Friday, September 30, 2016

More Deutschefreude

Frankly if the market is going to puke on one stupid bank that was just as shitty months ago when nobody cared, it's a really stupid market.

Which, of course, is nothing new when the market is moved by a bunch of cokeheaded 25-year-old snowflakes of the suburban petit-bourgeoisie.


Dan Davies - Deutschebank 'splainer. Cos dumb-ass cokehead Wall Street snowflakes need some good 'spainin':

Hedge funds moving excess derivatives collateral or prime brokerages is … hmm, it looks like this explainer needs an explainer.

Basically this is surplus cash that hedge funds have which isn’t invested, or surplus treasury bills that they don’t need to pledge against their trades, but have hanging around in their collateral account anyway. Big hedge funds always have more than one prime broker, and they’re always moving their surplus around. It’s pretty much zero cost to shift it away from a bank that’s in the headlines and it allows you to tell your boss or your investors that you’re doing something.

But because these balances are so volatile, they’re basically unusable by the bank as a funding source. The excess cash is just invested in cash, the excess securities aren’t re-pledged or borrowed etc. The business is, frankly, garbage for the bank, not worth having except that it’s part of the service provided to a big client. No real funding for Deutsche has been pulled, so far, only excess balances.

[...] If I saw corporate, retail or payments system accounts being moved, I’d worry, because these balances very much are part of the funding of Deutsche Bank’s business, and they do rely quite a lot on “behaviourally stable funding” (basically, in an overnight transactions account, it’s a different set of dollar bills every day, but the aggregate amount across the whole book of a big provider of transactions accounts is surprisingly stable). So far, nothing there.


In Lehman Brothers, the accountants’ joke was true: “On the left side of the balance sheet (assets) nothing’s right and on the right side of the balance sheet (capital) nothing’s left”. That’s not the case in Deutsche. The uncertainty, substantial as it is, all relates to the right-hand side of the balance sheet. The capital might not be sufficient, and the equity might be impaired by a big charge for DoJ fines. Both of these threats come from somewhere other than the left hand side of Deutsche Bank’s balance sheet (one of them is, literally, a number chosen by a regulator, which rather starkly points out how not “out of control” the situation is compared to 2008). If you are a secured creditor — which is to say, someone who looks not to the quality of Deutsche Bank, but to the quality of the individual collateral placed specifically with you — you’ve not seen anything in the last six months to particularly change your mind.

Finally, Deutsche isn’t Lehman Brothers and it isn’t 2008. There are so many more ways for a bank to get hold of short term liquidity than a broker-dealer, and so many more ways for a bank to get hold of short term liquidity in 2016 than there were in 2008. And the global network of central bank swap facilities now means that if Deutsche can fund in Euro, it can fund in any major currency of the world. This matters because in Euro, all of the collateral concessions and facilities created by the ECB for the benefit of small Italian and Greek banks are also available for Deutsche. I am actually finding it hard to think of any asset of Deutsche Bank, now that it has sold the Cosmopolitan Resort & Casino in Las Vegas, which couldn’t be pledged at the ECB for funding.

So don't believe the anti-western FUD that Vladimir Putin pays Daniel Ivandjiiski to publish at Zerohedge. The world's not going to end: Deutschebank is just going to crumble into a smoking ruin.

Kinda like Berlin in 1945.

Those wacky Germans love repeating history.

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