• Tag Archives Deutsche Bank
  • SNAP Stock Just SNAPPED: Down 29% From Its March IPO

    SNAP just reported earnings and plunged after hours after missing everything. It burned through $288 million in cash. The more it spends, the more it loses. An operational Ponzi scheme of sorts.
    The SNAP IPO was led by Morgan Stanley, Goldman Sachs, JP Morgan, Deutsche Bank, Barclays, Credit Suisse and Allen & Company. All the usual criminal cartel banks aside from Allen & Company. Allen & Company is a financial ‘advisor’ – i.e. sleazy stock broker – driven firm based in Florida. I don’t know how Allen & Co. was put on as an underwriting manager other than it’s likely that one of SNAP’s co-founders is buddies with one of the owners at Allen & Co.

    This post was published at Investment Research Dynamics on August 10, 2017.

  • This Hits the Wheezing Commercial Real Estate Bubble at Worst Possible Time

    The last big enthusiastic buyer, China, is leaving the party. Commercial real estate, such as office and apartment towers, in trophy cities in the US and Europe has been among the favorite items on the long and eclectic shopping lists of Chinese companies. At the forefront are the vast, immensely indebted, opaquely structured conglomerates HNA, Dalian Wanda, Anbang Insurance, and Fosun International. In terms of commercial real estate, the party kicked off seriously in 2013. Over the two years in the US alone, according to Morgan Stanley, cited by Bloomberg, Chinese firms have acquired $17 billion worth of commercial properties.
    In the second quarter in Manhattan, Chinese entities accounted for half of the commercial real estate purchases. This includes the $2.2 billion purchase in May of the 45-story office tower at 245 Park Avenue, the sixth largest transaction ever in Manhattan. At $1,282 per square foot, the price was also among the highest ever paid for this type of property.
    Most of HNA’s funding for this deal – one of its 30 major acquisitions since the beginning of 2016 – was borrowed from China’s state-owned banks. But HNA also borrowed $508 million from JPMorgan Chase, Natixis, Deutsche Bank, Barclays, and Societe Generale. This has been the hallmark for all Chinese acquirers: a lot of borrowing from China and some funding from offshore sources.

    This post was published at Wolf Street on Aug 8, 2017.

  • Greenspan Sees No Stock Excess, Warns of Bond Market Bubble

    Equity bears hunting for excess in the stock market might be better off worrying about bond prices, Alan Greenspan says. That’s where the actual bubble is, and when it pops, it’ll be bad for everyone.
    ‘By any measure, real long-term interest rates are much too low and therefore unsustainable,’ the former Federal Reserve chairman, 91, said in an interview. ‘When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.’
    While the consensus of Wall Street forecasters is still for low rates to persist, Greenspan isn’t alone in warning they will break higher quickly as the era of global central-bank monetary accommodation ends. Deutsche Bank AG’s Binky Chadha says real Treasury yields sit far below where actual growth levels suggest they should be. Tom Porcelli, chief U.S. economist at RBC Capital Markets, says it’s only a matter of time before inflationary pressures hit the bond market.
    ‘The real problem is that when the bond-market bubble collapses, long-term interest rates will rise,’ Greenspan said. ‘We are moving into a different phase of the economy — to a stagflation not seen since the 1970s. That is not good for asset prices.’

