Analyzing and reading the experts view on the current situation of Deutsche Bank to that of Lehman Brothers in 2008. Many of them are emphasizing and argue that 2008 is back.
I will argue that the current situation is the iconic milestone of the clear END of the 2008 crisis. Here is my argument:
What was the Lehman Crisis about? In September 2008, we were facing an under-regulated banking sector and fears of rising interest rates (due to presumed inflation generated by USD 140 oil prices).
What is the current Deutsche Moment about? In September 2016, we are facing an over-regulated banking sector (the US Department of Justice throwing an USD 14bn fine at Deutsche Bank) and fears of never rising quasi-zero (in Germany even negative) interest rates. Continue reading
September 15 2008 was one of the most extraordinary days in global financial history.A simmering credit crisis exploded into a full-blown apocalypse in the global financial sector when Lehman Brothers filed for bankruptcy.
With assets of $639bn and a further $613bn of debts, it was the biggest corporate bankruptcy in the US. The collapse of Lehman had immediate repercussions, frightening financial markets around the world, but with hindsight its demise has come to embody the failure of investment banks to adequately assess risk and invest accordingly.
Market Performance (from the close before Lehman BK) – Silver +71%, Gold +61%, S&P +58% ( For S&P the dividend are not accounted for. Including dividend it will be close to 88%)
Here is a must watch documentary of 60 min : “The West is done, it’s over! We screwed it all up. Do you want your great-grandchildren speaking Chinese 🙂
Although Lehman brothers is no more in existence but it has provided many strategies to the Investment banking space that are still in use and may be used more vibrantly in the markets.
One of them is the most famous Straight Line Pitch – “Straight line is an impulse selling at its most aggressive and there have been hundreds of thousands schooled and steeped in its traditions over the years”.
Since its beginning in the water street and madison avenue branches of the Shearson Lehman, the straight line has been taught and retaught a million times during countless boardroom meetings and brokerage firm training sessions. Continue reading
Nassim Taleb’s contribution to the world of finance are two fascinating concepts — essays really — subsequently expanded into book length. The first is Fooled By Randomness: The Hidden Role of Chance in Life and in the Markets, which describes the tendency of investors to find patterns where none exist, and to attribute to skill that which might be better credited to luck.
In one of his interview to Financial Times Taleb talks about how fragile we are. Five years on from the Lehman Brothers collapse, political and regulatory errors have made the world’s financial system even more fragile.This alarming line of thought comes from Nassim Nicholas Taleb, best known for The Black Swan, which explained markets’ difficulties in pricing extreme events for which they had no precedent.
He argues first that natural systems work by allowing things that do not work to break. This did not happen after the Lehman bankruptcy. True, letting Lehman fail was an attempt to instil discipline in the banking system, but it came too late. Continue reading
On 15th September 2008, Lehman Brothers declared itself bankrupt. The blog was relatively new,In one of the most dramatic events of the 2007-2008 global financial crisis, the 160-year old institution collapsed due to its exposure to subprime mortgages. After Lehman’s failure, financial markets entered a period of unprecedented volatility and governments spent trillions of dollars attempting to restore confidence in the banking industry. Five years on, how has the banking industry landscape changed?
On the one hand, the risk of another Lehman-style collapse has been reduced because banks are better capitalised than they were before the crisis. For UK banks, for example, Tier 1 capital was 8% of risk-weighted assets in 2008; by 2012 this had risen to 13%. In addition, the market infrastructure is being strengthened by the introduction of central counterparties, Continue reading