The euro “might start to unravel” if Deutsche Bank collapses according to respected financial journalist, Matthew Lynn. “It all has a very 2008 feel to it …” he warns and outlines his and our growing concerns about Deutsche Bank.
For most of 2016, Deutsche Bank shares had been sliding fast. On Monday, they crashed, down more than 7%, after Angela Merkel refused to consider a bailout for the troubled lender. The bank's bonds have slumped, while it default risk spiked. As some have correctly put it "it all has a very 2008 feel to it."
"To our surprise, we find that financial market information provides little support for the view that major institutions are significantly safer than they were before the crisis and some support for the notion that risks have actually increased."
Wondering why the stock and bond markets are tumbling simultaneously? Confused by the market's apparent inability to follow the mainstream media's narrative that higher rates are good for markets? Wonder no longer - the answer, as we have previously detailed - is the collapse in so-called "risk-parity" funds that force leveraged long positions in equity and bond markets to be unwound en masse.
"In the days following the collapse, all I wanted was for the towers to be rebuilt just like before. I wanted the skyline back to what I had know since the day I came into this earth at a New York City hospital to be restored exactly as I had always known it. I read a lengthy tome on Osama Bin Laden and al-Qaeda. I was an emotional and psychological mess, and it was when I was in this state of heightened distress that my own government and the military-industrial complex took advantage of me..."
While some European bank stocks have scrambled back some of their plunge losses post-Brexit, the current uncertainty over when the U.K. will start the process of quitting the EU has banks on tenterhooks, with a source telling CNBC that banks are "preparing for an economic nuclear winter situation." With negative rates (and a plunging yield curve) banks' earnings are under threat but the concerns over the potential for contagious European break-up and collapse of the pound after Article 50 is signed is existential.