To skeptics, it's the sign of impending economic collapse. To supporters, it's the beginning of the end of state governments lashed together as a unified body.
To me, it's just backlash.
It's noise. It's a not-terribly-surprising casting out of the old guard that failed the system and the (temporary) welcoming of a new guard fat with hopes and dreams that will, ultimately, founder upon the jagged outcrops of history and be looked upon in later years as a long-forgotten hiccup - assuming it's even looked upon.
I am talking about last weekend's elections for the European Union parliament - the officious, technocrat, bureaucratic and politically correct body of lawmakers that too often rides roughshod over the Continent with some of the most asinine laws, i.e.: children under the age of eight are not allowed to blow up balloons without adult supervision.
In this past weekend's election, ring-wing parties - some bordering on xenophobic fascism, and most calling for the EU to break apart and return to individual states - won an unprecedented 16% of the seats in parliament. With right-wing victories in France, the U.K., Denmark, Greece, Germany and elsewhere, some European news outlets labeled the vote an "earthquake" for Europe.
I'm going to say, "meh, not so much." History will show this moment in time to be an anomaly. And for those of us who look to build a portfolio of diversified investments, you have to look past the events of the moment and consider longer-lived macro trends, not transient cycles.
"The people have spoken loud and clear," bellowed an exultant Marine Le Pen to a crowd of fawning supporters after she and her party of French Euroskeptics won 24 seats in the EU parliament. "They no longer want to be led by those outside our borders, by EU commissioners and technocrats who are unelected. They want to be protected from globalisation and take back the reins of their destiny."
A nice sound-bite for French TV, but Ms. Le Pen is as wrong as day-old escargot.
Though the number of seats won by anti-establishment politicians on the right was historic, the vote itself wasn't so much historic as it was apathetic. Just 43% of registered Europeans cared to cast a vote, a low turnout. It's like a team of third-string scrubs winning a football match by forfeit: The record books record it as a win … but how important is it, really?
And therein we find the real story: Europeans are burned out. They've gone through half a decade of financial stress and austerity. They've seen rioting from Athens to London and various tourist destinations in between. They've struggled with high unemployment, particularly among youth. And they've had to deal with the rise of left-wing populism in places such as France, where President François Hollande swept to power on anti-austerity fervor but, like our own populist, flamed out spectacularly and created a mess bigger than before he arrived.
Now voters are simply switching boats. It's the European version of Thailand's coup, only without the military involved: voters, or those who cared to vote, are simply exasperated by the status quo and, so, they cast a protest vote … and the third-string won.
But just because the lunatic right is replacing the lunatic left doesn't mean the EU is on the road to rupture.
The pro-European center held firm in places like Italy and Spain, where one could arguably suspect that financial chaos and high unemployment would have led to Euroskeptic victories. And it held firm in Germany, the EU's largest and most-important state.
And that gets to the ultimate message…
Germany: The Gorilla Glue of the EU
I've said this many times as various facets of the European debt crisis has unfolded: Europe will not tear apart. Germany will never let that happen … and Germany is the only state that matters.
The French like to think they're important. The Spaniards are smart enough to know they're not. And the Italians just don't care. But in the grand scheme of Europe, Germany is the Gorilla Glue that holds the continent together - and it does so for Germany's benefit. Right-wing loons full of animosity and frustration for the EU and the euro are yelling into a hurricane. They have some power - such as it is - but their ability to begin rendering asunder the European Union is the equivalent of ant's power to move an elephant.
This is what I wrote way back in 2011, in the heat of the crisis, when the Chicken Little pundits in the American and British media were irrationally warning of the impending death of the euro and the collapse of the EU. The last three years have shown my words to have been the sober-minded analysis:
If you spend any amount of time thinking about the ramifications of the euro going away, you know that there's one reason the currency's survival is preordained: Germany.
The German economic miracle over the last decade is the direct result of the euro. The euro did away with the cost of currency conversions when importing and exporting products around the E.U. It also equalized pricing from one country to the next, and added huge efficiencies to the manufacturing and sales processes.
In essence, the euro allowed German exports to excel.
Indeed, German exports in the early '90s rose by about 3% a year. Between 1999 and 2003, when the euro existed largely as an accounting currency only, German export growth rose by more than 6% annually. And between 2003 and 2007, when physical euro coins and notes were in circulation, German exports grew by 9% a year … Anyone who thinks German business and industry - which relies heavily on selling goods to the rest of the EU - will allow such an important trading advantage to slip away is delusional. It's never going to happen. The single-currency's existence has added hundreds of billions of euros to the German economy in the last few years alone.
Survival is the only option.
Since that time, German stocks are up nearly 60%, and the broader European market is up more than 50%.
So high-fives all around to the right-wing lunatics out there. Good job winning some seats in the EU parliament. Enjoy your time in (relative) power … for it will be short, and it will be ultimately meaningless.
The EU is not going to split apart because a few fringe politicians won by forfeit.
As an investor, use that to your advantage. Europe is the developed-market economy you want to own - now, and for the long haul. Load up on large, dividend-paying blue-chip stocks in Germany, Switzerland, Spain, Denmark and the U.K.
Until next time, stay Sovereign …
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.