German economy loses altitude

The markets and the real economy are very tenuously linked.  In fact, a major blow to the real economy can send the markets soaring.  But this time, the massively overbought markets are looking for an excuse to sell and by gum, if you look at the real economy, you will very likely find all sorts of reasons to take your money and run.  The only economy in the EU that is not staggering from one disaster to the next is Germany's and folks, they are running out of customers very quickly.  So on the news that German exports have dropped sharply, the DAX plunged to a near one-year low.

I tend to discount this sort of news.  There are thousands of economic horror stories out there that are routinely ignored whenever the markets are advancing.  Considering how much naked corruption, front-running, and computers trading with each other that goes on in those massively over-reported markets, I wonder why anyone takes this news any more seriously than for any other form of betting.  But they do, and governments are known to create extreme hardships for their own citizens in order to keep those magic markets soaring ahead.  So I keep track of the casino only because far too many take it seriously.

Markets tumble as German data fuels EU recession fears

Text by FRANCE 24  2014-10-10

Asian stocks and Wall Street suffered their worst day of the year after weak German trade data fueled concerns that Europe is sliding into recession. European shares also opened significantly down on Friday.

Germany reported Thursday the biggest monthly plunge in exports in five years. The data came hot on the heels of a string of dismal data from Germany in recent weeks that has fed anxieties about recession in the eurozone.

Wall Street stocks slumped 2 percent on Thursday and Japan's Nikkei share average also skidded 1.5 percent on Friday on the news. European shares opened down in early trading on Friday, with Germany's DAX index sinking to a near one-year low.

Concerns about global economic growth also hit oil prices hard, with Brent oil prices falling to $89.24 a barrel, its lowest level since mid-2012.

With finance ministers and global investors pinning their hopes on Europe’s largest economy and powerhouse lifting the EU trading bloc out of the doldrums, the data sent the markets running.

“Horror story”?

Carsten Brzeski, economist at ING, described the current situation in Germany as a “horror story”, according to the UK’s Guardian.

Many investors fear that the US economy - the world's largest, but comprising less than a quarter of the entire global economy - cannot escape unscathed when Europe is stalling and many other big economies, including China, Japan and Brazil, face their own hardships.

However, many market players feel there is no need to panic yet, with Berenberg Bank economist Christian Schulz stating that the, “fundamentally sound German economy should rebound quickly. We expect a return to significant growth in early 2015." more

Germany also has some serious problems with powering her domestic machinery.  The promise to commit to phasing out nuclear power and running her economy with renewables was extraordinarily brash, considering absolutely no one had any idea how this was going to be done.  The people who made those promises seriously underestimated the size and complexity of such a program.  And now, when the big practical problems are rearing their heads and working solutions don't always arrive on schedule, folks are losing their nerve.  I blame the fact that because this project is so large and expensive, the energy companies should expect to run without profits for a long time—like several decades.  Now if energy were some venture that existed only to benefit the rest of the national economy, this would be quite easy to accept.  But since energy stocks are expected to pay dividends and routinely included in the portfolios of pension funds, this "loss of nerve" was about as predictable as the dawn—especially in a country like Germany with an aging population

Germany’s energy industry a ‘disaster’ – France’s EDF chief

RT October 09, 2014

Profits have declined for German energy companies since Angela Merkel decided to shake up the power industry by cutting nuclear energy in favor of renewables. The impact on the energy sector is severe, and may be having a domino effect across Europe.

Henri Prolio, the Chief Executive of France’s state-owned EDF, has openly criticized Germany’s two biggest energy suppliers, RWE and E.ON.

“When it comes to energy they are in a disaster. Their two major companies – E.ON and RWE – are under huge pressure. One is more or less dead, the other one is in a very difficult situation," Henri Prolio claimed, adding that his company was doing “quite well.”

The “dead” comment refers to Germany’s second biggest utility company RWE, which posted a 62 percent drop in profit is in the process of shutting down power stations to save money.

Dusseldorf-based RWE has been struggling to improve financially. Last April the company reported its first net loss since 1949. On top of that, company debt has risen to €30 billion.

E.ON, Germany’s energy leader, which is “in a very difficult situation” according to Henri, announced a drop of 20 percent in profits for the second quarter.

Germany’s top two power companies have been in sharp decline since a ban on nuclear energy. In the wake of Fukushima, Angela Merkel said Germany would phase out nuclear power by 2022 and subsidize renewable energy.

In the next 27 years, Germany will spend €550 billion on renewable technologies like wind and solar, in the hope of attaining 80 percent renewable energy by 2050. This makes technologies like wind and solar more expensive.

Berlin has had a particularly awful week in terms of hard economic data, with no positive news. The country’s GDP outlook has been lowered by economists, exports dived to pre-financial crisis lows over the Ukraine crisis, and other economic indicators such as business confidence and industry tanked. more