Baltic Dry Index. 888 -24 Brent Crude
48.88
"We
shouldn't pour cold water on everything.
We, the eight or nine players in global investment banking, have a very
good future."
Deutsche
Bank, CEO Josef Ackermann. Davos, January 2007.
Is Deutsche Bank the next Lehman? One way or
another we are about to find out. Eight years of from the collapse of Bear
Stearns, Lehman Brothers and AIG, nothing in Europe’s banking system has been
fixed apparently, and the Great Nixonian Error of fiat money, communist money,
is entering its next dysfunctional phase.
Below, the elephant in the room, that officially
isn’t there.
“What
me worry?”
Deutsche
Bank with apologies to Mad Magazine.
Deutsche Bank crisis threatens to roil global markets
Published: Sept 29, 2016 4:46 p.m. ET
Worries about European banks aren’t just trained on Deutsche Bank
Europe’s problems with some of its largest financial institutions could spill over into the rest of the global market.Deutsche Bank’s shares tumbled on Thursday on a report that a group of hedge funds were reducing their exposure to the giant financial institution
Earlier in the week, one financial blogger, Wolf Richter, wrote that deep-seated concerns about Deutsche Bank’s ability to raise enough cash to give the market comfort that it is on a sound footing speaks to a larger problem that Europe’s embattled banking sector must combat. Richter, the editor of financial blog site Wolf Street, said “the banking crisis [in Europe] has the potential to transmogrify into a financial crisis.”
He went onto say: “All it takes is for one of the big [banks] to suddenly topple. The flow of credit would freeze up instantly. In an economic system that depends on credit, and whose lifeblood is credit, such an event is a financial crisis.”
Deutsche Bank’s U.S. listed shares DB, -6.67% sank 6.7% on Thursday, underscoring a brutal week of losses for the Frankfurt-based bank.
The bank, run by CEO John Cryan, has seen its cost of borrowing steadily ratchet higher as questions about its ability to pay a potential $14 billion fine from the U.S. Justice Department, according to a Sept. 16 report from The Wall Street Journal.
Against that backdrop, Deutsche Bank’s hardest hit debt securities are its so-called contingent convertible bonds, which have plunged in price as worries about its shrinking cushion have intensified. A U.S.-dollar denominated “CoCo” bond with a perpetual duration has been trading around 70 cents on the dollar, MarketWatch’s Joseph Adinolfi writes.
And it isn’t just Deutsche Bank swooning.
A combination of factors continue to dog European banks and Europe’s economy:
1). The emergence of negative interest rates, as central banks employ radical monetary policies to juice growth in Europe, has hampered eurozone banks’ ability to make money, by eroding profits between their short-term borrowing costs and what they can charge for long-term loans. The German 10-year government bond TMBMKDE-10Y, +0.00% known as the bund, was yielding negative 0.15% as of Wednesday. Bond yields fall as prices rise.
2). Also, many banks have been late to restructure in the wake of the 2008-09 financial crisis that roiled global markets.
3). Italian banks are saddled with billions of souring loans and are seen as a possible threat to the eurozone economy.
4). And many other banks, namely Deutsche Bank, are set to face sizable fines in the fallout from selling dicey mortgage-related securities, which could further tax their capital cushions.
In the following chart, Richter shows how eurozone financial institutions have performed since hitting recent 52-week highs.
More
Commerzbank Plans to Cut Jobs, Suspend Dividend in Overhaul
September
29, 2016 — 8:05 AM BST Updated on September 29, 2016 — 10:30 AM BST
Commerzbank AG plans to reduce 9,600 jobs, or about a fifth of the
workforce, and suspend dividends as Chief Executive Officer Martin Zielke seeks
to shore up profitability at the German lender.
Under the draft plan, which was presented to the supervisory board,
Commerzbank will merge its Mittelstandsbank, catering to small and medium-sized
companies, with the corporates and markets unit and scale back securities
trading operations, the Frankfurt-based bank said in a statement on
Thursday. The management board on Friday will decide on the restructuring plan,
which will cost about 1.1 billion euros ($1.2 billion).
Zielke, 53, has been under pressure to counter a slump in earnings that
forced him to scale back full-year profit targets just months after taking the
helm of Germany’s second-largest lender. Under his predecessor Martin Blessing,
the bank eliminated 5,200 jobs to counter volatile markets and record-low
interest rates as regulators demanded lenders hold higher capital buffers
against risky activities.
