It has been hard for true fundamental investors to reliably make money since the bear market rally of this generation (c. 2nd quarter 2009) due to the fact that global market central planners world wide (read as central bankers and their cohorts) have been distorting price discovery and realistic valuations to an unprecedented extent. Counting the money just doesn't work when no one truly respects and valued money but you. In essence, central bankers world wide (starting here in the US, with our central bank) have disrupted and disrespected the economic circle of life. For a detailed explanation of this happenstance, see Do Black Swans Really Matter? Not As Much as the Circle of Life, The Circle Purposely Disrupted By Multiple Central Banks Worldwide!!! But..... Those very same central bankers/central planners have to juggle many, too many, balls in order to keep this charade afloat. Yes, sink this charade will - and when it does, it will probably look very ugly. Now, its a timing game. As the title inquires...
What Happens When That Juggler Gets Clumsy?
In continuing with the conversation with Eurocalypse concerning ALM and liquidity management, a bank that we previously warned about and whom our other resident trader set up a lovely trade on - Deutsche Bank - reported a couple of days ago. This is what it looks like: Associated Press: Deutsche Bank writes down Greek bonds in Q2
FRANKFURT, Germany -- Deutsche Bank's second-quarter earnings underperformed market expectations as it wrote down the value of its Greek assets in the wake of last week's agreement to bailout the country for the second time. The euro155 million ($224 million) writedown on bonds issued by Greece was one reason why the bank's earnings faltered.
Those who have been following our European research know that we had several observations on Deutsche Bank. First reference More On Trading with BoomBustBlog Research in which we read through the bank CEO sanskrit and found the translation:
- GERMAN-BANK-CHIEF - AM VERY GLAD THAT WE ARE WITH GREAT CHANCE TO BE COUNTING SIFIs
- GERMAN-BANK-CHIEF - ASSUME THAT INDUSTRY FIRST BEFORE TAXES FROM 16 TO ROE 19VH SEE IS ABOUT THE TIME AGAIN 25VH
- GERMAN-BANK-CHIEF - BY REGULATORY CHANGES WILL RETURN ON THE BANKS GO DOWN TEMPORARILY
- GERMAN-BANK-CHIEF - GREATER EQUITY LOANS ARE NOT FOR ALL EASY TO OBTAIN EUROPEAN BANKS START OF LOWER OUTPUT BASE
- GERMAN-BANK-CHIEF DBKGn.DE ACKERMANN - EQUITY CAPITAL AFTER THE CRISIS IS STILL MORE TO critically important competitive factor, POSITIVE AND NEGATIVE
- GERMAN-BANK-CHIEF DBKGn.DE ACKERMANN - BANKS OF REVENUE FROM OPERATING BUSINESS LIKELY TO REMAIN HUMBLE foreseeable future
- GERMAN-BANK-CHIEF DBKGn.DE ACKERMANN - ROME IS CURRENTLY WITH BANKS AND EU ON PARTICIPATION OF PRIVATE CREDITORS TO GREECE RESCUE DISCUSSED
One might consider this in bad faith as a hidden profit warning. Or what would like to say the Deutsche Bank? I'm short since the 39,50 level. The German bank leaves key support zones straight down. The critical 40 level has not kept the 39 and nobody seems to buy the Pavilion. There are now potential short term losses to be expected in the area of 37.50/38. Under these Levels shares will lost ground to the November support the low of around 36 €.
Shortly thereafter, we posted BoomBustBlog Traders Armed With BoomBustBlog Research Caught ~10% Deutsche Bank Fall, and it went a little something like this:
Deutsche Bank looks downright UGLY! Our new Forensic Analysis/Technical Trade combo called this one out about 2 weeks ago with impressive precission. Kudos to all who contributed.
This is the update (dated 6/29) to the trade setup illustrated above, which I haven't even published yet due to material grammar and translation snafus, but the cat is out of the bag now...
The fact is that Greece is like a smoldering fire. Sometimes Rest, then fire again, and you never really know when the next outbreak comes. This situation is unfortunately still get us some time.
Even New York's new proposal interpreted with some relief. The just enough to avoid the worst and the default is sufficient for today made to continue the tedious summer of consolidation. Again, as long as the S & P 500 above 1,250 and the Dow Jones is the defending 11.900, the technical picture is solid enough. Even the Wall Street optimists surprise with positive approaches. Eight days ago, it was just the opposite. A survey of Intelligence, "CNN Money" is: The number of optimists is increasing. Such surveys are always provided with a question mark, but still.
The banks respond to the new proposals for Basel III surprising positive, not the stock market. The deductions for COMMERZBANK and DEUTSCHE BANK may be an exaggeration, but the technical situation is both hard hit. It looks better with the Americans, according to these rules and regulations for the core capital ratio, all of which are on the safe side. We take this note, but I do not respond to U.S. banks.
COMMERZBANK is not to hold at the moment. € 2.70, of course, are fundamentally extremely low, however: The Greece-positions of around € 2.6 billion in the subsidiary EUROHYPO are in the current situation a mad speculative fears. It can stop each, depending on your taste. It would be good if COMMERZBANK not only keeps silent, but say something constructive. There is nothing worse than uncertainty. COMMERZBANK would announce today that these positions at half Price were sold, representing the market value, then they would have € 1.3 billion actually lost.
And one should expect values to get much worse from here!!!
More precisely, the daughter EUROHYPO. Whether this with, this amount by proposing to the consolidated financial statements is an open question. In any case, would then this disgusting toad swallowed. It is a courage to ask. The GERMAN BANK fighting for every technical resistance. This is all very scarce and an assessment is not possible while also here the Greeks topic the determined mood. Breaks through the price of the 39 € sustainably, everything is up to 36 € open. Then there is the real technical test, because under 36 € there is no resistance more on the inspiration to the actors. Probably not. I expect the continuation of the sideways trend in the range of 36-48 € but the €36 are to fill!
On that note, here is the latest (released yesterday) European bank and sovereign debt exposure research recalculated to show contagion paths: European Bank's Greece exposure
Additional French bank solvency analysis will be out shortly.
Please read this in the expansive context provided by the conversational post with Eurocalypse posted this morning -Let's Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such. Although lengthy, this is a very important post that leads directly into the second of our European bank trade setups based upon BoomBustBlog forensic analysis.
Kudos to BoomBustblogger Glen Bradford (he posted a link on Seeking Alpha, which interestingly enough no longer published my work) for his title idea. Quite apt, if I must say so myself.