Wednesday, 21 August 2019

A Analysis

 If you haven't heard, we're giving out free, fully smart contracts as a 5% rebate to anyone who purchases any of our research packages above the introductory novice $50 level. This is not your Daddy's rebate! The rebate actually gets larger as DB goes down in price. For those who may be coming late to the party, we can offer a 5x long gold (or even a long gold, short DB) smart contract rebate as well. Of course, the bulk of our research targets banks and entities other than DB, but I thought we'd make DB the subject of the rebate to drive the point home. Below is an actual contract crafted off of the price of a single share of DB for about 2 weeks.

Veritaseum 5x Short DB Smart Contract

Click here to explore and subscribe to our research. You will have to be willing to fully identify yourself and comply to the terms or our program (in essence, promise not to use the package for anything other than our rebate) in order to qualify for the rebate. Once the subsciption is paid for, email us to get started.

Oh yeah, if you haven't heard...

An Analysis of Deutsche Bank's Likely Recapitalization - German Tax Payer Bailout or German Bank Depositor Bail-in?

Deutsche Bank is going to need some money, and it's going to need some quite soon. The next two or three articles that I write will focus on why there is such a need. In a concerted effort to reduce or potentially eliminated the risk of taxpayer-funded bail-outs of European banks, the EU implemented a new “bail-in” regime beginning on January 1, 2016. As such, rules which require banks and certain systemically significant market participants in EU member states will have to write-down, cancel, convert into equity or otherwise modify certain unsecured liabilities if such steps are required to recapitalize the institution. What is the most bountiful unsecured liabilities of a bank? Read more...

 

Our next article will continue to hammer home the liklhood that DB will have to recapitalize, and where they probably WONT'T be getting the money from, as well as the likelihood it will come from someone who really didn't plan on giving it up (Ahem, depositors/savers/checking account holders). For those who are not yet convinced, peruse these related items...

The research and knowledge subscription module "European Bank Contagion Assessment, Forensic Analysis & Valuation" contains a full report of a very large European Deutsche Bank counterparty that faces a full 27% downside from current levels. It appears as if no one suspects a clue. It also contains much, much more (including at least 3 to 5 suspect banks). We can break this apart a la carte, if requested.

As excerpted:

Susceptible Bank 1: Financial Modeling

 

Deutsche Bank is trading at 1/4 its book value. Book value is the measure that the street uses to value banks. Unfortunately, boo value is meaningless for banks today, who's books are no longer marked to market, distorted by negative interest rates and transformed by Harry Potter style accounting. It appears as if the market is not going for it. We, at Veritaseum, never did! Here's an example of why oen should heavily discount DB's book value number. Mortgages are one of the, if not the, biggest loan buckets on DB's balance sheet. Five percent of those mortgages are underwater (guaranteed losses). Seventeen percent are over 70% loan-to-value ration. Well, you may be saying to yourself "That's not bank run material".

The German housing market is on an absolute tear. One could be tempted to say its a bubble, but the German economy is the strongest in all of Europe, right? It's the engine that powers the EU, right? Well, German home prices have handily outgrown, and continue to do so, German wage growth - by a very wide margin. So, if real wages aren't powering these fantastic price gains, then what is???

Geran rates

IF the ECB fails to perfectly juggle all of those negative interest rate balls simultaneously (unlikely) then DB will have a hell of a Bear Stearns/Lehman-like problem on its hands, as housing prices crash and DB's mortgage portfolio goes from 5% underwater (likely quite understated) to something like 30-40% underwater. There goes bank equity and here come bank bail-ins!

The info below is taken from our DB subscription research (see Derivative Risk Exposure of Major Banks to Deutsche Bank). Those who are truly interest in this should purchase our DB counterparty research to see who we feel is the most profitable potential short in the sector. It can be found here -European Bank Contagion Assessment, Forensic Analysis & Valuation. We can break out the short only research for $500 fi you don't want to subscribe to the entire series.

DB mortgage problem

Americans are trained to know and to cherish the ideals of democracy and to believe in the American Dream which teaches most Americans that equal opportunity is here for all and that the chances for success for anyone lie within him/herself. None of us are taught to know and understand the American status system which is an important part of our American Dream and often makes the success story a brilliant reality. We all are trained in school to understand democratic ideals and principles and to believe in their fullest expression in American life, but we only learn by hard experience, often damaging to us, that some of the things we learned in early life exist only in our political ideals and are rarely found in the real world. We never learn these things in school, and no teacher teaches us the hard facts of our social-class system, and by extension, our capitalist class system.

We posit that one should study the basic facts of our status system and learn them through systematic, explicit training which will teach at least the adult student much of what he/she needs to know about our status order, how it operates, how he/she fits into the system, and what he/she should do to improve their position or make their present one more tolerable.