“This looks like it could be the long-awaited broad overhaul and the
targets that Zielke is setting even look realistic,” said Daniel Regli, an
analyst at MainFirst.
The
shares fell 0.5 percent to 5.97 euros at 11:27 a.m. in Frankfurt, paring
earlier gains. The bank has lost about 38 percent of its market value this
year.
----Goodwill and intangible assets of the
two merged units will cause a writedown of about 700 million euros in the third
quarter, in a move that’s seen sparking a loss in that period. In the full
year, the lender expects a “small net profit,” when targeting revenue of
between 9.8 billion euros and 10.3 billion euros by 2020 as part of Zielke’s
plan.
The lender earlier this year paid a dividend of 20 cents per share for
2015, its first payout since 2007. It was expected to pay a dividend of 30
cents per share for this year, according to the Bloomberg Dividend Forecast.
More
If Merkel Wants to Help Deutsche Bank, She Has Few Options: Q&A
September
29, 2016 — 12:01 AM BST
Investors in Deutsche Bank AG are looking to Berlin for an indication of
what, if anything, German Chancellor Angela Merkel will do to shore up the
lender whose shares have plummeted more than 50 percent this year.The prospect of bailing out Deutsche Bank is politically noxious for Merkel, who’s deciding whether to seek a fourth term in an election next year. After a magazine article stirred speculation, Merkel’s spokesman said the government sees “no grounds” for talk of state funding for the bank as the U.S. seeks a multibillion-dollar fine.
That hasn’t quelled expectations of a bailout. Andreas Utermann, chief investment officer of Allianz Global Investors AG, said for example that the German government would have to step in if Deutsche Bank “was really in trouble.”
John Cryan, Deutsche Bank’s chief executive officer, told the Bild newspaper that raising capital “is currently not an issue,” and accepting government support is “out of the question for us.”
Under European Union laws that Merkel championed to keep taxpayers off the hook in a crisis, it’s now much more difficult for governments to prop up banks. For starters, the Bank Recovery and Resolution Directive, the cornerstone of Europe’s efforts to tackle too-big-to-fail banks, assumes that the need for “extraordinary public financial support” indicates that a firm is “failing or likely to fail,” triggering resolution.
State support for viable banks is tightly restricted, so if Merkel intervenes on Deutsche Bank’s behalf, she’ll be choosing from a small pool of options.
Lawmakers from Merkel’s governing coalition said they expect the government to step in if Deutsche Bank were at risk of collapse due to a capital shortfall. At that point, the need for some kind of state intervention would outweigh calculations about the political fallout, according to four lawmakers from coalition parties who asked not to be identified discussing a scenario the government wants to avoid.
Some lawmakers in Berlin want Cryan to do more. Two of the legislators said the bank needs to restructure its business to make it less risky; one pointed to planned job cuts at Commerzbank AG as a possible model.
More
Fines, Withdrawals, Job Cuts. It Was an Ugly Day for Global Banks
September 29, 2016 — 10:50 PM BS
Even before the opening bell in New York, Thursday looked like a grim day
for some of the giants of global banking.But few expected the barrage of bad news that soon hit on both sides of the Atlantic -- a rat-a-tat-tat of job cuts, scandal and financial worry that sent bank shares tumbling and left many investors wondering just where or when the pain would end.
It began in Germany, where long-struggling Commerzbank AG unveiled yet another plan to regain its footing, this time by cutting one in five of its employees. In Washington, came still more blistering attacks on John Stumpf, whose grip atop embattled Wells Fargo & Co., the largest U.S. mortgage lender, remains tenuous amid the uproar over a scandal involving unauthorized accounts.
And then, back in Germany, came the bombshell: revelations that some hedge funds were moving to reduce their financial exposure to Deutsche Bank, now the biggest worry in global finance. Before Stumpf left the U.S. House chambers after more than four hours of grilling, news broke his bank would be hit with more penalties after improperly repossessing cars owned by U.S. soldiers.
-----Eight years after the financial crisis, the global banking industry is groping for a way forward. Global regulators have sought to make banks look more like boring utilities, but that road has proven steep. Emboldened by an international populist groundswell, they continue to dole out fines and penalties, and firms are scrambling for ways to make money as trading volumes decline and capital requirements become more stringent.
