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.
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German Business Confidence Hits a Two-Decade High – Just One Day After Money Morning Rates the Country a "Buy"
Banks Catch a Break with Long Timeline for Implementing Basel III Regulations
Global regulators on Sunday agreed on new banking capital requirements – known as Basel III – that were much less severe than expected, boosting global financial stocks as investors were optimistic about banks' ability to comply. The Basel Committee on Banking Supervision agreed on new rules that will more than triple capital requirements to give […]
Germany's Export Reliance Edges Out European Neighbors
By relying on exports and not promoting domestic demand, Germany is creating a lopsided recovery that is hurting retailers and foreign exporters.
While Germany's exports continue to surge, its consumers are refusing to spend. The government has failed to raise wages or encourage consumption and says it has few plans to do so.
"By cutting its budget deficit and resisting a rise in wages to compensate for a decline in the purchasing power of the euro, Germany is actually making it more difficult for other countries to regain competitiveness," billionaire investor and cofounder of the Quantum Fund George Soros said in a speech on June 23 in Berlin. Germany is "the main protagonist" for Europe's debt crisis, he added.
Germany's economy - four times more reliant on exports than is the United States - posted the highest second-quarter growth in the Eurozone, growing by 2.2% in the second quarter from the first. The country is headed for about 9% growth this year.
While Germany's exports continue to surge, its consumers are refusing to spend. The government has failed to raise wages or encourage consumption and says it has few plans to do so.
"By cutting its budget deficit and resisting a rise in wages to compensate for a decline in the purchasing power of the euro, Germany is actually making it more difficult for other countries to regain competitiveness," billionaire investor and cofounder of the Quantum Fund George Soros said in a speech on June 23 in Berlin. Germany is "the main protagonist" for Europe's debt crisis, he added.
Germany's economy - four times more reliant on exports than is the United States - posted the highest second-quarter growth in the Eurozone, growing by 2.2% in the second quarter from the first. The country is headed for about 9% growth this year.
Drought Forces Russia to Ban Grain Exports
Russia yesterday (Thursday) banned grain exports after unrelenting heat left the country with its worst drought in at least a half-century.
Wheat rose to a 23-month high after Russia, the world's third-largest grower, announced a ban beginning Aug.15 that will last through the end of the year. Corn and rice prices also surged yesterday after Russian Prime Minister Vladimir Putin said a ban on those grains would be "appropriate" in light of skyrocketing prices.
Domestic grain prices gained 19% last week, faster than at the peak of the global food crisis in 2008. The ban includes wheat, barley, rye, corn and flour exports, according to the government decree that also set aside nearly $1.2 billion for stricken farmers.
Wheat rose to a 23-month high after Russia, the world's third-largest grower, announced a ban beginning Aug.15 that will last through the end of the year. Corn and rice prices also surged yesterday after Russian Prime Minister Vladimir Putin said a ban on those grains would be "appropriate" in light of skyrocketing prices.
Domestic grain prices gained 19% last week, faster than at the peak of the global food crisis in 2008. The ban includes wheat, barley, rye, corn and flour exports, according to the government decree that also set aside nearly $1.2 billion for stricken farmers.
This Weekend's G-20 Meeting Won't Bring Any Answers on Financial Regulation
Finance ministers from the Group of 20 (G-20) nations this weekend will attempt to reach a compromise on the implementation of stricter banking regulations at a meeting in Busan, South Korea. However, significant changes to financial regulation will come slow, if at all.
The meeting will start late Friday and will involve discussions about how to reduce deficits and prepare financial institutions for a wider set of rules.
"Sustaining world economic growth is the most important item on the G-20 agenda this weekend," said U.K. Chancellor of the Exchequer George Osborne. "Countries with high budget deficits must show that they can deal with them. Equally, surplus countries, such as China, must show that they too can support economic growth going forward."
The meeting will start late Friday and will involve discussions about how to reduce deficits and prepare financial institutions for a wider set of rules.
"Sustaining world economic growth is the most important item on the G-20 agenda this weekend," said U.K. Chancellor of the Exchequer George Osborne. "Countries with high budget deficits must show that they can deal with them. Equally, surplus countries, such as China, must show that they too can support economic growth going forward."
Money Morning Investment Report Update: German Economy Shows Surprising Strength
The German economy – Europe's largest, and one of three markets highlighted in Money Morning's most recent investment-research report – is demonstrating some real muscle. Just as we expected it to. The country's statistics office, Destatis, said Germany's gross domestic product (GDP) expanded at a better-than-expected rate of 0.2% in the first three months of […]
Germany's Short-Selling Ban Lacks the Political Muscle to Go Global
Hoping to win more public and political support for its involvement in the bailout of Greece, Germany has banned the naked short-selling of European sovereign debt instruments. However, other European governments are refusing to follow suit, highlighting the lack of political will that's needed to regulate the credit default swap (CDS) market.
German Chancellor Angela Merkel said that the ban would remain in place until the EU comes up with a comprehensive plan for financial reform.
"This will all remain in place until other rules are established on the European level," she said.
German Chancellor Angela Merkel said that the ban would remain in place until the EU comes up with a comprehensive plan for financial reform.
"This will all remain in place until other rules are established on the European level," she said.
What Does Germany's Credit-Default-Swap Ban Mean for You?
Germany did something on Tuesday that I've been hoping would happen for three years: It outlawed naked short-selling and speculation on European government bonds with naked credit default swaps.
The financial institutions that have been profiting from this type of speculation immediately went on the offensive.
German officials justified the surprise, unilateral move by financial regulator BaFin by stating that the "exceptional volatility" in government debt - if accompanied by massive short-selling and naked CDS trading - could result in excessive price movements that would actually "endanger the stability of the entire financial system."
