RICK SANTELLI: You know, there are many lessons to be learned from Deutsche Bank — and I’m not really talking about the ones that you the viewer or listener on the radio may be thinking of. My lesson is: central banks.
Now I’m not here to say they’ve had bad intent. I think all central bankers truly want to help.
But please, don’t help any more, okay?
Let’s think about this. So, the bailing out the system after the credit crisis (in 2008). And what we’ve had since are years and years of digging more “help,” finding more “help,” looking for more free “help.” Easy money. How has it really helped anything?
I’ll use the same analogy I’ve used for years. You can’t wallpaper over termites forever, okay? Deutsche Bank has plenty of issues we don’t need to get into. But one issue that’s going to affect not only Deutsche Bank and the European banks, it’s going to affect the Japanese banks, the emerging market banks, and our banks is the fact that the more negative interest rates prevail, the worst profitability is going to be.
But it can get worse, and I’ll tell you why. Do you think the Swiss national bank, or the Bank of Japan, or even with regard to corporates, the ECB, the other two or stocks. Central banks buying in the markets? Do you really think that’s a good idea?
Lets use Deutsche Bank as an example. Let’s say the stock of Deutsche Bank keeps going down. The CoCo bonds keep converting into equity. Everybody keeps blowing it out. What if the central banks all get together and decide, “Well, okay we don’t want that to happen. Let’s buy Deutsche Bank”? Or when any other bank or company is in trouble, “We’ll buy that.”
Or as you get to political highlight points, like election times, you want to keep everything pretty clean, make sure nothing goes down. Is that the world we really want to live in?
Here’s where I’m going with this. Janet Yellen recently, and it’s all over every blog and every tongue of every trader, is considering the costs and benefits of doing things like other central banks. Maybe buying equities, maybe buying corporates. It’s a bad idea!
It’s not only the fact of who gets to pick and choose, it will completely and utterly in every possible way destroy any value in the marketplace. Completely! It will be a useless investment.
What’s good is it without price discovery, without people getting together and using the markets to either add to risk or dispense of their risk to actually get a large group of individuals whether in a group or on an electronic platform to bid and offer to come up with a true price reflecting the fundamentals of whatever they’re trading?
A backstop by central banks is not only horrible — and the final joke here is that in order for Janet Yellen & Company to do any of that, they would have to go and get permission from Congress. I will just leave it at that. Think about that congressional hearing. Back to you.