    This post was published at bloomberg

  • These Were The Best Performing Assets In July And YTD

    July was a great month for virtually all asset classes (at least those tracked by Deutsche Bank) with the notable exception of what, which tumbled after surging previously.
    As DB’s Jim Reid writes, there was strong performance for most assets in the bank’s sample as various market volatility measures trended lower over the past month to touch new all-time lows. 33 out of 39 assets posted positive total returns in local currency terms while all assets except for one (wheat) saw positive returns in USD terms after a tough month for the Greenback (-2.9%). In summary commodities and equities make up the top of both the local currency and USD performance tables while European assets (equities and government bonds) crowd at the bottom of the LC performance table. However the strong performance of the Euro (and USD weakness more generally) lifted most European assets into more positive territory in USD terms. Thus in USD terms the worst performers were mostly US credit and treasuries, rounded out by two relatively underperforming agricultural commodities in Corn (+0.1%) and Wheat (-7%).
    In terms of the key movers on the month, oil was one of the strongest performers as it led all assets in local currency terms (WTI +9%; Brent: +8%). It should be noted that nearly all of the gains came at the tail end of the month following news of Saudi Arabia’s pledge to reduce crude exports in August. Elsewhere the Bovespa (+11%) and FTSE MIB (+8%) matched gains in oil to top the USD table following a rally in the underlying equities (Bovespa LC: +5%; FTSE MIB LC: +5%) and strong performance in their respective currencies (BRL +6%; EUR +3%). Broader EM equities also saw strong performance in general (MSCI EM: +6%). An important dynamic to note is the fact that despite the poor performance of broader European assets in LC terms (and middling performance in USD terms), European banks actually saw strong returns on the month with gains of +3% in LC terms and over +6% in USD terms as Euro area economic momentum continues to hold strong and Eurozone government bond yields have risen following Draghi’s speech at Sintra.

    This post was published at Zero Hedge on Aug 1, 2017.

  • Beijing Blowback Begins: China Orders Anbang To Sell Its Overseas Assets

    Two weeks ago, when discussing the troubles plaguing one of China’s conglomerates and “boldest dealmaker”, HNA Group – recently best known for acquiring Anthony Scaramucci’s SkyBridge capital in a transaction that has yet to close – we said that what until recently was one of the world’s most aggressive roll-ups of varied companies from around the globe, including stakes in Hilton Companies and Deutsche Bank, as well as countless Chinese acquisitions, could very soon become the “reverse roll-up from hell”, as the stock price of HNA tumbled, putting the roughly $24 billion in loans that had been taken against HNA stock in jeopardy of breachin their LTV limits, forcing a massive margin call, and potential firesale liquidation of the company’s assets as shown in the chart below…
    … which have been hit with the double whammy of various rating agency downgrades in recent months, further eroding the collateral value of HNA’s various assets.

    This post was published at Zero Hedge on Jul 31, 2017.

  • Deutsche Bank Former Executives Waive Half Their Bonuses

    Ten former and one incumbent executive board member of Deutsche Bank AG agreed to forfeit 38.4 million ($44.8 million) of outstanding bonus payments, drawing a line under almost two years of negotiations with the German lender related to misconduct fines.
    Deutsche Bank said it won’t hold the management board members liable as part of the deal, which includes them receiving the remaining 31.4 million in unpaid bonuses, according to a statement Thursday from the lender. There’s insufficient evidence for actionable damage claims against the members, the bank said.
    The lender has been seeking to persuade the former executives to contribute to billions of dollars in fines the lender had to pay because of past misconduct. Supervisory board Chairman Paul Achleitner said at the bank’s annual general meeting in May that an agreement with the 11 men was nearing.
    Deutsche Bank’s ‘supervisory board appreciates the fact that with the additional waiver of bonuses, the management board members in office at that time are making a further personal contribution to closing this chapter,’ Achleitner said in Thursday’s statement. ‘This helps us to look forward toward the future again.’

    This post was published at bloomberg

  • Market Talk- July 28th, 2017

    A weak market close for most of the Asian indices today but saw the KOPSI and ASX off around 1.55% the pair. The Nikkei gave up another 0.6% as the yen trade back to the mid 110’s. With Shanghai the only core that closed positive even the Hang Seng fell -0.6%. The sell-off was broad based but financials seemed to take their share of the beating, possibly influenced by European declines and notably that of Deutsche bank. The late news that the US Senate had voted down the Obama appeal certainly didn’t help sentiment. Japan did see a weaker Retail Sales release (2.1% versus a 2.3% expectation) with an inline Consumer Prices number.

    This post was published at Armstrong Economics on Jul 28, 2017.

  • Bill Blain: “Are We In A Bubble About To Burst, Or Are We Facing Massive Equity Upside?”

