Germany: A Sign of Hope for Europe?

I went strolling through Münich’s Marienplatz this morning. It’s the center of the city, and has been since 1158. Chunky snowflakes dumped on me as I went in search of a big German pretzel and a coffee. I soon discovered that Marienplatz (and consequently the economy of Germany) seem to be in no need of the ECB’s quantitative easing.

Snowplows were pushing around several inches of snow that had fallen overnight. The street vendors selling assorted warm and candied nuts were setting up their shops for the day, as were the women selling huge clementines, dates and other fruit. A couple of young girls at the H&M outlet were rearranging a window display. A small gaggle of German professionals and civil workers from nearby offices pooled outside of a popular bakery. And at the nearby Victuals Market, my destination, florists, bakers, juice sellers, butchers, cheesemongers, a woman selling 50 different kinds of honey, another woman who imports Spanish ham and wine for a local clientele and the morning staff at several small eateries were preparing for the day.

In other words: just another normal day in a bustling German town, in the middle of yet another Greek/euro dustup.

And that’s precisely the point. For all you hear about the struggles in the German economy being signs that the euro zone is in trouble again, life on the ground is a bit different than what you’re led to believe. And it’s this life on the ground that serves as another indication of the misinformation we’re all fed by the media, and proves that Europe is where you want some of your wealth invested today.

Clearly, a snapshot of a morning in the life of Marienplatz does not a bigger trend make. This is, after all, a tourist hotspot and the center of Münich’s municipal government. One would expect to see more economic activity in the area. Though, to be fair, the only tourists I saw crazy enough to visit Münich in the dead of snowy winter were a few Chinese couples, some Brits and me (but I’m here finishing a book and taking the pulse of the German economy for my Sovereign Investor readers).

Even if Marienplatz isn’t necessarily indicative of the Germany economy as a whole, it is, nevertheless, a great spot from which to comment on the German economy as a whole. Even a casual observer of economic conditions can tell a lot about those conditions simply by strolling a city’s main streets.

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During our own financial crisis in the States, the abundance of “for lease” signs on new and entirely empty office buildings, the “closed” signs on restaurants and shops, the forests of “for sale” signs in front yards across every major American city … they all told you that America was not in a good way. I saw similar signs while wandering the beachside barrio of Barceloneta in Barcelona, Spain, during the height of the European debt crisis — and Barcelona was one of Spain’s healthier cities.

Here in Münich, well not so much.

Beyond the Media’s Doom and Gloom

This part of Germany, a region called Bavaria, is the wealthiest state in Germany, and Germany is the wealthiest state in Europe. In business, wealth trickles up as much as it trickles down. If Europe was sucking wind as badly as we’re told, Germany would be floundering and Münich would clearly be feeling the effects.

And yet, business optimism here is upbeat. In fact, it’s rising across Germany.

Much-watched indicators — such as the Ifo Business Climate index, a business-expectations index and an index that assesses the business situation in Germany — are all on the rise. As Ifo noted in its January report, “Companies were far more satisfied with their current business situation and the majority was also optimistic about the business outlook.” The German Purchasing Manager’s Index, reflecting economic health in Germany’s all-important manufacturing sector, is rising. And German consumer confidence is on the upswing and retail sales are rising.

All of that is reflected in broad expectations that the German economy will grow by as much as 2% this year.

But still we’re told that Europe is a basket case and the euro is a disaster waiting to happen.

Maybe the snow that piled atop my head walking through Marienplatz froze my noggin, but something just ain’t adding up. Either the U.S. and British media have an agenda — and, in large measure, they’re the only real media we hear about Europe from the U.S. — or life in Europe just isn’t the bed of nails we’re told it is.

My stroll through Münich tells me it’s the latter.

As the Germans last month celebrated the highest consumer-sentiment readings in 13 years, Spaniards were celebrating retail sales for December that rose a very healthy 6.5% from a year ago — and this was one of the PIIGS nations the media insisted was destined for collapse. The French were celebrating their own retailing victory, as well.

So it is, then, that three of euro zone’s four biggest economies are improving. (And, actually, Greece was looking up, too, having grown by 1.7% in the third quarter. How that plays forward now that the anti-austerity Syriza Party has won is a crapshoot. Syriza, in a fit of childish martyrdom, wants to go cold turkey on its reliance on debt from the European Union, the European Central Bank (ECB) and the International Monetary Fund, even though that promises to be a massive disaster in a country so corrupt that ordinary Greek citizens have stopped paying taxes, which could leave government coffers empty by the end of this month.)

The only real problem in the euro zone is the ECB itself. In Federal Reserve-like fashion, it’s bastardizing the money and contorting interest rates without allowing the European economy to heal naturally. But underneath the ECB’s wrongheaded prescription, it’s clear from my stroll in snowy Münich that the real economy is working nevertheless.

Trade Expensive for Cheap

It’s for all of these reasons that Europe is a bargain today for investors. It’s why I just recently put my Sovereign Investor monthly readers into a European investment that will prosper as it becomes clear to the world that Europe simply isn’t the calamity the media write about. Better still, there’s no euro risk.

European stocks are cheap. American stocks are expensive, really expensive. Time to trade some of those expensive assets for cheap assets that you can ride higher when the tide turns … and based on what I saw here in Münich, it will.

Until next time, stay Sovereign …
Jeff Opdyke Sovereign Investor
Jeff Opdyke
Editor, Profit Seeker