Our Studio Guest this week is Martin Weber.

Martin Weber is Chair of Business Administration and Finance at the University of Mannheim. DW-TV: And joining us now in the studio is Martin Weber, chair of business administration and finance at the University of Mannheim. What do you make of the financial world right now? Is it back to square one? Martin Weber: It's actually not back to square one. It's another crisis. It's not the first crisis we've had. If we learn from the crisis, it will help to get ready for the next one. DW-TV: Ok. You say we're in between two crises now, because we hear that banks, obviously, haven't learned from the crisis -- at least, that's what we've just learned in the report. Martin Weber: I think they have learned, but from a purely logical point of view, they're always between two crises, and the unfortunate thing is we don't know what the next crisis will be. DW-TV: That's a somewhat fatalistic outlook, which means that we also heard that the run for bonds will eventually come to an end at the end of this year. So that's probably when the next crisis is just around the corner? Martin Weber: No, I don't think it's around the corner as fast as you just mentioned, but we've always had financial crises. You can go back to the Middle Ages and we had financial crises. So there's no reason to believe that there won't be any financial crisis in the future. DW-TV: But is there reason to learn from it? I mean, politicians have pledged that they would introduce more transparency, tougher regulations, into the financial sector. According to what you tell us now, it's not really necessary, because things won't change. Martin Weber: No, no. You will have a different financial crisis. I mean, the thing is, you want to regulate, you want to learn from the current financial crisis, but then something new comes up. You see, this financial crisis is not -- we had all this sort of big bubble and so on, in the 1990s. So we've overcome that problem. Now we have another problem. It's not fatalistic; I think it's empirical. DW-TV: So, Wall Street is back in business... and I'm somewhat confused .... you can probably tell me: How is it possible? Just a few months ago, banks were on the brink of bankruptcy, now they're back, alive and kicking -- how is that possible? Martin Weber: I mean first we should be happy that they're back alive, and they're not making more losses. And if you think, as you pointed out, 3 billion, that sounds a lot of money, at least to me. But if you look at the overall balance sheet, it's not; I'd say it's normal. DW-TV: So if you put it in perspective, 3 billion for a bank isn't that much. Still, they're back in the black. Which means one is somewhat dubious now. Does it have something to do with tweaked balance sheets? I mean, there are new regulations that could make that possible. Martin Weber: As far as we know from the banks, and we have to ask the banks themselves, two or three of them are really earning money by the original business. And then you have additional things, you sell a unit and so on, so you make an extra-ordinary profit, and that's what is showing up on the balance sheet right now. DW-TV: And what happened to all the toxic assets? They've been put on ice, but they could come back and haunt us. Martin Weber: They're on ice, and it's good they're on ice, but on the other side, it's not clear how toxic they are, and the future will tell. And of course they have to make provision for them, but hopefully we'll luck out. But it's not that clear, and you can't tell, honestly. DW-TV: Well,How do you rate the credibility of banking experts and advisors, consultants, you name it? Martin Weber: I think they try hard, but of course they can improve. DW-TV: They can improve. Perhaps they could improve if they read your book. I understand that you've co-written a guidebook which tells you how to invest, or how investment can be incredibly easy. Perhaps you could share some nuggets of your wisdom with us. Martin Weber: Of course some of them bought the book, and I'm sure that they get better investment advice. To be a little more serious, the key problem with investment is that the future's uncertain. You can't predict the stock market. People who predict the stock market just lie, or they think they can, but they can't really do it. So you have to cope with the uncertainty -- that's what the book is about. And you do it by diversification, by taking your own human capital into account, by knowing how to save and when to save what, and indeed to solve these type of problems. DW-TV: So in these times right now, would you advise somebody to invest or would you say, 'Be cautious, stay away until times are safer'? Martin Weber: That was a very good question if you're trying to trick me. It's even in these times that I don't know what the future will be. And so in these times the future is just as uncertain as in other times. So you should always invest according to the risk you can take and then broadly diversify. That's the key idea, and it hasn't changed before, after or in the crisis. DW-TV: Is there anything specific you would suggest one should invest in? Martin Weber: You should cope with the cost. You should invest in a fund that is really cheap and that offers a wide diversification. This is the way to go these days. DW-TV: Martin Weber, thank you very much for joining us.

DW-World | July 21, 2009

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