9 ms·

It's completely plausible that the post-Brexit Deutsche Bank is undervalued by the market due to panic and uncertainty, and Snapchat is overvalued by the market

It's completely plausible that the post-Brexit Deutsche Bank is undervalued by the market due to panic and uncertainty, and Snapchat is overvalued by the market due to hype.

cm2187 10y ago
I agree. Although in the case of banks, a panic can be self fulfilling. DB may be well capitalised and have sound assets, but if there is a market panic and no wholesale investor will roll their funding with them (as happened after Lehman went bust), and retail depositors start a run on the bank, the bank will go bust. Even if it is solvent. The liquidity requirements introduced after Lehman should be sufficient for banks to sustain another Lehman scenario but you could imagine an even more severe stress.
- Malarkey73 10y ago
  Hell will freeze over before the German government lets Deutsche Bank go bust. They let Greece go bust rather than the Landesbank.
  - cm2187 10y ago
    Actually I think what would happen would neither be a bail out or DB going bust, but a bail-in (which I described in another post): https://news.ycombinator.com/item?id=12065996 https://news.ycombinator.com/item?id=12065996
  - tim333 10y ago
    >They let Greece go bust rather than the Landesbank. It more a case they may have to bail out Greece rather than letting it default and take out the Landesbank. A lot of the problems could be prevented by the German controlled ECB easing monetary policy and aiming for say 2% inflation rather than the present 0%.
    - Tomte 10y ago
      As I like to point out whenever people claim that the ECB is controlled by Germany: Germany has a very small minority of the votes in the controlling gremium.
      - tim333 10y ago
        Fair enough - my bad.
      - Malarkey73 10y ago
        Influence in the Euro institutions is largely determined by the size of the economies and their contributions to the budget. Germany is first among equals.
        Tomte 10y ago
        As long as we're talking votes, not "soft power", Germany is a dwarf. European institutions are largely determined by "every member gets something", not economic size. In this example, the Governing Council of the ECB has 25 members, two of which are German. It is "first among equals" in the sense that no country has more members and few have as many, but what you're insinuating is factually wrong. When it comes to any European organization, just assume that each member country has one vote and you'll always be very close to reality.
        Malarkey73 10y ago
        I'm sorry - I don't mean to imply that Germany is all powerful. The power dynamics of different EU institutions are complex and sometime unwieldy. And often a single country can block something. However I respectfully disagree with your last sentence - assuming each country has equal power is not reality but fantasy.
  - pgeorgi 10y ago
    The various Landesbanken (banks of the states), the Bundesbank (federal bank) and KfW (kinda the federal investment bank) will be kept afloat in some way (although there might be mergers, as there were in the past), since they're public entities. However Deutsche Bank is a private company. It's still likely to be kept alive, but it's not as certain.
    - jsemrau 10y ago
      You are right that DB is private, nevertheless the bank is deeply intertwined with financing the Deutschland AG. Without them Daimler, BMW, Bosch, etc all would have to find new partners for financing their day to day operations.
- arbuge 10y ago
  DB is actually one of the less well capitalized major banks in the world: http://www.bloomberg.com/news/articles/2016-02-12/deutsche-bank-ranks-last-on-capital-gauge-where-citigroup-excels http://www.bloomberg.com/news/articles/2016-02-12/deutsche-b... As others have pointed out, the German government would probably be ready to bail them out if they ever ran into trouble, though that would likely be a painful process for existing common shareholders.
pg_is_a_butt 10y ago
lots of police drug math in the valuations too... just because you found someone willing to pay $200 a gram doesn't mean the kilo will sell for $200,000. if you upend snapchat and deutsche bank, and find a single buyer to acquire all assets and take over management, deutsche bank would easily garner more money.
jakozaur 10y ago
In 2007 there was viral video suggesting that Facebook is overvalued at $15bln comparing to Ford: https://m.youtube.com/watch?v=I6IQ_FOCE6I https://m.youtube.com/watch?v=I6IQ_FOCE6I Lets see how the story will unfold.
- akhilcacharya 10y ago
  *2007. That video is fantastic.
- mysterypie 10y ago
  > Lets see how the story will unfold You left it unstated that Facebook is now worth $283bln more than Ford. So, yes, the video looks silly for crying wolf back in 2007. But I'm at a loss to draw the correct conclusion from this. Is it rational that Facebook is now worth 6x as much as Ford?
