“Someday financial markets will decline...rising stock/bond markets will no longer be government policy. QE will end and money won’t be free. Corporate failure will be permitted. The economy will turn. Someday, somewhere, somehow, investors will lose money and once again come to favor capital preservation over speculation. Someday, interest rates will be higher, bond prices lower, and the prospective return from owning fixed-income instruments will again be commensurate with risk.” Seth Klarman
Monday, June 8, 2015
Remember 2008? You ain't seen nothin' yet? (Hint: Multiply $54T by 10.)
CEOs “Shown Door” - World's Largest Holder of Derivatives In Trouble?
"- Deutsche co-CEO's announce “resignation” nine months before their contracts expire
- Only two weeks ago, CEO Anshu Jain was given more power to reorganize the bank - Deutsche have been engaged in money laundering, tax evasion, derivative and manipulation scandals - Deutsche is world's largest holder of financial weapons of mass destruction (FWMD) - Deutsche Bank's derivatives position almost 15 times as large as Germany's GDP - Announcement follows Greek failure to pay IMF on Friday and growing financial risk
The joint CEO's of Germany's largest bank, Deutsche Bank, the twelfth largest bank globally in terms of assets, unexpectedly announced their resignation over the weekend. Anshu Jain will resign at the end of this month, almost two years ahead of schedule while Juergan Fitschen will stay on until May of next year.
It is believed they resigned but some media reported that the CEO's heads had “rolled”, they were “shown the door” and Reuters reporting that Deutsche had “purged its leadership.”
The announcement followed what Deutsche Bank described as "an extraordinary meeting" over the weekend. It is particularly surprising given that Jain had been granted extra powers at the bank only two weeks ago to reorganize the scandal plagued lender.
In the past year Deutsche, like many international banks, have been found to have been engaged in a slew of corrupt practices from manipulation of interest rates, for which the firm was fined $2.5 billion in April, to tax evasion and money laundering to "mis-selling" of derivatives.
Deutsche Bank’s derivatives position is truly enormous. It was recently estimated to be around $54 trillion. Germany's GDP, the fourth largest in the world, was a mere $3.64 trillion in 2015. Were Deutsche Bank caught off-side in its derivatives positions there is not a government or institution on earth that could bail it out and it could lead to contagion in the German financial system and indeed in the global financial system.
The contagion from such an event would be devastating. It is for this reason that Warren Buffet described derivatives as WMD or "financial weapons of mass destruction."
It is unnerving that the shock resignation should follow an "extraordinary meeting" over the weekend following the failure of Greece to meet its scheduled payment to the IMF on Friday..."