French Election Thesis Part 3: A real possibility

9:40 AM

Although I have had numerous debates about this, including with another trader from France. I fail to see why the market is underpricing this event.

Maybe because of what happened with Trump and Brexit, the market has a short-term memory, or maybe I have an information recency bias.

This is where I fall onto the main principle of which my trading is based. Credit & Business cycles.

It is not a case of right vs. wrong. It is a case of transference of power between the common and the elites.

It does not have its history in something so infant as the financial markets, but it is based on history. As a Christian, I see this pattern so strongly in the book of Judges and even why the split between Catholics and Protestants as linked to this theory.

What does this have to do with the French elections? Well, Hollande, the outgoing president is woefully unpopular. Most french presidents are, but he is the most unpopular president in France in the since the 1960s.

And why? Unemployment at over 10% for a long time, youth unemployment at 23%. Terrorist attacks, numerous. To top it all of the economy is not doing well. He is also labeled as indecisive.

When times are bad, and the common folk is not doing as well as the elites, a transference of power takes place. Between the elite/establishment and the common/anti-establishment.

France is in a bad place and they are with a left winged president. A logical move is to take a step towards the establishment back towards the right. 

This is the crux of my thesis.


Fillon: Abuse of power

Fillon is not generally in the conversation because of a certain scandal.

Dubbed the "Penelopegate", the scandal involving Fillon wife and child who were paid for doing nothing.

Nepotism is the pinnacle of the elitist taking advantage of their power.

 One of President Hollande great accomplishments was attempting to tamper with the 35 hour work week. This caused riots.

The French have short hours and they will not take to Nepotism lightly.


What about the middle?

One step towards Right but not completely Right is centerist Macron. He was the economic adviser to Hollande, so does that really establish that change will be made? Unlikely. He is the status-quo.

Some experts say that this is because he is not left winged. His government will be different. He is not establishment(right winged) either.

Macron was Hollande's former economic minister, one of the very points that make Hollande so unpopular, the economy not doing well, plus the current government has backed this man not scream that this is more of the same.

People who have backed him include the former PM, the environment minister and the junior minister for sports and youth. The cherry on the cake, Hollande himself.

With Hollande being so unpopular, why would the people vote for essentially the same?

This is where the polls and experts simply boggle me, why would people vote for the same? Yet he is ahead in the polls.

He is the HEAVY favorite to win the entire campaign.

My belief is the media has much to play to this. His youthful (let us be frank) good looks, charm and excellent standing at the debates has hyped this man. Interviews with overseas French expats who are against Le Pen would want for a status quo so they can continue their current lives.

Attention is no doubt on this hero as the alternative to the French people from an evil Front National and failed political parties.

But these appeal to the privileged in France. Not to the common man who owns a farm, a woodworking business, a small café in a village.

A free independent centralist who is neither left nor right.

However, it begs the question is it enough to win?

The last referendum which promoted EU integration. Paris was a heavy "yes" with over 70% still the referendum did not pass.

If Trump and Brexit are not lessons on this enough. The Privileged few are not the target here, but is it enough?


Now towards the right: Communist Crazy Economics

A step more towards the right of the political spectrum makes little sense. But it is what the people want or believe.

Just to be clear if either Melanchon or Le Pen win the election, my thesis will be a success. If either player moves to the second round I will be correct.

While I think Melanchon is playing the social media platform well, with his holograms, YouTube channel and tacky games. His economic policies make so little sense. It only would if one prefers a Marxist style economy.

A reduction from an already uncompetitive 35 hour work week to a 32 hour week with extreme fiscal spending. High tax on the rich, who in my opinion will simply leave the country, these are extreme measures.

While I do not think they will fly, it is possible this is what the people want. He is especially compelling due to the amount of power his party has in the senate and the possibility that he might be able to deliver on his promises.

The final logical choice: Far Right?

One of the reasons why I think Le Pen is more likely to win is because she taps into anger and frustrated people of France. Nothing is a stronger motivational force. This same power is available to Melancon because of how angry & unhappy the people are.

Talking about terrorism, uncontrolled globalization, xenophobia to a point where jobs are being taken. These are all the issues that Hollande was hated for. 

In having someone like Le Pen, you have a candidate who is directly opposite the current president. If people want change, this is the most direct way of achieving it.

She may not even be

Le Pen's vote towards protectionism is, in my opinion, a step backward in a progressive society, but it can work.

Hence, I would prefer Le Pen to make the second round. But either her or Melenachon supports the view.

Both are logical choices and certainly have a chance to win, based on my opinions, Le Pen seems the better of the two. 

The last part of my thesis will come out Monday, if Le Pen or Melanchon get in.

Update: Now that the Paris attacks have happened. The liklihood has since increased for Le Pen to win

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