It’s no secret that Deutsche Bank has been under pressure. Among other issues, negative interest rates have cut into the bank’s profits. In fact, Deutsche Bank shares have lost nearly 60 percent this year, and worst may be yet to come for the embattled investment bank.
Deutsche Bank finds itself in a highly leveraged position, and concerns over the health of the bank are becoming more and more apparent. Last week, news surfaced that some of the bank’s hedge fund clients were trimming their sails and removing some excess cash and positions from the bank.
Once this piece of news hit the wires, the effects on the broad market S&P 500 were quite rapid with the index declining by 15 or 20 handles in a very short period of time.
Could this just be a small taste of more selling to come?
Deutsche Bank is also negotiating a settlement for a U.S. lawsuit over subprime mortgages that is reportedly in the neighborhood of $14 billion- a figure that would hit the bank hard.
The bank also recently settled gold and silver price fixing allegations. All in all, its legal bills are well into the billions over the last several years.
The situation has an almost eerie similarity to the 2008 financial crises in the U.S. Following the collapse of Lehman Brothers, then Treasury Secretary Henry Paulson made two cash injections into Citigroup, which at the time was teetering on the brink of collapse. Although the bailout was not a popular move, it did keep the bank afloat and helped the bank avoid insolvency.
Europe is not the U.S., however, and the idea of a government bailout right now is reportedly being shunned by German officials.
Which begs the question: What could happen if Deutsche Bank is allowed to collapse?
While global risks may be less now than they were in 2008, the shock to the financial system could still be significant.
Equity markets could potentially tumble, and the flight to perceived safe haven assets such as gold and silver could possibly result in dramatic price increases for these precious metals.
Pressure could mount on the German Government to come up with public funds to rescue the bank. The question is: Will it?
Now is the time to be proactive in case the situation escalates. Now is the time to consider an allocation in hard assets that may potentially rise in value during what could be a very turbulent time for the global economy and banking system.
Now is the time to begin acquiring and holding physical gold and silver.
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Don’t wait for another major bailout and stock market crash before taking action. Be proactive. Call us today at 1-800-341-8584 to get started.Tags: advantage gold, bailout, deutsche bank, Germany, gold, investment banking, leverage, negative interest rates, recession