The primary drivers of social class mobility (i.e. Less stringent socio-economic stratification) are knowledge and access. Barriers to each of these is what drives socio-economic stratification and stifles social class mobility. For the extreme minority on the top of the socio-economic ladder, it is in their best interest to stifle mobility as much as possible, for mobility only represents:

  1. 1) Downward movement for them, or
  2. 2) Upward movement for those below them.

Any which way one can look at it, mobility, at best, represents displacement and lesser access, less capital, less relative status.

For those who are not members of the very top minority, socio-economic mobility usually means brighter outlooks – as long as said mobility is upward-facing (remember, mobility can be in both directions). As a matter of fact,

The primary products of Veritaseum are knowledge (through our interactively delivered research and opinion) …the lower you move down the socio-economic hierarchy, the more critical and leveraged the shift in socio-economic status becomes.... And access (through our patent-pending blockchain technologies) …

We are, in essence, the socio-economic mobility vendors.

Click here to access the Veritaseum Socioeconomic (Social Class) model... 

This model congeals basic materials about social class in America, identifies the multiple levels, and makes apparent the categories that can facilitate the movement from lower levels to higher ones, and vice versa. Its fundamental goals are to tell the reader (1) how to identify any class level, and (2) how to find the class level of any individual.

Social class enters into almost every aspect of our lives, into marriage, family, business, government, work, and play. It is an important determinant of personality development and is a factor in the kind of skills, abilities, and intelligence an individual uses to solve his problems. Knowledge of what it is and how it works is necessary in working with school records and the files of personnel offices of business and industry. What a woman buys to furnish her house and clothe her family is highly controlled by her social-class values. Keeping up with the Joneses and proving "I'm just as good as anybody else," although fit subjects for the wit of cartoonists because these slogans touch the self-regard of all Americans, are grim expressions of the serious life of most American families. The house they live in, the neighborhood they choose to live in, and the friends they invite to their home, consciously, or more often unconsciously, demonstrate that class values help determine what things we select and what people we choose as our associates.

This model provides a ready and easy means for anyone to equip him or herself with the basic knowledge of socio-economic class so that they can use this type of analysis whenever such factors are important in helping them to know a situation and adjust to it. I have used the model to help predict behavior in the investment real estate market, particularly the residential market in the NYC area where gentrification was rampant. It is now even more apropos, given the significant asset deflation, constriction and selective re-expansion of credit, and considerable shifting of wealth and resources within the US and worldwide.

The businesses of those who make, sell, and advertise merchandise as diverse as houses and women's garments, magazines and motion pictures, or, for that matter, all other mass products and media of communication, are forever at the mercy of the status evaluations of their customers, for their products are not only items of utility for those who buy but powerful symbols of status and social class. This model, and the more detailed and sophisticated one that shall follow, can greatly aid them in measuring and understanding the human beings who make up their markets. Note: This model has been geared towards the NYC Metropolitan area, hence may need to be fine-tuned for dissimilar rural, suburban or non-US areas.

The model has been built upon a modified version of the Index of Status Characteristics (I.S.C.).

 

Social Mobility

 Social class is defined (on this blog) as the amount of control one has over one's socio-economic environment. It is much more than money, although money is a large component. For instance, Barack Obama is in a higher class than Robert DeNiro or Michael Jackson, although Robert DeNiro and Jay-Z are most likely wealthier. Obama's higher class stems from his ability to exert more control over his socio-economic environment. The factors that this author uses to determine class combine (with the associated weights) to create a "socioeconomic index":

Socioeconomic Index=

(Occupation X 12) + (Income source X12) + (Income X 7) + (Wealth X 14) +

(Education X 7) + (Dwelling area X 15) + (Class Consciousness X 7) +

(Housing X 12)

As you can see, wealth is the largest contributor to the class standing, and coincidentally it is the factor that is the most at risk in this current economic climate. I believe that there will be a significant entry into the upper middle class by those who were once firmly entrenched into the upper classes! While that may not seem like a big deal to many, it is damn big deal to those who are moving down the ladder. This also means, that there will be some space for others to move (relatively speaking) up the ladder. One man's (or woman's) misfortune is another's opportunity. I believe this blog can not only be used to insure and proof against downward mobility for those in the upper strata, but can also be used by those in the lower, middle and lower upper strata to rise upward a notch or even two. Social Mobility is the name of the game in times of severe dislocation - times like we will ikely be experiencing soon.