  - GCA10 10y ago
    On Facebook v. Ford, in terms of how shareholder value gets built and sustained, yes, the market is being as rational as it ever gets. Consider the following five dimensions: CREATING THE PRODUCT: Facebook's engineers provide the framework, but each day's content is created free of charge by 1.5 billion active users. That's great for profit margins! At Ford, cars don't get built unless the company buys steel, glass, tires, etc. and pays workers to put it all together. That really squeezes margins. GENERATING DEMAND: Facebook's users share content and invite their friends to join, at no cost. Media companies beg to play in Facebook's ecosystem. By contrast, Ford needs to spend billions on advertising to get people excited about cars. OBLIGATIONS TO CUSTOMERS: Facebook has a modest-sized fraud and security team that keeps everything tidy. They do heroic work, but there aren't 50,000 of them. At Ford, the requirements for inspections, safety tests, recalls, legal settlements when vehicles go bad, etc. are vastly larger. OBSOLESCENCE: Ford has $58 billion invested in plant and equipment. Every day, those factories get a little closer to being obsolete. Ford must constantly either raise cash or reinvest profits to keep its factories competitive. That means less free cash for shareholders. By contrast, Facebook has just $8 billion invested in server farms, beautiful headquarters, etc. Its asset-maintenance burden is vastly less -- and should stay that way forever. MAKING MONEY: Ford's net income zigzags all over the place, jolted by lots of market/economic issues. Net income was down last year; historically it's ranged from $11 billion to sizable losses. Facebook's net income totaled $3.7 billion last year and is climbing at a very snappy rate. 35% a year? Doubling? Still hard to tell, but it keeps going up. Put all those factors together, and Facebook is a growth stock with a pretty straightforward path to making its business hum. Ford is a cyclical stock that may have already posted its peak profits. Ford may be a bedrock part of the U.S. economy, but that doesn't always get you a lot of love in the stock market, for reasons above. Yeah, Ford has $150 billion in revenue a year and Facebook had just $18 billion. But markets value companies on their growth prospects. I've got no trouble believing that Facebook's overall opportunity to make money is 6x better than Ford's.
pmorici 10y ago
It's probable that they are both over valued. Deutsche Bank supposedly has insane amounts of derivative exposure and is highly leveraged. Then again if you assume that they will be bailed out at any cost you could be right.
- LoSboccacc 10y ago
  Yeah, germany helping greece was mostly to save the over exposed DB, and I don't think it's over yet on that front. then there's the italian front, which is more of the same, and on top of it brexit has messed up euro value even further. It's going to recover, but that burned a lot of non indexed capital
adventured 10y ago
It's more plausible that Europe is going to go through a much harsher next ten years than the last ten years have been (a time during which the EU and Eurozone both saw essentially zero net GDP growth). They've only added to their debt situation since the great recession, nothing has actually been fixed, and they will be unable to raise interest rates for the next decade at least - that combination will continue to suffocate all GDP growth, by locking up trillions in capital that will no longer be productive and will be stuck in a blackhole yielding a negative return for decades. Italy for example is imploding on $300 billion in bad debts, which is likely to send their economy into a Spanish style depression. That's going to sink a lot of European banks. Deutsche Bank's lead economist is already calling for a $150 billion EU bank bailout. They're going to need something more like $500 billion as the financial picture gets worse in Europe in the next few years. Finland as another example is in a nearly decade long soft-depression, and is likely to abandon the Eurozone as their situation will continue to drift and erode. Countries like Sweden, Denmark, the Netherlands, and Norway, now have among the most indebted households on earth based on debt to income ratios. The mortgage debt accumulation going on there can't continue indefinitely. Spain and Portugal have barely begun to pull out of the last recession, when a new one is inbound. Greece is still a hobbled mess. Countries like France and Germany that are center to Europe's economy, have had zero growth for nearly a decade. Germany's ability to continue to bail out other parts of Europe, is now at an end. It's far more likely Deutsche Bank will be quasi-nationalized, than not at this point. The next few years will be worse, rather than better.