The 38-company Bloomberg Europe Banks and Financial Services Index has
tumbled 24 percent this year, while the KBW Bank Index of 24 U.S. lenders has
slid 4.6 percent, led by Wells Fargo’s 18 percent decline.
More
"We finished the
year, and we reported that we had $17 billion of cash sitting at the bank's
parent company as a liquidity cushion. As the year has gone on, that liquidity
cushion has been virtually unchanged."
Alan Schwartz, CEO Bear Stearns,
March 12, 2008. Bust March 16, 2008.
At the Comex silver depositories Thursday final figures were: Registered
30.42 Moz,
Eligible 142.72 Moz, Total 173.14 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Below, more on “God’s work,” at Goldie.
In a
time of universal deceit, telling the truth is a revolutionary act.
George
Orwell.
Hot Mess: How Goldman Sachs Lost $1.2 Billion of Libya’s Money
When
Wall Street’s most aggressive bank took on the world’s most incendiary client,
someone was going to make a killing.
By
Matthew Campbell and Kit Chellel | September 29, 2016
Moammar Qaddafi’s Libya was a miserable place for a business trip.
In 2008, a few years after renouncing its nuclear and chemical weapons
program, the desert nation remained a menacing and ugly place, with cratered
highways, awful restaurants with no booze, and Qaddafi’s leathery visage
everywhere, staring balefully down from billboards. The dreary capital,
Tripoli, sat at the edge of the Sahara, in the least barren sliver of a country
defined in the West by dictatorship, terrorism, and billions of dollars’ worth
of oil.
Goldman Sachs’s Youssef Kabbaj was one of the few that enjoyed the
commute. A securities salesman based out of the bank’s London headquarters,
Kabbaj found that Libya reminded him of his native Morocco, and he considered
the ruins in Tripoli’s old quarter enchanting. The city had a single decent
hotel, the Corinthia, a crescent hulk the color of sand, and that year Kabbaj
was such a frequent guest that he stored a rack of pressed suits there at all
times. With slick black hair, round cheeks, and a mischievous smile, he was
fluent in English, French, Arabic, and the language of international finance.
Qaddafi’s peaceful turn had reopened Libya to Western banking for the
first time in two decades. Its $60 billion in oil wealth, no longer dammed up
by international sanctions, was ready to flood into the market, as directed by
the Libyan Investment Authority, Qaddafi’s brand-new sovereign wealth fund.
With his North African pedigree, Kabbaj had been one of the first at Goldman to
spot the opportunity. The LIA had become his biggest client, transforming him
in a year from rookie salesman into possibly the No. 1 rainmaker at the world’s
most profitable investment bank. He was 31 years old.
On July 23, 2008, Kabbaj was in his room at the Corinthia, waiting
anxiously for his mobile phone to ring. It finally did around 9 a.m., and he
grabbed a pen and paper to take notes. On the line was Michael Daffey, a senior
Goldman executive in London. Daffey praised Kabbaj’s work in Libya and said
that after some negotiation, the bank was willing to guarantee him $9 million
in pay. It was an astonishing sum, even at Goldman.
Kabbaj immediately asked for more. He knew he’d been instrumental in
extracting an unusual amount of money from a highly unusual client. Who else on
the planet could sell a billion dollars of derivatives to a regime whose
theatrical despot slept in a tent under an all-female warrior guard?
----Zarti again interrupted. “Youssef,”
he said, “I’m asking you.” Before Kabbaj could say much more, Zarti exploded.
Screaming in a mix of English and Arabic, he accused Kabbaj of deceiving the
LIA into deals it didn’t understand. He called Goldman “a bank of Mafiosi” and
said that he could behave like a Mafioso, too. He stormed out of the room,
leaving Kabbaj, Pentreath, and a clutch of LIA staffers in a Marlboro haze.
Shaken, Kabbaj asked Zarti’s aides what had just happened. None had an
answer. After a few minutes, Zarti burst back in, angrier than ever. Catherine
McDougall, an Australian lawyer who was in the office that day, later recalled
Zarti’s words as along the lines of “F--- your mother, f--- you, and get out of
my country.” Kabbaj and Pentreath packed up their things.
