Be Very Concerned About the Deutsche Bank Decline

Steve Kanaval  |

I watched (for the the 5th time now) "The Big Short" with Steve Carell as Mark Baum a fund manager running within the framework of the Morgan Stanley umbrella when the housing market started to crash in 2008. There was a poignant scene where Baum is debating on stage with a competitor as Bear Stearns was going the zero.

I am reminded as I watch Deutsche Bank (DB) decline today that you can never believe what the company says when they go into a death roll. The stock is down 52% for the year, and much of this recently. The company said today not to worry...sure. Every single trading partner is questioning if the run on the bank will intensify. The firm is running around the deck looking for lifeboats. It gets to the point where not one person at the company knows what they are doing. It becomes a comedy of pilot error after pilot error. Enron did this, WorldCom did this, Barrings Bank did this when Nick Leeson imploded, and Deutsche Bank will need to be bailed out - or they will go to zero. Here's why...


If you recall in the movie the first thing Mark Baum did when he realized Morgan Stanley had a real problem (Baum thought they were losing $3B when they were down $15B) was to short the bank stocks...which is what everyone is doing. Deutsche Bank is still an attractive short here at $11.50, there is plenty of meat left on the bone. Once this stock falls to a hat size it will be lights out. Stocks that trade under $10 never ( in the 80th percentile) regain that $10 price level.

You can hear the flushing sound if you are on the wrong side...but most are already on the short side. Stay tuned for a few short shaking bounces, but this had $6 written all over it before year end, and we all have seen this movie before. Be afraid...be very afraid.

No one at Equities has a short/long position in Deutsche Bank (DB) nor any other Bank Stock on any exchange..

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Companies

Symbol Name Price Change % Volume
DB Deutsche Bank AG 7.92 0.02 0.25 3,725,483 Trade

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     

INTERVIEW: CEO Steve Stanulis - Stanulis Films

Equities.com's Sam Mitchell interviewing CEO Steve Stanulis of Stanulis Films.