Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
Login My Member Benefits Archives Research Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    ×
  • Subscribe
Enter stock ticker or keyword
×
5 Ways to Beat the Fed (and Crush Inflation)

Email this Article

Send with mail | ahoo instead.
Required Needs to be a valid email
Required Needs to be a valid email
You Could Be Stuck with Deutsche Bank’s Bills
http://mney.co/2e4Z4Ln
Required Please enter the correct value.
Twitter
Stocks: C, DB, WFC

You Could Be Stuck with Deutsche Bank’s Bills

The world’s most dangerous bank is the perfect candidate for a “bail-in”…

By Peter Krauth, Resource Specialist, Money Morning • October 12, 2016

View Comments

Start the conversation

Comment on This Story Click here to cancel reply.

Or to contact Money Morning Customer Service, click here.

Your email address will not be published. Required fields are marked *

Some HTML is OK

Peter KrauthPeter Krauth

The 5,300 Wells Fargo & Co. (NYSE: WFC) employees who set up 2 million bogus accounts to bring in a measly $5 million in extra fees are being fobbed off as “a few bad apples.”

They’re not. They’re the product of a global corporate culture of entitlement and corruption. The proverbial tip of the iceberg.

Don’t get me wrong – Wells’ misdeeds are bad, but there’s much, much worse going on in the banking sector right now.

The moral hazard and casino banking underway at this very moment are putting the entire global financial system at risk – again – when we’ve barely recovered from the last crisis.

So today, I’m recommending everyone buy the ultimate “alternative money” at some of the best prices we’re likely to see for the rest of the year…

This Is Easily the Gravest Threat to the Economy Right Now

Deutsche Bank

Click to enlarge

Deutsche Bank AG USA (NYSE: DB), Germany’s biggest “too big to fail” bank, is having some well-publicized trouble meeting its legal liabilities right now.

The bank has $2 trillion in assets, slightly more than Wells Fargo and Citigroup Inc.’s (NYSE: C) $1.9 trillion and $1.8 trillion piles.

But that figure is highly misleading. Here’s the difference.

Deutsche Bank’s tangible common equity (tangible equity divided by tangible assets) is just 2.9%. That’s all the bank could stand to lose before all its equity is flat-out gone. Wells Fargo and Citi hold 7.7% and 10.3%, respectively – the picture of health, by comparison.

It gets worse. Deutsche sports a derivatives book with a notional value of over $42 trillion, close to 14 times Germany’s $3.3 trillion economy. Its densely tangled matrix of exposure and counterparty risk makes it critical to the global financial system. And now it’s a ticking time bomb.

There’s little confidence in Deutsche Bank, for good reason. And the problem has landed in German Chancellor Angela Merkel’s lap.

She faces the ultimate quandary.

Tough-Talking the Economy to the Edge of Oblivion

By now, it’s well known that Deutsche Bank is on the hook for up to $14 billion in fines levied by the U.S. Justice Department for pushing mortgage-backed securities in the run-up to the last financial crisis.

But the problem is, that fine comes to 80% of Deutsche Bank’s entire $17.5 billion market cap. And management has set aside “just” $6.2 billion for litigation.

Merkel has already nixed to the prospect of a government bailout. She doesn’t have much leeway there, either, thanks to her hardline stance against bailing out equally precarious Italian banks.

That’s pretty much the official G20 stance agreed to in Australia back in 2014.

From a political perspective, the dilemma is obvious. A German federal election is slated for October 2017, and Merkel’s party has already suffered a sobering loss in recent regional elections. She’ll have a tough time going back on her “no bail-out” promise.

There’s really only one realistic course of action open to regulators and bankers. And it’s not good.

The Taxpayer Is on the Hook Again

Bail-ins are the more likely scenario, a risk to which I’ve alerted you numerous times over the past few years.

And for Deutsche Bank, the process is likely to start with its contingent convertible, or “coco,” bonds. Deutsche Bank’s €1.75 billion of cocos recently traded at an all-time low of 69.97 cents on the euro, highlighting just how precarious the situation is.

Now, coco bonds pay a higher coupon, but that premium comes with the risk that the bank’s capital ratio could fall below a set level.

If that happens before maturity, then the bonds can be converted to bank shares. Or, the bank can choose to either skip the coupon payment or write down the principal. There’s simply no free lunch.

The thing is, if the capital from convertible bonds is not enough, the next step is for the bank’s long-term debt to be converted into common shares. And if that’s still not enough, then it’s on to the next set of creditors: depositors.

Deposits are considered a liability of the bank. So in order to rescue itself, a bank would then start with any amounts above what would be government-insured. Of course, that too may not be enough, and what comes next is either some form of government support… or you’re on the hook for even more.

Even if you don’t hold a Deutsche Bank account, chances are high your bank has massive exposure to them. One way or another, the risk to your capital is a real and growing danger.

Here’s what you can do about it.

Join the conversation. Click here to jump to comments…

Peter KrauthPeter Krauth

About the Author

Browse Peter's articles | View Peter's research services

Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.

… Read full bio

Login
guest
guest
4 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
John Scott
John Scott
6 years ago

So where do I store my coins safely?

0
Reply
Joseph
Joseph
6 years ago
Reply to  John Scott

My I suggest Deutsche Bank safe deposit box :)

0
Reply
fallingman
fallingman
6 years ago
Reply to  John Scott

How about inside the stock of your shotgun … which you keep nearby at all times?

Just kidding … I think.

Safe storage is an issue. The first rule is anywhere but a bank. Beyond that, you do the best you can. There are plenty of non-bank storage facilities. Just don't put too much in any one … in any one jurisdiction.

0
Reply
ron goddard
ron goddard
6 years ago

it seems pertinent to purchase silver coins because of their negotiability in a crisis. if one is moving overseas maybe silver bullion (small quantities) might be the option. only big investors can buy the gold necessary to support a large portfolio. but for the 'small guy' silver seems best.

where to store it? anywhere but in a bank.!

0
Reply
LIVE
Visit Money Morning Live


Latest News

January 19, 2023 • By Money Morning Stock Research Team

These Stocks Could Go To $0

January 9, 2023 • By Money Morning Stock Research Team

The Government Is Pouring $391 Billion Into These Stocks - Buy Now

December 27, 2022 • By Money Morning Staff Reports

6 IPOs in 2023 You Can’t Afford to Miss
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Profit Takeover This Is VWAP Penny Hawk Trading Today Midday Momentum Pump Up the Close
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Night Trader Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Extreme Profit Hunters Profit Revolution Warlock's World Penny Nation Quantum Data Profits Live Trading Alliance Trade The Close Inside Money Trader Expiration Trader Vega Burst Trader Flashpoint Trader Darknet Hyper Momentum Trader

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell My Info

wpDiscuz