With rumors flying because of DB [Deutsche Bank] ’s stock performance this year, management issued a statement defending the bank’s liquidity position [...] Suffice it to say that historically, when a bank has been forced to issue a statement defending its solvency, insolvency is not far behind. We saw this with Bear Stearns and Lehman. Denial of a catastrophic problem is affirmation that the problem is very real.





Typically the credit markets sniff out a very real problem before the equity market “catches up.” Deutsche Bank has emerged as one of the most recklessly managed “Too Big To Fail” banks. Under Anshu Jain’s “leadership,” DB became a financial nuclear weapon bloated on derivatives, exceedingly risky assets and highly corrupt upper management. It’s a literal cesspool of financial fraud and Ponzi scheme banking activity.





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Currently DB has roughly $2 trillion assets supported by $68 billion of book value. The problem is that many of its assets are highly overstated in value and have yet to be written down. The financial world shuddered at the $7 billion of admitted write-offs DB took in 2015. The problem is that over 85% of the charges taken by DB were attributed to legal costs. We know its “on-balance-sheet” assets are being reported at a significantly overvalued stated level. DB has big loans to the energy sector, Glencore, Volkswagon/Audi and other sundry highly risky businesses. It would only take a 3.5% write-down of its asset base to wipe out its book value.





THEN there’s the derivatives. DB has $58 trillion of notional amount in OTC derivatives hidden off its balance sheet. The bank will claims most of that is hedged out and the “netted” amount is a sliver of the notional amount. But ask AIG and Goldman Sachs how hedging / netting works out in the long run. “Netting” is only relevant when counterparties are prevented by Central Banks from defaulting. Once the defaults start, “net” becomes “notional” in a hurry.





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