Just to start new burning topic in front of all.
After German govt announcing the bailout package for banks. Still the news say that this is just not sufficient and yet to come is big recession--- how to interpret the situation now? I would like to know thoughts of different people here.

my questions is: - How safe are German banks now?

Cheers,
Sreekar

Hi,

my second most visited site after trust7 in these days is this one...

http://www.finanztreff.de/index.htn?u=100

It is more exciting than a thriller in the TV :-)

I am happy that I did not had enough money to buy shares in the past and I wish that I would have enough money to buy some now ;-)

But to answer the question: I am very sure that the German Banks are safe!

I wish all of you a great weekend!
Detlef :-)

Hi,

Good topic.

All the share values are decreasing like never before in last 5 years. Its very painful for some one who has invested expecting to make some profit as a foreigner here in German market.

Don't even know if they would come back at least to the original value. It seems it is very difficult to predict.

But what I puzzled is: If the value is going down, would not it come back again in future? Why every one is so panic.,considering that the investment is for longterm. OR Am I mistaken?
I agree that, for the one who is aiming at short time returns from such share market then definately it is a bad time over all. But for long term plan, should n't it become better?

IF its going to decrease like this day-to-day/Week-to-Week where the world would end up? How the life would go on. As it is not only the matter of any individual who is directly involved by buying some shares but it is also affecting the companies. At the end, it would turn up to affect the complete soceity. I hope I am not mistaken.

Hmm... I have just scribled what I thought of. May be I am not correct.

Do comment !

thanx.

@alien0in2de

But what I puzzled is: If the value is going down, would not it come back again in future? Why every one is so panic.,considering that the investment is for longterm. OR Am I mistaken?

All good things must come to an end, including good economic times.

In order to determine the current state of the economy, you first need to take a good look at the business cycle as a whole. Generally, the business cycle is made up of four different periods of activity extended over several years.

- Peak
- Recession
- Trough
- Expansion/Recovery

Understanding the business cycle doesn't matter much unless it improves your portfolio returns. What's an investor to do during recession? Unfortunately, there is no easy answer. It really depends on your situation and what type of investor you are.

First, remember that a bear market does not mean there are no ways to make money. Some investors take advantage of falling markets by short selling stocks. Problem is, this technique has many unique pitfalls and should be used only by more experienced investors.

Another breed of investor uses recession much like a sale at the local department store. Referred to as value investing, this technique involves looking at a fallen stock not as a failure, but as a bargain waiting to be scooped up. Knowing that better times will eventually return in the economy, value investors use bear markets as buying sprees, picking up high-quality companies that are selling for cheap.

There is yet another type of investor who barely flinches during recession. A follower of the long-term, buy-and-hold strategy knows that short-term problems will barely be a blip on the chart when taking a 20-30 year horizon.

Of course, many of us don't have the luxury of a 20-year horizon. At the same time, many investors don't have the stomach for riskier techniques like short selling or the time to analyze stocks like a value investor does. The key is to understand your situation and then pick a style that works for you. For example, if you are close to retirement, the long-term approach definitely is not for you. Instead of being at the mercy of the stock market, diversify into other assets such as bonds, the money market, real estate, etc.

The financial media often takes on a "sky is falling" mentality when it comes to recession. But the bottom line is that recession is a normal part of the business cycle. Nobody can't say what the best course is for you - that's a personal decision. However, understanding both the business cycle and your individual investment style is key to surviving a recession.

Have a nice Day.

I will give concrete examples.

Detlef said:
But to answer the question: I am very sure that the German Banks are safe!

I am careful on this. The strongest capital system in Germany is Bavaria and even there are at least 2 banks who needed help from 500-billion-euro rescue plan lastly. Germany economy is not a closed economy. DAX has seen losts as much as %10 and since July, 3000 small-middle scale companies have been bankrupt in Germany (I have seen this on internet -media press-, unfortunately can't find again).

If USA can collapse then it is also technically possible that Europe can. Examples: The Netherlands took over Fortis. Island financial system collapsed.

alien0in2de wrote:
But what I puzzled is: If the value is going down, would not it come back again in future?

No, the vice versa: the trend in markets were growing since end of 1990's. Now this ballon exploded. Look at 2001 crisis. There is nothing going down. There was something over-valued, now it goes back to its normal value.

