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Denial is a ubiquitous psychological defense mechanism. It involves the repression of bad news, unpleasant information, and anxiety-inducing experiences. Judging by the German press, the country is in a state of denial regarding the waning health of its economy and the dwindling fortunes of its financial system.

Commerzbank, Germany’s fourth largest lender, saw its shares decimated by more than 80 percent to a 19-year low, having increased its loan-loss provisions to cover flood-submerged east German debts. Faced with a precipitous drop in net profit, it reacted reflexively by sacking yet more staff. The shares of many other German banks trade below book value.

Dresdner Bank - Germany’s third largest private establishment - already trimmed an unprecedented one fifth of its workforce this year alone. Other leading German banks - such as Deutsche Bank and Hypovereinsbank - resorted to panic selling of equity portfolios, real-estate, non-core activities, and securitized assets to patch up their ailing income statements. Deutsche Bank, for instance, unloaded its US leasing and custody businesses.

On September 19, Moody’s changed its outlook for Germany’s largest banks from “stable” to “negative”. In a scathing remark, it said:

“The rating agency stated several times already that current difficult economic conditions that are hurting the banking business in Germany come on top of the legacy of past strategies that were less focused on strengthening the banks’ recurring earning power. Indeed, the German private-sector banks, as a group, remain among the lowest-performing large European banks.”

Last week, Fitch Ratings, the international agency, followed suit and downgraded the long-term , short- term, and individual ratings of Dresdner Bank and of Bayerische Hypo- und Vereinsbank (HVB).

These were only the last in a series of negative outlooks pertaining to German insurers and banks. It is ironic that Fitch cited the “bear equity markets (that) have taken their toll not only on trading results but also on sales to private customers, the fund management business and on corporate finance.”

Germans used to be immune to the stock exchange and its lures until they were caught in the frenzied global equities bubble. Moody’s observes wryly that “a material and stable retail franchise in its home market, even if more modestly profitable, can and does represent a reliable line of defence against temporary difficulties in financial and wholesale markets.”

The technology-laden and scandal-ridden Neuer Markt - Europe’s answer to America’s NASDAQ - as well as the SMAX exchange for small-caps were shut down last week, the former having lost a staggering 96 percent of its value since March 2000. This compared to Britain’s AIM, which lost “only” half its worth. Even Britain’s infamous FTSE-TechMARK faded by a “mere” 88 percent.

Only 1 company floated on the Neuer Markt this year - compared to more than 130 two years ago. In an unprecedented show of “no-confidence”, more than 40 companies withdrew their listings last year. The Duetsche Boerse promised to create two new classes of shares on the Frankfurt Stock Exchange. It belatedly vowed to introduce more transparency and openness to foreign investors.

Banks have been accused by irate customers of helping to list inappropriate firms and providing fraudulent advisory services. Court cases are pending against the likes of Commerzbank. These proceedings may dash the bank’s hopes to move from retail into private banking.

To further compound matters, Germany is in the throes of a tsunami of corporate insolvencies. This long-overdue restructuring, though beneficial in the long run, couldn’t have transpired at a worse time, as far as the banks go. Massive provisions and write-downs have voraciously consumed their capital base even as operating profits have plummeted. This double whammy more than eroded the benefits of their painful cost-cutting measures.

German banks - not unlike Japanese ones - maintain incestuous relationships with their clients. When it finally collapsed in April, Philip Holzmann AG owed billions to Deutsche Bank with whom it had a cordial working relationship for more than a century. But the bank also owned 19.6 percent of the ailing construction behemoth and chaired its supervisory board - the relics of previous shambolic rescue packages.

Germany competes with Austria in over-branching, with Japan in souring assets, and with Russia in overhead. According to the German daily, Frankfurter Allgemeine Zeitung, the cost to income ratio of German banks is 90 percent. Mass bankruptcies and consolidation - voluntary or enforced - are unavoidable, especially in the cooperative, mortgage, and savings banks sectors, concludes the paper. The process is a decade-old. More than 1500 banks vanished from the German landscape in this period. Another 2500 remain making Germany still one of the most over-banked countries in the world.