    Are We In A Bubble About To Burst, Or Are We Facing Massive Equity Upside?
    ‘A liberal is a conservative who has been arrested.’
    No surprises from the Fed last night. Unchanged rate talk and hints about reducing the balance sheet ‘relatively soon’. We can go figure what ‘relatively’ means when inflation picks up. The stock market soared and VIX tumbled to a record low. Was that a warning about complacency? Since the 2008 crisis we’ve been here many times before – worrying about signals the economy is strengthening when suddenly its dived weaker.
    But, those us with longer memories can recall when the US economy has turned dramatically stronger – and in 1994, (yes, I remember it well), when the Fed acted prematurely, spiked the recovery and triggered what we’d now call a massive Treasury market TanTrum. This time it feels very different. I suspect we are very much still on course towards normalisation – a new kind of new normal: low rates, low inflation and steady state low growth.
    Stuff to watch today: Dovish Fed boosts stocks (record Dow) and dollar crashes. Lots of corporate results to wonder and worry about! Stuff the think about: Deutsche Bank results show it’s taken yet another thumping – difficult to see how it plays catch up and regains market relevance when it’s still swinging the headcount axe. Where is the US economy when inflation remains so low? What are the risks to Europe of the low dollar?

    This post was published at Zero Hedge on Jul 27, 2017.

  • Deutsche Bank CEO tells staff: Prepare for Brexit “worst outcome“

    Deutsche Bank CEO John Cryan told employees that the German lender is preparing for a hard Brexit in which roles will “inevitably” move from London to Frankfurt.
    Cryan said in a video announcement on July 11 that the bank “will assume a reasonable worst outcome” from the U.K.’s talks with the European Union, according to a Bloomberg News report.
    “The worst is always likely to be worse than people can imagine,” Cryan said.
    Deutsche Bank operates a branch in the U.K., and while London is one of the firm’s major investment banking hubs, Cryan said he will move “the vast majority” of the markets balance sheet to Frankfurt. As a result, some roles will move too.
    “There’s an awful lot of detail to be ironed out and agreed, depending on what the rules and regulations turn out to be,” Cryan said in the video. “We will try to minimize disruption for our clients and for our own people, but inevitably roles will need to be either moved or at least added in Frankfurt.”

    This post was published at Business Insider

  • Deutsche Bank Faces DOJ Subpoena Over Trump-Russia Probe

    Deutsche’s relationship with Trump and questions about hundreds of millions in loans have dogged the German bank and the White House for months, abd now, ‘according to sources’ reported by The Guardian, Robert Mueller’s team and Trump’s bankers have established informal contacts and formal requests for information are forthcoming.
    According to an analysis by Bloomberg, Trump now owes Deutsche, his biggest creditor, around $300m. He has four large mortgages, all issued by Deutsche’s private bank. The loans are guaranteed against the president’s properties: a new deluxe hotel in Washington DC’s old post office building, just around the corner from the White House; his Chicago tower hotel; and the Trump National Doral Miami resort.

    This post was published at Zero Hedge on Jul 20, 2017.

  • Is Canada Really “In Serious Trouble”: Goldman Responds

    One week after we channeled Deutsche Bank’s Torsten Slok, who two years ago warned that “Canada is in serious trouble“, a warning which was especially resonant after last week’s rate hike by the Bank of Canada – the first since 2010 – which we argued threatens to burst Canada’s gargantuan housing bubble…

    This post was published at Zero Hedge on Jul 19, 2017.

  • What’ll Happen to US Commercial Real Estate as Chinese Money Dries Up?

    See Manhattan.
    In the second quarter in Manhattan, Chinese entities accounted for half of the commercial real estate purchases with prices over $10 million. By comparison, in 2011 through 2014, total cross-border purchases from all over the world (not just from China) were in the mid-20% range.
    ‘At a time when domestic investors have pulled back, foreign parties have ramped up their holdings in Manhattan,’ according to Avison Young’s Second Quarter Manhattan Market Report.
    This includes the $2.2 billion purchase in May of 245 Park Avenue by the Chinese conglomerate HNA Group, the sixth largest transaction ever in Manhattan. And at $1,282 per square foot, it was ‘among the highest price per pound for this type of asset.’
    The purchase of the 45-story trophy tower is being funded in part by money borrowed in the US via a $508 million loan from JPMorgan Chase, Natixis, Deutsche Bank, Barclays, and Societe Generale, according to CommercialCaf. The rest is funded by HNA’s other sources, presumably in China.
    The influx of Chinese money and the propensity by Chinese companies to hunt down trophy assets have propped up prices in Manhattan. And yet, despite the Chinese hunger, total sales volume has plunged, according to Avison Young:

    This post was published at Wolf Street by Wolf Richter – Jul 17, 2017.