It's completely plausible that the post-Brexit Deutsche Bank is undervalued by the market due to panic and uncertainty, and Snapchat is overvalued by the market due to hype.

cm2187 10y ago

I agree. Although in the case of banks, a panic can be self fulfilling. DB may be well capitalised and have sound assets, but if there is a market panic and no wholesale investor will roll their funding with them (as happened after Lehman went bust), and retail depositors start a run on the bank, the bank will go bust. Even if it is solvent. The liquidity requirements introduced after Lehman should be sufficient for banks to sustain another Lehman scenario but you could imagine an even more severe stress.

Malarkey73 10y ago
Hell will freeze over before the German government lets Deutsche Bank go bust. They let Greece go bust rather than the Landesbank.
- cm2187 10y ago
  Actually I think what would happen would neither be a bail out or DB going bust, but a bail-in (which I described in another post): https://news.ycombinator.com/item?id=12065996 https://news.ycombinator.com/item?id=12065996
- tim333 10y ago
  >They let Greece go bust rather than the Landesbank. It more a case they may have to bail out Greece rather than letting it default and take out the Landesbank. A lot of the problems could be prevented by the German controlled ECB easing monetary policy and aiming for say 2% inflation rather than the present 0%.
  - Tomte 10y ago
    As I like to point out whenever people claim that the ECB is controlled by Germany: Germany has a very small minority of the votes in the controlling gremium.
    - tim333 10y ago
      Fair enough - my bad.
    - Malarkey73 10y ago
      Influence in the Euro institutions is largely determined by the size of the economies and their contributions to the budget. Germany is first among equals.
      - Tomte 10y ago
        As long as we're talking votes, not "soft power", Germany is a dwarf. European institutions are largely determined by "every member gets something", not economic size. In this example, the Governing Council of the ECB has 25 members, two of which are German. It is "first among equals" in the sense that no country has more members and few have as many, but what you're insinuating is factually wrong. When it comes to any European organization, just assume that each member country has one vote and you'll always be very close to reality.
        Malarkey73 10y ago
        I'm sorry - I don't mean to imply that Germany is all powerful. The power dynamics of different EU institutions are complex and sometime unwieldy. And often a single country can block something. However I respectfully disagree with your last sentence - assuming each country has equal power is not reality but fantasy.
- pgeorgi 10y ago
  The various Landesbanken (banks of the states), the Bundesbank (federal bank) and KfW (kinda the federal investment bank) will be kept afloat in some way (although there might be mergers, as there were in the past), since they're public entities. However Deutsche Bank is a private company. It's still likely to be kept alive, but it's not as certain.
  - jsemrau 10y ago
    You are right that DB is private, nevertheless the bank is deeply intertwined with financing the Deutschland AG. Without them Daimler, BMW, Bosch, etc all would have to find new partners for financing their day to day operations.
arbuge 10y ago
DB is actually one of the less well capitalized major banks in the world: http://www.bloomberg.com/news/articles/2016-02-12/deutsche-bank-ranks-last-on-capital-gauge-where-citigroup-excels http://www.bloomberg.com/news/articles/2016-02-12/deutsche-b... As others have pointed out, the German government would probably be ready to bail them out if they ever ran into trouble, though that would likely be a painful process for existing common shareholders.

pg_is_a_butt 10y ago

lots of police drug math in the valuations too... just because you found someone willing to pay $200 a gram doesn't mean the kilo will sell for $200,000. if you upend snapchat and deutsche bank, and find a single buyer to acquire all assets and take over management, deutsche bank would easily garner more money.

jakozaur 10y ago

In 2007 there was viral video suggesting that Facebook is overvalued at $15bln comparing to Ford: https://m.youtube.com/watch?v=I6IQ_FOCE6I https://m.youtube.com/watch?v=I6IQ_FOCE6I Lets see how the story will unfold.

