The masked vigilante
German animal spirits
Today, on March 9th 2021 the longest stock market expansion in history turns twelve. If the bull run, which has seen stock market indices across the world, even the sluggish German DAX, more than double, will become a teenager before the tide turns, is anyone's guess.
Germans have historically shunned the public markets. The Wall Street Crash of 1929, which devastated the feeble Weimar Republic and changed the trajectory of German history, left scars on the German psyche which are still visible today.
Ten years ago, when the post-financial crash bull market was a mere toddler, only 5.6 percent of Germans were invested in the public markets, while every third Dutchman had an investment portfolio, according to Statista.
Most Germans act like finance minister Olaf Scholz. As aggressive as the bazooka man is with the public finances, when it comes to his private savings, he is known to prefer the good old Sparbuch.
"I do what no investment advisor recommends: I just put my money in a savings account,” the Bundeskanzler hopeful and well known stock market sceptic told Bild am Sonntag in 2018.
But, while Mr Scholz is collecting negative interest on his Sparbuch, animal spirits are running wild in Germany. Last year more than 15 percent owned stocks - three times as many as ten years earlier.
In particular during the last year, as the DAX has climbed another staggering 25 percent, Germans of all ages have piled onto the markets. The number of public market investors has grown by another 70 percent according to the research company Kantar.
Just as the previous bull market ended in tears in March 2000, eventually this one will end as well. Retail investors who, following the timeless advice of Wall Street legend Peter Lynch, invest for the long run, only buy what they understand and - most importantly - diversify their investments, needn’t worry. Even the careful Bundesverband der Verbraucherzentralen will tell you that in the long run, the stock market always beats the savings account.
Yet, unfortunately, research by the Deutscher Aktieninstitut shows that the young in particular are punting on volatile individual stocks rather than investing in well diversified index funds.
Hence there’s reason to believe that this party will end with a bad hangover and that most newly minted investors will follow the advice of Mr Scholz and return to their good old Sparbücher.
Some on the other hand, might do as Mr Lynch would do - buy when everyone else is selling…
A.B.B.
The masked vigilante
Stop us if you’ve heard this one before… but the paper trail always seems to head in one direction - eastwards.
We’ve commented this year on Angela Merkel’s cosy relationship with the dictatorship in Beijing, the dependence of German carmakers on exports to the Middle Kingdom, and the research links making virologists wary of speaking openly about the origins of the pandemic.
This week again, we’re here to inform you that a dodgy political tie to China is at the centre of a major political scandal.
Nikolas Löbel is just 34. But an unfinished law degree and an early life climbing the slippery ladder of the CDU’s youth wing were enough to secure him a safe seat as member of the Bundestag for Mannheim at the 2017 election. Since his arrival in the corridors of power, his main job has been sitting on the foreign affairs committee.
But Mr Löbel isn’t just a politician. Like so many members of the CDU, he is also a proud businessman. He set up two companies before entering the Bundestag, and also sits on the advisory boards of various companies and public organizations.
Mr Löbel isn’t afraid to mix business and pleasure - in his words - he likes to “find the right balance between business and politics.”
Last summer, he used his influence as a former board member of a state-owned building society to ensure that his own private tenants had a place to stay when he cancelled their rental contracts. The rooms were meant exclusively for use by tenants of the Mannheimer Wohnungsbaugesellschaft, but the kind-hearted Löbel ensured that his own former tenants had a roof over their heads after he renovated and then tripled the rents in his apartment portfolio.
Another useful nexus he found between politics and business came in April when Germany faced a desperate shortage of medical masks.
Mr Löbel took the initiative, emailing businesses (using his Bundestag account!) to inform them that he had a fortunate connection. A “colleague from China” owned a mask company and, although they aren’t taking on any new orders, he would be able to secure a deal… with a commission for his efforts.
According to der Spiegel, the colleague from China is a member of the People’s Congress, presumably a contact from his work on the foreign affairs committee.
The young entrepreneur secure deals with a care home company and a hospital, earning commissions totalling a quarter of a million euros, an amount he has defended as “in line with the market.”
When the deal came to light this weekend, Mr Löbel first tried to pacify the critics by announcing he was stepping down form the foreign affairs committee. But anger inside his own party forced him into announcing he was quitting politics altogether.
Mr Löbel isn’t the only CDU politician who has been caught with his hand in the cookie jar.
Georg Nußlein was deputy head of the Union faction in the Bundestag before it came to light that he’d charged a mask producer a €600,000 commission for securing contracts with several government ministries. Mr Nußlein’s offices have since been raided on suspicion of tax evasion and corruption. He has also reluctantly agreed to step back immediately from politics.
There are major issues here. Union politicians are notorious for their “side jobs” on the advisory boards. CDU and CSU politicians have banked an eye-watering €14 million in outside contracts in this legislative period.
The openness to corruption likely extends well beyond the two men caught out this week. We will know on Sunday evening how angry voters are when results come in for state elections in Baden-Württemberg and Rhineland-Palatinate.
And then, there is the China problem. Mr Löbel was too busy making business connections to used his role on the foreign affairs committee to keep checks on the Merkel’s foreign policy. The official German reason for its close business ties to China is Wandel durch Handel (change through trade) but in Mr Löbel’s case, he was doing the trade - and keeping the change, thank you very much.
J.L.
Who we are:
Jörg Luyken: Journalist based in Berlin since 2014. His work has been published by German and English outlets including der Spiegel, die Welt, the Daily Telegraph. Formerly in the Middle East. Classicist; Masters in International Politics & Arabic from St Andrews.
Axel Bard Bringéus: Started his career as a journalist for the leading Swedish daily Svenska Dagbladet and has spent the last decade in senior roles at Spotify and as a venture capital investor. In Berlin since 2011