Deutsche Bank Declares War On Mario Draghi, Warns Him Any Further QE Will Push Stocks Lower

Tyler Durden's picture

In what is the first official warning to a central bank to no longer do what has been done so far for seven years, earlier today Deutsche Bank came out with a startling presentation addressed to Mario Draghi, warning him explicitly that any more QE will not only not help stocks (and certainly not DB stock which continues to plumb post-crisis lows on fears it is overexposed to the commodity crunch and potentially such names as Glencore and various other commodity traders), but will actually push equities lower.

Here is the key segment from a report just released by the bank's European Equity Strategy:

While the outlook for more ECB easing has buoyed equity markets, we think it could turn out to be a negative for risk over the coming months, as it is likely to lead to further dollar strength, which in turn is set to translate into additional downside pressure on the oil price, further balance sheet stress in the US energy space and higher US high-yield credit spreads . Our models suggest that European equities are fairly valued, given the current level of US high-yield spreads. If more dollar strength and weaker oil lead US speculative default rates to rise above the level of around 4% currently priced into the credit market, this could mean more upside risk for HY credit spreads and more downside risk for equities over the coming months.

A lose-lose currency war policy dilemma, you say? Why yes, yes it is:

We see four pathways from ECB easing to further stronger strength: (a) against the backdrop of a Fed that remains committed to its tightening agenda, further ECB easing is likely to lead to more downside of the euro against the dollar; (b) more ECB easing puts pressure on the Bank of Japan to intensify its own easing program; (c) ECB-inspired euro weakness puts upward pressure on the new CNY basket, increasing the likelihood of a renewed Chinese FX devaluation; (d) the more expected ECB easing calms the market in the near-term, the more likely the Fed is to hike again over the coming months, adding to yield support for the dollar.

The key chart:

In other words: "Draghi, back off!"

To be sure, what DB has said is what many others have openly thought but few dares to state: after all in a world in which the Fed is, if only for the time being, out of the easing picture, it was all up to the BOJ, and of course, the ECB whose jawboning last week helped send futures soaring. If the DB thinking catches on, and suddenly any more speculation that the ECB will ease further is perceived as a negative for risk, then all bets are off as the world will have to find an entirely new paradigm with which to justify rising stocks, one which is not predicated upon further easing by non-US central banks.

Of course, the simple implication from DB's report is that while the ECB should refrain from more QE, the Fed should not only stop hiking but revert to easing more, especially if as we reported previously, China will no longer engage in broad monetary stimulus but instead proceed with targeted liquidity injections via reverse repos.

Here is DB's plea to Yellen:

"If the Fed abandoned its tightening program, this would lead to a more sustainable rally in the equity market. However, we agree with our US economists that a Fed relent is unlikely in the near-term."

With the Fed sitting down for its January meeting, it suddenly finds it has many more storm clouds over its head than it had hoped just one month ago when it was confident a rate hike signal would "prove" that all is well. Instead, everything turned to be very, very unwell.

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R.R.Raskolnikov's picture

Nice, all that Draghi promises will factored out of the stock market because the market was full of hope that he would do more QE.

BullyBearish's picture

The central bank's nether member is shriveling in the cold...END THE FED

Cognitive Dissonance's picture

Simply brilliant. So this TBTF bank is positioning itself as a 'victim' of the central bank(s)? And were they also a 'victim' when they were bailed out and subsequently enriched by same central banks?

The whore banks are sensing their political/popular support is running dangerously thin. Time to CYA.


BTW notice DB is talking about stock prices and not the corrupt banking/political/financial system. You may complain all you want about the symptoms, but never about the disease. Fractional reserve banking and central banks are fine. They are just poorly run at the moment.

Father Thyme's picture

Spy vs. Spy was good on MadTV. Next: Bankster vs. Bankster.

CClarity's picture

Cue Citibank "wah wah you should have shot us in 2008, put us out of our misery, it's your fault we're still struggling in this symbiotic relationship that is so UNFAIR to the rest of y'all   bhahhhahahahaha"   said the mistletoe to the oak!

Glasnost's picture

And so the system begins to truly fracture.

Retired Guy's picture

There is much talking their book noise about how the Fed should back off on the tiny interest rate increase. Bonds move inversely to interest and in their own way so do stocks. This stock price decline should be no surprise. As the bubble pops and things begin returning to healthy we can expect plenty of price pain. It is a bit like a fat guy on a diet- Pain but better than early death. I say bring on the rate increases.

bigkahuna's picture

ECB will QE regardless what the piss ants think. If they are going down, they will go down swinging. Our FED will follow or perhaps lead.

RiverRoad's picture

"With the Fed sitting down for its January meeting, it suddenly finds it has many more storm clouds over its head than it had hoped just one month ago when it was confident a rate hike signal would "prove" that all is well. Instead, everything turned to be very, very unwell."

