Slightly Premature Victory Laps

The nightmare of nightmares of the globalist elites and France’s political establishment has been avoided: as the polls had indicated, Emmanuel Macron and Marine Le Pen are moving on to the run-off election; Jean-Luc Mélenchon’s late surge in popularity did not suffice to make him a contender – it did however push the established Socialist Party deeper into the dustbin of history. That was very Trotskyist of him (we can already picture a future Weekly World News headline: “French socialists discover giant alien dust mites”).

 

Lateral entrants to the business of avenging the disinherited, leavened by strawberry cake.

 

Around three micro-seconds after the election results became known, the entire French and European political elite immediately announced its undying support of Emmanuel Macron, with only a handful of “populist” parties outside of France saying that they were rooting for Marine Le Pen.

Just to clear this up beforehand, Ms. Le Pen may be the terror of the establishment, but she is just as statist as her competition was and is – in some respects probably more so. The run-off election is between two central planners (or at least “third way” proponents), each one of whom believes to be in possession of the “better plan”.

 

First round election results: the distribution of support between Ms. Le Pen and Mr. Macron reminds us a bit of the 2010 election map of Ukraine, which showed a similar East/ West split (see “Mapping the Conflict in Ukraine” for more details on this). Amazingly, Hamon didn’t even win a single department – click to enlarge.

 

There is no political constituency for liberty or anything remotely resembling classical liberalism (= libertarianism) in France. Moreover, in view if Mr. Trump’s recent magical transformation from putative swamp-draining rebel to slightly confused neo-con (who urgently needs a compass), it is clearly time to once again focus on the only thing that one can actually hope for in politicians, and that is entertainment value; luckily we have good news on that front.

Given unanimous establishment support for Macron, it was apparently concluded that the 2nd round voting ritual will be a mere formality, a kind of rubber-stamping exercise for the Brussels-approved candidate. Just to be safe, the French bureaucracy nevertheless mailed two ballot papers each instead of one to several hundred thousand Frenchmen living abroad so they will be able to vote twice.

That  should produce a small haul of fraudulent votes for Macron, as it was decided to simply let the matter rest. Action will only be taken if fraudulent voting attempts are “detected” after the fact, which sounds like a difficult thing to do without Batman (in view of Le Pen’s anti-EU stance, most Frenchmen living elsewhere in the EU are bound to vote against her for personal reasons).

 

Second-round voting intentions, from the department of reasonable assumptions: after Geert Wilders “lost” the election in the Netherlands by enlarging the presence of his party in parliament by 33%, the  conviction that  Mr. Macron will deliver a Hillary Clinton-type landslide victory has solidified (“it doesn’t matter if the probability is 91%, 95% or 99%” – only climate science dazzles with more exactitude and prescience!). Admittedly, the recent French polls are probably more accurate than the US polls were, but we will still spend most of this post explaining why an upset could happen anyway – click to enlarge.

 

Confidence that the Brexit and Trump polling failures were non-repeatable one—off events seems indeed quite strong, judging from the party that was thrown in stock markets around the world. Even the sickly looking euro regained its footing.

To this we would point out the following: for a variety of unrelated reasons the euro was ripe for a rally regardless of the outcome of the first round election. Moreover, it simply doesn’t matter what the candidates say they want to do about the euro – not one of them is likely to abandon it.

Without a parliamentary majority it isn’t even possible for a French president to call a referendum on EU membership or the euro, as it would touch on a constitutional issue. We bet that would be just fine with Ms. Le Pen, since going back to the French franc would entail headaches any politician will want to avoid – unless a major crisis forces his or her hand (note: the FN has currently just 2 out of 577 seats in the National Assembly and Macron’s new party has so far not yet taken part in an election).

Buying already overbought and overvalued stocks is a different kettle of fish though – although the relief rally was not really unexpected, it still looks like mindless herding behavior. It makes about as much sense as buying gold due to rising geopolitical tensions, i.e., not much.

 

French stocks take off, as does the euro. The latter makes sense, the former doesn’t really – click to enlarge.

 

Money supply growth rates are currently slowing in every major currency area except China. M1 growth was recently still fairly high in the euro zone in absolute terms, but the ECB is beginning to “taper” QE as of this month, so a further slowdown is quite likely.

 

Narrow euro area money supply aggregate M1 (~equivalent to TMS) – the y/y growth rate has slowed from a high of ~14.5% to ~8.5%, with a further slowdown likely. That is usually not the best time to buy stocks, especially if they have already rallied for a while. Obviously, a Macron victory isn’t going to persuade the ECB to print more money – click to enlarge.