Moody’s don’t put much stock in the cost-cutting measures of the German banks. Added competition and a “more realistic pricing” of loans and services are far more important to their shriveling bottom line. But “that light is not yet visible at the end of the tunnel … and challenging market conditions are likely to persist for the time being.”

The woeful state of Germany’s financial system reflects not only Germany’s economic malaise - “The Economist” called it the “sick man” of Europe - but its failed attempt to imitate and emulate the inimitable financial centers of London and New-York. It is a rebuke to the misguided belief that capitalistic models - and institutions - can be transplanted in their entirety across cultural barriers. It is incontrovertible proof that history - and the core competencies it spawns - still matter.

When German insurers and banks, for instance, branched into faddish businesses - such as the Internet and mobile telephony - they did so in vacuum. Germany has few venture capitalists and American-style entrepreneurs. This misguided strategy resulted in a frightening erosion of the strength and capital base of the intrepid investors.

In a sense, Germany - and definitely its eastern Lander - is a country in transition. Risk-aversion is giving way to risk-seeking in the forms of investments in equities and derivatives and venture capital. Family ownership is gradually supplanted by stock exchange listings, imported management, and mergers, acquisitions, and takeovers - both friendly and hostile. The social contracts regarding employment, pensions, the role of the trade unions, the balance between human and pecuniary capital, and the carving up of monopoly market niches - are being re-written.

Global integration means that, as sovereignty is transferred to supranational entities, the cozy relationship between the banks and the German government on all levels is over. Last October, Hans Eichel, the German finance minister, announced OECD-inspired anti-money laundering measures that are likely to compromise bank secrecy and client anonymity and, thus, hurt the German - sometimes murky - banking business. Erstwhile rampant government intervention is now mitigated or outright prohibited by the European Union.

Thus, German Laender are forced, by the European Commission, to partly abolish, three years hence, their guarantees to the Landesbanken (regional development banks) and Sparkassen (thrifts). German diversification to Austria and central and east Europe will provide only temporary respite. As the EU enlarges and digests, at the very least, the Czech Republic, Hungary, and Poland in 2004-5 - German franchises there will come under the uncompromising remit of the Commission once more.

In general, Germans fared worse than Austrians in their extraterritorial banking ventures. Less cosmopolitan, with less exposure to the parts of the former Habsburg Empire, and struggling with a stagnant domestic economy - German banks found it difficult to turn central European banks around as successfully as the likes of the Austrian Erste Bank did. They did make inroads into niche structured financing markets in north Europe and the USA - but these seem to be random excursions rather a studied shift of business emphasis.

On the bright side, Moody’s - though it maintains a negative outlook on German banking - noted, in November 2001, the banks’ “intrinsic financial strength and diversified operating base”. Tax reform and the hesitant introduction of private pensions are also cause for restrained optimism.

Pursuant to the purchase of Drsedner Bank by Allianz, Moody’s welcome the emergence of bancassurance and Allfinanz models - financial services one stop shops. German banks are also positioned to reap the benefits of their considerable investments in e-commerce, technology, and the restructuring of their branch networks.

The Depression on 1929-1936 may have started with the meltdown of capital markets, especially that of Wall Street - but it was exacerbated by the collapse of the concatenated international banking system. The world today is even more integrated. The collapse of one or more major German banks can result in dire consequences and not only in the euro zone. The IMF says as much in its “World Economic Outlook” published on September 25.

The Germans deny this prognosis - and the diagnosis - vehemently. Bundesbank President Ernst Welteke - a board member of the European Central Bank - spent the better part of last week implausibly denying any crisis in German banking. These are mere “structural problems in the weak phase”, he told a press conference. Nothing consolidation can’t solve.

It is this consistent refusal to confront reality that is the most worrisome. In the short to medium term, German banks are likely to outlive the storm. In the process, they will lose their iron grip on the domestic market as customer loyalty dissipates and foreign competition increases. If they do not confront their plight with honesty and open-mindedness, they may well be reduced to glorified back-office extensions of the global giants.

About The Author

Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, PopMatters, and eBookWeb , a United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in The Open Directory Bellaonline, and Suite101 .

Until recently, he served as the Economic Advisor to the Government of Macedonia.

Visit Sam’s Web site at http://samvak.tripod.com; palma@unet.com.mk

Maverick Investors specialise in seeking out non-standard, little-known investment routes. They don’t believe that investment is necessarily ‘difficult’, or that it should be left entirely in the hands of ‘experts’. Experts have their place, of course, but the investment industry wants you to believe that they are vital, and your only route to smart investment strategies.

That simply isn’t true.

Let’s take a look at a couple of examples of what a Maverick Investor might be doing, even as you read this article.

Example 1 - Covered Call Options. It would take too long to explain this in depth, but it’s a bit like renting out the stock you own for a monthly income. Is it safe? Well, it’s allowed within your 401k, so the US government certainly think it is! Does it require huge expertise? No! You need to know how to do it, of course, but you can learn that in a day. From then on, it’ll take you two or three hours a month to implement. Is it worth it? Well, that depends on your criteria. However, you can safely expect to make a return of between 3% and 6% a month if done correctly - and that’s way more than any bank or brokerage house will offer you!

Example 2 - Online Businesses. If you’ve ever tried (or are trying right now) to find a way to make money online, you’ll probably know it to be a frustrating, time-consuming, and ultimately fruitless task. And yet, and yet….there are some people out there who are making consistent fortunes on the Internet, day in, day out, without working that hard for it. In fact, I know a guy who is consistently making $100,000 a month in what he would class as a largely passive income, i.e. he does very little, if anything, to ‘earn’ it. So, what’s the difference between him and you (apart from that income figure!)? The difference is, he has a largely automated system, and a way of thinking strategically, that puts him streets ahead. That’s the bad news. The good news is, he’ll teach you all he knows, and he won’t charge you a fortune for it!

Example 3 - Volatility Trading. The biggest stock market myth is the idea that some people can consistently predict the direction of a given market or stock with a high degree of accuracy over an extended period of time - years, say. It’s not true. Nobody has that ability. However, what if you had a technique where you could a) predict which stocks are due for a large move, b) predict, with some accuracy (a matter of days), when this large move is likely to take place and c) position yourself in the market so you would make money on that move regardless of which direction the move took. Wouldn’t that transform your investment performance in the stock market? Well, there is such a technique, and it’s there for the taking.

Example 4 - Below Market Value Real Estate. In the realm of real estate investing, what sort of a difference would it make if you could consistently buy property without using any of your own money, and instantly turn those properties into money-generating cash cows? How many would you need in order to give up your job and be a full-time Maverick Investor? Not many, let me tell you! And yet there are no real estate brokers out there who will show you how to buy houses and apartments 10%, 20%, 30% and more below their retail value. I wonder why?

Now, there’s way too much hype around on the Internet for me to want to add to it in any way at all. So let’s just back off a little way and put some of the above examples together in a very conservative ‘what if’ scenario.

What if you already have a $50,000 stock portfolio - by implementing a covered call strategy, you could be making 3% a month on that, giving you an income of $1,500 a month for a couple of hours work, and leave your portfolio largely untouched. And what if you were able to plug into an online business system that is generating one man $100,000 a month, and what if it ‘only’ made you 1% of that - that’s still another $1,000 a month in largely passive income.

Using just two of the four examples above, and taking super-conservative estimates, you’re already up to $2,500 a month for very little extra effort.

This is the power of the Maverick Investor! Find out more about these and other Maverick Investor strategies at http://www.maverick-investor.com

Rob Best is a writer, researcher and Maverick Investor who is one of the people behind…

http://www.maverick-investor.com - Helping You to Choose Financial FREEDOM!

Forex trading strategy is becoming more the domain of the individual trader as sophisticated software continues to level the playing field in the currency markets. Forex is short for foreign exchange and are the markets where currencies are traded. Plainly stated, it entails the trading of the various versions of money found around the globe. When you go on a trip overseas and exchange your US Dollars for the local country’s money, you are in reality participating in the currency markets.

The difference between this type exchange and that in the forex markets is that you are not primarily looking to book a profit from this exchange of currencies. One simply requires the native currency in order to having spending money with which to enjoy their trip. However, let’s assume that you retained a few bills of the local currency left over as your trip ends and you go to board your flight back home. You go to the foreign exchange booth at the airport and swap the local currency back into dollars. That action completes a full fledged currency trade.