  • BNP Fined $246MM After Its Traders Were Found To Still Use Chat Rooms To Rig FX Trading

    Two months after the Fed fined Deutsche Bank a paltry $157 million for manipulating currency markets after the German bank’s traders were found to be using “chat rooms” to rig FX trading, we learn that there was more gambling going on here, and on Monday the Fed announced that it will fine French BNP Paribas $246 million “for the firm’s unsafe and unsound practices in the foreign exchange (FX) markets.”
    According to the press release, the Board levied the fine “after finding deficiencies in BNP Paribas’s oversight of, and internal controls over, FX traders who buy and sell U. S. dollars and foreign currencies for the firm’s own accounts and for customers.” And, not surprisingly we once again find that FX rigging was confined chat rooms:
    “The firm failed to detect and address that its traders used electronic chatrooms to communicate with competitors about their trading positions. The Board’s order requires BNP Paribas to improve its senior management oversight and controls relating to the firm’s FX trading.”
    Perhaps one day the Fed will realize that as long as its keep settling for paltry amounts that are a fraction of how much the banks make by violating the rules (and yes, participating in chat rooms), this type of behavior will never end. That day won’t be today.
    In its complaint, the Fed notes that during the Review Period:

    This post was published at Zero Hedge on Jul 17, 2017.

  • Goldman Is Troubled By The Fed’s Growing Warnings About High Asset Prices

    With both the S&P, and global stock markets, closing last week at new all time highs, it is safe to say that any and all warnings about “froth“, and perhaps a bubble in the market, as Deutsche Bank characterized it last week have been ignored. And yet, as Goldman’s economist team writes over the weekend, the recent rise in warnings about “risk levels” and asset prices by Fed officials is concerning: “Fed officials have expressed greater concern about asset prices and financial stability risk recently, a change from their more relaxed view last fall. In particular, the minutes to the June FOMC meeting highlighted concern about high equity valuations and low volatility and drew a connection between potential overheating in the real economy and financial markets.”
    To underscore this point, here is a recap of recent Fed warnings about asset prices, which have increased significantly since the presidential election:
    Janet Yellen, July 12, 2017
    So in looking at asset prices and valuations, we try not to opine on whether they are correct or not correct. But as you asked what the potential spillovers or impacts on financial stability could be of asset price revaluations – my assessment of that is that as assets prices have moved up, we have not seen a substantial increase in borrowing based on those asset price movements. We have a financial system and banking system that is well capitalized and strong and I believe it is resilient.

    This post was published at Zero Hedge on Jul 16, 2017.

  • Deutsche: The Fed Has Created “Universal Basic Income For The Rich” And Now It Can’t Get Out

    Two weeks after Aleksandar Kocic highlighted the moment in 2012 when the market stopped caring about newsflow and reality, and, in a word “broke” with pervasive complacency setting in regardless of macro uncertainty…

    … Deutsche Bank’s post modernist master of stream-of-consciousness narrative is back with a new essay dissecting his favorite topic, the interplay between the Fed and markets, the so-called “umbilical limbo” that connects the two in the form of ultraeasy monetary policy and QE in general, and more importantly, the narrative that the Fed has spun over the past ten years, which while supportive of risk assets, has concurrently resulted in what Kocic calls a “permanent state of exception” from normalcy as a result of the Fed decision to defer the financial crisis indefinitely.

    This post was published at Zero Hedge on Jul 15, 2017.

