I have a sense that, for Europe, it is going to be "Apocalypse Soon." This is not a guess; I never guess. I arrive at my conclusions with rational deductions utilizing sixth level thinking. I may not always be right, and I may not be right this time, but my thought process is clear enough. Neither do I have any axes or prejudices. I do not arrive at any investigations with any premeditated conclusions.
I am not the IMF, please.
Terminate with extreme prejudice.
- Apocalypse Now
The popular thinking, supported by the mainstream press, is that Marine Le Pen will win the first round and then someone else, anyone else please, will win the second and final round of the French elections. This conclusion, of course, supports the hope and the belief that France will continue along as Germany's step-child in the European Union. "Les Echos" reported on Saturday that Ms. Le Pen is currently the favorite with 27% in the polls and the support of almost 40% of the French Millennial crowd. Hmmm, 'twas the night before Trump and all through the house ("Et tout au long de la maison.")
Well, maybe. The one thing that you can count on here is that if Marine Le Pen wins, that France will sever its ties with the EU with "extreme prejudice." She wants to return to the Franc you know, and she wants her country back. The French have been here before, as I am sure you all are aware. It began in 1788 with the insurrection of Grenoble and spanned eleven years until Napoleon was named the "First Counsel" in 1799.
L'idée la plus extravagante qui puisse naître dans la tête d'un penseur politique est de croire qu'il suffit aux gens d'entrer, d'armes à la main, parmi un peuple étranger et d'attendre l'adoption de ses lois et de sa constitution. Personne n'aime les missionnaires armés; La première leçon de nature et de prudence est de les repousser en ennemis.
(The most extravagant idea that can be born in the head of a political thinker is to believe that it suffices for people to enter, weapons in hand, among a foreign people and expect to have its laws and constitution embraced. No one loves armed missionaries; the first lesson of nature and prudence is to repulse them as enemies.)
- Maximillian Robespierre
Today, at Orly Airport, the French had an armed missionary that had entered France. They have had many that have entered recently. Some stole guns, some drove trucks, some killed people in a magazine office. Each incident, I believe, will drive the French people to the modern-day version of "Vive the Revolution."
Με γάντζο ή τον άλλο τρόπο αυτό κίνδυνο πάρα πολύ είναι κάτι που θυμόμαστε
- Όμηρος, Η Οδύσσεια
(By hook or by crook this peril too shall be something that we remember.)
The Greeks, in my estimation, are out of money, out of patience and out of time. In July the country has a large debt payment to make. You can speak of a falsified "primary surplus" or the IMF showing up any day now to save the day or the EU granting debt forgiveness and you might as well expect the gods to step down from Mt. Olympus to set things right. I am quite dubious that anything is going to "set things right."
The biggest owner of the IMF is the United States. These people now report to Mr. Trump and his "America First" crowd. The Financial Times reports that, a Congressional Bill introduced on Thursday "calls for the Trump administration to oppose any further IMF participation in a Greek bailout. Should the US fail to achieve that aim, the bill would also require the US to oppose any broader IMF quota reforms until Greece had repaid all of its debts to the IMF." Consequently, I consider it highly unlikely, no matter the European garbage bandied about in the Press, that the IMF is going to get further involved in this mess.
Further, I do not see any German "debt forgiveness." It would be political suicide, I believe, in Germany. So, we are left with Default, Default and leave, Default and be removed, as the main contenders for the Greek outcome. Grexit now, in my opinion, is squarely on the table.
There will be an election sometime this year. The Five Star Movement is reported to be in the lead. The Italian banks, for all intents and purposes, are "bust" in my estimation, and only hanging on by political pressure that has been fostered on certain institutions to lend them money. They are quickly "running out of road."
Non sono interessati a preservare lo status quo; Voglio rovesciarlo.
(I'm not interested in preserving the status quo; I want to overthrow it.)
- Niccolò Machiavelli
Well, the author of "The Prince" may be echoing the future, once again. I believe that Italy is far more troubled than thought by many. "These days Italexit scenarios are very fashionable but they give me the chills," Pier Carlo Padoan, Italy's finance minister, said on Saturday. So, grab your coats. It may get far chillier in Italy soon.
Event Driven Risk
You can logically look at "fundamental analysis" and reach certain conclusions. You can ride the "Muddle Through" wave and investment in the European banks and other European companies. Many institutions, obviously, are doing just that.
I, however, think that the "event driven risk" in Europe will overshadow the "fundamental analysis" soon. I think, as Homer stated, that the "hook is coming for the crook." Plenty of those bad boys in European politics these days.
I see way more risk than reward in Europe now. Perhaps I am being overly conservative? Perhaps I am missing some opportunities? If I err, it is on the side of caution. I can live with my choice and sleep quite soundly.