Stock Price

As many of you are aware, the DB ticker symbol represents Douche Bag - whoops - I mean Deutsche Bank. And its stock price declined consistently for the past few years. Although many traders expected the stock price to breach $10 and go into the single digit upon hearing that the bank failed its stress test, the market managed to push the price back up to $11 and is in the process of establishing support at this region.

This is very weird - and I will crack this mystery for you.

Financial Crisis Casino

The old veterans will know what happened in 2008. Mortgage-backed securities, collateralize debt obligations, credit default swaps, synthetic CDOs - people familiar with the inner workings of the financial industry will be no stranger to these buzzwords. For those new to these buzzwords, here are some explanations:

Mortgage-backed securities (MBS): This is basically the bank offering a third party the option to lend money to a mortgage borrower, and in return the third party will receive interest payments

Collateralize debt obligations (CDO): This is a bunch of MBS lumped together to be offered to a third party and if accepted, then the third party will receive interest payments

Credit default swaps (CDS): An insurance in case the underlying mortgagees in the MBS and CDO fail to make payments

Synthetic CDO: A bunch of CDS lumped together as insurance

The Mortgage Debt Problem Was Never Solved

As you can see from the above, the financial products were created to form a counter-party risk chaos in the financial services sector. When the underlying subprime mortgagees failed to make payment, the MBS and CDO system began to crumble and Deutsche Bank being one of the major players taking the wrong side of the CDS trade, have been suffering consistently for the past 10 years.

The short-term good news is that since the entire system is based on counter-party risk, if Deutsche Bank is allowed to fail, the entire debt system will collapse - so the other banks involved with this counter-party risk chaos will not allow DB to fail. This is why DB stock price increased again these few weeks despite the failed bank stress test - they need to pump the stock price up to increase the market's confidence in the debt system.

There really isn't much else to say other than that the stock markets really is a rigged game despite everyone believing that it is "regulated". Well I guess it is "regulated" since it is the central banks rigging the game.