Zarti followed them into the corridor. If Kabbaj didn’t make amends, he
shouted, “we will go after your own family in Morocco!” The Al-Fateh Tower
elevators were agonizingly slow to arrive. “What are you still doing here? Get
out of my building!” Zarti screamed. He told Pentreath that if he didn’t get in
the lift soon, he’d throw him out the window.
Kabbaj was white with shock. Zarti had saved his most chilling remark
for him. “You are only a Moroccan here in Libya,” he said. “I can make you
disappear, and nobody will ever hear back from you.”
The story of Goldman’s seduction of Libya—based on court evidence,
testimony from witnesses, and interviews with people who were involved in the
transactions—is as brief as it was costly. Barely 12 months elapsed between
Zarti’s first tour of the bank and his threat to murder its brightest young
star, and Libya wound up losing $1.2 billion. Goldman enjoyed its payday, the
exact size of which it has never disclosed. But whatever the level, the matter
is now before a London judge, and the Libyans have a chance to extract an even
more damaging toll.
----The
reemergence of Libya, and its vast oil wealth, coincided with an era of nearly
unbridled avarice on Wall Street—and nowhere more so than at Goldman Sachs. The
same year that Qaddafi established the LIA, Goldman posted the largest profit
in Wall Street history. The bank paid employees an average of $622,000, with
many times that amount available for bankers who nailed down the biggest deals.
A stupendously wealthy petro state desperate to buy into a bull market was a
dream client—the kind of “elephant,” in Goldman argot, that could make careers.
More
“Call it the Goldman
Sachs test. If this is something Goldman would do to its clients, don't do
it."
Felix Salmon.
Solar & Related Update.
With events
happening fast in the development of solar power and graphene, I’ve added this
section. Updates as they get reported. Is converting sunlight to usable cheap
AC or DC energy mankind’s future from the 21st century onwards? DC?
A quantum computer next?
Mass producing graphene using microwaves
Date:
September 27, 2016
Source:
Ulsan National Institute of Science and Technology (UNIST)
Summary:
A simple new method for producing large quantities of the promising
nanomaterial graphene has been discovered by an international team of
researchers.
Dr. Jieun Yang, an alumna of UNIST is part of an international team that
has discovered a simple new method for producing large quantities of the
promising nanomaterial graphene.
Graphene, a material that could usher in the next generation of
electronic and energy devices, could be closer than ever to mass production,
thanks to microwaves.
A new study by an international team of researchers from UNIST and
Rutgers University has proved that it is now possible to produce high quality
graphene, using a microwave oven. The team reports that this new technique may
have solved some of graphene's difficult manufacturing problems. The findings
of the research have been published in the September issue of the journal Science.
This study was jointly conducted by Dr. Jieun Yang, an alumna of UNIST,
Prof. Hyeon Suk Shin (School of Natural Science) of UNIST, Prof. Hu Young Jeon
(School of Natural Science) of UNIST, Prof. Manish Chhowalla of Rutgers
University, and five other researchers from Rutgers University, New Brunswick,
NJ, United States.
Graphene comes from a base material of graphite, the cheap material in
the 'lead' of pencils. The structure of graphite consists of many flat layers
of graphene sheets. One of the most promising ways to achieve large quantities
of graphene is to exfoliate graphite into individual graphene sheets by using
chemicals. However, the oxygen exposure during the process may cause some
inevitable side reactions, as it can ultimately be very damaging to the
individual graphene layers.
Indeed, oxygen distorts the pristine atomic structure of graphene and
degrades its properties. Therefore, removing oxygen from graphene oxide to
obtain high-quality graphene has been a significant challenge over the past two
decades for the scientific community working on graphene.
Dr. Yang and her research team have discovered that baking the
exfoliated graphene oxide for just 1-to-2 second pulses of microwaves, can
eliminate virtually all of the oxygen from graphene oxides.
"The partially reduced graphene oxides absorb microwave energy,
produced inside a microwave oven ," says Dr. Yang, the lead author of the
study. She adds, "This not only efficiently eliminates oxygen functional
groups from graphene oxides, but is also capable of rearranging defective
graphene films."
MoreThe monthly Coppock Indicators finished August.
DJIA: 18401
+18 Up NASDAQ: 5213 +16 Up. SP500: 2171 +18 Up.
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