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The Germans, Italians, French... Most Of Western Europe On The Brink Of Bank Collapse!

Reggie Middleton's picture


If those who persue the BoomBust regularly recall, on Tuesday, 12 July 2011 I penned BoomBustBlog Traders Armed With BoomBustBlog Research Caught ~10% Deutsche Bank Fall.

Deutsche Bank looks downright UGLY! Our new Forensic Analysis/Technical Trade combo called this one out about 2 weeks ago with impressive precission. Kudos to all who contributed.



DB is now trading 20 points lower. Those that haven't read said piece should check it out for the resident BoomBustBlog traders and fundamental analysts caught this one right on the money and a full three months before the sell side and the pop media. On that note, Bloomberg reports Deutsche Bank Risk Seen Rising as Puts Appreciate Most in Europe: Options 9 Sep 2011

'' There could be ongoing pressure on German markets because people want to be short and there could be some pricing... The price of options to protect against losses in Deutsche Bank ...

It would appear that much of the pop media should follow the BoomBust a tad bit more closely. I will probably release the prime French bank run candidate some time soon, potentially on in the Max Keiser Show, as I drop little bread crumb hints along the way since the banks share price is already approaching our valuation bands. Anyone in the pop media space who wants a scooping story, here is the motherload. On a separate, but related note, let's look at what those DB puts looked like when the BoomBust first warned on said German bank... Click to enlarge...


And this just in from Bloomberg: Germany Said to Ready Plan to Help Banks If Greece Defaults

Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said.

The emergency plan involves measures to help banks and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece’s bailout is withheld, said the people, who spoke on condition of anonymity because the deliberations are being held in private. The successor to the German government’s bank-rescue fund introduced in 2008 might be enrolled to help recapitalize the banks, one of the people said.

The existence of a “Plan B” underscores German concerns that Greece’s failure to stick to budget-cutting targets threatens European efforts to tame the debt crisis rattling the euro. German lawmakers stepped up their criticism of Greece this week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country’s progress.

Greece is “on a knife’s edge,” German Finance Minister Wolfgang Schaeuble told lawmakers at a closed-door meeting in Berlin on Sept. 7, a report in parliament’s bulletin showed yesterday. If the government can’t meet the aid terms, “it’s up to Greece to figure out how to get financing without the euro zone’s help,” he later said in a speech to parliament.

Well, Greece is going to default. We ran the numbers over a year and a half ago (A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina) and nothing has changed except for the situation getting worse, reference Greece's Circular Reasoning and Greek Asset Sales Fall Short.

This is a tragic Greek comedy. Professional/institutional subscribers should reference the Greece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb in its entirety. For those who chose not to subscribe, I am posting excerpts from pages 5 and 6 from said document, don't read this while eating or drinking for fear of spitting up your lunch!

Hmmm... Remember, on Saturday, 23 July 2011 I suggested "The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!"

Specifically, we have applied writedowns on both banking and trading books with the results available in the subscription document File Icon The Inevitability of Another Bank Crisis? and well as File Icon European Bank's Greece exposure. In essence, after Lehman Brothers collapse, sovereign states appear to deem themselves obligated to bail out their respective insolvent banking systems, thus real stress tests should test both the banks' distressed portfolio carried at unrealistic marks and leverage and the sovereign's ability to aid said banks. Of course, this will be very unpopular from a political perspective because you will get a lot of nasty answers to the questions asked.

Below is a chart excerpted from our most recent work showing the asset/liability funding mismatch of a bank detailed within the report. The actual name of the bank is not at issue here. What is at issue is what situation this bank has found itself in and why it is in said situation after both Lehman and Bear Stearns collapsed from the EXACT SAME PROBLEM!

Note: These charts are derived from the subscriber download posted yesterday, Exposure Producing Bank Risk (788.3 kB 2011-07-21 11:00:20).



Overnight and on demand funding is at a 72% deficit to liquid assets that can be used to fund said liabilities. This means anything or anyone who can spook these funding sources can literally collapse this bank overnight. In the case of Bear Stearns, it was over the weekend.

In reviewing my post on this topic in January predicting the fall of Bear - "Is this the Breaking of the Bear?", it is actually scary how prescient it actually was...


Book Value, Schmook Value – How Marking to Market Will Break the Bear’s Back

Okay, I’ll admit it. I watch CNBC. Now that I am out of the confessional, I can say that when I do watch it I hear a lot of perma-bulls stating that this and that stock is cheap because it is trading at or below its book value. They then go on to quote the historical significance of this event, yada, yada, yada. This is then picked up by a bunch of other individual investors, media pundits and other “professionals,” and it appears that rampant buying ensues. I don’t know how much of it is momentum trading versus actual investors really believing they are buying on the fundamentals, but the buying pressure is certainly there. They then lose their money as the stock they thought was cheap, actually gets a lot cheaper, bringing their investment down the crapper with it. What happened in this scenario? These investors bought accounting numbers instead of true economic book value. Anything outside of simple widget manufacturers are bound to have some twists and turns to ascertain actual book value, actual marketable book value that is. This is what the investor is interested in, the ECONOMIC market value of book, not what the accounting ledger says. After all, you are paying economic dollars to buy this book value in the market, so you want to be able to ascertain marketable book value, I hope it sounds simplistic, because the premise behind it is quite simple – How much is this stuff really worth?. The implementation may be a different matter, though. I set out to ascertain the true book value of Bear Stearns, and the following is the path that I took...

