Lehman Brothers 2.0 is Fast Approaching
Yesterday we discussed Deutsche Bank (DB) as a systemic risk.
The basic outline is as follows.
DB sits atop one of the largest derivatives books in the world: an astonishing $48 trillion.
To put this number into perspective, it’s more than 13 times Germany’s GDP and equal to 57% of global GDP.
Now, there are two types of derivatives:
- Regulated Derivatives: Derivatives that pass through open exchanges allowing for transparency and clear price discovery based on active market buying and selling.
- Unregulated, Over the Counter (OTC) Derivatives: Derivatives that are privately traded between “dealer” banks and are priced based on the dealers’ internal valuation models or whatever they can get away with.
And because most of DB’s derivative book is comprised of OTC derivatives, it’s impossible to know the other banks that have exposure to this monstrosity.
Or is it?
Global Banks are Following Deutsche Bank’s Lead
By comparing the charts of large global banks to that of DB, we can get a decent idea of who has major exposure to DB’s derivatives book.
In all of the following charts, DB is in orange, with the other bank in blue.
Shown below, the stock chart for Credit Suisse (CS) looks remarkably like DB’s.
UBS (UBS) is also following DB’s movements…
Spanish Bank Santander (SAN) also has a stock price that is tracking DB…
So does French bank Societe General (SCGLY)…
And finally, so does American bank Wells Fargo (WFC).
Deutsche Bank Quickly Becoming “Lehman 2.0”
There are no coincidences in investing. The fact that these large banks are tracking DB shares so closely tells us that the market knows there’s a connection between these banks.
And not in a good way.
Now you see why I am calling Deutsche Bank “Lehman 2.0.”
If DB goes bust, it’s going to take down multiple global banks with it. The fallout would be truly terrifying.
And given how significant these banks are to their respective countries’ financial systems, global central banks will be forced to intervene dramatically in order to hold things together.
Those investors who are correctly positioned for this have the opportunity to generate literal fortunes.
Imagine being able to time the currency markets to profit from what is about to happen to central banks days in advance?
I’ve spent the last six months developing a trading strategy to do precisely this.
In the last month alone, we’ve seen gains of 67% in two days’ time, 75% in five days’ time, even 100% in four days’ time.
And we just closed out another winner, a 52% gain in just two days!
I’ll tell you all about it in the coming weeks, but suffice to say, the opportunity to generate literal fortunes from central bank schemes is here.
Editor, Money & Crisis