The new bond King, Jeff Gundlach, offers some sage advice here, in a Reuters interview by morse code.
“I would just stay away. It’s un-analyzable,” Gundlach told Reuters by phone about Deutsche Bank shares and debt. “It’s too binary. The market is going to push down Deutsche Bank until there is some recognition of support. They will get assistance, if need be.”
“One day, Deutsche Bank shares will go up 40 percent. And it will be the day the government bails them out. That jump will happen in a minute,” Gundlach said.
“It is about an event which is completely out of your control.”
While we all love to see Germany’s biggest bagholder punished in biblical terms, it’s a toxic trade for both longs and shorts. On one hand, the bank is all but dead. The capital base is on the verge of destruction — with over $1.8t in assets and a market cap slightly above $15b. On the other, in spite of what Merkel said, there is no way the Bundesbank permits DB to blow up, when considering they underwrote every single Greek bailout over the past decade.
The billion dollar question is, when will Germany assist Deutsche Bank? Do you know? I have no idea. I’m guessing they won’t do it, unless the stock gets hammered a little bit more. Clearly, they’d like to avoid displaying moral hazard for as long as they can. But, if we’re being honest here, the entirety of western finance is now a rigged game of smoke and mirrors. You’d have to be crazy to believe they’d sit back and let Deutsche Bank unravel and then blow up.
Short sellers will be met with an awfully acrimonious vengeance, whenever the Bundesbank decides to step in. You’re better off sitting back and enjoying the shit-show.
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Perhaps it won’t be a bail out but rather a bail in.
hehehe, hit it on the nail
Well the reason Douche bank crashed this week is cus Germany said no to bail out and it will be a bail in! Hence bank run! They have papered over two years, and the decay and rot of the system is unbearable to the masses. Now gamblers are on their own, as that time is well over due.
Bail In, is the new Bail out.
that’s why i think DB will hit 16 at some point…..
At some point Douche Bag pops. But first a little lower please.
When will we turn our attention to the Chinese banks? DB is over leveraged there, as is HSBC. Chinese banks are overleveraged themselves, and default rates are climbing. I’d be surprised if the buck stops at DB without HSBC and other Euro banks being examined, and then eventually the Chinese banking system.
DB could be the contagion for Euro and Chinese banks.