 

Rise of the Deplorables

The default assumption should be that Macron will indeed win the second round, but he does have some problems that may be masked in the polls by the “Bradley effect”. One advantage of Ms. Le Pen that reminds us a bit of Donald Trump’s campaign is that her voters seem more engaged and less likely to switch sides. The same cannot be said of Macron’s supporters.

 

Not only Macron’s supporters are less sure of their choice than Le Pen’s: note how fickle Hamon’s voters are. How certain is it that only 3% of them will vote for Le Pen vs. 70% for Macron? What they are telling an interviewer may not really be indicative of where they will put their cross in the contemplative quietude of the voting booth – click to enlarge.

 

In recent years security, immigration and terrorism have become increasingly important issues. It is fair to say that a great many French voters have by now  migrated closer to Le Pen’s views on these topics (so to speak), in spite of the fact that the population of France once was one of the most tolerant in Europe.

 

After its election results fell intermittently to a low point from 2006 to 2008, support for Marine Le Pen’s Front National has grown noticeably. There seem to be more deplorables in France than previously suspected – click to enlarge.

 

That has changed significantly after the big surge in terror attacks over the past year (here is a list of French voter priorities posted by Mish in February; security and terrorism are sharing third place with purchasing power, right after jobs and government handouts). It should be no surprise that the Front National has become a bit of a fan favorite in recent years.

Last week’s terror attack in Paris elicited a comment by Macron that was faintly reminiscent of Marie Antoinette’s idea about people lacking bread. In an editorial for the Guardian he essentially told people to “get used to it”. That may simply have been a realistic assessment, or a less than ideal way of putting it. Still, when emotions are sufficiently stirred up, it may be taken as a sign that he won’t do much about it. That is quite different from Le Pen’s activist attitude.

 

Le Pen doesn’t seem to consider the problem “imponderable” – she would simply close the borders to immigrants from Isistan. Once upon a time this stance was widely decried as racist, but France has been on the receiving end of numerous terror attacks and many people’s attitudes have changed accordingly.

 

This doesn’t look like something one would want to get used to.

 

Macron: Hidden Entertainment Value

It may in this case be to Macron’s advantage that he frequently dispenses fascinating outbursts of verbiage that seem deserving of  being entered into an incomprehensibility competition. He sounds at times as if he has a built-in postmodernism generator, or as if his speech hasn’t been decrypted just yet. People may therefore not be worried too much about what he says, since it is always possible that he has switched to philosophical bon-mot mode, and that stuff is generally beyond the ken of mere mortals.

It is incidentally also the good news we alluded to above, in the sense of entertainment to look forward to. We were previously fairly certain that only Marine Le Pen and perhaps the French Hugo Chavez would be able to deliver a satisfactory performance entertainment-wise. It turns out they have company.

After taking a closer look at Macron’s antics, we realized we had overlooked an incredibly gifted artiste. Because of this exciting discovery we can now look forward to the election with complete equanimity –  any outcome will do. Here are a few remarks by other observers and critics commenting on his rare talent:

 

François Baroin: “He says nothing about nothing, and probably doesn’t think much more than that about it either.”

Unknown (to us, anyway) observer: “That is to say, a little elusive… it sounded hollow, in my opinion”

Another unknown observer (faintly reminiscent of Sherlock Holmes): “It is the most brilliant encryption system in history.”

Desperate woman standing in a fog bank: “I don’t understand… I don’t understand a word.”

Yet another anonymous observer: “This surpasses everything I could imagine.”

Marine Le Pen, speaking to Macron in a debate: “You have an insane talent, you end up speaking for seven minutes, I cannot even summarize your train of thought, you have said nothing, it is like the absolute void between the stars.”

 

What is it that so excites and at times perplexes his fans? We give you a few examples below (and will provide proof that he really said those things):

 

Macron at a feminism conference: “The identity is “A” equals “A”. There exist at least “A’s” and “B’s”. I didn’t want that “A” equals “B”.”

Macron during an interview: “You don’t want to live in a box, do you? I don’t. And so, our life always happens “at the same time”, it is more complex than what we want to reduce it to.”

Macron writing in “Le Journal du Dimanche”: “I have always accepted the vertical dimension, the transcendence, but at the same time, it has to be fully anchored in the immanent, in the material.”

Macron delivering a speech: “I, my life, my memories, they are made of childhood memories of my grandmother and that professor of philosophy, whom I have never seen…  and yet, I have the feeling I know his face.”

