the change, which is more than likely to bring about a fresh
round of selling. According to a statement by the IMF, DBK is now the most
dangerous bank in the world. DBK is currently the riskiest bank which will
bring down the entire financial banking system, globally.
Gold is the key asset to own:
The bond king, Jeff Gundlach, stated that "things are shaky and feeling dangerous".
Regarding the European banking crisis, the Double Line bond king noted: "Banks
are dying and policymakers don't know what to do. Watch Deutsche Bank shares
go to single digits and people will start to panic... you'll see someone
say, 'Someone is going to have to do something'."
Gundlach stated that "gold remains the best investment amid fears of instability
in the European Union and prolonged global stagnation, as well as
concerns over the effectiveness of central bank policies," reports Reuters.
Conclusion:
The belief by Wall Street that Germany will not allow DBK to fail is fading.
Post the Brexit, tensions are running high among the remaining members, as
seen in the spat between Germany and Italy. Due to the earlier hard stance
of the Germans, it is likely that any move to bailout DBK will face considerable
resistance from all of the member nations. If allowed to fail, DBK will cause
a 'crisis' many times over that of which Lehman Brothers did. The final meltdown
commences!
Americans need to pay attention to this European Financial Crisis because
its' very contagious and going to spread here.
Gold remains the asset to invest in, as I have been advising my
subscribers for a long time now. DBK is failing and not even the
ECB will be able to stop its' plunge into oblivion!
Next week I will share with you another asset class rarely mentioned or invested
in which could explode in value going forward and actually become a major
asset/currency world wide - Stay Tuned!
