Fearful Investors Stash Money in Luxury Goods

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The uncertain financial markets and the euro crisis have left many Germans feeling nervous. Worried about the security of their savings accounts, increasing numbers of people are deciding they would rather invest in material goods like art, vintage cars and real estate instead. But experts warn that nothing is 100 percent safe any more.

Franz Herrmann, head of the German Association of Savers (BDS), has spent half a century trying to be a good investor. As a child, he filled piggy banks and, as an adolescent, he put money away in his savings account. Later came a building loan contract, in addition to 12 life insurance policies. "Money attracts money," his father liked to tell him, quoting a German saying. "I was hardwired for saving money," Hermann explains.

At 52, he says he figured out "what’s going on." He’d earned money through his business selling beer steins and jewelry in Munich’s city center. But he became convinced that he’d actually lost money through his savings efforts and cancelled his insurance policies, while the small interest earnings from his remaining savings accounts were "eaten up by inflation," he says. To fight back, Herrmann formed the BDS. Now he makes appearances around the country, warning of "money-destroying instruments." He’s certain that saving is "state-sanctioned robbery."

Becoming poorer by saving? As radical as Herrmann’s perspective may sound, a growing number of people share his mistrust. They no longer believe in the rates of return promised by the financial industry, while savings and fixed deposit accounts yield pathetic interest earnings, and the never-ending euro crisis feeds fears of inflation or even a currency devaluation.

Surveys by the polling institutes TNA Infratest and Allensbach reflect the current crisis of faith in Germany: Nearly half of the respondents now fear inflation, while every second person with a job questions which form of private investment even makes sense anymore.

Sports Clubs, Art and ‘Cement Gold’

"People are becoming increasingly cautious about entrusting their hard-earned money to the banks," says Rolf Bürkl of market research institute GfK. It has yet to become a mass movement, but a significant number of people are shifting their money around, cancelling supposedly rock-solid financial products like life insurance. Some two years ago, customers had already begun criticizing the weak returns on such investments, according to Philipp Vorndran, capital market strategist for wealth management company Flossbach von Storch. "Now many people are asking themselves just what kind of products they actually own," he says.

Instead of trusting German banks, many investors are turning to tried-and-true institutions such as the Hamburg soccer club St. Pauli. Within the span of just four weeks, some 5,000 fans recently bought a total of €6 million ($7.7 million) worth of shares in the club so it could build a new stadium. They were promised 6 percent interest. The club seems like a secure kind of bank to many. After all, it’s been around since 1910 and has survived the many crises that have befallen Germany since then.

Until now, polls and studies have always shown that Germans tended to save even more money than usual during uncertain times, according to market researcher Bürkl. But, lately, trust in the financial system has been flagging so rapidly that the crisis has triggered a kind of clearance-sale mood. "The fearful saver has turned into the fearful consumer," he says.

The trend hasn’t yet been captured in figures, with the savings rate down only moderately so far. But consumer confidence is rising, and the pre-Christmas retail market wasn’t the only area to profit.

Those who can afford it are putting their money into their own homes, in the form of better insulation or renovations. Roofers are booked out for weeks in many regions. The sector is one of the winners of the crisis, growing some 5 percent in 2011 to reach almost €8.5 billion in turnover.

Many people want to swiftly stash their money somewhere safe. Those who can afford it are investing in supposedly secure goods. Record prices are being paid at art auctions. Meanwhile, in cities with booming economies, such as Hamburg and Munich, real-estate agents are reporting bidding wars over so-called "cement gold," as property has been dubbed.

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