Those who participate in the forex markets are seeking to purchase a chosen currency and subsequently convert it back to dollars thus yielding a short term trading profit. If one is bearish on a given currency, you are able to engage in what is called shorting a currency. This is in essentially betting that the targeted currency will decline against your core currency. The currency markets can be thrilling and lucrative. Forex trading also comes with additional lifestyle benefits.

Forex traders enjoy the liberty associated with being able to work from home or wherever else they desire. Unfortunately, a significant majority of the plethora of work at home programs come with high fees and little income. The forex markets have been in existence for centuries. The various forex markets around the world are legitimate enterprises which attract the most sophisticated of institutional and retail investors. Abundant proof has been established in the form of large fortunes generated through the trading of currencies.

The international character of the forex trading markets translates to trading going on virtually around the clock. Night owls are able to trade currencies into the wee hours of the morning. Early birds have the ability to commence trading long prior to the time normal stock markets open. Forex traders can make their own schedule and trade from any location with access to the Internet. A successful forex trader has a lifestyle which is universally envied.

Cutting edge automated software programs is able to grant an even higher level of freedom through the automated execution of currency trades. One simply has to select their given trading strategy and acceptable risk levels and let the robot go off to work. There is no longer a need to remain fixed to your monitor for endless hours.

The biggest error that many novice currency traders make is to engage in the arbitrary predicting of the movement of various currencies without the assistance of software. Fluctuations of valuations of currencies within the forex markets often are rapid and based upon convoluted events. Traders who strive to engage in this challenge alone often find themselves outmatched. Fortunately, there is now publicly available sophisticated automated trading programs which help in combat against other forex warriors.

Forex trading strategy executed by robots presents a prominent advantage relating to a robot’s ability to eliminate the adverse impacts many traders experience when emotions come into play. Novice forex participants many times experience the undesirable results when emotions begin to dictate trading decisions. Automated forex trading robots do not experience emotion and coldly trade guided by numbers and logic. Traders who are attempting to navigate the forex markets by intuition and guesses often don’t stand a chance against these machines.

People make things hard because it is natural. But it has been proven over and over that a simple forex trading strategy will outlast any complex system. For more on this, have a look at this forex strategy review I found and then you decide on the possibilities.

How would you like to make extra cash without much effort of either time nor money? Sure, who wouldn’t enjoy an extra income stream to fund your lifestyle or to help cover the bills. If you’re familiar with the foreign exchange market, than you know that both of these options can be true, but how can you know if investing in the foreign exchange market is for you?

Then just what exactly is required to trade on the forex market? The requirements are actually quite simple, as the only things you will need is a personal computer, a little capital to get started, and a trading plan to execute your trades.

Since the forex is a global market that operates 24 hours a day, and almost seven days a week, all of the trading is done via computer. This holds true for both individual traders as well as seasoned investment firms. The only difference is in the power of their software and the amount of money they are willing to invest.

The barriers of entry into the forex market are low, and you can start trading with as little as a dollar. Obviously, you will reap much better rewards if you invest $100,000 than if you were to invest only only $5. However, you can always start small and reinvest your winnings. This is a great way to quickly increase your forex trading leverage while using a small initial investment. Many brokers have used this technique of only reinvesting earnings to great success and very little risk.

Finally, the biggest skill, and most often the largest stumbling block to new investors is having the discipline to follow the market. Since the foreign exchange market can move quickly, many inexperienced investors can lose their confidence and begin making rash decisions. This is the worst thing to do, and many fortunes have been lost this way. Trading Forex is done by the numbers. It is best to have a proven system and to follow it exactly. There are many programs out there that will do exactly that, taking the guesswork out of investing. Either way, once you have a system in place, it is important to stick to it and not let emotions get in the way of your trading.

If you would like to venture into making some extra, and sometimes a lot of extra money, and think you have the discipline and a little capital to work with, than investing in the foreign exchange market is for you.

Peter Aldrich highly recommends Forex Automoney to generate profits overnight and trade like a Pro. Be sure to take advantage of their trial membership and feel free to take his Forex Automoney Challenge