One of the biggest benefits I get from writing newsletters (Mining Stock and Short Seller’s Journal) is that I get “grassroots Main Street” intel from subscribers. This has led to some invavluable insights into the housing market and the general economy all over the country.
Yesterday I received this email:
Heard from a friend east of the Atlantic that things are worse than are even being reported by alternative media. I bet the only thing the banks would like more is if the Chinese took another week off! I also heard next week could be big trouble.
My friend’s employer is a financial institution in Europe – you can probably guess which country. Words used were ‘chaos’ and ‘possible shutdown. Advised to buy silver as much as possible.
I tried to pull more info out of him but he was understandably compelled to pass on generalities in order to protect the identity of his friend.
Having said that, the information is consistent with what is unfolding at Deutche Bank. It also dovetails with the systematic take-down of gold. I’ll have more on that later today. Interestingly, the media attention has focused on DB. But the stock market is telling us that Credit Suisse has huge balance sheet problems as well:
Both DB and CS have significantly underperformed the benchmark bank index since early March. The index is composed of U.S. Too Big To Fail and super-regional banks. With all the “smoke” coming from DB, it’s entirely possible that Credit Suisse is either inextricably tied to the fate of DB via a perilous derivatives counterparty relationship or CS has catastrophic problems of its own that swirling around but receiving less media attention.
The reality is that all of the U.S. Too Big To Fail banks are also inextricably tied to DB through OTC derivatives counterparty relationships. DB was excessively aggressive in underwriting exotic energy-related derivatives both in the U.S. and Canada (this comes from an inside source of mine), which means that JP Morgan and Citi, specifically among several others, are tied to DB’s fate.
As detailed here, Deutsche Bank received two bailouts from the Fed and the Government approaching $100 billion in 2008: U.S. Taxpayers Bailout DB. Without question, this is because the big U.S. banks are tied at the hip to the fate of DB.
I have no doubt that Fed is using its resources to help the German Government and the ECB keep DB propped up for now. I also have no doubt that there are huge hidden financial bombs at DB that the Fed et al will be unable to locate before they detonate. I would suggest that notion is reflected in the warning above passed on to me yesterday.