Akshay wrote too academic and philosophically. I put it more concrete:

Subprime mortgage in USA was dependent to short-term credits. Financial institutions invested these credits to hedge fonds to compensate the short term. After a while (around 2006), people could not pay their credits ("thanks" to FED). Thus all financial system had to take their hedge fonds back because there is need for money. Now this system broke down. All developing economies collapsed. Pakistan, Argentina, Turkey...

Although Europe is interial, it is not independent from common market. Island is bankrupt now. And other economies like Germany will be affected in 2009. Nobody wants to destroy its balance until Xmas because Xmas is one of the most important financial investment period in capitalist system. All financial problems will appear next year.

Germany government passed a rescue plan of 500 billions. But they did not explain where they will find this money. Olaf Scholz said it will not be additional taxes. I don't believe him because they don't want to lose the Elections 2009.

Therefore, 2009 will be very though year. The side effects of collapsed banks will cause layoffs in private companies everywhere in the world, because all private systems work with credits.

This is especially difficult for Europe because the continent is very old. Average age is getting higher and workers must pay more and more taxes. If this crisis comes, it will be a challenge for Europe.

We will see. It will be very though next year. The average unemployment rate among foreigners is double of the national average in Germany and this crisis will affect firstly the foreigners in Germany.

Klenze17.

Guys, the whole economic system around the world is collapsing, and there's no way back. I believe that we will see drastic changes in the system in the very near future. The rescue plans will only keep the system floating for 1-2 more years untill a real solution/change is agreed on. Wait and see...

Take a look at financial sector of Germany now:
http://www.spiegel.de/politik/deutschland/0,1518,587843,00.html
Financial rescue plan of government will be refomulated because most of the banks refused the plan. The banks don't want the state to buy themselves in the urgent case.

The are rumours that state will buy Commerzbank:
http://www.spiegel.de/wirtschaft/0,1518,587640,00.html

Through the speculations on stock market, Porsche made VW the most expensive company in the world but now they are in the beginning of crisis:
http://www.spiegel.de/wirtschaft/0,1518,587842,00.html
This will influence all the related credit relationships with other banks in Germany.

Hypo Real State bank in Germany took 15 billions Euro from Rescue Program:
http://www.spiegel.de/wirtschaft/0,1518,587617,00.html

There will be a lof banks who will ask for rescue plan contribution:
http://www.spiegel.de/wirtschaft/0,1518,587490,00.html

The system in Germany is more "inertial" and all these banks are private entertainment. And they basically refuse state contribution in the short term because if state comes, then they lose in their profit. And they don't publish their bad situation otherwise they will lose customer. They are afraid of that people take their money away, because of panic.

These "short term strategies" will lead bad conditions in the coming days. Therefore it is early to say "banks in Germany are safe". That's why I said "I am careful on this".

Germany economy is not closed so turbulences might happen. Let's wait and see.

On the other hand, automotiv sector is afraid of a possible breakdown at all productions in Europe:
http://www.spiegel.de/wirtschaft/0,1518,587705,00.html
This might influence all side sectors and all supply chain companies. These will cancel a lot of software projects in software companies who work for automotive in Europe.

The chain reaction is expanding slowly in private sector in Europe. I am expecting a lot of layoffs in 2009 everywhere, in all the sectors in the world.

Klenze17.

Hi,

Some info about safety of our money in German banks. It seems that per person and per bank, up to 20k Euro is safe even in the worst conditions as per the German law.

http://www.bankenverband.de/channel/101832/art/2535/index.html

Apart from the above law, the banks joined in a kind of pool where they give more security to the individual account holder who has more that the above said 20k euro.

But it seems, the safest way for the one who is having more than 20k liquid amount in a bank to shift to another bank with the above 20k euro and that way one can be safe even in worst conditions when comes to liquid money.

Hope information is use full.

Do comment if it is not correct thinking.

Thanks,

@alien0in2de

....the safest way for the one who is having more than 20k liquid amount in a bank to shift to another bank with the above 20k euro....

There are better ways to invest, for example you can open HiZins Festgeldkonto
with ICICI Bank earning 5,30% annual interest.

The Einlagensicherung per customer is 1.500.000 Euro. What more do you want?

http://www.icicibank.de/faqs_de.html#q5