Todd Harrison: Trading Deutsche Bank and the Tape

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<div qowt-divtype="page" style="margin-left:auto;"> <div id="E-7" qowt-divtype="section" qowt-eid="E62"> <em>Editor's Note: Todd posts his vibes in real time each day on our <a href="http://www.minyanville.com/buzzbanter/?camp=BuzzBanter&medium=toddarticles&from=editornote">Buzz & Banter</a> where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary?<a href="http://mvp.minyanville.com/go-mv-pro-special-intro/"> Click here to learn more about MVPRO</a>.</em><br /> <br /> <strong><span id="E69" qowt-eid="E69">Deutsche Bank</span></strong><span id="E70" qowt-eid="E70"> ( DB ) painted the tape yesterday and it was none-too-pretty. </span><span id="E72" qowt-eid="E72"><a href="http://online.wsj.com/articles/deutsche-bank-suffers-from-litany-of-reporting-problems-regulators-said-1406056664" id="E71" qowt-divtype="qowt-field-hyperlink" qowt-eid="E71" target="_blank">According to the WSJ: </a> </span><span id="E74" qowt-eid="E74">"</span><span id="E75" qowt-eid="E75">Financial reports produced by some of th</span><span id="E76" qowt-eid="E76">e bank's U.S. arms "are of low </span><span id="E77" qowt-eid="E77">quality, inaccurate and unreliable. The size and breadth of errors strongly suggest that the firm's en</span><span id="E78" qowt-eid="E78">tire U.S. regulatory reporting </span><span id="E79" qowt-eid="E79">structure requires wide-ranging remedial action."</span><br /> <br /> <span id="E81" qowt-eid="E81">The bank responded by saying, </span><span id="E83" qowt-eid="E83">"We have been working diligently to further strengthen our systems and controls and are committed to being best in class." </span> <span id="E85" qowt-eid="E85">The bank is investing €1.0B as part of this effort, and we have appointed 1,300 colleagues to focus on it as part of a dedicated program. That includes 500 compliance, risk and technology employees that the bank plan</span><span id="E86" qowt-eid="E86">s to hire in the US this year.</span><br /> <br /> <span id="E88" qowt-eid="E88">We've been talking about this stock for a few weeks, given </span><span id="E89" qowt-eid="E89">that it lost 1/3 of its entire market capitalization since t</span><span id="E90" qowt-eid="E90">he January high.  I don't claim to know how much of this </span><span id="E91" qowt-eid="E91">latest news </span><span id="E92" qowt-eid="E92">is "in" the stoc</span><span id="E93" qowt-eid="E93">k, but I would venture to guess that some of it is.</span><br data-line-break="true" id="E95" qowt-divtype="data-line-break" /> <br data-line-break="true" id="E97" qowt-divtype="data-line-break" /> <span id="E98" qowt-eid="E98">As the news (and the stock </span><span id="E99" qowt-eid="E99">got</span><span id="E100" qowt-eid="E100">) hit late yesterday, I nibbled on some upside calls</span><span id="E101" qowt-eid="E101"> (</span><a href="http://www.minyanville.com/buzzbanter" id="E102" qowt-divtype="qowt-field-hyperlink" qowt-eid="E102" target="_blank"><span id="E103" qowt-eid="E103">in real-time on the Buzz & Banter</span></a><span id="E104" qowt-eid="E104">)</span><span id="E105" qowt-eid="E105">, </span><span id="E106" qowt-eid="E106">fully aware that we could see some analyst downgrades </span><span id="E107" qowt-eid="E107">this morning (I haven't seen any yet). It's a small position as these things go, consistent with my current stylistic approach of </span><span id="E108" qowt-eid="E108">surgical trading</span><span id="E109" qowt-eid="E109">. </span><br /> <br /> <span id="E111" qowt-eid="E111">Someone </span><a href="https://twitter.com/todd_harrison" id="E112" qowt-divtype="qowt-field-hyperlink" qowt-eid="E112" target="_blank"><span id="E113" qowt-eid="E113">pinged me on Twitter</span></a><span id="E114" qowt-eid="E114"> last night to opine that DB could be a modern day Lehman Brothers, and that "Sloppy accounting - sell." I don't believe that to be true, but lest there is more to the story than meets the eye, </span><span id="E114" qowt-eid="E114">th</span><span id="E115" qowt-eid="E115">os</span><span id="E116" qowt-eid="E116">e calls are currently </span><span id="E117" qowt-eid="E117">paired against </span><span id="E118" qowt-eid="E118">the SPY puts I've layered into the l</span><span id="E119" qowt-eid="E119">ast few sessions, </span><span id="E122" qowt-eid="E122">although that exposure is </span><em><span id="E124" qowt-eid="E124">this close</span></em><span id="E126" qowt-eid="E126"> from being stopped out above recent highs. </span><br /> <br /> <span id="E128" qowt-eid="E128">A chart of the two positions -- a tale of two fates -- can be found below.