Lower Strata

Underclass/Poor

 
 

Working Poor

 

Middle Strata

Lower Middle Class

 
 

Upper Middle Class

 

Upper Strata

Lower Upper Class

<-- 20% to 30% of Veritaseum users are here, roughly 1,000 of you! We would like to diversify and smooth this out...

 

Higher Upper Class

 

  Now, in term of wealth (not social class and influence, just wealth) we can split the upper strata into three different categories (there are only two above because of the other factors that come into play when social class or socioeconomic standing is taken into consideration). There is the poor wealthy, those guys and girls that are just a hair's breath from being pulled into the upper middle class strata due to marginal wealth. This would be the $1m to $10m net worth crowd, who rely on business profits, salary and investment returns for income. The next would be the middle strata of the wealthy, hailing between $10 t0 $100 million in Net Worth, and then there is the upper strata wealthy at above $100 million. Each of these three strata of wealth represent, in my opinion, distinct behavior tranches in terms of discretionary expenditures, investment, and politics and (what passes as, this is a story for another post) philanthropic activities.  

 

Demographic

Source of wealth

Net Worth

Lower strata wealthy (High net worth)

Service professionals, corporate executives, entrepreneurs, inheritors

Salaries, stock options, restricted stock, small business profits, investment returns

$1 m to $10 m

Middle strata wealthy (Very High Net Worth)

Corporate executives, entrepreneurs, inheritors

Business ownership, investment returns, salaries, restricted stock, stock options

$10 m to $100 m

Upper strata  (the truly Rich!)

Entrepreneurs, inheritors, very few CEOs

Business ownership, investment returns

$100 m to several $billion

A trip to practically any decent sized yacht club or recreational vehicle port reveals the relatively stark differences in discretionary spending behavior. The first strata can be found in the 36 ft. to 68 ft. yacht docks (where a captain is optional, but not mandatory and you really don't need a crew). The second strata can be found 50 ft to 120 ft docks, where captains, crews and semi-custom fiberglass boats abound. The third strata are almost exclusively in the super yacht category, where the carrying cost alone for these (basically waste of money) fully custom built hulls and vehicles are about million a year to start with. You can also see the other social economic strata as well, upper middle class in the 20 to 35 ft boats, the middle and working class in the considerably smaller fishing boats - as opposed to the ultra fast Viking and Hatteras deep sea fishers, etc. It is an interesting and instructional study in social studies and anthropology just walking along your local docks! Once you are aware of how these things break down, you will see many settings in a different light.

Many of those in the higher strata would not be there if they had to compete on a more level playing ground. Alas, elimination of said level playing ground is a goal of those in the upper strata. The problem with that is that such behavior is good for the individual in the upper strata, but bad for society in general for it prevents efficient utilization of human capital. Basically, the best people don't get to do the most things, because they are blocked by those of lesser capability but greater access - access to infrastructure and access to knowledge.

Enter Veritaseum. Our business is to supply said access. We offer knowledge...

Access our knowledge through our proprietary research, analysis and education courses.

We offer access to infrastructure through our gateways to the peer-to-peer capital markets...

If one purchases our research (anything besides the introductory course) we will offer a 5x gold smart contract as a perk. Basically, we will give you a 5% rebate in the form of a Veritaseum smart contract that pays you the price of gold (or a gold index), levered 5x up to a stated maximum. This is a perfect way to both learn and get introduced into the new P2P capital markets and smart contracts.

 

 

 

This is the 4th installment of our public service announcements on Deutsche Bank subsidiary, Xetra-Gold's gold note offerings. Since a lot has been covered already, it's advisable that you read the first 3 articles to catch up:

  1. Veritaseum Knowledge Exposes Frightening Counterparty Risk At Deutsche Bank for "Gold Investors"
  2. Is Deutsche Bank Prepping for Fraud Charges Against It's Gold Derivative Products?
  3. The Debate on the Potential of Fraudulent Actions At Deutsche Bank Subsidiary, Xetra-Gold

Now, that we have determined that Deutsche Bank subsidiary Xetra-Gold "may" not have been fraudulent, mainly because they stated in their prospectus things that contradict and befuddle the misleading things they stated in their marketing material, we are left to ponder, "Well, we know the offering was unethical, but was it illegal?" Unfortunately, I'm not a lawyer thus cannot accurately opine on such. Alas, I can speculate as a laymen. The Xetra-Gold derivatives were offered in the UK, as well as several other jurisdictions. Let's peruse the UK perspective via the FCA in the difference between clear and misleading financial advertising:

"Financial adverts and promotions can be misleading for many reasons, but there are some questions you can consider to help you spot and avoid misleading financial adverts, such as: ... Are there important points that are only shown in the small print?"