Seems to me the Fed knew DAMN-well what would transpire globally when they raised rates.

What will be the catalyst that ultimately calls the Fed's bluff here?  

sam i am's picture


Liberals attack Ramzan Kadyrov, Putin and sovereignty of Russia, by Scott

yogibear's picture

Draghi looks more appropriate in an orange jumsuit and shackles. He belongs in prison with the other central banksters. 

wildbad's picture

how many trillions of derivatives is DB on the hook for?  counterparty exposure much?

DeadFred's picture

DB is down 50% since July and 25% in the last month. I think I know which equity values they are most concerned about. Their derivative exposure is enormous. Taking them out of the daisy chain of derivatives would make Lehman look like a walk in the park. Mario will follow directions but will Janet?

khnum's picture

an outfit with 75 trillion in derivatives is now lecturing on fiscal responsiblity,pot meet kettle

Calculus99's picture

Looks like they're all starting to turn on each other doesn't it?

ECB will probably do the wrong thing and try to face the markets down. But they always have their Joker card to play - blame the nasty speculators! Yes, those same speculators they encourged to speculate on the long side! Funny the CBs of the world never mention the nasty ones when they're doing their bidding for them. 

tc06rtw's picture

     “…  blame the nasty speculators!”

   They can’t do THAT…  China got the copyright.

wmbz's picture

 "Draghi, back off!"

The only way to stop CB assholes like Draghi is to put a bullet between his eyes.

Arnold's picture

Oak stake in the heart, beheading,

Only Silver bullets can be expected to be marginally effective.

Lead hollow points need to be filled with Garlic.

gatorengineer's picture

Well let me give you my tinfoil hat theory.  The refiners are NOT hurting.  cant be.  Price of gas has not droppe to be nearly commensurate with the price of oil.  Margins have to be very very high.

When big oil divested themselves of drilling and exploration a few years back it was pretty curious.  now they are driving those same firms into bankruptcy.  Someone is going to pick them up for pennies on the dollar, and hit it huge in a few years.   I think its just orchestarted by big oil to buy these assets back for nothing. 

Lady Jessica's picture

And they will receive loans to do so from the massive excess reserves generated by the various iterations of QE.

NoWayJose's picture

Draghi is not listening to DB, and DB is probably 'short the market' anyway. I don't see DB's arguments winning against the 'weaker Euro' and 'deflation fears' mantra!

Doom and Dust's picture

A warning on lower equity prices is now a declaration of war?

Seems asset prices aren't the only things inflating.


Boris Badenov's picture

 For EU bonds to be priced well over par to offer a guaranteed loss to any purchaser who holds to maturity is just ludicrous.

Skeeterworborton's picture

the forest from the trees my friends

strangeglove's picture

WTF, now Im hoping for more QE


What Does HSBC want?

falak pema's picture

Mutti's Germany vs the US squid legacy...race to bottom hottens up as its "every man for himself"...Draghi of course protects the soft underbelly of Capitalism in EU : Italy/Spain...where the rain...

g'kar's picture

ecb headquarters is in frankfurt, douchebank headquarters is in'll be a short ride for whoever launches the panzer blitzkrieg first

moneylover3's picture

But douchebag's bosses are sitting in London

Chuckster's picture

I think people have a right to opine their stupidity.  It should have been  a specific right of man.  Yahoo finance!  I don't know who writes the articles but absolute stupidity is espoused each and every day.  we have seen what qe will do.

Nesbiteme's picture


Shitty, badly run German bank warns shitty EU central banker not to do something stupid. News flash we have crossed the event horizon on this it's just now only a matter of time.

cn13's picture

As a side note, anyone notice DB's stock price lately?

18.36 last, an all-time low. 

The low for this stock in 2009 was 19.60.

Is DB pulling a Lehman?

TheDanimal's picture

So, arguably the worst commercial bank in the world is talking trash about what is arguably the worst central bank in the world.  I love it when the pot calls the kettle black!  Deutsche bank is biting the hand that feeds.  I fail to recall them speaking out against QE when it was still effective in igniting irrational exhuberance in the markets.

goldstorect's picture

State of delaware soon to require all gold dealers and pawn shops to submit not only sellers of items but buyers of gold and silver into a database system. Following the footsteps of CT. I suppose this falls under the Patriot act and anti dollar terrorism.

Old_European's picture

Deutsche Bank has shown (part of) its hand, and it's ugly. Clear demonstration of how desperate DB is.

Luckhasit's picture

They dare doubt Super Mario?!

I dont know if i should be offended or disgused.  

 No QE for you!

SmittyinLA's picture

(Privately they're screaming print moar faster)