Another Macron interview: “What constitutes the French spirit is a constant aspiration to the universal, that is, this tension between what has been and the part of identity… this strict ipseity, and the aspiration to a universal, that is to say, that which escapes us.” [ed. note: “ipseity” = “selfhood” – a term to be found – no kidding – in the “Dictionary of  Untranslatables”;  apparently French deconstructionist philosopher Jaques Derrida used the term ‘ipséité’ frequently in his writings. We incidentally also have to thank Derrida for books like “Specters of Marx” and sayings like “To pretend, I actually do the thing: I have therefore only pretended to pretend. And lastly, from another interview comes what we would at this stage call Macron’s piece de résistance… something for true connoisseurs, the high point – so to speak the Mount Everest of his pseudo-philosophizing and improbable reasoning. Just a few sentences of oddly poetic nonsense, declaimed with such moving sincerity one sits spellbound as the  magniloquent imagery unfolds – until either the last sentence, or… We made the terrible mistake of watching the facial expression of the TV presenter, who listened to it live when it premiered and managed to preserve a deadpan, slightly bemused expression throughout, with a degree of self-control worthy of a Shaolin warrior monk. We probably sprained something in the process (the septum transversum? If Macron were in the US, we could sue him now).  So here goes, Macron has the word:

We all have our roots. And because we are all deeply rooted, there are trees next to us… there are rivers, there are fish… There are brothers and sisters…”

 

Stunning. We have in the meantime found out there is more… the man is a veritable fount of memorable quotes. Here is a video that shows him actually saying all of the above (in French, which somehow makes it even funnier):

 

The reincarnation of Socrates… or someone like him. Sort of.

 

What If?

We have to briefly consider what happens if the bête noire Marine Le Pen – unlikely as it seems – manages to pull a Trumpian upset. When Donald Trump won, the big surprise was that risk assets only went down for about an hour and immediately commenced to rally, a state they have been in every since. We don’t believe  situation in France is going to be similar, if a surprise victory is achieved by the apparently greatly feared populist candidate.

The reason is mainly that market participants have decided to celebrate already. Prior to the US election, a mild undercurrent of “he might just pull it off” was always detectable. Also, the markets were a bit nervous, with volatility premiums high until D-day and the market weakening somewhat into election day.

This more recent flipping of the switch from semi-sobriety to full-on party mode is almost disrespectful by comparison. Anyway, it also tells us that the election outcome is widely regarded as predetermined and anything else is therefore going to upset the markets to varying degrees (in the short term).

 

She looks like she’s about to take off… can she actually fly? Her first round result was the best the FN has achieved in its history (see insert). Oh, and she’s wagging two fingers at once, for extra-emphasis. Finger-wagging by politicians is usually not a good sign, since it is most often employed when talk turns to perfectly harmless voluntary activities that the speaker wants to make illegal or regulate into near-death type catatonic compliance.

 

Conclusion

This is probably the last time we will write about the French election, unless the unlikely happens somehow. As we said though, that is a possibility that shouldn’t be dismissed. Other than that, we just hope that Macron continues with his creative impromptu wordsmith career.

 

Bonus Chart: Long Term Approval Bear Market

French presidents seem to have impressed their subjects less and less as time has gone on. Mr. Hollande saw his approval rating tumble to levels so low they were  previously unimaginable; he didn’t even try for a second term as a result. To add insult to injury, at the time his approval rating hit its low it amounted exactly to 100 minus Putin’s approval rating. Wining the French presidency is evidently easier and more fun than actually governing.

As a final aside: five of seven post WW2 French presidents of France were “conservatives” – and yet, France is by many measures one of the most socialistic countries in the EU today, with government spending amounting to a breath-taking 58% of GDP (no wonder they are liked less and less).

 

The people increasingly disapprove… – click to enlarge.

 

Charts and tables by: Economist, Guardian, stockcharts, ECB, Ifop, Anatoly Karlin/votrejournaliste.com, Boomberg  