Hmm... Let's take a look at the Xetra-Gold advertisement, and cross reference it to it's prospectus:

DB Xetra-Gold false advertising test

You guys tell me, is this a blatant case of false advertising, or is it not? Let me know in the comment section below. It's not as if DB is totally innocent in these matters, for they just signed a consent order admitting the manipulation of gold prices. This goes deeper than many may care to admit. Deutsche bank seems to be dumping its gold exposure, and what better way to dump it than to sell it unsuspecting gold derivative note buyers. This is how it could be going down...

Deutsche Bank, through it's Xetra-Gold subsidiary, has a guaranteed, zero premium call option.

  1. DB/Xetra-Gold accepts money from investors who are told they are buying gold, from “an economic perspective”.
  2. DB/Xetra-Gold takes money that was supposed to buy gold (at least in the eyes of many investors) and does whatever they want with it (which could include buying gold) because gold delivery on demand is not guaranteed and the investors have been disclaimed against ownership of, and rights to, the gold underlying as well as price correlation, and failure to deliver.
  3. If the price of gold goes up, DB/Xetra-Gold can fail to deliver (as disclaimed) and keep the capital gains profits. They don't even have to match the price of the gold underlying. or return the initial investment.
  4. If the price of gold goes down, DB can deliver gold on demand and keep the spread from gold spot and the price originally charged for the gold notes.

This is good work, if you can get it, no? 

This is how a company like DB can have over 90% in profitable trading days, because they never had a chance of losing in the first place. The losses belong to their clients! This is speculation, of course (wink, wink). Now, legal eagles say that we can't scream fraud, because Deutsche clearly says they have the motivation to, and the ability to, rip you off in their prospectus (but not in their marketing materials).

DB

Which leads us to the end of "The Debate on the Potential of Fraudulent Actions At Deutsche Bank Subsidiary, Xetra-Gold", where John Titus (see his videos at the end of this article at the bottom) explained to me after I queried about misleading and contradictory marketing materials:

I asked, "If marketing materials are negatively contradicted by the prospectus then the marketing materials are fraudulent and misrepresentative, no?" He replied...

Misrepresentative, yes (accepting your definition of economic), and the marketing materials probably do in fact flout any number of laws against false advertising.
 
But fraudulent, no. The essence of fraud is to falsely induce someone by words or acts into doing something against his interests that he wouldn't have done but for the dishonesty. Courts consider the totality of the circumstances. So while you would undoubtedly tear the economic investment statement to shreds, you'd still be left with the many other statements from the prospectus that are true, and herein lies the problem.
 
The UK Fraud Act of 2006 is a criminal statute. So each element of the crime has to be proved beyond a reasonable doubt (or whatever the English equivalent burden of proof is). The first element of fraud by false representation under the Act is "dishonestly makes a false representation." The problem posed by the prospectus is that it would preclude a finding that DB acted dishonestly beyond a reasonable doubt. I mean, you've got one false (but arguably vague) statement vs. several clear-cut disclaimers that are accurate. The totality of the statements are perhaps half false and half true, but dishonest beyond a reasonable doubt? Fuhgetaboutit. DB played the game with all of its cards face up. Yeah, they contradicted each other, but they were damn sure visible to investors, who can claim they were misled only in a subjective (personal) sense, not in an objective way (which is how a judge would look at it).
 
Now, if--in addition to the mktg mat's and the prospectus--you've got some Goldman-like behavior where DB took out massive insurance policies on the investments it sold and concealed them from the buyer, it's a totally different story."

Hmmm... On that note, let's take a look at whether DB has been a net buyer or net seller of gold exposure. Remember, Goldman, sold MBS structures to clients and then took big short positions betting against their own clients, reference "Goldman 'bet against securities it sold to clients'.

The subcommittee also released four internal Goldman Sachs emails. In one, says a subcommittee statement: "Goldman employees discussed the ups and downs of securities that were underwritten and sold by Goldman and tied to mortgages issued by Washington Mutual Bank's sub-prime lender, Long Beach Mortgage Company. Reporting the 'wipe-out' of one Long Beach security and the 'imminent' collapse of another as 'bad news' that would cost the firm $2.5m, a Goldman Sachs employee then reported the 'good news' – that the failure would bring the firm $5m from a bet it had placed against the very securities it had assembled and sold."

Goldman is fighting to clear its name after the $1bn fraud charges brought by the US Securities and Exchange Commission last week, and wants the case settled in court.

The movie, "The Big Short" dramatized this rather well.

Well, guess what it looks like Deustche has been doing...

DB gold exposure expressed as VaRDeustche has been a net seller of foreign exchange risk, which includes (wait for it now, and guess....) gold! They probably were not cash sellers, but purchased swaps to reduce exposure, possibly along the parameters I mentioned above with the guaranteed, zero premium call option.