  • “A Reverse Rollup From Hell”: China’s “Boldest Dealmaker” Faces Margin Call Disintegration

    One month ago, when describing the bizarre, not to mention systemically dangerous practice of dozens of small and mid-cap Chinese companies and executives offering to backstop losses on their employees’ purchases of company shares, we couldn’t quite explain it, although it seemed to revolve around a simple, and fraudulent, ponzi scheme: the same executives who were making the “make whole guarantee” had themselves taken out substantial loans collateralized by a pledge on their own stock. Naturally, the lower the stock dropped, the closer the moment when the dreaded margin call would come in demanding loan repayment, and since the value of the stock used as collateral was below the value of the loan, defaults would inevitably follow. As such, the “offer” to backstop losses was nothing more than a last ditch effort to find the greatest fool of all: an employee who believed that the sinking ship known as his or her employer would bail them out, when in reality it was the other way round. Oh, and good luck, trying to collect on your “guarantee”, when both the company and the executive were in bankruptcy court, or worse.
    We bring it up because in a report overnight, Bloomberg has uncovered that while the practice of backstopping corporate stock purchases may – for now – be limited to a subset of potentially fraudulent companies (our advice is to create a short basket of all the companies that engaged in this practice listed here and watch them sink), pledging shares is not. In fact quite the opposite: as it turns out, one of China’s most acquisitive companies, HNA Group which Bloomberg dubbed “China’s boldest dealmaker” which “supercharged its transformation from an obscure Chinese airline operator to a juggernaut capable of amassing multibillion-dollar stakes in globally recognized brands, including Hilton Worldwide Holdings Inc. and Deutsche Bank ” had pledged billions of its own shares as a source of funding for these purchases.
    And herein lies the rub: as we said one month ago, “fundamentally a ponzi scheme, this works without a glitch during rising markets but falling prices especially among small and mid-cap companies, have eroded the value of that collateral, raising the specter of forced liquidation – where lenders, often Chinese brokerages, make borrowers sell the pledged shares. Selling the stock adds more pressures on share prices, triggering a downward spiral.”

    This post was published at Zero Hedge on Jul 13, 2017.

  • “Canada Is In Serious Trouble” Again, And This Time It’s For Real

    Some time ago, Deutsche Bank’s chief international economist, Torsten Slok, presented several charts which showed that “Canada is in serious trouble” mostly as a result of its overreliance on its frothy, bubbly housing sector, but also due to the fact that unlike the US, the average household had failed to reduce its debt load in time.
    Additionally, he demonstrated that it was not just the mortgage-linked dangers from the housing market (and this was before Vancouver and Toronto got slammed with billions in “hot” Chinese capital inflows) as credit card loans and personal lines of credit had both surged, even as multifamily construction was at already record highs and surging, while the labor market had become particularly reliant on the assumption that the housing sector would keep growing indefinitely, suggesting that if and when the housing market took a turn for the worse, or even slowed down as expected, a major source of employment in recent years would shrink.

    This post was published at Zero Hedge on Jul 12, 2017.

  • “… A Recession Has Always Followed”: Is This The Real Reason The Fed Is Suddenly Panicking

    “Why is the Fed so desperate to raise rates and tighten financial conditions? Why has the Fed shifted from a dovish to a hawkish bias?”
    That is the question on every trader’s, analyst’s and economist’s mind in the past month. Is it because the Fed is suddenly worried it has inflated another massive equity bubble (major banks now openly warn their clients the market is in frothy territory, if not inside a bubble), or is the Fed just worried that it will fall too far behind the curve and be unable to regain control of the economy once inflation spikes, without creating a recession (in what will soon be the second longest, if weakest, economic expansion of all time).
    This is also what BofA’s chief economist Ethan Harris tried to answer over the weekend, when he recalled that while from 2013 to 2016 the Fed seemed to have a “dovish bias” signaling a slow exit from super easy monetary policy, but pausing at any sign of trouble, this year the Fed appears to have shifted to a “hawkish bias:” signaling a slow exit, but only pausing if the outlook changes significantly. He says that this was most evident when the Fed hiked rates and signaled balance shrinkage at its June meeting despite weak growth and inflation data.
    The second reason for the Fed’s hawkish turn is that it is probably encouraged by how easily the markets have absorbed its forecasts. Since the start of the year the Fed has hiked more than expected and has accelerated its balance sheet shrinkage plans and yet, as Goldman has repeatedly noted and all other banks have promptly followed, stocks have rallied while bond yields have been little changed on net. If a steady exit is causing no apparent pain, why not continue? (for one answer, read the latest note from Deutsche Bank on Conundrum 2.0)

    This post was published at Zero Hedge on Jul 10, 2017.

