Deutsche Bank Flip Flops, Now Begs For Central Bank Intervention And Ideally More QE

Tyler Durden's picture

We were stunned 10 days ago when, out of the blue, it seemed as if Deutsche Bank had finally figured it out: namely that constant central bank intervention is leading to increasingly more dire outcomes... such as a surge in DB CDS and its stock price plunging to record lows.

The bank which had been crushed over the past month, released a solemn appeal to the ECB and BOJ, in which it made it quite clear that any additional easing and continuous easy money will only hurt both DB and its peer banks.

In the report titled "The Risks From Further ECB and BOJ Easing" Deutsche Bank's Parag Thatte warned that with the Zero Lower Bound already breached in nearly a third of global markets, the benefits to risk assets from further easing no longer exist, and in fact it says that while central banks have hoped that such measures would "push investors out the risk spectrum" the "impact has been exactly the opposite."

Well, what a difference a week makes, because whoever wrote the first DB clearly got a tap on the shoulder.

Over the weekend, it was Deutsche Bank once again who reappeared with a narrative that, not all surprisingly, was the diametrical opposite of what DB said just one week earlier, when it made it very clear,  that "sorry, it was only kidding", and that it is all up to the central banks after all. This is what Sebastian Raedler said, after he angrily took the podium over from last week's Parag Thatte.

Without policy intervention, there is more downside risk for equities: any ECB measure to support European banks (e.g., an LTRO to reduce bank funding stress) would likely trigger a market rally, but addresses only a symptom of the current credit stress, not the root cause. To avoid a further rise in US defaults, we will likely need to see a Fed relent, leading to a sustainable drop in the dollar, higher oil prices and reduced energy balance sheet stress. The problem is that there is little sign of the Fed wanting to give up (with the JOLTS survey strong and Yellen’s remarks that easing elsewhere offsets Fed tightening). In the absence of strong policy intervention, more downside for European equities is likely: if credit spreads rise to 1,150bps to reflect our strategists’ default scenario of 7.2%, this points to 10% downside for equities, while a full default cycle would mean around 20% downside. A US default cycle would increase the risk of a US recession, as the rising cost of debt capital reduces investment and hiring, while falling asset prices push up savings ratios, thereby lowering consumption growth. Our US economists have recently downgraded their 2016 growth forecast to 1.2%, significantly below consensus at 2.2%. During the past two default cycles, IT, autos and consumer durables have all seen their consensus EPS slashed by 80%+.

Oh no, a world without policy intervention, one where the global economy is finally allowed to determine what its true rate of growth is without 7 consecutive years of artificial liquidity "sweeteners." And as for the horror of stocks dropping another 20%... let's not even go there.

But wait, this is the same bank that just on February 6 said more easing brings major risks. It appears DB felt the need to footnote this statement, with an explanation that came also over the weekend, this time by way of equity strategist (Jim Bianco who still has a 2200 year end S&P target). It appears when DB says "easing" it only means "NIRP." Because if "easing" means "QE4", then by all means please do it.

Here is the nail in the coffin of whatever period of lucidity Deutsche Bank may have had, courtesy of David Bianco:

Escalating the currency war will bring mutually assured destruction, in our opinion. The WMD are negative interest rates. Central banks must stop the proliferation now. Negative rates don't stimulate beyond currency devaluation. They began with small CBs fighting flight-to-safety surges in their currency. But negative rates set by larger CBs produce no benefit in a soft global economy because they are  countered. If Euro plunges, then others from GBP to RMB will too, and then if a strong dollar breaks the US economy the whole world will suffer. This spiral risk destabilizes FX markets and price setting in other markets and threatens saver and financial system health. Stick with QE!

So there you have it: Please no more easing, but only if easing means NIRP. As everyone has seen by now, more NIRP means a collapse in DB risk assets. But if "no more easing" means "even more QE", then go for it.

And just like that we are back to square minus one, where central banks are called upon to fix the mess that central banks made, while holding banks and their flip-flopping "analysts" (and year end bonus paychecks) hostage.

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yrad's picture

"Deutsche Bank is fine!!!"

Cognitive Dissonance's picture

Sounds like a fiat addict to me. I want to stop....I want moar. Time to just say no.

knukles's picture

Definitely in need of a fourth step

Durrmockracy's picture
Durrmockracy (not verified) knukles Feb 16, 2016 3:51 PM

Disaster capitalism.  It's the best kind of capitalism around.