If you enjoy this free analysis, there's much more where this came from as we pick apart many other banks in our paid research and knowledge modules. WE just finished a true forensic valuation (very extensive, and detailed analysis) of a very large European bank that led to a huge short recommendation. Subscribe here and pass the word. Our bank analyses have performed very well in 2016, with Banco Popular and Banco Popular Milano doing roughly 40% to 80% in theoretical returns (contingent on how the positions were taken). We have done an excellent job historically as well, calling the fall of Bear Stearns, Lehman, Countrywide, GGP, etc. If you think the free stuff is intense, you should see the stuff that we sell!

 Let me ask you a question. If you were a prospective gold investor, and were not a client of Veritaseum Knowledge, would you buy these gold instruments?Deuscthe Borse Commodities prospectus

Well, clients of Deustche Bank et. al. certainly did. Reference this story from RT.com: Deutsche Bank refuses clients' demand for physical gold

Clients of Germany’s biggest bank who have invested in the exchange-traded commodity Xetra-Gold are facing problems when they want to obtain physical gold, according to German analytic website Godmode-Trader.de.
Xetra-Gold is a bond on the Deutsche Börse commodities market, and Deutsche Bank is a designated sponsor. On the website, Xetra-Gold says its clients have the right for physical delivery of gold...
“Physically backed: The issuer uses the proceeds from the issue of Xetra-Gold to purchase gold. The physical gold is held in custody for the issuer in the Frankfurt vaults of Clearstream Banking AG, a wholly-owned subsidiary of Deutsche Börse. In order to facilitate the delivery of physical gold, the issuer holds a further limited amount of gold on an unallocated weight account with Umicore AG & Co.,” says Xetra-Gold.
However, despite claims that every virtual gram of gold is backed by the same amount of physical gold, clients have been refused the precious metal upon demand.
According to Godmode Trader, its reader “sought physical delivery of his holdings of Xetra-Gold. For this he approached, as instructed by the German Börse document, his principal bank, Deutsche Bank." However, he was told that “the service” was no longer available for "reasons of business policy". The article went on to say it’s not yet clear whether other banks are still delivering gold through Xetra.

The website's marketing material is clear enough...

DB Xetra Gold

The issuer of Xetra Gold is an entity jointly owned by Germany's Commerzbank & Deutsche Bank (rumored to be merging - Yechh!), among others. Uh Oh!

Deuscthe Borse Commodities

In the Deutsche Borse Xetra Prospectus under the heading "Key information on the key risks that are specific to the Notes", you will find the following snippet:

Upon acquisition of Notes, an investor is, from an economic point of view, invested in gold and thus bears the market risk associated therewith.

This statement is simply not true, and it's amazing that it passed muster with legal counsel and auditors. Why? Because the following line in the prospectus literally says:

"No correlation with the gold price"

Let's look at this a bit more closely, shall we...

The value of the Notes is a function of demand and supply regarding the Notes as such and not of the demand for and supply of gold. For potential purchasers of the Notes the pricing may, apart from the gold price, also be determined by other factors (e.g., the creditworthiness of the Issuer, the evaluation of these risk factors or the liquidity of the Notes).

Hmmm... It sounds as if the gold is actually held on the balance sheet of the note issuers. If that's true, then this is not an investment in gold, it's and investment of a derivative of gold exposure and the balance sheet exposure of the issuer. Now, how many of the so-called "investors" of these derivatives got that concept BEFORE they bought in???

Deuscthe Borse Commodities prospectus - counterparty risks

Now, you guys (and girls) tell me, do we have reason to suspect credit and solvency issues at the Issuer,'s parent, Deutsche Bank? Let's refer to notes available to subscribers of Veritaseum Knowledge, in particular, the European Bank Contagion Assessment, Forensic Analysis & Valuation module... 

DB Cojunterpary risk shift 2

Actually, DB doesn't think we should concern ourselves with things such as adjustements for credit risks or credit worthiness...

Deusstche loan valuation 2

So, with the aforementioned understanding, let's move on through the prospectus...

"The value of a Note will therefore not necessarily equal exactly the value of one gram of Gold at any given time."

"No rights or beneficial ownership in the Gold"

So, let's add these up now...

  • ..."an investor is, from an economic point of view, invested in gold", but
    • "No correlation with the gold price", and 
    • and "The value of the Notes is a function of demand and supply regarding the Notes as such and not of the demand for and supply of gold", but
    • "For potential purchasers of the Notes the pricing may, apart from the gold price, also be determined by other factors (e.g., the creditworthiness of the Issuer, the evaluation of these risk factors or the liquidity of the Notes)." - keeping in mind that Deutsche Bank believes 
    • There's no movement in counterparty risks yearly, or cumulatively, due to collateralization (where said collateral is wide open to market forces and valuations) for instruments.