  • Deutsche Bank Warns “Markets Seem To Have Entered Frothy Territory (If Not Being In A Bubble)”

    Another day, another warning of market froth, only this time not from the (widely ignored) Federal Reserve, but from Mikihiro Matsuoka, chief economist at Deutsche Bank who in a note released on Monday says that he believes that “the equity market in developed countries begins to show symptoms of ‘froth’. A simple average of the standard deviation of the stock market capitalization as percentage of GDP of seven major developed countries has been approaching very close to the previous peaks of 2000 and 2008. The reason we believe it is entering a frothy territory is that an eventual turnaround of monetary policy after a long period of post-GFC accommodation is under way in major developed countries, which in our view, raises the returns on safe assets and lowers the valuation of risk assets.”
    While Matsuoka hardly says anything Janet Yellen did not cover in the past two weeks, here is the summary:
    Some factors, such as 1) higher nominal GDP growth above long-term bond yield thanks to massive monetary accommodation, 2) chimera equities in which dividend yields get higher than the long-term bond yield and a resulting rise in P/E thanks to ‘search for yield’, and 3) financial surplus of non-financial businesses in developed countries, might help evade or put off a large and prolonged adjustment in asset prices.
    However, the gap between nominal GDP growth and the long-term bond yield has expanded to a historical high under which monetary policy turnaround would naturally shrink the gap. The decline in the potential growth in the post-GFC era eventually restrains the profit growth and a resulting dividend growth over the long run. The price-earnings ratio has been on a slow but persistent rise after the GFC. The monetary policy turnaround could counter this by lowering the valuation of the risk assets. An expanding financial surplus for non-financial businesses reflects disappearance of investment (or profit) opportunities, i.e. an end of capitalism. The fall in the potential growth restrains a rise in the valuation of risk assets over the longrun.

    This post was published at Zero Hedge on Jul 10, 2017.

  • Visualizing “Conundrum 2.0”: This Is What The Fed Is Missing

    While it may come as a surprise to the current crop of 17-year-old hedge fund managers, the current period of persistently low long-term interest rates and plunging, near reocrd volatility in the face of a hawkish Fed and rising short-term rates, is hardly new: exactly the same happened from 2004 through 2006, despite the Fed’s continued rate hikes and jawboning. Alan Greenspan, the Fed’s Chair at the time, called this phenomenon a “conundrum” and blamed it on many things, including the global savings glut.
    And, as the latest FOMC minutes demonstrated, the current period of especially loose financial conditions despite a projected 3 rate hikes in 2017 coupled with a balance sheet rolloff is likewise confusing the Fed. Deutsche Bank has called this “Conundrum 2.0.”
    So, in an attempt to explain what the Fed is missing as it stubbornly hopes to push LT rates higher and risk prices lower, Deutsche’s financial strategists believes the causes of long-term rate decline to be as shown in the chart below: they think that rate declines are largely being caused by four factors:
    disappointment over policy of the Trump administration (pink), geopolitical/political risk outside the US (orange), increased demand for and decreased supply of bonds (yellow) and concerns about slowing US and Chinese economies (grey). At the same time, Deutsche believes the causes of rising share prices in a time of declining long-term rates, are shown in the bottom right quadrant on the chart below. The first of these is an ‘excess liquidity spiral’. In the absence of risk-off factors, declining long-term rates (with the added impact of a weakening USD) give rise to excess liquidity. Pension funds/individuals/insurers strengthen their risk-taking stance to compensate for reduced income from government bonds and the like. Strengthening of the risk-taking stance brings about decreases in long-term rates through aggressive acquisition of term risk.

    This post was published at Zero Hedge on Jul 8, 2017.