Value destruction
This is a truly terrifying graph. It shows this year's continuing freefall of the German DAX. At the time of writing the share index is at 2207, down 70% from its 7 March 2000 high of 8065. That?s right. Down 70%. Can you imagine what this is doing to the morale of businesses and shareholders? The stresses now operating on the German economy and society are scary.
But there?s more. When the country?s turgid corporate sector needed a place to trade small stocks, the Neuer Markt (a version of the Nasdaq) was launched just before the 2000 market high. Well, it?s gone. And the banks are in trouble from the high level of corporate defaults. And the insurers, because of their holdings, are badly wounded by the drop in equities. And let?s not forget the demographic implosion the country faces, plus the fact that consumption is flat.
One seriously underreported finance story of the last year is that Germany enjoyed a bigger bubble than the US did and is now experiencing a far worse crash.
