EU Elections 2017: A Corruption Train Wreck in France

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Latest Polls: Monday, March 6, 2017

Macron vs Le Pen second round -> now at 60/40, lowest percentage for Macron since Feb 23rd, and down from 63% last Thursday.

Fillon vs Le Pen 44%, Fillon 56%. Lowest percentage of the past month (recorded also on Feb 20th)

On the Run

“Trump 2.0 in France?  National Front leader Le Pen is hostile to free trade, rejects open borders, and says globalization is destroying France.”


The political establishment is on the run globally, after losses in the U.K. (Brexit) and the U.S. (Trump) – they’re digging deep into the dirt, using the judicial system in France to try and influence the presidential election.   There are so many investment opportunities baked in the analysis of this process.  The politically induced swings in financial markets HAVE NEVER been greater.

Le Figaro Poll, from March 5, 2017



The establishment media is your best friend in the financial arena, they are consistently underselling the global tsunami that swept Trump and Brexit into power.  Time after time, trades are mispriced in the market as participants have trusted BOGUS polling data.

Elections: The Road Ahead in France, Netherlands, Germany and Italy

The once promising presidential bid of French conservative Francois Fillon, already seriously weakened by pending (politically triggered) corruption charges, was “coming apart Friday” with the resignation of his campaign director and his campaign spokesman, adding momentum to a stream of defections and panicking his party.

Fillon appeared increasingly alone with the resignation of two key officials, and other high-profile supporters following them out. But he did not balk.   Minister Alain Juppe again was being mentioned as a potential Plan B for The Republicans party, which could find itself without a candidate as the April 23 first round of the presidential election nears. A runoff between the top two candidates is May 7. Juppe had refused filling in for Fillon in the past. – AP

French Election 2017

French Elections

Odds Juppe’s success are on the rise.  France is looking more like Venezuela by the day.  Using the judicial system to eliminate political opponents is a rusty sword used in banana republics, now it’s moving to the developed  world, how pathetic, how sad.   The media is telling us the Fillon candidacy is apparently doomed (indictment scheduled for March 15), the runner up for center right party, Alain Juppe, possibly could his place. This would put Juppe vs Macron (Center left) and Le Pen, who’s also engulfed in mini-scandal and if so, polls now tell us Juppe odds are surging (see above). Accordingly, we saw Le Pen odds declining and Euro currency rallying late Friday.  Fillon COULD drop out as early as this weekend and market participants don’t want to be short Euro into this possibility.  French Republican party will hold a political committee on Monday, instead of Tuesday, to review the case of its presidential candidate Francois Fillon, according to Agence France-Presse Saturday.  Senator and Fillon’s closest ally Bruno Retailleau says the meeting “has no importance,” on BFM TV.

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Political Risk in Europe Creating Divergence

Euro v Gold

We’re witnessing two powerful forces at work here.  On one hand surging political risk in France is a 10,000 pound lead weight on the Euro, creating a powerful divergence from gold above.  On the other, surging inflation risk in the Eurozone has political leaders scratching their heads looking at Mario Draghi’s ECB.  It’s either insanity or a trade war?  A near $85B a month of QE bond buying from the ECB with a Eurozone PMI up at 56, highest since 2011.  Really???  The ECB has a case of political addiction to EMERGENY central banking tools in an economy well above crisis levels. 

Lessons of 2011 and 2012

We must focus on Europe, the political risk calendar coming at us this Spring, Summer and Fall and filled with market moving events.

Eurozone Credit Risk Contagion, Leaking Over to U.S. Equities

EU S&P 500

Keep in mind, EU political triggers in the Spring / Summer of 2011 and 2012 took the S&P 500 down 20% and 11% respectively.

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In the Netherlands, general elections are planned on March 15.   The leader is found in a Trump-like PVV party as populism’s surge rolls on.  They are on pace for nearly 35 MPs out of 150.  A right turn here after Brexit and Trump increases the chances a follow on in France.

Europe Bond Yields on the Rise, Political Risk or Inflation?

Bonds France Italy

Focus is on the French presidential election with round one taking place on April 23 and the run-off on 7 May.  Uncertainty focused on in the spread of French sovereign bond-yields to German Bunds at the highest levels since 2012 (at 95bp as of March 3, up from 45bp in January 2017. 

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In another move toward the global populist revolution, far-right National Front candidate Marine Le Pen leads in polls of voting intentions for the first round (at 28-29% support) but similar to Trump last summer, lags her opponent independent candidate Emmanuel Macron in some opinion polls to date of the second round.
The significance of the French election mainly relates to the potential consequences of the surprise outcome of a Le Pen victory (betting markets currently ascribe a 36% probability to a Le Pen win). Le Pen has been highly critical of the Eurozone and the EU and advocates a ‘return to monetary sovereignty’ for France (including introducing a French currency), a referendum on EU membership and a range of anti-globalization and anti-immigration measures.

Inflation at 5 Year Highs in Europe

Eurozone Inflation

In the UK, the House of Lords last month took up proposed legislation for the UK government to trigger Article 50 to formally begin EU Brexit proceedings, which is planned before the end of March.   The ECB is buying $80 to $60B a month of government bonds with inflation expectations now at five year highs.  There’s growing concern in Frankfurt Germany, we think a taper is coming a lot faster than market expectations.

In Italy, the likelihood of early elections in 2017 appear to be receding, but the resignation of former PM Renzi as leader of the centre-left PD party highlights ongoing political uncertainties. Meanwhile, hopes for an early resolution of the current standoff between Greece, the IMF and Greece’s European creditors appear to be in vain, even though we expect an agreement over the second bailout to be reached in time for the Greek debt maturities in July 2017.


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