Oh yeah! If I were hired as an expert witness, this stuff could get ugly.... As for now, methinks its time to go put shopping again.

Oh, there's more, for those of you who believed that line "an investor is, from an economic point of view, invested in gold". 

The purchasers of the Notes will only acquire the rights securitised by the Notes. The purchasers of the Notes will not acquire any title to, or security interests or beneficial ownership in, the physical Gold held in custody on behalf of the Issuer. An investment in the Notes does not constitute a purchase or other acquisition of Gold.

Here's some more risks, this time due to liquidity of the derivatives....

Tradeability No assurance can be given that the admission of the Notes to the regulated market (General Standard) of the Frankfurt Stock Exchange will continue or that the Notes will continuously be traded on the Frankfurt Stock Exchange. Consequently, there is the risk that sale of the Notes on an exchange may not, or not at all times, be possible.

In reference to actually getting what you're paying not to own...

No control of genuineness or fineness of the physical Gold Neither the Issuer nor the Depositary Agent or any other agent of the Issuer will control the genuineness or fineness of the physical Gold held in custody on behalf of the Issuer by Clearstream Banking AG in its capacity as Depositary Agent. As the party responsible for all physical delivery processes, Umicore AG & Co. KG will be liable for the genuineness and fineness of the physical Gold acquired by the Issuer with the proceeds from the issue. If the physical Gold which is held in custody by Clearstream Banking AG as Depositary Agent of the Issuer is not genuine or if its fineness does not comply with the requirements specified in the rules adopted by The London Bullion Market Association (or a successor organisation representing market participants in the London gold trading market) for the delivery of gold bars, as amended from time to time and which, at the date of this Prospectus, provide for a minimum fineness of 995 parts per 1000 pure gold, the Notes might only be covered by the aforementioned liability claims against Umicore AG & Co. KG as the party responsible for all physical delivery processes. Market disruptions If the Calculation Agent determines that a market disruption has occurred or continues to exist at any given time, the Issuer will not fulfil its delivery or payment obligations until the Calculation Agent determines that the relevant market disruption has ceased to exist. Any such determination may delay 16 fulfilment by the Issuer of its delivery or payment obligations

Become a member of Veritaseum Knowledge now, and subscribe to the knowledge module European Bank Contagion Assessment, Forensic Analysis & Valuation. There's much, much, much more to this story than meets the eye. More apparently, there are many more European banks and institutions involved - in countries you'd likely never suspect. We suspect some of them will be going pop in the not too distant future. This is from the team that called Bear Stearns, Lehman, GGP and nearly all of the significant financial institution failures of the 2008 crash.

 

 

Our report on Banco Popular Milano was released to clients in March and April of 2016 as part of the "Potential for a European Banking Collapse" series. This research is continuously being updated at Veritaseum Knowledge, including additional and other financial institutions along the way. Here is an excerpt from the report:

BPM report teaser

This is the Banco Popular Milano share price over the time period in question...

Banco Popular Research stock price

'Nuff said! Click here to participate in Veritaseum Knowledge. We've compiled a list of six banks whom we believe the market has materially underestimated the risk of. Some of which are systemically relevant institutions with plenty of room to fall in terms of public equity pricing.

Thursday, 25 August 2016 15:01

How Deutsche Bank Can Destroy Europe

How can Deutsche Bank destroy the EU? Capital fight and extreme, involuntary deleveraging. DB is closing nearly 200 German bank branches. Not a big deal, right? German bank's depositor base is 111% of German GDP. A run on German banks is literally a run on the German economy - the largest economy in Europe...

fredgraph 1

...not to mention a major (the major) funding source for DB's massive derivative positions.  

Current news events don't portend a positive outcome for Germany's largest bank either. Bloomberg reports: NordLB Boosts Shipping Provisions Five-Fold, Warns of High Loss

Norddeutsche Landesbank boosted provisions for bad loans nearly fivefold to 1 billion euros ($1.1 billion), as Germany’s biggest shipping lender prepares for its first full-year loss since 2009.

NordLB, controlled by the state of Lower Saxony, posted a loss of 406 million euros in the first half as it battles a prolonged slump in maritime markets, including eight years of crisis in the container segment. That compares with a profit of 290 million euros in the same period last year.

“The shipping crisis, which further intensified in the first half of the year, has necessitated impairments that were higher than planned,” Chief Executive Officer Gunter Dunkel said in a statement. The bank lowered its outlook for the year, now anticipating a “significant” loss. It had projected a “negative result” in the spring.

