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German Crosswalks and Italian Subways

Earlier this month, Finland held national elections. Until now, according to the New York Times, “Finnish politics was about as interesting as watching paint dry.” The same three dominant parties were returned to govern by coalition every year. But not any more. To quote from the Times again: “In the general...

Earlier this month, Finland held national elections. Until now, according to the New York Times, “Finnish politics was about as interesting as watching paint dry.” The same three dominant parties were returned to govern by coalition every year. But not any more. To quote from the Times again:

“In the general election last weekend, the nationalist and populist True Finn Party emerged from political obscurity after largely campaigning on the evils of the European Union and its bailouts of Greece and Ireland.”

It seems Finland is having its own Tea Party moment. Obviously their goals and enemies aren’t exactly the same as the U.S. tea partiers’, but the labels being thrown around—True Finns, protest vote—are eerily similar.

As I mentioned last week, I’m currently traveling in Europe myself. I haven’t been to Finland yet, though I may make it there in a month or two. However, just traveling between the two countries I’ve visited so far—Germany and Italy—has already shone a lot of light on the European political situation.

I’d been to both countries before, so their differences didn’t come as a complete surprise to me, but the intense juxtaposition—I took an overnight train from Munich to Rome—and the current European political situation have really thrown them into sharp relief this time.

The example that best represents the conflict—whether you call it Southern Europe vs. Northern Europe, bailout recipients vs. economic engines, or something else—is a simple one: crossing the street.

In Munich, when Germans want to cross the street, they find a crosswalk, and obediently stand at attention until the walk light turns green. Even if there are no cars visible for blocks, they won’t cross the street until the walk light turns green. This unwavering compliance with the law occurs despite the ostensible absence of policemen from most areas of the city.

In Rome, by contrast, Italians cross the street wherever and whenever they please, dodging Fiats, scooters and tour buses. OK, it’s not quite as chaotic as, say Beijing, but it is a shocking change when you’ve just spent a week in Munich. Small wonder that Italy has gone through more than 50 changes of government since the end of World War II.

Another example: In Munich, the subway runs on an honor system. After buying a ticket, you’re supposed to validate it in a stamping machine before boarding the train. But there are no turnstiles, no doors, no subway attendants to ensure you actually do it. I did see a woman checking tickets on the train once, but apparently it’s fairly rare. Yet, as far as I can tell, everyone pays for the subway.

In Rome, on the other hand, there are turnstiles at all the subway stations, but I saw multiple people sneak through them. I myself had to, after I accidentally swiped my ticket on the wrong side of the station. When I asked a subway worker what to do, he told me to go back up to the street and into the right entrance, then to follow someone through the turnstile.

I could go on and on. The subways in Munich are pristine and nearly silent. Most of the subway cars in Rome are covered in (actually quite beautiful) graffiti, and they’re all very loud. When I told a German I was planning to sleep on the overnight train to Rome, he commented that the train tracks in Italy were far too bumpy to sleep on (I slept fine).

Obviously, Italy has many fantastic qualities that Germany can’t even dream of competing with—that’s why I’m here. But visiting them back-to-back certainly makes it clear why Europe’s economic engines are reluctant to subsidize the lifestyles of their Southern neighbors. And though I haven’t been there, evidence suggests that Greece—the first country to receive a bailout—is even more difficult to get along with.

A Times article last year titled “Greek Wealth is Everywhere But Tax Forms” detailed the challenges of taxing the Greeks. On their 2009 tax returns, just 324 residents of a wealthy suburb of Athens reported owning swimming pools. However, satellite images of the area reveal a very different number: 16,974 pools—over 98% of the swimming pool owners lied on their tax forms.

Apparently it gets much worse (whole incomes manage to disappear regularly), but the swimming pool anecdote, like the behavior of Germans at crosswalks, gives a simple and memorable insight into the Greek culture. I’m willing to bet they’re not big fans of obeying walk signals either.

(Just to clarify: Italy has neither needed nor received any bailout money from the EU, though, like Greece, it was found to have used “irregular” accounting to meet monetary union requirements.)

Today’s Investment of the Week is inspired by an interesting coincidence in the latest Dick Davis Investment Digest. We always focus on current trends in the Digest, highlighting the stocks and industries that are most popular among our contributors. Recently that’s meant a lot of energy stocks, natural resource stocks and other stocks that will benefit from rising oil prices. Last week, the latter group included stocks of two companies that make electric vehicles. One, a major pioneer in the industry, I had heard of. The other was a new name to me, but I’ll be keeping an eye on it from now on.

The stock is Kandi Technologies (KNDI), a Jinhua, China-based company working with the Chinese government (a very powerful ally) to make and sell electric cars in China. The company already is making money, thanks to its go-kart and all-terrain vehicle businesses. But it’s the electric vehicles that could make Kandi a winner.

The company recently opened an electric vehicle (EV) showroom in Hangzhou, which is a pilot city in a government-sponsored electric vehicle program. A key component of the program will be 3,500 charging poles and 38 “express change” stations where EV drivers can swap out their batteries for fresh ones—a robot-assisted process that could take minutes, as opposed to the hours it takes to charge an EV battery. The government also will heavily subsidize purchases of Kandi’s EVs in Hangzhou, bringing the price down from 89,800 RMB to 29,800 RMB (about $4,600)—within the price range of middle-class Chinese. It’s all part of the government’s stated goal of having 23,000 EVs on the road in Hangzhou by the end of 2012.

In all honesty, I don’t know anything about the KD 5011, the car involved in all these plans, other than that it is Chinese-government approved and subsidized. But, from what I know about the Chinese government’s ability to get things done (remember the Beijing Olympics?), that’s probably enough.

Unfortunately, the stock, KNDI, is currently in a strong downtrend. I wouldn’t buy until you see evidence that the downtrend has been broken and an uptrend is beginning. There were five up days in a row last week, so the decline’s back could be broken, but I’d wait for a couple of up weeks before throwing any money on the table. It still will be a good deal a little above this low. If it does recover soon and you buy, expect resistance near the all-time high above 6.

Learn more about KNDI and other high-potential stocks featured in Dick Davis Investment Digest!

Wishing you success in your investing and beyond,

Chloe Lutts