DownWithYogaPants's picture

Perhaps they have a position in the market that would benefit from QE??

Sudden Debt's picture

I guess they just figured out that minus their fair bonusses that the account holders at DB don't have any money anymore.

So what's better then to print fiat money so they can just give it to the people who worked hard for it. Makes you wonder what the value of money is he? It's all just newly create numbers out of thin air.


Ghost of PartysOver's picture

Stuff most ne getting really serious.  They can't even figure out which way to turn.

Janet Shalom Bernanke's picture

Those German Assholes Need to GO UNDER.




yrad's picture

"Deutsche Bank is fine!!!"

JustObserving's picture

Could you get more clueless?  And then to have $60 to $75 trillion in derivatives.  No wonder the stock falls everyday.

Sudden Debt's picture

England want's a brexit.

The ECB just can't do it with this threath.

wildbad's picture

when schäuble says its fine..and tries to crank his face into a for the fucking hills

Bill of Rights's picture

Off in the distance you can hear the faint laughing of Ben Bernake...

Budnacho's picture

Deutsch Bank is My Wife *slap!*....It's your Sister...*slap!*.....It's your wife....*slap!*'s your sister!...*slap!*

semperfi's picture

Can I get some of that QE too for my company?  Its not a bank but so what - show me the money!

Janet Shalom Bernanke's picture

Sure, I believe that if you file papers claiming the following, you will receive QE money from the Fed:

1) that you are too big (and stupid) to fail,

2) that you pay yourself obscene bonuses, and produce commensurate losses,

3) that you are willing to pay speaking and consulting fees to Federal Reserve ex-chiefs and ex-regional presidents.  (Level 1 Banks pay speaking fees, Level 2 Banks pay consulting fees)

4) that you say positive things about the e-con-me and the Federal Reserve.


Here is the application form you need to fill-out:


Free Money!!!!!   Weeeeeeeeeeeeeeeeeeee

LawsofPhysics's picture

Fuck you DB.  In the current monetary system bankers/financiers are in fact nothing but overcompensated middlemen between the printer/computer (where money is created without any real work/collateral) and the producer/consumer in the real economy.  Long past time to execute the middlemen!

MFL8240's picture

200 points up in the Fraudulent Equity farce and $50 lower in Gold.  Mission accolpished now new reality check.  Completley insane manipulation and lies.


Give me a stick, and I will kill it if no one else is willing to do the dirty deed.

Panic Mode's picture

Douche bank: "We are cock solid"

To Infinity And Beyond's picture

I have to admit this is fucking entertaining. Every 8 years or so the banks will scream they can't stay in business unless the taxpayers bail them out, otherwise tomorrow ATM's don't work. Bail out will happen and they will raise their exposure to shit they know will crash at some point and rinse and repeat. These fuckers know how to work it. 

Spectre's picture

If the price keeps falling for two more weeks I wll go ahead and purchase DB.  After I rape it for all I can I will let it implode.

jcdenton's picture




Historical precedent?

Let's see ..


During their final days as a world power, the Soviet Union allowed cognitive dissonance to rule its better judgment… as so many Americans are doing in 2012 [2016]. The handwriting on the wall was pretty clear for Gorbachev. The Soviet economy was failing. They did none of the necessary things to save their economy.


In 2012 [2016], the handwriting on the wall is pretty clear for the American people. The economy is failing. The people and the Congress do none of the necessary things to save their economy. Why? Go re-read the definition of cognitive dissonance. That’s why.


We have a classic fight going on between those who want government to take care of them who will pay the price of lost freedom to get that care, and those who value freedom above all else.


On one day we have 50 state attorneys general suing Bank of America for making fraudulent mortgages, and on the next we have M.F. Global losing billions upon billions of customer dollars because they got mixed with the firm’s funds – which is against the law – or we have J.P. Morgan Chase losing $2 billion (or is it $5 billion?) in bad investments.


As Eduard Shevardnadze said, “Everything is rotten. It has to be changed.” As I would say it, “There is no Rule of Law in America today. There has been no real Rule of Law since George Herbert Walker Bush took office.”


No one listened then; no one is listening in America now. The primary reason? Cognitive dissonance.


-- Chapter Two, WANTA! Black Swan, White Hat (2013) pg. 13

Wild Theories's picture

OMG, you can't tell people all these NIRPs are just currency manipulation, not from developed, western nations! it's... it's a stimulus! or something!

how will you explain it to the people on the street, currency manipulation is something only red commies do!