I urge all to review that post of January 2008 and realize that negative equity is negative equity, and no matter how you want to label it, account for it, or delay and pray, broke is broke! This lesson should not be lost on the Europeans, but unfortunately, it is!

Those who wish to subscribe to BoomBustBlog research (wer're on a roll now, and global FIRE sector and bank failure is our forte) should click here. Stingy bastards and tightwads can always follow my free opinion via the avenues below...

Reggie Middleton Boom Bust Blog

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Wed, 09/14/2011 - 03:04 | 1666837 chinawholesaler
chinawholesaler's picture

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Sun, 09/11/2011 - 09:17 | 1655950 aleph0
aleph0's picture

Hey Reggie,

maybe they're going to use ( what's left of ) the German Pension Funds to bailout the banks :

Schäuble is (provisionally) calculating a new "Retirement Age"  : 69


I wish he'd do the calculation for 73 , it makes the swindle so much easier to understand !

Fri, 09/09/2011 - 19:24 | 1652892 Itinerant
Itinerant's picture

It's the mother lode, something completely different than mother load.

Fri, 09/09/2011 - 14:56 | 1651983 how to trade ar...
how to trade armageddon's picture

I'm wondering Reggie what's your take on this oft-quoted number that Eurobanks had already completed 80% of this year's funding by July. Sounds to me like something some sell-side guy who doesn't know jack just made up. Why would 80% roll over in the first seven months of the year. Maybe what actually happened was they accelerated short-term borrowing in Jan-July to compensate for lack of longer-term offers and deposits? And now ...

Fri, 09/09/2011 - 14:33 | 1651870 bankruptcylawyer
bankruptcylawyer's picture

reggie you da man.

i only hope youre getting rich off this.


are you supporting obama or ron paul? 

Fri, 09/09/2011 - 15:41 | 1652186 g
g's picture

a most excellent question, do tell

Sat, 09/10/2011 - 01:02 | 1653719 Zero Govt
Zero Govt's picture

any person 'supporting' a politician is a bit like a moron following a retard ...the 50% of voters that vote are actually borderline delusional-insane, the ones that don't vote "because it makes no difference" are correct (realists)

Fri, 09/09/2011 - 14:30 | 1651855 sun tzu
sun tzu's picture

The US banks were close to collapse until Timmy and Benny rode in to the rescue with taxpayer funds and inflationary policies. The same will happen in Europa

Fri, 09/09/2011 - 13:34 | 1651564 bugs_
bugs_'s picture

Them first!

Fri, 09/09/2011 - 13:29 | 1651540 Zenster
Zenster's picture

Thanks for the article.

Fri, 09/09/2011 - 13:11 | 1651473 gookempucky
gookempucky's picture

Geithner should be REGGIES BITCH period---get my coffee son and just one cube of sugar...oh and take the trash out while your at it.

Fri, 09/09/2011 - 13:45 | 1651626 sodbuster
sodbuster's picture

Then Timmay would be sitting out on the curb!!

Fri, 09/09/2011 - 12:57 | 1651411 anony
anony's picture

Anyone who has actually visited European countries who comes away with the notion that Europeans are anything but near Third World status has had too much wine.

I haven't seen such sad looking people since my last trip to Detroit, Compton and Harlem. These are susbsistence only countries, forget success, progress, and wealth for anyone but the top skinteenth.

Fri, 09/09/2011 - 13:42 | 1651605 Reggie Middleton
Reggie Middleton's picture

Harlem has more millionaires within its confines than at any time in its history due to gentrification (socio-economic, not racial). Take a trip to Red Rooster off of 125th and Lennox, where the Obama family dined a few months ago and look at the upper middle class, highly educated, pretty people crowd that you didn't know you were speaking of.

Fri, 09/09/2011 - 14:28 | 1651847 sun tzu
sun tzu's picture

I'm sure some parts of Harlem have gotten better due to gentrification. The same can be said of areas in Brooklyn. It is still generally an impoverished area compared to the rest of New York

Fri, 09/09/2011 - 15:05 | 1652008 Reggie Middleton
Reggie Middleton's picture

Brooklyn contains some of the most upscale portions of the NY metro area. I live in a part of Brooklyn where 5,000 to 12,000 sq. foot, landmarked (100 yr old and up) mansions are the norm, not the exception. There are many parts such as this, Park Slope, Brooklyn Heights, etc.

