Lessons not learnt from the global financial meltdown

Ten years ago, on September 15, 2008, Lehman Brothers filed for chapter 11 bankruptcy. The mayhem that followed led to the worst global financial crisis after the Great Depression. Like the latter, the 2008 financial crisis has been a matter of much discussion – from Congressional testimonies to saucy Hollywood productions leave alone the academic garbage that it generated.

Turkey Default Risk Spikes to 2008-2009 Crisis Levels; Possible Contagion, Warns Russell Napier

Source: Bloomberg, Financial Sense® Wealth Management. Past performance is no guarantee of future results.

 

All focus is on Turkey right now as their currency goes into freefall and 5-year credit default swaps (insurance against default) have now spiked to levels last seen during the 2008-2009 financial crisis.

Global credit crunch WARNING issued on debt bubble as current trends mirror 2008 crash

A indicator tracking credit is following a worrying trend [Getty]

 

WARNING signals have been felt today after a key credit indicator mirrored the same pattern experienced ahead of the financial crisis of 2008, in a eerie sign that the global economy is heading for another downturn.

A key UBS credit impulse which monitors the changes in credit volume has tumbled by six per cent of GDP since last year.

It mirrors the same movement seen before the financial crisis 10 years ago, raising fears the global bubble could be about to burst and another credit crunch.

Deutsche Bank “Is Probably Insolvent”

This is getting to be a habit. Previous late summer holidays by this correspondent coincided with the run on Northern Rock, and subsequently with the failure of Lehman Brothers. So the final crawl towards the probable nationalisation of Deutsche Bank came as no particular surprise this year, but it is tiresome to relate nevertheless.

The 2015 annual report for Deutsche Bank runs to some 448 pages, so one rather doubts if even its CEO, John Cryan, has read it all, or has a complete grasp of, for example, its €42 trillion in total notional derivatives exposure.

Financial CRISIS: Will Deutsche Bank collapse be WORSE than Lehman Brothers in 2008?

WOULD the collapse of the German banking giant be another Lehman moment for the global banking sector? 

The dramatic collapse of Lehman Brothers eight years ago this month was a defining moment of the devastating financial crisis.

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Eight years on, Deutsche Bank’s shares fell to an all-time low today amid fears that it cannot afford to pay a huge fine from the US. 

The EVERYTHING Bubble: What’s Coming Will Be Much Worse Than 2008

The amount of negative issues the markets are ignoring is staggering.

1.     Italy’s banking system is on the verge of collapse. Nearly 20% of loans are non-performing (meaning garbage). This is not Greece. We’re talking about a €2 trillion banking system.

2.     The US is in recession. Consensus is that all is well, but industrial production, labor market conditions, the corporate bond market, C&I Delinquencies, the Conference Board Leading Indicator, Inventory Accumulation and ISM are screaming “RECESSION.”

Deutsche Bank’s Lehman Behavior Signals a Looming Stock Market Crash

Yesterday, Deutsche Bank AG‘s (NYSE: DB) co-CEO John Cryan released a surprise memo saying its balance sheet “remains absolutely rock-solid.” His assertion comes amid fears that the investment bank is unstable (an understatement) – which could be emblematic of a broader European bank fueled stock market crash.

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Releasing a forced statement to the worrying public is something Lehman Brothers did just before it collapsed in 2008. The now-defunct corporate banking giant assured investors that it had enough liquidity to weather the financial crisis in 2008.

After Crashing, Deutsche Bank Is Forced To Issue Statement Defending Its Liquidity

 

The echoes of both Bear and Lehman are growing louder with every passing day.

Just hours after Deutsche Bank stock crashed by 10% to levels not seen since the financial crisis, the German behemoth with over $50 trillion in gross notional derivative found itself in the very deja vuish, not to mention unpleasant, situation of having to defend its liquidity and specifically assuring investors that it has enough cash (about €1 billion in 2016 payment capacity), to pay the €350 million in maturing Tier 1 coupons due in April, which among many other reasons have seen billions in value wiped out from both DB’s stock price and its contingent convertible bonds which are looking increasingly more like equity with every passing day.

Next financial crash is coming – and before we’ve fixed flaws from last one

In case you missed it last week:

 

The next financial crisis is coming, it’s a just a matter of time – and we haven’t finished fixing the flaws in the global system that were so brutally exposed by the last one.

That is the message from the International Monetary Fund’s latest Global Financial Stability report, which will make sobering reading for the finance ministers and central bankers gathered in Lima, Peru, for its annual meeting.

This Is For The ‘Nothing Is Happening’ Crowd…

A lot of people out there expected something to happen in September that did not ultimately happen.  There were all kinds of wild theories floating around, and many of them had no basis in reality whatsoever.  But without a doubt, some very important things did happen in September.  As I warned about ahead of time, we are witnessing the most significant global financial meltdown since the end of 2008.  All of the largest stock markets in the world are crashing simultaneously, and so far the amount of wealth that has been wiped out worldwide is in excess of 5 trillion dollars.  In addition to stocks, junk bonds are also crashing, and Bank of America says that it is a “slow moving trainwreck that seems to be accelerating“.  Thanks to the commodity price crash, many of the largest commodity traders on the planet are now imploding.  I wrote about the death spiral that has gripped Glencore yesterday.  On Tuesday, the stock price of the largest commodity trader in Asia, the Noble Group, plummeted like a rock and commodity trading giant Trafigura appears to be in worse shape than either Glencore or the Noble Group.  The total collapse of any of them could easily be a bigger event than the implosion of Lehman Brothers in 2008.  So I honestly do not understand the “nothing is happening” crowd.  It takes ignorance on an almost unbelievable level to try to claim that “nothing is happening” in the financial world right now.

Greece Contemplates Nuclear Options: May Print Euros, Launch Parallel Currency, Nationalize Banks

As we said earlier today, following today’s dramatic referendum result the Greeks may have burned all symbolic bridges with the Eurozone. However, there still is one key link: the insolvent Greek banks’ reliance on the ECB’s goodwill via the ELA. While we have explained countless times that even a modest ELA collateral haircut would lead to prompt depositor bail-ins, here is DB’s George Saravelos with a simplified version of the potential worst case for Greece in the coming days:

The ECB is scheduled to meet tomorrow morning to decide on ELA policy. An outright suspension would effectively put the banking system into immediate resolution and would be a step closer to Eurozone exit. All outstanding Greek bank ELA liquidity (and hence deposits) would become immediately due and payable to the Bank of Greece. The maintenance of ELA at the existing level is the most likely outcome, at least until the European political reaction has materialized. This will in any case materially increase the pressure on the economy in coming days.

All of which of course, is meant to suggest that there is no formal way to expel Greece from the Euro and only a slow (or not so slow) economic and financial collapse of Greece is what the Troika and ECB have left as a negotiating card.

The next few days will transform Greece and Europe

As it turns out, the Greek crisis ends not with a bang, but with a referendum.

It has been easy to ignore the doings in Greece for the past few years, with the perpetual series of summits in Brussels that never seem to resolve anything. But it’s time to pay attention. These next few days are shaping up to become a transformational moment in the 60-year project of building a unified Europe. We just don’t yet know what sort of transformation it will be.

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Whatever the exact phrasing of the question (and assuming the referendum goes forward as planned), it really boils down to this simple choice:

Bank Of Greece Pleads For Deal, Says “Uncontrollable Crisis”, “Soaring Inflation” Coming

The situation in Greece has escalated meaningfully since last week. After the IMF effectively threw in the towel and sent its negotiating team back to Washington on Thursday, EU and Greek officials agreed to meet in Brussels over the weekend in what was billed as a last ditch effort to end a long-running impasse and salvage some manner of deal in time to allow for the disbursement of at least part of the final tranche of aid ‘due’ to Greece under its second bailout program. Talks collapsed on Sunday however as Greek PM Alexis Tsipras, under pressure from the Left Platform, refused (again) to compromise on pension reform and the VAT, which are “red lines” for both the IMF and for Syriza party hardliners. 

Is Deutsche Bank the next Lehman?

 

Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened.  In hindsight there were a few early-warning signs,  but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed.

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And the rest is history.

Could this happen to Deutsche Bank?

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By the time we are aware of a crisis – if one is in the offing — it will already be a roaring blaze by the time it is known publicly.   It is by now well-established that truth is the first casualty of all banking crises.  There will be little in the way of early warnings.   To that end, we begin connecting the dots:

The Greatest Heist of All Time

An article from 2009 that couldn’t be more relevant today:

 

 

Germany is conquering Europe without firing a shot.

Nov. 9, 1989, was a momentous day. It was the day the Berlin Wall came crashing down. The Soviet empire began to retreat from Europe, releasing the Continent from the clutch of communism.

Nineteen years later, another—possibly even greater—event shook the world, one that had a similar emboldening effect on Europe. The sudden collapse of America’s banking system in September 2008 opened the way for the emergence of a European economic superpower—and for the nation hijacking it.

Last fall, America stood in stunned silence as it witnessed the largest corporate bankruptcy in history (Lehman Brothers), the largest insurance company failure in history (American International Group) and the largest corporate seizure in the history of finance (Fannie Mae and Freddie Mac).