german business confidence ....lessons for the us from the german real estate slump

it´s been a long time since i´ve posted good or even very good news (with the exception of gold.....). but i think it is time to watch the recent german data. but at the same time the construction data can give some hints how severe the us slump will be. it´s importand to note that the german bubble was very very small compared to the us and driven by large tax breaks to build the eastern part of germany because of the reunification. the bubble never spread to "normal people" and never influenced lifestyle, spending etc. the word "refinancing" (in the meaning of the us) hasn´t been heard here until today.

es ist verdammt lang her das ich mit ausnahme von bullishen goldnews positives gebloggt habe. da kann es nicht schaden sich die erstaunliche wiederauferstehung vom "ehemals"(?) kranken mann deutschland anzusehen. und evtl. gibt ja auch der rückblick z.b. auf das bauhauptgewerbe eine indikation wie lange eine branche am boden liegen kann wenn die wie nach der wende aus ner übertreibung kommt. da z.b. die blase in den usa um ein vielfaches größer ist/war finde ich es naiv zu glauben das bereits 12 monate nach dem platzen alles wieder in bester ordnung sein soll und der boden jetzt erreicht sei. propaganda........

for the international readers.

the ifo is by far the most important business indikator for germany and the eurozone. it reflects the sentiment of 7.000 german companies.

chart1: this is the chart for the manufactoring segment. the yellow line shows the expectations, the blue line the current situatian, the red one is the ifo (middle of expectations and current)

the chart on the top right is the one that shows the construction related component.(yellow/expectations, blue/current) you can see how is was flatlining for years. compare this to all the talk in the us that after a bubble five to 10 fold as big hitting the bottom and recovering just 12-18 month after the peak...... spin......

this one is a very long term chart. the red line shows the residential construction. the blue line is for the commercial construction. the yellow line is the public funded construction. you can see a steady sliding down year after year. maybe we can stabilize or even buck the trend despite the vat hike from 16% to 19% in 07. compare this to the illusion that the worst in the us is over.........

one thing that will differ for sure ist that the us or state government will bump up the public construction. here is one example from california / ein unterscheid wird sicher sein das die usa den öffentlichen bau massiv pushen werden (here is the take from mish http://globaleconomicanalysis.blogspot.com/2006/11/is-california-going-bankrupt.html )

"(debtfueled) $37.3 billion public works rebuilding program could be model for other states"

The four propositions will spend $19.9 billion on roads and public transit, $10.4 billion on school construction, $4.1 billion on levees and other flood-control projects and $2.9 billion on affordable housing

needless to say that germany did just the opposite. control spending and debt....in large part to the "euro stabilisation pact" . under the stability pact they had to keep the deficit close to 3%. ironical the germans/bundesbank were the main force to implement this barrier. :-) we feared after the d-mark was replaced by the euro that all the big spenders like italy, spain etc. were undermining the euro..... germany was the first to break the 3%........

überflüssig zu erwähnen das deutschland das gegenteil gemacht hat und auf defizite und verschuldung geachtet hat....... dank an den stabilitätspakt....

ps: the biggest buyers of german real estate in the past years were private equity firms from the uk and the us. they bought almost every big auction available. they control comined close to 1 mio units. (my rough estimate). and even here the first "flips" are happening in 2006 nad 2007 were parcels of the bigger portfolios/blocks are changing hands with huge profits. according to ernst & young almost 50% of the "flips" went to another private equity investor......

kein wunder das uk und us investoren alles an deutschen immonilienwerten erwerben was zu bekommen ist. denke das die aktuell wohl sicher ne knappe mio wohneinheiten unter ihren fittichen haben. (ist nur ne schätzung/ bin für genaue zahlen dankbar, bitte unter kommentaren posten oder mailen) was aber sicher bedenklich ist das im jahr 2006 schon erste portfolios mit riesigen profiten den besitzer gewechselt haben. und über 50% gingen an andere finanzinvestoren........

one final note:

the german economy is highly dependent on their exports and a stong growing world economy. my feeling is that we in germany should enjoy the "good" times as long as they last.......

da die deutsche wirtschaft in erster linie exportgetrieben ist und ne stark wachsende weltwirtschaft benötigt sollten wir die guten zeiten geniessen so lange sie anhalten......