Fed Bigger Threat To Depositors Than Wells Fargo – Ep. 199

* It looks like the U.S. stock market is going to close out the 3rd quarter on a positive note
* The catalyst for the rally today is the big rally in Deutsche Bank; shares are up better than 14%
* They were in danger of going below $10 yesterday
* There were nervous about maintaining accounts with Deutsche Bank
* People were re-living memories of Lehman Brothers all over again
* I think the Obama Administration was beginning to get concerned
* The Dow was off about 200 points on the close yesterday
* When worries about contagion spilling over from European banks into U.S. Banks
* It wasn't good with these Wells Fargo Congressional hearings
* I am going to chime in on that later in today's podcast
* I think the Obama administration was getting nervous about precipitating another financial crisis before the election
* I think they gave a nudge to the Department of Justice which had been talking about a $14 billion fine on Deutsche Bank
* The rumors this morning are that they are nearing a settlement with Deutsche Bank for a much lower number; maybe around $5.5 billion
* Which is below the amount that Deutsche Bank had set aside to settle this
* So from $14 billion down to about $5.5 billion - this is causing a big rally in the shares of Deutsche Bank and in fact that is returning confidence to the entire sector
* I don't think that this means that the European banks or the American banks, for that matter, are out of the woods
* I still think there are a lot of problems in the financials, because as I said in a previous podcast,"They're damned if the Fed raises and they're damned if they don't"
* Negative rates are bad for the banks but rate hikes are also bad for the banks, based on their balance sheets
* I think there are still a lot of problems percolating beneath the surface for the financials
* As far as the Obama Administration is concerned, the key is to get everything through the next election without a crisis
* So I think that having the Department of Justice settle with Deutsche Bank for a much smaller number...
* You know that $14 billion fine was very close to what the Europeans were looking to fine Apple
* But I think the Department of Justice is more concerned about elections than the symbolism regarding Apple's fine
* So coming to an agreeable solution with Deutsche Bank that was lower than the markets had feared serves the Administration's purpose right now
* So that's where the rally is coming from today and of course the traders like to paint the tape a little bit going into the end of the quarter
* It's not just the markets that had a strong quarter - crude oil ended the day about $49
* We have some kind of agreement among OPEC nations for production cuts
* And while that might be good for oil stocks, it's not going to be good for the U.S. consumer, who is already struggling
* In fact we did get a mixed bag on economic numbers out today
* The disappointing number was consumer spending, which for the month of August was flat; the anticipation was for an increase of .2%
* Personal income did manage to meet expectations with a .2% increase
* But that was about half the increase we got in the prior month
* Spending went down from +.4 (which was upwardly revised from the original +.3) to flat
* Higher energy prices, gas prices at the pump are simply going to eat into that consumer spending number
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