akhilcacharya 10y ago
*2007. That video is fantastic.
mysterypie 10y ago
> Lets see how the story will unfold You left it unstated that Facebook is now worth $283bln more than Ford. So, yes, the video looks silly for crying wolf back in 2007. But I'm at a loss to draw the correct conclusion from this. Is it rational that Facebook is now worth 6x as much as Ford?
- GCA10 10y ago
  On Facebook v. Ford, in terms of how shareholder value gets built and sustained, yes, the market is being as rational as it ever gets. Consider the following five dimensions: CREATING THE PRODUCT: Facebook's engineers provide the framework, but each day's content is created free of charge by 1.5 billion active users. That's great for profit margins! At Ford, cars don't get built unless the company buys steel, glass, tires, etc. and pays workers to put it all together. That really squeezes margins. GENERATING DEMAND: Facebook's users share content and invite their friends to join, at no cost. Media companies beg to play in Facebook's ecosystem. By contrast, Ford needs to spend billions on advertising to get people excited about cars. OBLIGATIONS TO CUSTOMERS: Facebook has a modest-sized fraud and security team that keeps everything tidy. They do heroic work, but there aren't 50,000 of them. At Ford, the requirements for inspections, safety tests, recalls, legal settlements when vehicles go bad, etc. are vastly larger. OBSOLESCENCE: Ford has $58 billion invested in plant and equipment. Every day, those factories get a little closer to being obsolete. Ford must constantly either raise cash or reinvest profits to keep its factories competitive. That means less free cash for shareholders. By contrast, Facebook has just $8 billion invested in server farms, beautiful headquarters, etc. Its asset-maintenance burden is vastly less -- and should stay that way forever. MAKING MONEY: Ford's net income zigzags all over the place, jolted by lots of market/economic issues. Net income was down last year; historically it's ranged from $11 billion to sizable losses. Facebook's net income totaled $3.7 billion last year and is climbing at a very snappy rate. 35% a year? Doubling? Still hard to tell, but it keeps going up. Put all those factors together, and Facebook is a growth stock with a pretty straightforward path to making its business hum. Ford is a cyclical stock that may have already posted its peak profits. Ford may be a bedrock part of the U.S. economy, but that doesn't always get you a lot of love in the stock market, for reasons above. Yeah, Ford has $150 billion in revenue a year and Facebook had just $18 billion. But markets value companies on their growth prospects. I've got no trouble believing that Facebook's overall opportunity to make money is 6x better than Ford's.

pmorici 10y ago

It's probable that they are both over valued. Deutsche Bank supposedly has insane amounts of derivative exposure and is highly leveraged. Then again if you assume that they will be bailed out at any cost you could be right.

LoSboccacc 10y ago
Yeah, germany helping greece was mostly to save the over exposed DB, and I don't think it's over yet on that front. then there's the italian front, which is more of the same, and on top of it brexit has messed up euro value even further. It's going to recover, but that burned a lot of non indexed capital

adventured 10y ago

It's more plausible that Europe is going to go through a much harsher next ten years than the last ten years have been (a time during which the EU and Eurozone both saw essentially zero net GDP growth). They've only added to their debt situation since the great recession, nothing has actually been fixed, and they will be unable to raise interest rates for the next decade at least - that combination will continue to suffocate all GDP growth, by locking up trillions in capital that will no longer be productive and will be stuck in a blackhole yielding a negative return for decades. Italy for example is imploding on $300 billion in bad debts, which is likely to send their economy into a Spanish style depression. That's going to sink a lot of European banks. Deutsche Bank's lead economist is already calling for a $150 billion EU bank bailout. They're going to need something more like $500 billion as the financial picture gets worse in Europe in the next few years. Finland as another example is in a nearly decade long soft-depression, and is likely to abandon the Eurozone as their situation will continue to drift and erode. Countries like Sweden, Denmark, the Netherlands, and Norway, now have among the most indebted households on earth based on debt to income ratios. The mortgage debt accumulation going on there can't continue indefinitely. Spain and Portugal have barely begun to pull out of the last recession, when a new one is inbound. Greece is still a hobbled mess. Countries like France and Germany that are center to Europe's economy, have had zero growth for nearly a decade. Germany's ability to continue to bail out other parts of Europe, is now at an end. It's far more likely Deutsche Bank will be quasi-nationalized, than not at this point. The next few years will be worse, rather than better.