Well, my fellow Slope-a-Dopes, I trust most of you avoided the sea urchin OPEX minefields in the rocky shallows off the beach. Sorry to those of you who ran back to your lounge chairs screaming in excruciating pain, with black candlestick needles impaled in your bloody sunburned toes. The rest of us enjoyed a long invigorating swim, had fun in the sun with Carla, and are now famished. The all important question which must now be answered, as we head for the local equity market to spend our Euros, is what's for lunch. Donuts or Gazpacho?
The optimists among you, will point to the glass pastry display case showing an array of cooked earnings dough, which look to have risen ever so fluffy & higher than expected. Salavating, as local chef Benny-bag-a-donuts brings out yet another delectable fresh batch of his favorite QE filled ZIRP glazed Honey Dews. Yum! They are still warm right out of the oven, and will quickly be devoured by the voracious momo monster in you. Get out of the way, the sugar high will surely super charge the little mutant HFT Borgs playing Frisbee on the beach, recklessly kicking sand into your teeth. On a side note, I'm confident Carla won't be stuffing her pretty face with any of these doughy American delicacies. Enjoy the Gazpacho honey!
On the other hand, the pessimists will tell you that ingesting under cooked tapas economic data dumplings, and washing them down with spoiled Andalusian Gazpacho, which had been left out in the tuscan sun too long, will make you very sick. You will soon be running to the nearest porta potty to purge the putrid combination, ending up on your knees, with your face planted in the toilet, staring at the red swirling water, as you flush your burgandy vomit down the drain. On another side note, sure Iooks like Nicolas prefers donuts to Gazpacho.
Now that we have been shown the culinary choices on the simple macro menu, let's explore the technical treats. Very juicy orange wedges on both the S&P and the USD are about to be sliced one way or the other. These clearly defined wedges have been narrowing & compressing for the past 3 weeks, and something is about to give way. Charles Hugh Smith, who's blog "of two minds" is always a whimsical and interesting read, has posted the following charts which high lite the impending break out of theses "Wedgies", as he amusingly calls them:
The U.S. stock market is getting a wedgie, and so is the U.S. dollar. That matters, as wedges tend to break up or down in a big way. Stocks are a "risk-on" trade, the dollar is a "risk-off" trade, so they are riding a see-saw with wedgies. Yes, I realize this is an unpleasant image, so let's turn to the charts.
A wedge is characterized by a compression of price into a narrowing triangle as Bulls and Bears battle over who will lead the next trend. The wedge is clearly visible on a daily chart of the S&P 500 (SPX). Note the loss of momentum in the recent uptrend as RSI, the Bollinger bands and the 20-day moving average (MA) are all trending down.
We see two wedges on this weekly chart of the U.S. dollar index (DXY, or on stockcharts.com, USD). The first wedge was traced out between May and August 2011, and it broke to the upside in early September 2011, resulting in a 10% gain in the next few months.
Now another wedge has been traced out around the key long-term line of support and resistance around 80. The direction of the break may be telegraphed by MACD, which is solidly above the neutral line and the stochastic, which is also trending higher.
Ok, so now that we are done with lunch, and have snatched a technical treat for the beach. It's time for a sensual coat of Bain de Soleil orange tanning gel, and a serious expose of the French presidential elections direct from sunny Saint Tropez with Carla Bruni. As you will see, the break out of the aforementioned wedgies, are entriely in her capable hands. France holds the first round of its presidential elections nationwide on Sunday, which provided no candidate obtains more than 50 percent of the vote, will be followed by a second and final round on May 6. Round one elections are important, political analysts say, since momentum is the most critical factor in the second round. For months polls have had Sarkozy and Hollande in a tight race, with both at around 28 percent, flanked by the far right and far left candidates, Marine Le Pen and Jean Luc Melenchon, at about 15 percent.
Every poll indicates incumbent president Sarkozy is likely to face the Socialist Party front runner Francois Hollande in the final second round. Astonishingly, the latest numbers according to the french press, show seven out of eight polling firms giving Hollande at least a 10 point lead over Sarkozy on May 6. Another politically embarassing fact, in a major blow to the incumbent, even former president Jaques Chirac, a member of Sarkozy’s own party who was his mentor at one point, has made it very clear that he is voting for Hollande.