<br /> <br /> <a href="http://image.minyanville.com/assets/FCK_Jan2013/images/Lila2014July/todddbspy.gif"><img alt="s and p 500" src="http://image.minyanville.com/assets/FCK_Jan2013/images/Lila2014July/todddbspy.gif" style="width: 550px; height: 394px;" /></a></span><br /> <br /> <em>Click to enlarge</em><br /> <br /> <span id="E134" qowt-eid="E134">Random Thoughts:</span></div> <ul> <li qowt-divtype="section" qowt-eid="E62"> <span id="E136" qowt-eid="E136">The </span><span id="E138" qowt-eid="E138">VXO </span><span id="E139" qowt-eid="E139">is again </span><span id="E140" qowt-eid="E140">trading in the single digits again</span><span id="E141" qowt-eid="E141">. Some historical perspective for these historic times:</span></li> </ul> </div> <div qowt-divtype="page" style="margin-left:auto;"> <div qowt-divtype="section" qowt-eid="E62">  </div> <div qowt-divtype="section" qowt-eid="E62"> <a href="http://image.minyanville.com/assets/FCK_Jan2013/images/LilaDec13/vxo_historical.gif"><img alt="" src="http://image.minyanville.com/assets/FCK_Jan2013/images/LilaDec13/vxo_historical.gif" style="width: 550px; height: 394px;" /></a><br />  </div> <div qowt-divtype="section" qowt-eid="E62"> <em>Click to enlarge</em><br /> <div>  </div> <div> <div qowt-divtype="page" style="margin-left: auto;"> <ul> <li qowt-divtype="section" qowt-eid="E62"> <strong style="font-size: 12px;">Goldman Sachs </strong><span id="E152" qowt-eid="E152" style="font-size: 12px;">( GS ) </span><span id="E153" qowt-eid="E153" style="font-size: 12px;">has been</span><span id="E154" qowt-eid="E154" style="font-size: 12px;"> thumbing its nos</span><span id="E155" qowt-eid="E155" style="font-size: 12px;">e at the insider sales window</span><span style="font-size: 12px;">.</span></li> </ul> </div> <div qowt-divtype="page" style="margin-left: auto;"> <ul> <li qowt-divtype="section" qowt-eid="E62"> <strong style="font-size: 12px;">Herbalife</strong><span style="font-size: 12px;"> </span><span id="E163" qowt-eid="E163" style="font-size: 12px;">( HLF ) is provided</span><span style="font-size: 12px;"> </span><span id="E165" qowt-eid="E165" style="font-size: 12px;">Mr. </span><span id="E167" qowt-eid="E167" style="font-size: 12px;">Ackman</span><span id="E169" qowt-eid="E169" style="font-size: 12px;"> with an equity enema yesterday, following his presentation on the company. These things happen, even to the very best investors on the street.</span></li> </ul> <ul> <li qowt-divtype="section" qowt-eid="E62"> <span id="E173" qowt-eid="E173" style="font-size: 12px;">We walked through the four primary metrics that determine stock prices yesterday; if you missed it, </span><span id="E175" qowt-eid="E175" style="font-size: 12px;"><a href="http://www.minyanville.com/business-news/markets/articles/todd-harrison-technical-analysis-vxo-gold/7/22/2014/id/55596?camp=syndication&medium=feed&from=nasdaq" id="E174" qowt-divtype="qowt-field-hyperlink" qowt-eid="E174" style="font-size: 12px;" target="_blank">click here!</a></span></li> </ul> </div> </div> <br /> <span style="font-size: 12px;">As </span><span style="font-size: 12px;">always, I hope this finds you well.</span></div> <div qowt-divtype="section" qowt-eid="E62">  </div> <div qowt-divtype="section" qowt-eid="E62">  </div> <div id="E-8" qowt-divtype="section" qowt-eid="E62"> <br /> R.P.<br /> <br /> <em>Twitter: </em><a href="http://twitter.com/#%21/todd_harrison" target="_blank"><em>@todd_harrison</em></a><br /> <br /> <em>Follow Todd and over 30 professional traders as they share their ideas in real time with a <a href="http://mvp.minyanville.com/buzz-banter-landing-page-new-content/?utm_source=News%20Content&utm_medium=website&utm_content=News%20Content&utm_campaign=buzz">FREE 14 day trial to Buzz & Banter.</a></em></div> </div> <br />




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Stocks

Referenced Stocks: DB , GS , HLF

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