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Will the collapse of Deutsche Bank make the collapse of Lehman Brothers look like a minor event?
Will Deutsche Bank trigger a deflationary depression making 2008 look like a sunny day at the beach?
The October issue of [I][B]James Dale Davidson’s Strategic Investment[/B][/I] newsletter warns of a world economy balanced on the edge, with the impending collapse of Deutsche Bank as the nudge that will push it into the abyss.
Excerpts:
“If I were forced to guess, I would focus on aforementioned [B]Deutsche Bank (NYSE: DB)[/B] with its $70 trillion-plus in derivative exposure. On May 16 of this year, Berenberg Bank warned that Deutsche Bank’s woes may be “insurmountable,” noting that DB is more than 40 times leveraged — 129% of the leverage ratio that brought down Lehman Brothers. Near the peak, the Lehman Brothers leverage ratio was 31 times.”
"Unable to fund its operations, Lehman filed for bankruptcy on September 16, 2008. In short order, the world financial system seized up and almost collapsed.
Something similar (or worse) could happen again. Indeed, I believe it will."
Hmmm… the question is whether A. Merkel would allow another Lehman fiasco or will she emulate Henry Paulson’s swift action with Citi.
Ordinarily, it is not in the German psyche to do bailouts but there is an election coming up and the governing party did not do so well in recent local elections - watch for any comments from Weidmann.
Btw, rumour on the fine amount just caused a nice move on Euro - now the twitter account that caused the rumour has gone - that’s the market I suppose.
Good chance that there was substance to the rumour, even to the amount of 14 bn down to 5.4bn - the Euro has benefited as have the indices.
Likely we’ll have to wait until after the close for confirmation - some guys buying the stock in anticipation.
It’s good to see that the Germans are declining to comment on these rumours, after all they were just rumours.
Wonder will the European Commission have a re-think, maybe in a few months time when all the dust has settled, on the recent judgment on Apple - around 14.6bn was the number if memory serves.
Latest update, yesterday was a holiday in Germany, but on Sunday many of the larger German firms voiced continued support for DB, later even some DB competitors.
The 5.4bn report still unconfirmed, the CEO and some colleagues over to the IMF meeting to try and reach a settlement with the DOJ.
Reasonable and up to date summary this morning here:
its more smoke then fire. dont believe the medias too much.
yes if deutsche bank collapses then the lehman collaps will look like a firework next to a nuclear bomb explotion.
but the chances for that are not significant higher then the chances that the bank of america or merryl linch collapses.
first you have the european bank savings umbrella which has more money stored than deutsche bank collapse would destroy.
second you have the german governmemt which wont let the bank collapse but keeps (intelligent) quiet untill things are solved to not weaken the negotiations positions of deusche bank.
third you habe deutsche bank itself which holds more assets then tge banks nominal shares worth by times 8. so the bank itself it worth 8 times more then people are paying for it on the stock exchanges by ots assets alone without its business model.
let the media run their mouth as much as possible. in the end its numbers that make the math and the media doesnt know how to calculate.
no they wont. EU is moving against Amazon and Microsoft aswell. it started with USA giving volkswagen a 14b fee for doing things everyone was doing even the US car producers. General motors did exactly tge same thing 2 years before Volkswagen and got a penalty of only 200 million. So “some people”; especially polititians and lobbyists in Brussels got offended by the protectionism os domistic companies but slaughter of foreign companies by the US government.
then EU answared with Apple. US with deutsche bank. as we all know Bank of America and city did exactly the same thing like Deutsche Bank did but got fees less then 1 billion. now its the next step Amazon and Microsoft. Google is beeing checked aswell. this “hit back” mentallity which started after Volkswagen, has yet only started and as i see it, the US companies are much more vulnerable to this then the EU global players.
deutsche bank is leveraged on aaa+ products like german, us, canadian, japanese governmemt bonds. so in order this leverage bevomming a risk factor first those countries must collaps and declare as bancrupt in order that deutsche bank gets in trouble with this.
lehman brothers was overexposed in second and third class real estate loans bonds. ccc+ was their qualitative highest bond. forst the american real estate market collapsed (2007) then (because of that event) lehman collapsed (2008) and then the financial crisis hit in 2009.
