DJ what have you guys been doing out there in Germany?!
French and German combined total market capitalization is smaller than the top 20 UK companies, and less than the top four US companies.
I do not think much of Mr. Fisher's track record, but facts are OK.
I think the US+UK markets will likely fall a lot more, as opposed to the German+French market rising rapidly, with energy.
The difference in performance may be explained by the fact that Germans and French are not treating their homes as ATMs, credit cards as wallets, and stock exchanges as playgrounds.
forbes.com
Crash and Opportunity
Kenneth L. Fisher, 04.28.03, 12:00 AM ET
Pessimism is thick and pervasive in Germany. Its stock market is down 75% from the high. This presents a great opportunity, especially among insurance stocks.
Reporting live from the war: heavy casualties, with German forces hit worst--75% lost. American and British losses lighter. German life insurers decimated. I'm not gloating, just reporting the facts: In terms of market capitalization, the coalition of the willing is doing much better than the coalition of the unwilling. The U.S. and the U.K. between them account for more than two-thirds of the world's combined stock market value. The German market is now worth less than Canada's. That was not true in August, when Iraq war talk began. Canada's stock market has been correlating with those of the two Uniteds, which are hovering at last summer's levels. German and French stocks, in contrast, have tanked. Badly.
The German and French markets combined are now worth less than the U.K.'s 20 largest stocks, or the 4 largest American stocks Microsoft (nasdaq: MSFT - news - people ), General Electric (nyse: GE - news - people ), Exxon (nyse: XOM - news - people ) and Wal-Mart (nyse: WMT - news - people )). The unwilling are being marginalized.
I report from Munich. With the war starting I had to head to Europe to get some good old-fashioned anti-Americanism. I can't find much. There is more back home in San Francisco. Germans love Americans but dislike the French. Yet in foreign policy they allow themselves to be led blindly by the French. The French can't fathom why they're losing ground as they plant both feet firmly in the 20th century.
What about all those antiwar protests? They sure get a lot of television play. On Mar. 29 I saw the biggest anti-American protest since San Francisco, in Edinburgh, Scotland--but it was all students and old 1960s socialists, openly organized by the Scottish Socialist Party. The Scots, for all that they are part of the British Isles, have less hostility to Americans than to the English. The two Uniteds are united. The unwilling are losing badly. The unwilling are unable. Disabled.
Germany's market is down 75% from its high three years ago--worse than 75% in real terms, since there has been a little inflation. That puts its bear market in a league with America's 1929-32 debacle. That period saw the S&P 500 down 86%, but the decline was partly offset by a 33% deflation. In real terms the U.S. Great Crash came to 79%, in line with Germany's current crash. Very similar.
In 2000 financials were 33% of the German market, slightly more than tech was in America's market. But the German financials fell even more than the U.S. tech stocks did. This sector is led by insurers instead of banks, and as stocks have fallen they have been forced to sell their own equity to meet regulatory requirements, driving their stocks lower still. These newly created shares provide newly created liquidity at depressed, fire sale prices. This vicious cycle won't end until global markets rise. But because of the forced equity sales, these insurers will have greater liquidity than their non-German peers after the dust settles, and they will be stronger for it. In sympathy with the insurers, everything else German is battered badly.
Pessimism is thick and pervasive. At a Munich-based German professional investor conference, sentiment is vastly more dour than in America. It's the war. Germans can't make sense of what is happening and see no way out. There is more talk here among professionals about surviving in money management than about the German stock market. How to cut costs. How to hunker down. How to survive regulatory scrutiny. Opportunity is obsolete in their minds. And Munich is ground zero as the insurance capital. The tower of dour.
But the biergartens are busy. Business on the streets isn't as bad as you read about. The economy is weak, but nothing near as weak as the stock market. The depression is more psychological than real. Older Germans, and most are, can't watch news of the war or even talk about it. They have talked themselves into a slump of despondency. Hence, there's opportunity.
As Iraq fades--and it will--so, too, will the coalition of the unwilling. With that, as markets rise in the two Uniteds, their overwhelming weight in the world will, through classic competitive sympathy buying, pull the non-United equity market up, too. And then Germany's market will rise, but more so. It will be led by the same insurers that dragged it down. Just as tech in America led the U.S. market down but is now leading it up, the insurers that cost Germany so badly present great opportunity. Expect a reversal soon.
To the victors go the spoils. Buy Allianz (nyse: AZ - news - people ) (5), Munich Re (68, MURGO) and HVB Group (8, HVMGY). But also buy beat-up German noninsurers, like chipmaker Infineon Technologies (nyse: IFX - news - people ) (7), chemicals maker Henkel (55, HENKY) and software vendor SAP (nyse: SAP - news - people ) (21). Once the unwilling are willing, they'll be willing and able.
Kenneth L. Fisher is a Woodside, Calif.-based money manager. Visit his homepage at www.forbes.com/fisher.
|