The financial institutions that have been profiting from this type of speculation immediately went on the offensive.
German officials justified the surprise, unilateral move by financial regulator BaFin by stating that the "exceptional volatility" in government debt - if accompanied by massive short-selling and naked CDS trading - could result in excessive price movements that would actually "endanger the stability of the entire financial system."
To learn about the strategies you should employ because of Germany's move, please read on...
Debt Contagion Fear Spreads in Europe as S&P Lowers Eurozone Credit Ratings
Standard & Poor's yesterday (Wednesday) lowered Spain's credit rating - just one day after downgrading the ratings of Greece and Portugal. The downgrades have prompted Germany to promise a quick release of Greece bailout funds as fears of a debt contagion spread rapidly across Europe.
"It is probably fair to say that Tuesday, 27 April was the day that the situation in the euro area took a dramatic and rather frightening turn for the worse," credit analysts at Credit Suisse (NYSE ADR: CS) in London said in a research note. "The concern is the extent and speed of the spreading of the crisis in an environment of too many financial obligations, not all of which will be serviced, in our view, and in a crisis which in our view is about far more than Greece."
S&P downgraded Spain's long-term credit rating one notch to AA from AA+ with a negative outlook, citing an extended period of low economic growth and high borrowing costs.
"It is probably fair to say that Tuesday, 27 April was the day that the situation in the euro area took a dramatic and rather frightening turn for the worse," credit analysts at Credit Suisse (NYSE ADR: CS) in London said in a research note. "The concern is the extent and speed of the spreading of the crisis in an environment of too many financial obligations, not all of which will be serviced, in our view, and in a crisis which in our view is about far more than Greece."
S&P downgraded Spain's long-term credit rating one notch to AA from AA+ with a negative outlook, citing an extended period of low economic growth and high borrowing costs.
Is There an Ulterior Motive for Bailing Out Greece?
Since back in December, when Fitch Ratings Inc. slashed its credit rating on Greece's debt to below investment grade for the first time in 10 years, there's been a mind-numbing flood of media coverage of that European country's debt crisis.
And yet, despite high-volume of high-level media coverage, none of the stories have picked up on a very basic - yet very key - fact...
The bailout being developed is as much for Germany as it is for Greece.
Let me explain ...
And yet, despite high-volume of high-level media coverage, none of the stories have picked up on a very basic - yet very key - fact...
The bailout being developed is as much for Germany as it is for Greece.
Let me explain ...
Germany: The "Must-Invest" Economy
If you're a U.S. investor, you can't be happy about the prospects for your portfolio. After all, you're mostly trapped in an economy with a gigantic and dangerous financial-services sector, a central bank that can't stop itself from printing money and a government that overspends wildly.
But there is an answer: You should consider allocating some of that "at-risk" capital to a country that has none of those problems - Germany.
Germany has a banking system, of course, but that banking system is not the overgrown financial-services monster that we have here in the United States (or, for that matter, in Great Britain). It's impossible to get a subprime mortgage in Germany: Even now - and even after mortgage levels have crept up in recent years - the average down payment for the purchase of a new home in this key Eurozone nation is 50%. As a result, the homeownership rate in Germany is only 43%, the lowest rate in the European Union.
That's actually healthy; far less of Germany's capital is tied up in unproductive housing and the savings rate is correspondingly higher. (Let's face it, most Americans don't accumulate 50% of the cost of a house in savings over their lifetimes - unless forced to do so in a company pension scheme).
But there is an answer: You should consider allocating some of that "at-risk" capital to a country that has none of those problems - Germany.
Germany has a banking system, of course, but that banking system is not the overgrown financial-services monster that we have here in the United States (or, for that matter, in Great Britain). It's impossible to get a subprime mortgage in Germany: Even now - and even after mortgage levels have crept up in recent years - the average down payment for the purchase of a new home in this key Eurozone nation is 50%. As a result, the homeownership rate in Germany is only 43%, the lowest rate in the European Union.
That's actually healthy; far less of Germany's capital is tied up in unproductive housing and the savings rate is correspondingly higher. (Let's face it, most Americans don't accumulate 50% of the cost of a house in savings over their lifetimes - unless forced to do so in a company pension scheme).
To find out how to profit from Germany's promise, read on...
Why You Need to Look at these Three "Zombie-Free Zones"
Quantum Fund co-founder George Soros had it right on Monday, when he said the U.S. recovery would be held back by "basically bankrupt" banks and companies. I call them the "zombies," the institutions being propped up by government bailouts. Companies like Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), General Motors Corp., Chrysler […]
Why You Should Invest in the "New" Germany
Pundits greeted Angela Merkel's convincing election win in Germany Sunday with a collective yawn. Commentators think the German economy is sluggish and over-dependent on exports, and believe that a change in the German government from a grand coalition to a center-right coalition will make little policy difference. I think that's wrong. It's an erroneous viewpoint […]
Investment News Briefs
With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world. IMF to Raise Global Growth Forecast; CIC Investing $1 Billion in Oaktree; Yen Highest in Eight Months; Bombardier JV Wins China Contract; World Bank President Wary of Fed's Power; Trichet: […]
Germany: Emerging Market Profit Potential, With (Only) Developed Market Risk
Many commentators have picked the East Asian economies of China, Korea and Taiwan to emerge the most vigorously from the ongoing global financial crisis. And with some justification, for China and the two Asian "tigers" share some alluring characteristics like: A highly competitive and innovative manufacturing industry. Excellent government and workforce discipline. Modest fiscal and […]
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