Bielmeiers Blog

DZ BANK

Stefan Bielmeier, DZ BANK’s Chief Economist and Head of Research, comments on economic developments in Europe, the USA and the Emerging Markets, assesses international financial market trends and gives his opinion on politics and economic policy – concisely, succinctly and to the point.

The economics and financial market experts of DZ BANK’s Research division support Stefan Bielmeier in his blog.

Find out more in Bielmeier‘s Blog about DZ BANK Research’s current topics, the experts’ focal areas, and their general viewpoints on the latest developments.
Speculative excesses at Bitcoin & Co.

The Bitcoin share price has risen by around 45 per cent since 2012. Another 1,000 other crypto currencies have been created. Everything suggests a bubble is forming. Blockchain has the potential to make business processes and payments safer, faster and cheaper. But it is completely uncertain whether such “crypto currencies” will survive in the long term and if so which. Investors should stay well away from Bitcoin & Co. Their share price performance looks more like an auction than a fair pricing process. Regulation by the supervisory authorities is probably only a question of time.     What is a speculative bubble? – Many capital market researchers and Nobel prize-winners have worked on this question without having developed a viable early warning system. But we believe there are some empirical features that have characterised previous speculative bubbles. These include the fact that valuation is not possible using traditional methods: “this…

Overdue consolidation on the equity market – no cause for concern

Share prices have finally experienced a slight setback. After the DAX had marked a record high at the beginning of the month, it has lost four percent since then. In this context, there can be no talk of a genuine consolidation – or even a correction. Since 1975, the DAX has corrected intrayear from one high to the next low by 18% in average terms. Applied to the current parameters, even a correction from the annual high of 13,478 points to a good 11,100 would still lie within these historical statistics. We do not expect equity markets to fall that strongly. Rather, the current development appears to be a direct response to the evident „overheating“ of share prices and economic leading indicators. Profit taking is now on the agenda. This could prove all the greater, the more quickly investment funds exhaust their risk budgets for equity mandates or the lower…

German upturn enters a new phase

The German economy continues to be advancing full steam ahead: According to the preliminary estimate released by the German Federal Statistical Office, gross domestic product (GDP) for the third quarter of 2017 was 0.8 percent higher than in the second quarter of 2017 after adjusting for prices. In the first half of 2017, GDP rose appreciably, namely by 0.6 percent in the second quarter and 0.9 percent in the first quarter. The new data can most definitely be considered another positive surprise on the part of the German economy. The strong momentum in the third quarter means that a growth rate of over 2 percent is now on the cards for 2017 as a whole. What is especially gratifying is that the upturn now seems to be increasingly driven by investments. For a long time that was the weakest point in the current economic recovery, which has now endured for…

Theresa May under pressure

As political uncertainty mounts in the UK, the pound sterling is faced with significant headwind at the start of the week. The pressure on prime minister Theresa May has meanwhile reached a new dimension. The latest chain of negative headlines for the head of government started with the resignation of two cabinet members. Foreign Secretary Boris Johnson is also facing mounting criticism following the clumsy manner in which he commented on the situation concerning a dual British-Iranian woman being detained in Iran on espionage charges. Calls for his resignation have not stopped Johnson together with Environment Secretary Michael Gove from formulating a “secret letter” to the prime minister, in which the two Brexit hardliners demand that the UK puts better preparations in place to deal with a failure to negotiate an agreement with Brussels. A potential transitional phase should also be limited to a maximum of two years. The two…

Low interest rates over a very long period of time – possible?

In the wake of restrained loans approval policies among commercial banks on the one hand and constantly rising central bank liquidity on the other, in January 2012 the European Central Bank (ECB) resolved to lower the minimum reserve requirement from 2% to 1% of the volume of a bank’s deposits used for the calculation. At present, the interest paid on the minimum reserve is 0% and thus corresponds to the main refinancing rate at which the ECB makes central bank money available to commercial banks. In total, the minimum reserve requirement of all banks taken together runs at around EUR 123 billion. By contrast, the interest rate at which commercial banks can deposit their surplus reserves with the ECB has since March 2016 been minus 0.4%. In 2012 the ECB lowered the minimum reserve rate to 1%, because the significance of the instrument had dwindled given full allocation of the…

MDAX valued ever higher, but no sign of a trend reversal

Small and mid-caps are popular. The MDAX, which is made up of the shares of 50 medium-sized German companies, has clearly left the DAX standing since the beginning of the year. To date the smaller index has increased its value by more than one fifth. The DAX bellwether index itself is near its all-time high and has managed to catch up to some extent, but this year too it has lost ground against the MDAX with a performance of 17%. In a long-term comparison the MDAX is the star among the indices of the DAX family. Since 1988 the mid cap index has gained 11.7% a year, while the DAX has managed “only” 9.1% a year. The difference of 2.6% a year means the MDAX is now roughly twice as high as the DAX because of the compounding effect. The small & mid cap indices are home to a mixture…