If Deutsche Bank goes under — and it may indeed totally collapse — it will be a weapon of mass destruction many times larger than the failure of Lehman Brothers in 2008.
- It has $46 TRILLION in derivatives on its books with immeasurable counterparty risk.
- It’s facing up to a $14 billion fine from the U.S. Department of Justice for its role in the 2008/09 crisis and refuses to pay it — because it can’t afford to.
- What is vulnerable is Deutsche Bank’s business model, since it is obligated to invest its large German deposit surplus in German government bonds. With a sovereign debt crisis looming, that’s a recipe for disaster.
- With an estimated 3.4% return on tangible equity for 2016, Deutsche Bank is worse than other banks in Europe, which is half the total of 6.8% for all institutions on the Continent, according to financial services firm Keefe, Bruyette & Woods. U.S.-based banks are projected to have a 10.6% return.
I find it fascinating that one of the largest banks in the world could go down precisely when my AI models forecast an important turning point.
You’ve seen the charts here before, charts like this one for gold.
These come from my Artificial Intelligence (AI) and Neural Net (NN) computer models.
I can run them on any freely traded market and they will give me a projected path forward …
Not only for price, but also for important turning points, in markets and economies.
And often, when many markets show the same turning point … something big is brewing somewhere in the world.
In previous columns, I showed you similar charts. The Dow Industrials, the euro, and all were pointing to early October as an important turning point.
So how does this tie into the possible failure of Deutsche Bank?
- You can expect several more banks in Germany to go. Deutsche Bank isn’t the only German bank in bad shape.
- You can expect Italy’s near bankrupt financial system to collapse.
- You can expect the euro to tank.
- You can expect the dollar to soar.
- As for U.S. stocks, initially lower, but then a sharp recovery as European flight capital comes pouring into the U.S.
As for gold and silver, it remains to be seen. The forecast charts call for a low, and they have nailed the recent downtrend. But in times like these, gold and silver could continue lower beyond the October 5 date.
Why? Because if Deutsche Bank goes, there will be massive margin calls and forced liquidations of stocks and other assets, and gold and silver could get hit very hard.
So although a low is due about now in gold and silver, I’m not going to make that call until I see more action, and especially see how Germany handles what’s happening with Deutsche Bank.
Angela Merkel has sworn there will be no taxpayer bailouts. But already, she’s trying to skirt the law by effectively nationalizing 25% of Deutsche Bank by buying as much as 25% of its stock.
Fine I say. Go ahead, Angela. You’re going to incur massive losses for the German government, which is the taxpayer no matter how you look at it …
And you’re going to lose your chancellorship come elections next summer.
So what should you be doing now?
For one thing, you should mostly be in cash, as I have stated all along.
For another, if you acted on any suggestions I made to hedge gold and silver holdings with inverse ETFs, you should exit those now — with gains.
I know — above I just stated that gold and silver could move still lower. So why am I telling you to grab gains on any inverse metals ETFs you may have?
Simple. In this free column, I can’t give you specific timing and buy and sell signals. It wouldn’t be fair to paying members of my various services, who get my signals and everything my models tell us.
Stay safe, and best wishes, as always …