the “experts” of “sovereignsociety.com” should first check their sources, knowledge and reasons behind something and only then derivate conclutions and connections to actual happenings.
was their business model, and still is, to invite big companies with low taxes - mostly no taxes at all - to operate in all EU out of ireland. no taxes but highly paid jobs. thats all fine and regular and allowed but the other big economies in the EU wont tolerate this model forever simplybecause its draining money out of other countries giving a discount to US companies. Ireland did it for 30 years and at some point the EU must start finding a common tax system all member countrirs share to stop this “unfair” game approach of which only foreign companies benefit the most.
even US government officials are distorted by this system as facebook and apple and other companies write off taxes in USA and reduce their taxes significantly by simply handling a lot of businessin ireland but only on paper. and thereby paying minimal taxes in USA aswell.
take starbucks as an example (Brussels aswell moving against starbuck as we speak right now) they never paid taxes in germany at all. the profit of starbucks in germany from 2015 was $1200. simply by having a parent compamy registered in malta or ireland which is charging the german located starbucks with a 45% franchisee fee, and in malta and ireland you pay only 2% tax on income of intelectually protected goods (franchise fees). so starbucks paying 2% tax while a german or USA based company that would do exavtly the same business as starbucks pays 40%.
Yeah, the multi nationals argue that they choose Ireland for many reasons in addition to the Corporate Tax rate of 12.5%, it’s not all tax they say.
Indeed I recall Dell moved from Ireland to Poland about 5 years ago - they cited operating costs.
UK have been decreasing their own rate since 2010 from 28% to 20%, there is talk right now for even greater decrease in the wake of Brexit.
The tax rate is applicable to all companies whether local or international, indeed this forms the defence to the EU commission accusation of preferential treatment for Apple.
Malta has the highest rate at around 35%, Bulgaria at 10% the lowest - EU treaty states that tax rates to be decided by each individual country, would take a treaty change and the agreement of all 28 countries to change that.
Update on DB - they are shedding a further 1000 jobs in order to remain more competitive, or is it efficient, they will likely say - anyways, shows determination to not go under - sell assets, reduce costs.
apple was paying a corporate tax of 0,2% over 15 years. yes sure there might aswell be other reasons to choose ireland over UK or other EU countries but im very confident the tax was the biggest and pretty much only reason. especially consodering its only a few hundret -or even less- employees in the apple ireland headquarter. same for other companies like google microsoft startbucks already mentioned in this thread.
Apple employees in Ireland 5500, next France, 2400, next Germany, 2200, next Italy 1800
Most Irish employees in Cork, specifically Hollyhill, now expanding their campus for yet a further 1000 employees.
Development costs for the existing campus has exceeded 140m euro in the past 4 years.
Tax? nope think why is it that leading tech companies are expanding in a specific location, tax is a by-product of profit, to get the profit in this industry you need the guys/gals along with the circumstance - education, education, education.
If Tax is the motivator then why is it that Apple didn’t locate to the UK, surely a larger market than Ireland.
In 2012 they chose to expand their Cork operation by committing the above 140m Euro yet in that same year their tax bill in the UK was a whopping ZERO
When sitting at a board meeting, expansion and investment in a specific market is on the agenda, tax liabilities are low down on the list - you pay guys to legally keep that to minimum.
A tech company absolutely needs personnel, that is their number one requirement, can we get the people to make this happen.
The Irish government recognized this back a few years ago, they created an ‘open’ economy, wiki perhaps explains it best, the upshot is that if you wish to rent an apartment in Dublin right now then you will have to join a line, the tech companies are swallowing them for their employees.
Ireland was in a bailout (forced upon them by the ECB to protect German banks), citizens bailed out the banks with ‘austerity’ but there were no riots, just a determination to get on with it.
Education and a hard-work attitude were the keys, the tools most needed by techs.
It’s not a trick Turbo, it’s Politicians doing what they are paid to do - discreetly of course
Now back to DB and Clint’s post, it’s over now to the States, any leaks have to come from that side - let’s see, if positive perhaps a little buy on the S&P.
