Sunday, 27 November 2022

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


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".

Is GM really doing that well? In 2007, they did well too, in 2008 their finance arm= .gov bailout. In 2009 GM went Bankrupt! On January 14th, 2015 I penned Toil, Trouble, Crash and Bubble! Monetizing The Biggest Crash of the Millenium? with the following graphic...

Here comes the crash

Just keep that in mind as you read my thoughts on GM's amazing blowout quarter that the mainstream media is simply gushing over. This was on the front page of CNBC's website this morning...

gm reports surprise earnings

Excluding special items...

I noticed that when management categorizes something as "special" or "one-time", sell side analysts literally tend to gloss over it. Literally, no matter how special, or not so "one-time" it may be. In this particular situation we are referring to GM's record recall. Take a look at this...

  1. The company continued to recall more of its cars over the next several months. As of June 30, 2014, GM has issued 45 recalls in 2014, which have involved nearly 28 million cars worldwide and over 24.6 million in the United States.
  2. 2014 General Motors recall - Wikipedia, the free encyclopedia

GM's 28 or so million potentially affected vehicles in 2014 are equivalent to over 40% of GM's fleet and about 11% of all vehicles in operation, using Experian Automotive data. This is more than they sold over the last TWO (2) years. Of course, we can just gloss over that since GM's accounting firm apparently hired a highly skilled storyteller to do this quarter's numbers.

Here are some more choice tidbits from the article:

  1. North American profit margins for the full year were 6.5 percent. Excluding the additional costs for a record vehicle recall in 2014, the margin would have been 8.9 percent...
  2. Shares of GM moved higher in premarket trading following the report.
  3. The company also said it plans to raise its dividend by 20 percent
  4. ... the planned increase, which will boost the company's annual outlay for dividends by about $400 million to $2.4 billion, was due to the strong 2014 results and stronger performance expected this year.

  5. ... plans to pay 48,400 full-time UAW union workers annual bonus of up to $9,000.

It's a Party Over Here - OR - NIRP's Financing a Bubble Like You've Never Seen Before...

It is my contention that GM is not good at managing financial companies through Boom/Bust cycles. Their former captive finance company, GMAC, had to be bailed out and purchased by the government in 2008. Did we learn our lesson? I'll let the numbers tell the story, but first a few qualitative observations, such as desperate car selling measures like we never seen before.

  1. Zero down sub prime lending...
  2. 100 dollar a month leasing...
  3. Auto repos are at all time highs (or at least 70% higher)

From Wikipedia, on GM's former captive finance company, GMAC:

The bank has more than 15 million customers worldwide and provides a range of financial services including auto financing, corporate financing, insurance, mortgage services, and online banking. In 2009, Ally employed 18,900 people. In 2008, the firm provided financing to 75% of the 6,450 General Motors dealers.

The company was bailed out by the US Government during the financial crisis of 2007–08 taking over from its previous owner General Motors

Not to be outdone, GM goes at it again with GM Financial:

General Motors Financial Company, Inc. is a financial services arm of General Motors. The company is a global provider of auto finance, with operations in the United StatesCanadaEuropeand Latin America. The company is headquartered in Fort WorthTexas.

Founded in 1992 as AmeriCredit Corp., the company was acquired by GM in October 2010 and renamed General Motors Financial Company, Inc. The company provides retail loan and lease programs through auto dealers for customers across the credit spectrum. They also offer commercial lending products, such as retail floorplan, construction and real estate loans, or insurance for cardealerships.

Before its acquisition by GM, the company ranked at 768 on the Fortune 1000.[2] AmeriCredit's loan parameters would originally provide financing at an interest rate of between 10% and 23% APR to clients with credit scores around 500 who can prove employment and residency, though the company has become increasingly more stringent over the past few years.

Acquisition by General Motors

In July 2010, General Motors entered into a definitive agreement to acquire AmeriCredit in an all-cash transaction valued at approximately $3.5 billion. The deal provided GM with a new financial arm to replace the loss of GMAC in 2006.[3] Following the approval of the deal by AmeriCredit shareholders, GM renamed the company "GM Financial" on October 1, 2010.[4]

On Sep. 4, 2014, GM and GM Financial announced they entered into a support agreement providing for leverage limits and liquidity support to GM Financial if needed, as well as other general terms of support. Under the terms of the agreement, as GM Financial expands its product portfolio and grows its business, GM committed to provide funding to GM Financial if its earning assets leverage ratio rises above pre-determined thresholds. GM extended an intercompany revolving credit facility to GM Financial to provide up to $1 billion of liquidity if needed. This facility, which is subordinate to GM Financial’s senior unsecured and secured debt, will replace an existing $600 million line of credit from GM. The agreement also provides that GM will use its commercially reasonable efforts to ensure that GM Financial will continue to be designated as a subsidiary borrower on up to $4 billion of GM’s corporate revolving line of credit.[5]

Since being acquired by GM in 2010, GM Financial has significantly increased its share of GM’s business which now represents 75 percent of GM Financial’s consumer loan and lease originations.[5]

On Sep. 25, 2014, Standard & Poor's Ratings Services upgraded the credit ratings of both GM and GM Financial to investment grade with a stable outlook. The new GM corporate and GM Financial credit rating is BBB-.[6]

 I'm not going to go into an automotive finance class here, but if (or as) things deteriorate, pay attention to the terms floorplan (dealers get throats slit in a slow down), lease programs (depreciating collateral backing increasingly defaulting loans with a weak resale market), and the oldie but goodie "across the credit spectrum", ie. as in skilled storyteller turned bean counter parlance - includes people who knowingly won't pay the loans back.

Just in case nobody decided to actually glimpse at the numbers behind GM's blowout numbers, let me do it for you...

GM Financial Q4 results - horiible

So, let me get this straight. GM Financial has triple digit increases in interest expense in a NIRP (negative interest rate policy) environment. As a matter of fact, 16% of government bonds now have a negative yield, but this company is spiking in the opposite direction as the rating agencies RAISE their rating on it???!!! Yeah, okay! Delinquincies are high, and getting higher. All of this, and the news media is gushing about the parent company selling more cars!!?? Are they selling cars or are they giving them away as a packaged deal with loose money loans? I want you guys to sit back and think about it.

The Veritaseum UltraCoin value trading client now has built in leverage - of up to 10,000:1. This is world's first, but unfortunately we are delaying the public release until next week in order to ge the patent filings in. When we do release it, ardent users can feel free to contact me in taking positions on reality TV show-style earnings releases like the one above. Now, while you can get in a lot of trouble with 10:000:1 leverage, ratcheting it down a bit seems like a good idea when going after those fairy tale stories.

GM short

Anybody interesting in participating in the UltraCoin venture (financially, strategically, even spiritually) should feel free to reach out to me. We're looking for it all.

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