Sunday, January 20, 2013


I will occasionally touch on German finance news amongst the various German topics that blog on.  Today, I'll give you an small introduction to the DAX....the German version of the Dow Jones index on Wall Street.

The DAX is made up of the thirty largest companies that trade on the open market in Germany.  Some examples are: RWE, Siemens, Deutsche Post, Deutsche Telekom, Bayer, and BASF.  The daily DAX price is an index of where those thirty companies are going.

Do companies fall off the DAX (like the Dow Jones)?  Yes, occasionally, the finance guys sit down and decide that some company is just not up to their old standards, and they get replaced.

Where is German Wall Street?  In the heart of Frankfurt.  It is regarded as the tenth largest stock exchange in the world.

How do most Germans view the DAX?  This is a bit more difficult to figure out.  From my own humble opinion, the majority of Germans don't have much of a knowledge over the DAX or buying stocks.  In a village of 1,000 residents....there might be thirty people who either play the stock market themselves or have a broker or investment handler who does it for them.

What you tend to find is that Germans have two obstacles in getting themselves to an investment point.  Most consider anything in the investment be a risk that they really don't want to take.  It's their take their cash to the bank and simply accept a two-percent CD option, than invest it into Mercedes or Audi or BASF.

The second problem is simply the amount of knowledge that you need to make stock purchases happen.   There's not that many avenues for a typical German to sit down and get a certain amount of knowledge, play with stocks in various scenarios, and then exercise their knowledge in the real world.  Without these outlets, no one ventures out of the safe area they've built.

As for odd terms that you might occasionally hear from the German news?  XETRA is the system that makes the trades on the Frankfurt floor.  You execute via XETRA, and stocks move from person to person.

The MDAX?'s fifty large German companies that have nothing much to do with banks, books and clothing.  The finance news folks will talk about how the MDAX is doing each day at the conclusion of the business cycle.

The SDAX?  It's a list of fifty medium and small companies.  Air Berlin, Hornbach (the hardware store), and SIXT (the car rental folks) are on this listing.

The TecDAX is a listing of thirty German companies that deal with technology only.  Software AG and SolarWorld make up this listing.

The OkoDAX?  It's one that you don't see much on the finance news and rarely discussed.  It's the renewable energy group of roughly ten players.  It is probably the least known of the DAX operations, and some might argue that it's among the least traded as well.

The HDAX?  It's all of the members from the various DAX groups...combined.

The CDAX?  Every single stock sold on the German DAX market falls into this bucket.

How many companies are listed on the DAX?  Between 1300 and 1400 German companies.  The majority....are likely companies that you've never heard of....even if you were a German.

Where do you get your typical German news?  The obvious point is Channel One's nightly news...between 0812 and 0815, there will be a sixty-second clip on winners, losers, and notes for the day. After that, you have the N-TV coverage from another commercially run network.

From the printed media....most papers will have some minor business news listed....but if you wanted fresh and broad news....then there's the Handelsblatt (printed daily).  They run around 140k copies a day and if you were into trading stock in'd typically read this daily.

As an American, you tend to find large segments of American society who have an interest in stock trading but simply lack the knowledge.  Some will sit down and spend a year reading various publications and quietly pull out $5k to play the field and learn from mistakes.  Germans are not the type to take those kind of risks.  They want something better than a fifty-fifty shot on their hard earned money.  If I had to pick one of the top ten differences between the two cultures....this risk thing does makes it into the top ten.

The curious thing?  A couple of years son was in the last year of German school, and the math teacher had an extra class that he threw into the mix....playing the stock market.  This was a small school and mostly for average kids.  The county education folks threw up this stock challenge.  As a group, you went out and picked your stocks, and at the close of the school year....they'd add up the profits.  Typically, the gymnasium kids (the smarter schools) should have prevailed.

In this son's school group actually did the best of the entire region.  You could probably sit down with my son and the other members of his group today....mention stocks....and each kid could explain how you buy and sell stocks.  Would they do it with their precious income of today?  No.  They just don't like that risk thing.

So if you are in the company of Germans, and stocks come up as a topic....don't be shocked that they are shocked over your playing the market.  They might ask questions and wonder how you actually do it.  

No comments: