Oil Prices and Interest Rates.....

Thrugelmir

cells wrote: »

The Saudi Arabia of car exports is Germany. Exporting something like $250 billion a year worth of cars. That is more than 3 x the value of saudi oil exports.

In the credit boom years. The biggest export market for BMW's was the UK. Says it all really.

VW's demise must have had an impact more recently.

cells

Generali wrote: »

The total quantity of petrodollars was estimated by Citibank to be $1tn in 2007 and so is probably more like $1.5-2,000,000,000,000 now . It wouldn't need a huge proportion of that to be held on deposit for a huge amount of bank reserves to be based on Petrodollars.

but do the oil net exporters with net trade accounts pop down to the local RBS to open a savings account?

I can see and understand that some nations might have built large pots of savings but I dont believe them to be bank deposits much more likely government bonds corporate bonds and shares in big companies

So if the Saudis or Russians can no longer save but need to dip into their savings they will start selling those assets they wont go to the local RBS branch to withdraw fifty pound notes


EdIT: Also whats $2 trillion in this day and age. It wont even buy you half a London

Generali

Thrugelmir wrote: »

Any views on about Deutsche Bank Generali. Or are you detached from the European Banking scene down under.

Apparently question marks hanging over Barclays and CitiCorp as well.

I think Deutsche is an accident waiting to happen. Whenever I write what I really think of them I get a load of exclamation marks come up instead! They've got a cost:income ratio of 135% !!!!!!!

A bail in for Deutsche would be 'interesting' for the German economy as they have well north of EUR1,600,000,000,000 in liabilities on their books. As for a bail out? I can't imagine the Greeks would be massively impressed if the ECB was to bail out Deutsche Bank.

Still you can get 13% on Deutsche CoCos right now so if you think they're a going concern there's plenty of money to be made there.

CoCos, for the unitiated, are a sort of bond that banks now issue which get converted into shares if the bank gets into trouble. If you do get converted it's fair to say that you are likely to lose a fair bit of money.

michaels

Generali wrote: »

I think Deutsche is an accident waiting to happen. Whenever I write what I really think of them I get a load of exclamation marks come up instead! They've got a cost:income ratio of 135% !!!!!!!

A bail in for Deutsche would be 'interesting' for the German economy as they have well north of EUR1,600,000,000,000 in liabilities on their books. As for a bail out? I can't imagine the Greeks would be massively impressed if the ECB was to bail out Deutsche Bank.

Still you can get 13% on Deutsche CoCos right now so if you think they're a going concern there's plenty of money to be made there.

CoCos, for the unitiated, are a sort of bond that banks now issue which get converted into shares if the bank gets into trouble. If you do get converted it's fair to say that you are likely to lose a fair bit of money.

But why are they suddenly broken now when they weren't 7 years ago? Surely defaults are way down since then and there has been plenty of time to rebuild asset bases?

cells

michaels wrote: »

But why are they suddenly broken now when they weren't 7 years ago? Surely defaults are way down since then and there has been plenty of time to rebuild asset bases?

Ive not been following it at all but the banks are businesses too and could potentially be out competed or be poorly managed and let costs increase and lose customers

so not necessarily bad loans or a credit crunch causing a failure of business models.

one thing I read somewhere was that if interest rates stay low then each year they are low hurts the banks because there is a floor of 0% for money in banks. So if the base rate is 5% some silly deposits will have cash at 0% accounts so the bank makes a pretty penny from them. With interest rates at near 0% then its almost like all the depositers got extremely MSE and moved their deposits to the best paying accounts killing the margins of the banks. Of course all the depositors are not super MSE just that the banks cant maintain a 5% spread on deposit to loans by paying 0% on deposits with low interest rates.

Generali

michaels wrote: »

But why are they suddenly broken now when they weren't 7 years ago? Surely defaults are way down since then and there has been plenty of time to rebuild asset bases?

Four things:

Firstly there has been a nasty chipping away at various bits of the investment bank business model, especially in Europe. Deutsche is suffering the effects of that as badly as anyone.

Secondly, there are not meant to be any more bailouts.

Thirdly I have absolutely no confidence that risk weighted assets are being weighted correctly.

Finally Deutsche's net interest margin will be getting killed in the low interest rate environment (just like the other banks). As it has such a massive deposit base its NIM will be hurting more than most.

padington

Generali wrote: »

I think Deutsche is an accident waiting to happen. Whenever I write what I really think of them I get a load of exclamation marks come up instead! They've got a cost:income ratio of 135% !!!!!!!

I brought up Deutsch bank a while ago because my friend in the Sunday Times has been thinking for a while they might be the next thing to fold and I thought you said at the time you thought they were water tight because they had so much cash in reserve ?

Maybe it was someone else ?

Thrugelmir

michaels wrote: »

But why are they suddenly broken now when they weren't 7 years ago? Surely defaults are way down since then and there has been plenty of time to rebuild asset bases?

I'm guessing that it's the sheer scale of the operation. Like RBS was. Deutsche is a global operation. Bank sheet was shrunk by $425 billion last year. But is still 3 times the size of the entire German economy. Also has more fines to settle yet in the coming years.

Generali

padington wrote: »

I brought up Deutsch bank a while ago because my friend in the Sunday Times has been thinking for a while they might be the next thing to fold and I thought you said at the time you thought they were water tight because they had so much cash in reserve ?

Maybe it was someone else ?

Not sure.

Looking at the balance sheet they have EUR56bn at central banks plus another EUR75bn in cash held at other banks. The latter may well be margin for the most part so not possible to get back without unwinding the underlying trade.

About a third of their assets are EUR571bn of unrealised gains on derivatives positions and a third of their liabilities are EUR544bn of unrealised losses on derivatives positions.

What systemic risk?

mwpt

Generali wrote: »

A bail in for Deutsche would be 'interesting' for the German economy as they have well north of EUR1,600,000,000,000 in liabilities on their books. As for a bail out? I can't imagine the Greeks would be massively impressed if the ECB was to bail out Deutsche Bank.

Why would it have to be the ECB? Germany could do it herself.