German Business Confidence Hits a Two-Decade High – Just One Day After Money Morning Rates the Country a "Buy"

[Editor's Note: Money Morning's Martin Hutchinson has made a lot of great market calls for readers over the past three years. He did it again last week, labeling Germany as a "Buy" just one day before the Euro-giant's economic outlook received a dramatic upgrade. To find out what else Hutchinson likes, check out our 2011 special forecast.]

Just one day after Money Morning columnist Martin Hutchinson told readers to invest in Germany, that country's business-confidence index jumped to its highest level in 20 years. Berlin this week also raised its forecast for economic growth by a hefty half a percentage point.

Hutchinson's report – complete with an investment recommendation – appeared in Money Morning on Thursday. On Friday, the Ifo Business Climate Index for German industry and trade advanced to its highest point since the early 1990s, the latest sign that the economy of this European linchpin is being fueled by strong domestic demand, and not just export growth.

Earlier in the week – after Hutchinson had penned his column and made the call to "Buy" Germany, but a day before the article was actually published – German Economic Minister Rainer Brüderle said his country's economy would advance at a 2.3% clip this year, a significant increase from the estimate of 1.8% he made late last year.

"This is pretty dramatic news and is quite different form the picture we are getting out of any other developed economy," says Hutchinson, a former global merchant banker who also edits the Merchant Banker Alert and Permanent Wealth Investor advisory services. "It reinforces my view that now the East German reunification costs are receding. Germany's strengths are again making it a robust rapid-growth economy, like it was before 1990."

In his Money Morning report recommending Germany, Hutchinson detailed the catalysts that were likely to drive growth in Europe's largest economy. And he gave Money Morning readers a specific investment recommendation that would enable them to profit from his forecast.

The German economy rebounded strongly in 2010, advancing at a rate of 3.6%. The rising business confidence underscores that Germany "would continue to power ahead" in the New Year, Carsten Brzeski, an economist at ING Bank (NYSE ADR: ING) in Brussels, told The Financial Times.

Indeed, it's even possible that the growth rate could accelerate to 3% this year, though 2.5% is more likely, Andreas Rees, of Unicredit in Munich, told The FT.

Worth noting: Even a 2.5% growth rate would exceed the just-boosted government forecast of 2.3%.

In boosting his estimate for economic growth, German Economic Minister Brüderle revealed one other point that bodes extremely well for the Eurozone heavyweight: The company's public-sector deficit is likely to drop below the European Union's 3% limit sometime this year. If that happens, it would be a full year ahead of schedule.

At a time when sovereign-debt concerns are on the upswing, any country that's able to reduce its liabilities is certain to gain favor with global investors who are searching for the low-risk/high-return profit plays that are all too rare in this post-financial-crisis environment.

Germany already deserves investor respect for having eschewed the wasteful and risky stimulus policies that so many other countries embraced, Hutchinson said. The fact that Germany is cutting its deficit – ahead of schedule – should only increase that country's investor allure.

"To really maximize the profit potential of your portfolio, you need to have money in Germany - at least 5% to 10% of your overall portfolio," Hutchinson says.

[Editor's Note: If you like the market insights and investment analysis that stories such as this one provide -but you want to receive stock recommendations, too, take a close look at our monthly affiliate newsletter, The Money Map Report.

Each month, the global-investing experts who write for Money Morning get together and identify the very best profit opportunities you'll find anywhere in the world. You read about many of those ideas in Money Morning. But the best ideas are reserved for The Money Map Report, or MMR.

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About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press.

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