... NordLB’s pessimistic view highlights risks at other German banks, which hold roughly one-quarter of the about 400 billion euros in global shipping loans. Under pressure to unwind sour legacy maritime assets, banks including HSH Nordbank AG and Commerzbank AG are also trying to shrink their loan books.

 What does this have to do with Deutsche Bank? A lot! Because everybody wants to sell these assets that aren't considered very desirable, and all at the same time, we've made a bad situation worse - precisely when DB can't afford it.DB mass selling bad shiping loans

Then there's the issue of DB's somewhat questionable assumptions and characteristics in its financial reporting. Deutsche Bank addendums are quoted as saying:

"The credit risk on the securities purchased under resale agreements and securities borrowed designated under the fair value option is mitigated by the holding of collateral. The valuation of these instruments takes into account the credit enhancement in the form of the collateral received. As such there is no material movement during the year or cumulatively due to movements in counterparty credit risk on these instruments."

What???!!! So, the value of collateral doesn't move now? On planet Earth, not only does the value of collateral move, it tends to move in the exact same direction as the value of the loan, borrowing or underlying, often at an exaggerated pace in the beginning (it's markets are the first to know of turmoil). Reference my podcast interview with Max Keiser at the 2:40 marker. Want some more? Read this page from our EU banking report a couple of quarters ago...

For those who don't believe me, I made this call in early 2008 - twice. Once for Bear Stearns (Is this the Breaking of the Bear?) and once for Lehman Brothers (Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008). Was I right? Of course, that was then and this is now, so the banks are better prepared, right? Of course. The graphic below was taken from our Banco Popular report (click here for more info), not from 8 years ago, but from a quarter ago - yes, 2016! Hey, there's more...

Banco Popular Research teaser3

Now, just imagine that Italy's Banco Popular is the entity that DB used to hedge it's exposure, and Banco Popular (obviously) can't pay up on every(any?)thing. DB's gross exposure become's DB's net exposure as DB's notion value and market value converge near instantaneously if (or when) market shoots off in one direction (you can likely guess what direction that would be for stakeholders, and this time around that includes depositors and bondholders, not just shareholders).

What does this all mean?  Well, we went through this in explicit detail and have identified no less than 6 (and we're still actively looking) financial institutions that may have passed the EBA stress tests, but have miserably failed our examination - and that's without adding in the bank contagion factor!

To partake in this knowledge, join Veritaseum University and purchase the interactive research asset called "European Bank Contagion Assessment, Forensic Analysis & Valuation".

Banks are about to enter a steep cyclical downtrend...

Saturday, 17 October 2015 00:00

The Great Global Macro Experiment Has Failed

My thoughts on today's financial climate. ..

Bloomberg reports Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, is on track for its largest pretax loss since 2008 after setting aside 3.1 billion pounds more ($5.1 billion) for legal and compensation claims. We will delve into this report in detail, but first a little background so we're all viewing 20/20.

I've been spending a lot of time rebuilding the banking system as software over a cryptocurrency framework. Basically, I'm building a more efficient, more "Trustworthy" financial system. Many are doubtful of these endeavors. I say, don't underestimate the effort. For one, a more efficient, more trustworthy system is sorely needed. Here we are, 7 years after the start of the great financial trainwreck that I'm known for predicting, and I'm still at it doing the same thing to the same industry. This is only possible when there's a structural problem in the industry. A problem that rapid advancements in technology are ripe to solve.

On Thursday, 11 April 2013 I penned, I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets! wherein I clearly illustrated that RBS is materially understating its liabilities AND even went so far as to include links to the SEC and the UK banking regulator so that US/UK taxpayers and investors can notify our erstwhile regulator(s) to the potential of financial shenanigans. The root of the problem is that RBS has materially under-reported its liabilities (in my oh so humble opinion.) Those that stress tested RBS (the same erstwhile professionals that allowed the Irish banks to pass their stress tests 3 months before they started collapsing) apparently overlooked humongous swaths of liabilities. 

The amount of evidence that I produced to back my claims was prodigous...

What happened behind closed doors?

Ulster Bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland. U.S. investors would have had to rely on the contents of The Royal Bank of Scotland's 2008 Annual Accounts which apparently (in my opinion) concealed the existence of the CRO registered charges to the Bank of Ireland.

Ulster Bank RBS charge doc 2 Page 1 >Ulster Bank RBS charge doc 2 Page 1

Now, back to the Bloomberg article...

The provision includes 1.9 billion pounds for lawsuits and fines tied mostly to the sale of $91 billion of mortgage-backed securities from 2005 to 2007, the lender said yesterday. It follows agreements Deutsche Bank AG, JPMorgan Chase & Co. and UBS AG (UBSN) struck with U.S. regulators to settle claims they didn’t provide adequate disclosure about mortgage-backed debt sold in the housing bubble that preceded the 2008 financial crisis.