Many well established french have become disgusted by the flamboyant Sarkozy's jet set flash. He divorced months into office, then quickly married former supermodel Carla Bruni, and became seen as a self indulgent bling-bling president more concerned with pleasing his super-rich friends than serving the public. The common man finds him more infatuated with the international spot light, then interested in the struggles of the average Frenchman on the street. The French like their Presidents to be statesmen. After all, the President of France enjoys almost absolute power. Having beheaded their King during the Revolution, the French, despite their talk of liberty, equality and fraternity, long for a monarch, elegant, diplomatic, autocratic even, but with a certain savoir-vivre. De Gaulle, George Pompidou, Valery Giscard d'Estaing, Francois Mitterrand, Jacques Chirac were all men of stature and culture.
Before you accuse me of superficiality in serious times, consider the fact that, if things turn out as expected, the vote will come down to two men with the nicknames “President Bling-Bling” and “Mr Normal”. “President Bling-Bling” refers, of course, to Sarkozy, who was lauded upon election in 2007 for wearing a trim Prada suit to his swearing-in, a nice piece of European Union outreach. He has since displayed a penchant for not just political but appearance-related statements, from the lifts in his shoes to his love of expensive watches – he wore a Rolex until Carla Bruni, his wife, gave him a Patek Philippe as a wedding gift – and his often-present Ray-Ban sunglasses.
Sarkozy has displayed a great affection for the fashion world: since he took office he has awarded the Légion d’honneur to at least 15 fashion insiders – more than three times as many as Chirac and Mitterrand combined; while Bernard Arnault, chairman of luxury group LVMH, was a witness at his wedding to Bruni.
“The defeat of Nicolas Sarkozy, if it does take place, is not based on rationality. It's not based on a judgment of his record, but based on a rejection of his person,” argued leading Paris intellectual Dominiique Moisi.
Francois Hollande on the other hand, is the perfect antidote to Sarko's overly excitable, lamentable nouveau riche persona. The unassuming moderate socialist is calm, sage, and even down right boring. It is said, that Jacques Chirac once joked that Francois Hollande, the bashful Socialist pup sent to challenge him in his rural power base, was less well known than Francois Mitterrand's labrador.
Here again, the Financial Times Style section's Vanessa Friedman gives us her take on somber Francois whom is quietly leading in the polls:
“Mr Normal” is Francois Hollande, whose receding hairline, so-so-fitting suits and plain glasses are seen as just as colourless and bland as his oratory. Still, his almost Hollywood-perfect average-ness is striking a chord with the polled electorate (or at least exerting no negative effect), who often have him leading Sarkozy in round two.
And then there is this characterization from the french news network France 24:
Response to Hollande’s campaign in the foreign press has often been coloured by almost bemused wonder at how an uninspiring candidate has ended up at the presidency’s doorstep. For The New York Times, Hollande’s success can partly be explained by what the French want their politicians to look and sound like – especially in the wake of a brash, relatively unrefined president like Sarkozy. “Hollande provides a quainter and, for many, more comfortable vision of what a French politician should be,” read a profile of the candidate in the New York Times. “With his distaste for the rich and his lack of ostentation, Hollande represents a return to traditional French politics.”
A profile in The Guardian also saw Hollande benefiting from the contrast with Sarkozy. “[Hollande] reasons that after five years of the testosterone-fuelled, frenetic, right wing Nicolas Sarkozy…this is the moment for a Mr. Ordinary,” the article assessed.
Enough of the all important style / personality clash between the two front runners. It's the economy stupid! Sarkozy enjoyed a string of foreign policy successes, improving relations with the United States and Israel, leading an international airstrike campaign in Libya, rallying European partners to stem Europe's financial crisis. But voters at home felt forgotten and hurt by a presidency that included France's worst recession since World War II. Jobs and purchasing power are now the primary concern of the French, with unemployment near 10 percent, and petrol over $10 a gallon. There is also growing angst about the bloated, downgraded, under-capitalized banking sector, and the detrimental roll it poses to the economy as a whole.
Let us now delve into what it means when the Socialists put Francois Hollande in the Elysee Palace, which at this point looks all but certain. The final nail in the coffin for Sarkozy came when the increasingly popular extreme left fringe candidate, firebrand Jean Luc Melenchon, publicly pledged all his support to Hollande if he does not make it past the 1st round, which is highly likely, since the top two contenders are both near 30%, while he has garnered an unexpected, yet very impressive 15%. In order to cement the support of the extreme left, it is important to note that the centrist Hollande, will have to move even further to his left, making political promises & appointments that will most likely force his hand, and policy while governing. Its been 31 years since France was first governed from the left. If elected, Hollande would be only the second Socialist along with Francois Mitterrand to seize power in the modern era Republic, establish under general De Gaulle after WWII.
