Deutsche Bank collapsing...

...this could be spectacular.

https://www.zerohedge.com/news/2019-07-16/bank-run-deutsche-bank-clients-are-pulling-1-billion-day

And there was me thinking it would be an Italian bank which would collapse the house of Euros.

I'm not a bank guy, what are they pulling out of as couterparty?

If it's investment related...... isn't that just the strategy that deutsche announced 

This really isn't a bank run, just clients of the prime brokerage business organising an orderly transfer of their trades and assets to alternative providers. A prime broker, in the simplest terms, is a broker who will let you trade on margin and do some other more exotic trades with them. It's a different risk profile to banking proper (where you take short term liabilities, i.e. deposits, and turn them into leveraged long term assets, i.e. loans). That model works because depositors don't tend to need all of the cash in their deposits at the same time, which is kind of ruined when there's a run on a bank. 

Counterparty risk shouldn't be much of an issue for the derivatives trades (the $45tn nominal doesn't mean that there's anywhere near that exposure, and I believe substantially all derivatives trades go through clearinghouses to avoid that risk since the GFC, given that it's what blew up Lehman and caused contagion across the market). This is more like if you knew that your law firm was dumping its, say, structured finance team - would you keep using that team on your deals knowing that it was no longer a priority for the firm and might go away soon, or would you find another firm to handle that work for you? 

The bigger issue for Deutsche is that this affects their own orderly transition out of the business, since BNP Paribas (or another buyer) hardly wants to buy an expensive-to-operate business with an ever-shrinking client list. Worst case is that Deutsche gets no money for it and has to pay to wind down trades and pay off everyone who hasn't quit yet, probably. 

Anyone who thinks that DB has $45t exposure under derivatives is a fucking moron. Daniel Ivandjiiski doesn't have a clue how derivatives work.

 

I simply do not understand why anyone with two brain cells to rub together would read Zero Hedge.

Also, Merkel will never let DB collapse, anymore than HMG would ever let RBS collapse. 

That said I like Zero Hedge Supes - what's wrong with it? They have a range of writers, from the more reliable, to the guys on the batshit end of the spectrum...

Stru, whoever wrote the linked piece and the one the other day that Tarquin linked to are most definitely on the batshit end.

I love some of the comments on the article:  "If DB runs out of cash, can't it pay with the derivatives it has?"

I can't remember the one Tarquin quoted but this one seems okay surely? I mean yes, calling it a "bank run" is misleading and there are other factual issues with the article, but it's basically quoting a Bloomberg article which says prime brokerage clients are pulling funds from DB at an increasing rate, and then it goes on to give some interesting analysis of the implications. 

Also, this particular piece appears to have been written by Tyler Durden himself (the owner/founder), not by one of the other contributors. 

Sorry, but no. the implications are ridiculous and it is nothing even remotely like a bank run. Tyler Durden is just a rotating pseudonym for the various writers, though I think primarily it is Daniel Ivandjiiski. Zero Hedge is like the National Enquirer for financial news. Sure the links are accurate but the description of those links and the analysis of them is utter garbage, worse than anything you'd find in a red top.

 

We had a tun plus on why the derivatives analysis in Zero Hedge articles is just so far way from being accurate. I'm not in the mood to go through it all again.

In fairness to Supes, Zero Hedge is a site, that has, "quite remarkably been calling the top in equity markets since it launched a decade ago"

I'd say it has the odd decent article but it always feels a bit overly supportive of the Russian view of how the world should work

I’ve just discovered the meaning of SMH. I’ve spent years thinking it meant suck my hole. 

Haha, I also looked up "SMH" as a result of reading this thread.

So, to put it in very simple terms, Zero Hedge is basically Captain Swing?

This is a consequence of unregulated capitalism and bankers wanting to be, as Tom Wolfe puts it, Masters of the Universe. There should be separation between retail, investment and merchant banking, and 'shadow' banking should be made illegal.

They should also all be strung upside down from the nearest lamps. 

So you'd like your pension scheme trustee to just stick your contributions in a savings account, huh?

Student politicians don't tend to have pensions, Orwell. 

Never had a pension. Law is badly paid and law firm pension schemes suck. Better to own and rent out property, but if the money sucks, the jobs are intermittent, if available at all, that's not an option either. Haven't got the looks to be a gigolo, haven't got a shed to become a bootlegger, failed chemistry so cannot 'break bad'. Been a student. Don't want to be again. Moving from the fringes of the law to be away from it altogether, without becoming an 'outlaw'.

Now, would consultancy be an option? I reject conventional wisdom, though.

When you don't know where you're going, any wind will take you 

Bernstein, though that sounds inviting, and has it's downsides for sure, it's better than being in positions one hates. Living for oneself, not to placate other people's prejudices or sensibilities is one of the best ways to live.