Blain’s Morning Porridge 8^th July 2024 – De Mal En Pis in France, and not much better elsewhere…

“The only people we hate more than the Romans are the Judean People’s Front, the Judean’s Popular People’s Front, and the People’s Front of Judea..”

The shenanigans around the second round of French voting has achieved a messy but acceptable stalemate for Macron. All he has to do now is figure out how to make the essentially ungovernable economy work without breaking French bonds, the Euro and Europe while keeping out Le Pen in 2027! Simples…

Yesterday I joined our local swimming gang for our Sunday swim down the River against the incoming tide. One of the gang turned up with an American visitor. As we waited for the gang to assemble I got chatting to him… he was a trader in New York and immediately we started swapping war stories and soon worked out who we knew in common. I told him to have a read of Blain’s Morning Porridge. He was stunned… on the flight across that night he’d been listening to my latest appearance on the Macrovoices Podcast, and had then opened the Porridge website to read it… He pulled out his phone to show me – there it was, my website! Small world or what?

Back in the real world.. The last few weeks have been dominated by politics… there are other things going on… in Bonds, in EVs (Tesla, Tesla, Tesla,) and across the Alternatives space – were I’m planning to write at least one Private Capital Markets note per week, and launch a new Alts newsletter by the end of Summer (assuming summer ever arrives here in the UK!)

This morning we have the “out of the poêle à frire into the fue” (forgive my Franglais), moment in France. Last week I’d warned about the potential dangers to OATs and the Euro from Le Pen and the Far Right, and a reader send me a message warning how Far Left leader Jean-Luc Melenchon was likely even more dangerous. I thought his chances too slim to worry about. Wrong.

Macron snatched an unlikely stalemate in the French National Assembly elections by pushing Marine Le Pen’s National Rally (RN) into third place via the “Republican Front” tactical voting mechanism of the Far Left’s Popular Front and his own centrist party, Renaissance, agreeing to stand down against each other to present voters with the binary choice of Le Pen or anything else. It worked. Le Pen came third – but still with 1/3^rd of the total votes. She will now wait for the Presidential Election – noting that the RN tide is rising higher on each plebiscite.

The one thing that is abundantly clear is nothing is really solved in France. If Le Pen’s RN right spelt bad news for French Government Bonds, the Euro and EU stability, then Jean-Luc Melenchon’s plans to cut retirement to 60 (or is it 50?), spend upwards of €200 bln to hike wages and benefits while guillotining hedge fund managers in the Place Vendome, look marginally worse. Although Melenchon’s France Unbowed is just part of the Popular Front, the alliance of fringe lefties is the largest power block in the National Assembly – meaning he could still get the chance to form a government, although he’s helpfully said no deals will be cut..

The result is France will be effectively ungovernable for, perhaps, months as electoral deals are cut – which may have been Macron’s calculation since he called the Snap Election in June. As leader of the Centre Block, Macron’s party looks most likely to be part of any coalition – unless, of course, the Right and Left can figure out they both want much the same things… generally giving everyone what they want, and getting Europe to pay for it. As General de Gaulle noted: “how can anyone govern a country with 246 varieties of cheese?”

The big question for markets is how will a France crisis impact Europe – could it destabilise the Euro and EU borrowing as French political instability wobbles investor confidence in the whole ECB construct – watch this space.

Politics feeling increasingly unstable across the West – even here in the UK where Labour won a landslide because people voted against the Tories, and because the right-wing vote was hopelessly spilt between the Tories and Reform. It a landslide built on foundations of sand – which isn’t to say Labour politicians aren’t good – new Business Secretary Jonathan Reynolds came across well on Doomsburg on Sunday Morning.

The deep read on recent European elections and the rise of right: the increasing likelihood of a Trump landslide in November, the stunning protest vote to reform in the UK, and now the French election leaving France politically gridlocked, demonstrate common threads of political instability across the western democratic nations. Confidence has been undermined. There is growing distrust of politicians and the political classes, increased political polarisation, a rejection of decency (under the banner of less wokery), rising social tensions blaming immigrants for self-inflicted political wounds, rising anti-semitism, and rising poverty.

As all the above is undermining society, confidence in solutions in receding because of a rising rejection of conventional media and new sources – increasingly voters are willing to believe whatever they find on their social media feeds (which, let us not forget, targets folk with advertorial and “curated” copy) When young voters are desperate for any kind of change, and smart politicians promise solutions on TikTok – it becomes a game changer – as illustrated by Nigel Farage’s success in the UK vote last week, successfully enlisting social media to capture a massive slice of the young voter pie..

The rejection of conventional media is hardly surprising. Personally, and much as I trust the BBC, it is no longer regarded as the absolute guardian of the truth here in the UK. Sadly, in trying to become all things to all people, the BBC has become a mirror for comfortable middle-class values which mean nothing to the vast numbers of UK voters. It has a PLU (people-like-us) mindset. Two weeks ago the Beeb sent 200 staff to cover the Glastonbury Festival. Don’t get me wrong, I would love to go to Glastonbury – who would not – but I had to laugh as the carefully curated “diverse” team of ethnic, gendered and differently gifted presenters talked about the street-cred and life-story of some wonderful American black rap-star, and then the camera panned away to focus on an ecstatic audience of 100% white, middle-aged 40s-50s, middle-class folk dressed in their festival chic as they dad-danced away pretending they listened to her music all the time…

Let them eat cake…. Indeed.

Or yesterday where the choice of Sunday viewing on the Beeb was Wimbledon or Wimbledon. Do they know how many kids in the UK don’t play tennis, and will never ever have that opportunity afforded to them? I was painting on Sunday afternoon, but as my layers of wash were drying I watched the UK Grand Prix on Channel 4 (something I haven’t done in decades) to see Lewis Hamilton win. Marvellous. Well done him!

I reckon the BBC’s political coverage is excellent – but I’m one of the few who actually likes to watch politicians being grilled, fried and stewed. I listen to The Rest is Politics – but who is to say Alistair or Rory are correct? The problem with the BBC is try as it might to convince us of its woke credentials, its diversity awareness and right-on-ness.. these things are increasingly irrelevant to Viewers who simply don’t care about the colour or sexual orientation of Dr Who – but just want scary monsters, super-freaks and great story lines.

The increasing irrelevance of the BBC and other news providers is symptomatic of something wider. There is a dangerous mix of instability across Western societies. The destabilisation of the West feels deliberate. It absolutely suits the objectives of our “enemies” to create distrust and undermine the authority of governments to achieve economic, geopolitical and military goals. The rising misbalance is being manipulated by troll farms, bot-nets, fake news and news manipulation – and don’t imagine for one moment that financial markets are too clever not be sucked into it.

Out of time, and back to the day job…

Bill Blain

Author of the Morning Porridge

Wind Shift Capital

www.windshift.capital