Are they referring to claims similar to the ones I made that RBS  bought Ulster Bank full of unrecognized mortgage crap, levered up off it and hid the debt? I strongly suggest my readers brush up on how The Irish Banking Cancer Spreads to the UK.

More than five years after giving RBS the biggest bank bailout in history, the government still hasn’t been able to cut its 80 percent stake.

... “When the crisis broke, the bank was involved in a number of different businesses in multiple countries that have subsequently faced heavy scrutiny by customers and regulators,” McEwan, 56, said in yesterday’s statement. “The scale of the bad decisions during that period means that some problems are still just emerging.”

... The charges led the bank to cut its forecast for its core Tier 1 capital ratio, a measure of financial strength. RBS expects the ratio will be about 11 percent at the end of 2013, or as much as 8.5 percent under the latest rules set by the Basel Committee on Banking Supervision. That’s down from the company’s estimate of 11.6 percent and 9.1 percent in November.

“Fronting up to our past mistakes is very expensive, but RBS is a much stronger bank that can deal with these costs on its own while running a good capital position,” McEwan said on the call. “Dealing with these litigation and conduct issues is essential if we are to move the bank forward.”

Well, I still haven't noticed them come clean on the Ulster Bank charge issue. If they really are going to "Front[ing] up... past mistakes" then they really need to address this, no? If the Ulster Bank charges are included in the Basel capitalization guidelines, then RBS needs a bailout, and needs one Now! It doesn't end their though. On Monday, 20 May 2013 I queried Who is RBS? Royal BS... or the Royal Bank of Scotland, to wit:

"An independent Scotland would have an exceptionally large banking sector compared to the size of its economy - with banking assets of more than 1250 percent of Scottish [gross domestic product] - making it more vulnerable to financial shocks and the volatility of the sector," the Treasury report said on Monday.

The report pointed out Scotland's banking exposure would dwarf that of Iceland and Cyprus, two countries that faced severe banking collapses in recent years. Iceland's banks, for example, had assets equivalent to 880 per cent of GDP, while Cyprus, which faced a banking crisis in March, had total banking assets of around 700 per cent of GDP.

The report as cited by the article then goes on to make more direct comparisons to Cyprus, not unlike I did two months ago, but with Ireland (see As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come). 

"At the end of September 2012, the two largest banks – the Cyprus Popular Bank and Bank of Cyprus – had assets in the region of 210 per cent and 175 per cent of Cyprus's GDP respectively."

"It is worth noting that, if Scotland became independent, its banking sector would be similarly concentrated (with two large players, Bank of Scotland and Royal Bank of Scotland and a number of smaller firms), and that an independent Scotland's domestic banking sector would be likely to be significantly larger than that of Cyprus (assuming no change to firms' domicile arrangements)."

I penned, I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets! wherein I clearly illustrated that RBS is materially understating its liabilities AND even went so far as to include links to the SEC and the UK banking regulator so that US/UK taxpayers and investors can notify our erstwhile regulator(s) to the potential of financial shenanigans. The root of the problem is that RBS has materially under-reported its liabilities (in my oh so humble opinion.) Those that stress tested RBS (the same erstwhile professionals that allowed the Irish banks to pass their stress tests 3 months before they started collapsing) apparently overlooked humongous swaths of liabilities. The charge documents referred to in the aforelinked article are definitively not apparent in the recent bank stress testing’ conducted by the European Banking Authority, at least not in the summary results that the EBA have made available. For those who are still skeptical, I beg thee reference the RBS Stress Test download.

To think, there are actually many who query as to why I seek to make a more efficient financial system...

With the latest advances in technology, I can literally replace large swaths of bank functions with software. Software that doesn't lie, cheat, steal, or screw you for a bonus! Zero Trust software...

page-0 page-0page-1 page-1page-2 page-2page-3 ;">page-3page-4 page-4page-5 page-5

If the RBS/Ulster Bank mortgage-backed secutities would have been traded through UltraCoin, rehyppthecation, double-spending, over-leverage, and thrice pledged assets would have been a thing of the past. These contracts are overollateralized (200%) and use no leverage, yet still hold the promise of significant return, not to mention a mere fraction of the cost of the big bank stuff. Will the dawn of this technology herald the end of fractional reserve banking as we know it?

Let it be known, Wall Street banks' profit margin IS my business model!!!

My Twitter Updates

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ReggieMiddleton @fortunekr75 @venmo We have our own internal USD token. We actually use our metal tokens as private currency for transactions.
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