Below is a listing of two townhouses in Brooklyn, the first is Brooklyn Heights, which has been upscale for several decades, the second is Fort Greene which was considered by many to be a veritable ghetto just 25 years ago.


Brooklyn Heights
69 Willow Street Info | Photos | Floorplan  Townhouse 5,800     $5,750,000
Fort Greene
181 Washington Park Info | Photos | Floorplan  Townhouse 4,400   5 floors $3,450,000

These are townhouses (brownstones) that require phycial maintenance plus all the trappings that go along with home ownership. Many consider this level of home ownership wealthy, and this is the face of much of Brooklyn, where many Manhattanites go when they have more than one child.

Those of you who adhere to ideas of what's going on versus what is actually going on will get hurt, whether it be real estate, banks, Global macro issues or even the mobile tech wars. Adhere to the facts, all of the time.

Fri, 09/09/2011 - 14:51 | 1651953 how to trade ar...
how to trade armageddon's picture

No, there's no way you could call today's Harlem "impoverished". Property values are obviously less than lower Manhattan but well higher than NYC average. Incomes are probably about in line with NYC average, with a very wide range within Harlem itself. These days the NYC disaster zones are well out of Manhattan and mostly out of NYC itself, in places like Hempstead and Newark.

Fri, 09/09/2011 - 14:25 | 1651812 ReactionToClose...
ReactionToClosedMinds's picture

am another 'close to subscribing' person (issue: have other subscriptions already ... gonna have to stop something else there is the foot drag) Go read bio of Andrew Mellon (quite good on multiple fronts ... e.g., art market, AM's clearly precocious financial astuteness & biz sense especially new trans-formative technologies/biz models ... rarely went to public markets interestingly - did not want to reveal anything) Point: after Fall 2008 realized 'this time is different' so went on panic read: many deep econ tracts, treatises, classics (strongly recommend J Schumpeter), historical analyses. But the Mellon bio gave me best timeline feel of the ripe instability from 1929 market crash which did not cause great depression to waiting slow roll of Creditstaldt collapse in August 1931 (Summer?) due to French/Brit fears Germany & Austria were about to enter into (verboten by Versailles Treaty) customs union ..... slow domino tumble started ... all Euro land banks went down then spread to USA banks as gold was king ...for awhile countries dropped gold standard to stop gold redemption which US ultimately forced to do You should study this in detail (Summer 1931 through end of 1931 60 day bank run around December that started Depression ... the comparison to present is too eerie to articulate here .... different circumstances and specific dynamics ... but broad comparable dynamics at work then and now

Fri, 09/09/2011 - 14:10 | 1651742 MFL8240
MFL8240's picture

You go, I'll pass!

Fri, 09/09/2011 - 14:27 | 1651839 Are you kidding
Are you kidding's picture

I gotta  Blacks with doesn't change what's inside.  It's the last place I'd want to eat in NY.  Sorry...but we don't want you around.

Fri, 09/09/2011 - 13:33 | 1651562 Cui Bono
Cui Bono's picture

I don;t know who booked your vacation package but you gotta fire those bitchez....

Fri, 09/09/2011 - 14:17 | 1651781 andybev01
andybev01's picture

Thank you for the laugh!

Fri, 09/09/2011 - 12:50 | 1651375 Nozza
Nozza's picture

Thanks Reggie

Alway good to read your insightful and detailed posts here



Fri, 09/09/2011 - 12:46 | 1651351 Manco
Manco's picture

Thanks for telling it like it is Reggie!

Fri, 09/09/2011 - 12:45 | 1651344 nah
nah's picture


Fri, 09/09/2011 - 12:51 | 1651378 lynnybee
lynnybee's picture

I can't rest, I WON'T REST until that s.o.b. ROBERT RUBIN is behind bars .

Fri, 09/09/2011 - 12:58 | 1651419 anony
anony's picture

Then plan on a lifetime of staying awake.

The jews of Wall Street are Untouchable.

Fri, 09/09/2011 - 12:41 | 1651325 Moe Howard
Moe Howard's picture

Thanks for the article.

Fri, 09/09/2011 - 12:39 | 1651306 the not so migh...
the not so mighty maximiza's picture

gotta start thinking in positive terms, its not collapsing its being reborn.

Fri, 09/09/2011 - 12:43 | 1651333 Silver Dreamer
Silver Dreamer's picture

Born or reborn, it is quite painful.

Fri, 09/09/2011 - 12:38 | 1651304 zorba THE GREEK
zorba THE GREEK's picture

In the long run, it is better for both the EMU and Greece for Greece to fail now

and for European banks to be recapitalized. Debt problems can never be solved

by more debt.

Fri, 09/09/2011 - 12:35 | 1651295 Robslob
Robslob's picture



Stingy bastards...seems like we are all going to have to be stingy for awhile Reggie


As always...Fantastic research and follow through...yes, I may even subscribe!

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