There has been a recent article in a website called ZeroHedge that has been feverishly forwarded in social media...it is after all very easy to forward via WhatsApp..a click and it is gone!!
For those who haven't seen it...the gist is below: "Deutsche Bank meltdown started, it is expected that we have entered the eminent crisis of 2020 in 2019. It is expected to hit globally starting with the finance sector and gradually impact the manufacturing and service industry. The impending crisis will lead to job freeze and job cuts. China, India, US, Canada and EU is likely to hit the most with this Tornado. Market risk will appear as a significant risk with investment risk. Finance and Banking will be the first hit. All Indian bank will get impact. With this significant change, many of our business line can get impacted"
Very alarming and clearly that looks to be the intention and with the amount of discussion...I'd say mission accomplished!!
In financial markets, there's always a new reason to worry. While we don't know what is happening within Deutsche, we can attempt to review this in 2 part. 1. Who sent it? 2. Does this look possible?
A quick search on ZeroHedge brought us to Wikipedia where it is described as a financial permanent bear, peddling gossip and rumours about the financial industry. Source isnt very credible.
Then onto the issue being highlighted....I quote from an FT article: The issue with banging on about Deutsche Bank's notional derivative exposure, as ex-IMF economist Mark Dow pointed out yesterday, is that the German business's net exposure is infinitesimal compared to the notional number. The total in Deutsche's report represents positions both long and short positions including hedging transactions.
Indeed, according to the International Swaps and Derivatives Association, the gross credit exposure of over-the-counter derivatives, which " is a more accurate measure of counter-party credit risk", was just $2.3tn for the entire market at the end of 2018, a decline of 0.4 per cent from 2017.
So unless you think Deutsche's risk management is so bad that it would expose €61.3bn of capital to €43.5tn of unhedged derivative positions, perhaps it's time to start looking elsewhere for a market event that will pull the plug on the longest equity bull market in history.
We don't know what we don't know but let's not panic based on rumours and attributions circulated by websites that aren't very credible.