![]() Date: 2024-08-16 Page is: DBtxt003.php txt00011350 | |||||||||
Finance | |||||||||
Burgess COMMENTARY | |||||||||
Why Brexit May Be the Straw that Breaks the Camel's Back The head of Germany's financial regulatory authority is sounding the alarm on Brexit risks to large German banks. Two banks cited as having the largest business dealings in London are Deutsche Bank (DB) and Commerzbank (CRZBY), with shares of DB breaking to new all-time lows.
Consider 'Brexit' would cause big problems for German banks: German financial watchdog
Starting out this year, credit default swaps—insurance against the risk of default—on Deutsche Bank shot straight up matching levels not seen since the European debt crisis. Though off their February highs, default risks appear to be rising again:
Though a vote by UK citizens to leave the EU next week on June 23rd could be the catalyst for wider concerns regarding the fate of European Union, we should not reverse cause with effects. See 'Desperate' ECB risks destroying European project with negative rates, warns Deutsche Bank:
Given the current risks, Cumberland's David Kotok sent out a note on June 10th saying 'We have taken banks and financials to max underweight' and 'We have raised cash.' Here's the reasons he gave:
But here was the key nugget: 'Using the price/sales ratio we examined the financials with the help of Ned Davis Research. The Financial Sector is more than 2 standard deviations above its 30-year average. It is the highest ever using weekly data.' If true, and the financial sector is massively overvalued, it certainly doesn't look good for their bottom line when bank loans at or near default are spiking to recessionary levels.
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