The stagnant economy is the main issue with the leading rival candidate proposing alternative solutions. Sarkozy has stressed austerity, Hollande wants to stimulate growth. The choice that French people make will affect not only France, Europe's second largest economy, but is likely to also have a profound impact on the European Union and its attempts to manage the Eurozone debt crisis. There can be no doubt that the EU technocratic muppets & the global banking cabal, are none too pleased with an apparent Hollande victory. Van Rupoy, Barroso and Mario Draghi are shaking in their boots at the prospect of Hollande's commitment to renegotiate the recently agreed to EU budgetary fiscal compact. Let's not forget that in the early stages of the french elections, Angela Merkel, David Cameron, Mariano Rajoy and Mario Monti all made a not so secretive pact to shun the Socialist Hollande during the French presidential campaign. They too must not be very happy with the resurgence of the Socialists. The quiet deliberate Hollande may well remember their disdain for him, and strike back at a later date.
Under Hollande, the demands of austerity will be shifted away from the weakest, and pushed towards the strongest members of society. Taxes will be raised, and the significant & important french public sector will again have a champion who values their contribution to a free & socialized economy. This of course, is welcome news to the mass unemployed of Spain, Italy, Ireland, Portugal & Greece, that feel completely disregarded, and totally abandoned by the EU technocrats. They would like nothing better than to see austerity placed squarely on the shoulders of the self serving elite bankers and their over paid coddled corporate CEO pals. These privlidged few & their respective organizations, are seen by many in Europe, as nothing more than greedy avaricious pigs, which feed at will from the trough of National wealth, and are in many ways directly responsible for much of what has gone wrong on the old continent.
More on the impact of Hollande's election on the EU from CNN International:
Sarkozy has worked closely with German Chancellor Angela Merkel throughout the European debt crisis, leading the way for strict austerity measures in Greece and other troubled countries. Would Hollande's election encourage a change in strategy?
"There is concern that, within the eurozone, Hollande's election could create greater instability," Leruth said. "He's talked about renegotiating some of the accords that have been reached — at the instigation of Sarkozy and Merkel — to ensure greater stability in the eurozone."
The reason is long-term growth.
"I think some of the French like the way (Sarkozy) handled — with Merkel — the agreement in December to get more rigor, more austerity into European budgets. But then Hollande and other economists are saying we also need growth, and these plans are going to absolutely stifle growth," said Homer Sutton, a French professor at Davidson College near Charlotte, North Carolina. Like Leruth, he is teaching a course on the election.
France's own debt is also a concern. Like the United States, the country recently had its AAA credit rating downgraded. Hollande has promised to create tens of thousands of public-sector jobs and raise taxes on the rich to pay for it. But some are concerned that might encourage the rich to just leave France.
"There's some feeling that if Hollande is elected, the attack on the French sovereign debt could be quite serious," Sutton said. "And this is what Sarkozy has been saying: 'If you elect Hollande, we're going to be losing more than our AAA. We'll be going down even further.' "
So the fierce battle lines in Europe are being drawn in the sand, on the one hand, you have the globalists which represent the the NWO agenda of the EU technocrats with their enforcement of harsh fiscal austerity, while on the other hand, you have the Nation states which represent sovereign democracy, and the right of the people to manage their own economic affairs. Certainly looks like France is about to change sides, which could drastically upset the fragile coexistence that has been achieved to date by TPTB.
EU Austerity plans have under pinned a resilient Euro, but the Sovereigns increasing desire for job growth will necessitate a Euro devaluation. If the Periphery is going to dig their way out through growth, as opposed to austerity, a devalued currency will be just the remedy required, and la belle France may well be the new champion to deliver such a corrective countermeasure.
The Bernanke & the TBTF global banking elites whom have been directing EU traffic through their chosen GS police squids, have a big problem on their hands with a new elected government in France. The Greeks, and now the Dutch! are right behind them. Both these sovereign democracies are also about to elect new leadership intent on distancing themselves from the NWO globalists, and their self serving policies. The people behind the emboldened Nation states are about to flip them the bird, and tell the despicable banksters to stick a fork up their asses.
EUR/USD 1.25 here we come, U.S. equity markets be damned.
No Steak Frites for you little Timmay…….Evil Plan 55.0 is a ballon rouge for the common man.
Carla can shove it up her tight ass.