(this site behaving very erratically lately, have to type very slowly)
Edit: slightly concerned about BP behavior, so maybe will stay away for a while
noone ever said that irelands are not hard working etc. that was not my point. neither was my point that all those tech companies came by complete coincidence to ireland. it is politics work that attracted them. we only disagree about the main reasons.
i dont quite know why you think ireland was forced to take a bailout. their banks were broken and they were just very happy about a bailout from the ECB, and as it happens i remember very clearly the news back then and statements that ireland wants a bailout because their banks were too big for the country to bail them out by themselves leading into a total collapse of the system in ireland if EU/ECB wouldnt have bailed them out. just like iceland (and iceland isnt even part of the EU but still got bailed out by the ECB and EU) and UK aswell (only difference UK has their own central bank and has his own bailouts) and neither do i understand why you think germany forced a bailout on Ireland, especially considering that its germany who was against any bailouts since the crisis but still went along by public demand of other countries.
the problem is not that companies chose ireland but that the irish system allows them to make profit in france germany uk spain italy and challange those profits to ireland only where they pay less then 1% tax.
so net income in germany: 890million - taxes in germany 110million
taxes in ireland: 0.8 million
result: 109 million goes to new york as a gift from the irish government. stake holders in USA are happy. tax payers in germany and companies paying tax in germany feel fooled.
and thats only in germany. take aside all EU including UK and other countries without the EURO currency aswell.
thats several billion in taxes saved.
it makes a big difference if your companies net profit is 7 billion or 18 billion annually. a increase by “only choosing the right location” by more then double. not hard working highly skilled tech people made that 14 billion profit. but a “deal”.
a simple example: if there was a equivalemt to apple licated in germany. a company that is producing iphone like smartphones. their smartphones must be 10% more expensive for them to have the same profit margin as apples iphone only because they pay regular tax. so in order for them to stay competitive they MUST move to ireland and get the same dealas apple does.
the problem is not the location itself but the problem is that its possible to channel a companies gains in 28 EU countries to one single location in which the company has a discount.
the EU did not challange irelands 12% tax but the “special deals” with US tech companies which allows them to pay less taxes then 1% (check article)
yes the site is very bugged. since a year i am able only to write with phone. cant login with computer. thats yso many spelling mistakes.
Has [B]Deutsche Bank[/B] raided the gold holdings of investors in the [B]Xetra-Gold[/B] exchange-traded commodity fund, in a desperate attempt to remain solvent? Customers who have attempted to take delivery of their gold, and have been refused by Deutsche Bank, likely believe so.
source: the guardian
backsource of the guardian: IMF
not as sure as some people are that the irish bail out was firced and not “wanted” or “needed”. it for sure was a preventional act which happened fast enough to prevent the country into going into a similar status or stage like greece. in fact if it would have come a year or two later it might would have ben to late.
but in hindsight you will always find people saying “wasnt needed” or “was forced” or “was wrong”.
in the heat of the moment this is the list of countries with the biggest problems:
1st. ireland
2nd. greece
3rd. United Kingdom
4th. spain
5th. portugal
this was the list of “about to collapse”-candidates back then.
we could debate a year or even longer what it was and what it wasnt but in my eyes -and thats my opinion and nothing i read somewhere- the bailout was irelands lucky punch keeping it from collapsing and enabeling ireland to recover extremely fast.
post action -in hindsight- opinions years later always change their opinion backed with “history facts” or “letters from somewhere”. but this history they “back on” back then was not history but the heat of the moment. if ireland needed or didnt need a bailout noone can tell. it is like in trading. looking charts strwtching back 10 yeaes in hindsight it is easy to say “uhh there was a great opportunity to go long or short” but while the charts are beeing made-on tge tick- it is not as easy and not as “clear” what you should do.
back then it was simple: ireland was collapsing, other helped. and now the role of others helping is beeing reduced to the others beeing “agressors” forcing the poor people into austerity?
it feels like a collective guild concept like germany had after the second world war blaming “that guy” and the entire nation was unguilty as it only followed “that one guys” actions and orders.
because we all know: its easier to blame others then to admit his/her own mistakes and to blame him/her-selves.