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • A Surprise Move in Gold
      Traders and Analysts Caught Wrong-Footed Over the past week gold and gold stocks have been on a tear. It is probably fair to say that most market participants were surprised by this development. Although sentiment on gold was not extremely bearish and several observers expected a bounce, to our knowledge no-one expected this:   Gold stocks (HUI Index) and gold, daily. As noted in the annotation above, a Wells Fargo gold analyst turned bearish at the worst possible moment...
  • May Away
      May Gone in June... Yes, now that June is here, it is indeed the end of May. Theresa May, to be precise, the henceforth former British Prime Minister. After delivering her unparalleled masterclass in “how to completely botch Brexit”, British cartoonists are giving her a well-deserved send-off, which we are documenting below. But first, in case you don't know anything about Ms. May's heroic “Brexit”-related efforts, here is an explanation of how she tried to finagle the best...
  • US Money Supply Growth and the Production Structure – Signs of an Aging Boom
      Money Supply Growth Continues to Decelerate Here is a brief update of recent developments in US true money supply growth as well as the trend in the ratio of industrial production of capital goods versus consumer goods (we use the latter as a proxy for the effects of credit expansion on the economy's production structure). First, a chart of the y/y growth rate of the broad US money supply TMS-2 vs. y/y growth in industrial & commercial loans extended by US banks.   At...
  • Elizabeth Warren’s Plan to Bamboozle American Voters
      A Plan for Everything! The run-up to the presidential primaries offers a funhouse reflection of American life.  Presidential hopefuls, hacks, and has-beens turn to focus groups to discover what they think the American electorate wants. Then they distill it down to hollow bumper stickers. After that, they pump their fists and reflect it back with mindless repetition.   A plea for clemency from Mr. 1/1024th crow. [PT]   Change We Can Believe In.  Feel the...
  • How Not to Launch a Gold Standard - Precious Metals Supply and Demand
      The Money of the Free Market, not of Governments Monday was Memorial Day holiday in America. Last week the price of gold rose 8 bucks, and silver 16 cents. With Keith traveling in Asia right now, this will be a brief report. But speaking of Asia, everyone seems to be talking about China’s (and other countries, such as Russia) accumulation of gold.   Accumulation of gold reserves over the past decade by various emerging market central banks (from the new Incrementum In Gold We...
  • The Ugly End of Globalization
      The Ugly End of Globalization Sometime in the fall of 2018 a lowly gofer at the New York Stock Exchange was sweating  bullets.  He had made an honest mistake.  One that could forever tag him a buffoon.   Art Cashin the living hat-stand, going through a succession of DJIA milestone hats. He promised was going to crack a smile for the Dow 27,000 hat photo, alas, it was not to be. [PT]   After trading sideways for most of the spring, the Dow Jones Industrial...
  • In Gold We Trust 2019 
      The New Annual Gold Report from Incrementum is Here We are happy to report that the new In Gold We Trust Report for 2019 has been released today (the download link can be found at the end of this post). Ronnie Stoeferle and Mark Valek of Incrementum and numerous guest authors once again bring you what has become the reference work for anyone interested in the gold market.   Gold in the Age of Eroding Trust   A chart from the introduction to the 2019 IGWT report: trust...
  • Gold vs. Silver - Precious Metals Supply and Demand
      Is Silver Still Useful as a Monetary Metal? The price of gold jumped a whole twenty bucks last week. We imagine that the marginal gold bug is relieved to be rid of his gold, in this opportunity afforded by the highest price since early April. OK, all kidding aside, the price of silver went up a penny.     The gold-silver ratio keeps hitting new highs recently (this is actually a long-term trend, frequently interrupted by strong rallies of silver against gold). Is silver...
  • Bitcoin: What is the Best Day of the Week to Buy?
      Shifting Patterns In the last issue of Seasonal Insights I have discussed Bitcoin’s seasonal pattern in the course of a year. In this issue I will show an analysis of the returns of bitcoin on individual days of the week.   Bitcoin, daily – since bottoming in early December, BTC has advanced quite a bit. It remains an excellent trading sardine. [PT]   It seems to me that Bitcoin is particularly interesting for this type of study: it exhibits spectacular price...
  • The Italian Job - Precious Metals Supply and Demand
      Lira Comeback? The price of gold jumped 35 bucks last week, and that of silver 48 cents. The dollar is now down to 23 milligrams of gold. Keith is on the road this week, so we will just comment on one thing. If Italy is serious about moving back to the lira, that will make the euro less sound (to say nothing of the lira). That will drive people mostly to the dollar, but also to gold.   Italian deputy prime minister Matteo Salvini (as the leader of the Lega party he is...
  • Paul Tudor Jones Likes Gold
      Gold is Paul Tudor Jones' Favorite Trade Over the Coming 12-24 Months In a recent Bloomberg interview, legendary trader and hedge fund manager Paul Tudor Jones was asked what areas of the markets currently offer the best opportunities in his opinion. His reply: “As a macro trader I think the best trade is going to be gold”. The relevant excerpt from the interview can be viewed below (in case the embedded video doesn't work for you, here is a link to the video on...
  • Fed Chair Powell’s Plan to Pickle the Economy
      A Loose Relationship The Dow Jones Industrial Average made another concerted run at the elusive 27,000 milestone over the last several weeks.  But, as of this writing, the index has stalled out short of this psychosomatic barrier.  By our estimation, this is for the best.   Since early 2018 the DJIA has gone nowhere, albeit in interesting ways... [PT]   While not always apparent, the stock market generally maintains a loose connection to the underlying...

Support Acting Man

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!