FRANKFURT, Germany -- Deutsche Bank's (NYSE:DB) second-quarter earnings underperformed market expectations as it wrote down the value of its Greek assets in the wake of last week's agreement to bailout the country for the second time.
Look, I don't come up with my own greatest ideas, I synthesize my ideas by reading people that are in a league of their own when it comes to prescience. Hopefully you read my last expose on Deutsche Bank. Things are set to get worse. The whole situation is ugly. "Too-Big-To-Fail" was in vogue the last three years. "Too-Big-To-Save" is going to be the vogue of the next few. I want to give a shout out to Reggie Middleton over at BoomBustBlog.com. I strongly encourage anyone out there who is looking to understand why things are not sustainable to subscribe to his stuff, because it will save you much more than it will cost you in embarrassment and in subscription fees.
Deutsche Bank would hurt if the global economy starts slowing. Germany has been the net beneficiary from the redistribution of manufacturing due to the conglomorization of the eurozone. Regarding the global economy, I see absolutely no reason for things to pick up and in fact see several wildcards out there that can lock things up in a jiffy:
- China liquidity issues (SHIBOR) and the unwinding of the pyramid of ridiculousness and unsustainable (Negative ROI) infrastructure spending.
- Europe Contagion - Greece actually is in default.
- The USA is not AAA anymore. This will be reflected in due time, perhaps in the next 30 business days (that's my expectation).
Also note that the most prescient leading indicators out there from the ECRI have been gloomy for some time now, ever since the last silver bubble popped earlier this year. The hardest thing for me personally is trying to analyze stocks using fundamentals only these days -- because it seems to me that politics is becoming an increasingly important factor of investment success. Subsidizing stupidity only works for so long and Italy specifically is cutting a fine line -- and in my opinion could easily tip over into the zone of "Too-Big-To-Save." As this is the case, I wouldn't recommend investing in Deutsche Bank.