Merkel’s lapdog Round Two


The French Election: Round Two of Europe’s Internal Leadership Battle

Part II


By Richard Matthews, London


Live Squawk News, 18 April 2017

The French elections are unlike any others and, with two of the parties under 18 months old, certainly full of new ideas and thoughts. The lines seem to be blurred between parties and it does seem plausible that the election will come down to the personalities of the leaders as much as the policies of the parties.

However is there now a very real possibility that the French electorate, emboldened by seeing how Britain is thriving, will turn their back on centrist politicians and their policies and chose the more radical options or after the terror attack in Paris will they plump safe with Fillon? In a week where an ultra-safe politician, Theresa May, has gambled on an unnecessary election will the French also gamble on the unknown?

Over the last couple of weeks Melenchon has made great advances in the opinion polls and pre the attack of last night looked like a good outside bet to make the final run off. However one gets the feeling that after the recent terrorist outrages in France, with the memories of Bataclan being awakened last night, he may have run his course and won’t make the last two .As a consequence of this, ironically, the votes of the Ultra Left may drift to the ultra-right and strengthen Marine’s chances .At first sight this seems bonkers but often if you compare the attractions of extreme left and right wing policies they appeal to the same people. This has been evident in the UK where traditional Labour voters have been seen to be more likely to vote UKIP than Conservative. Basically Blue collar workers share the same fears.



Looking back over the last twenty-odd years, candidates for the French presidency promised to make changes and get the French economy back and properly working again. Unfortunately, these promises have led to very few changes. The previous conservative President Sarkozy promised sweeping reforms when he became President in 2007, but little came of them, apart from a reform of the retirement age.

His unpopularity led to the victory of his Socialist opponent François Hollande. Hollande, whilst President, has achieved even less. He promised to cut France’s high unemployment rate, and to revitalise the economy.  But if he has just about got the economy back into positive territory, he has failed dismally on the unemployment front, and the number of jobless in France today is far higher than it was when he took office and stays stubbornly around the 10% level.  This has led to disenchantment amongst the youth and when combined with a seam of Radical Islamists the country appears uneasy with itself.

Hollande is now the most unpopular French president in nearly 75 years, his approval ratings hovering around the 4% mark. His Socialist party is now bitterly divided between the moderate reformers and the hard-line left, and by trying to please both wings of his party, Hollande has managed to achieve that rare thing of displeasing almost everyone.

Unlike the two party political systems that the UK and US enjoy, France has a selection of parties that seemingly cover every single voting wish of its population. Perhaps this accurately reflects the nation as much as having nearly 250 regional cheeses does. Recall President General Charles De Gaulle’s remark of:  “How can you rule a country that has 246 varieties of Cheese. “ What appears at first simple in analysis of France’s party system is in reality far from it. Often right-wing policies are favoured by left-wing parties, and vice versa.

“Les Républicains”, the Republicans, are the main Conservative or centre-right political party and are led by Francois Fillon. They are the closet heirs to the politics of the legendry French leader De Gaulle. Sarkozy engineered the name change in 2015 to draw distance from predecessor party Union for a Popular Movement (UMP), founded in 2002 by ex-president Jacques Chirac .They have been in turmoil since the 2012 election defeat and the scandal of Penelopegate may have fatally wounded Fillon.

Marine Le Pen’s National Front party was formed by her father, Jean-Marie Le Pen, in 1972.  Historically of the extreme far right — virtually Nazi apologists — it has tried hard to become more mainstream since her father resigned in 2011. Despite persistent attempts to moderate its image, including the expulsion of former key members including Le Pen senior, the shadow of the previous leader still seems to hang over it.

France Insoumise! (France Unsubmissive) was newly founded, only a year or so ago, by Jean-Luc Mélenchon. It’s a hard-left party with green overtones, and a charismatic leader who at times appears to overcomplicate its polices. He is committed to high tax levels and changing fundamentally France’s relationship with Europe.

BenoÎt Hamon’s Socialist Party is a more traditional socialist party tracing trace back to the 1880s and the fallout from the Paris commune and over the years has seen Francois Mitterrand and Hollande elected as presidents, but now seems a bit dated and could disappear completely after this election.

En Marche! Is the centrist independent party fighting its first election? Economically liberal, but left-wing on social issues, En Marche! was founded in 2016 by the charismatic Emmanuel Macron. The party appears to be seeking to cross-traditional political boundaries to become a trans-partisan organisation — in other words a mix of left and right wing politics.

The establishment money has been talking a safe no change in the status quo election. They would wouldn’t they? They may well turn out to be correct with the “Justin Trudeau Light “politician Macron being their choice. Regardless of this after the seismic political events of the last two years it would be foolhardy to discount another political earthquake. If Le Pen , which most commentators are forecasting , makes the last two do not rule out her chances of winning . In terms of markets my sentiment is to be short the Euro and European Bourses (including London) and long of Gold, Dollars and Sterling. It is hard to ignore the fact that there have been large flights of capital from France in recent days and as they say, money talks.

Richard Matthews, who began in career in 1973, is a former trader-broker in the London money, futures and foreign exchange markets. Twitter @dickiematthews5


This column is the opinion of the author and does not necessarily reflect the opinion of Live Squawk.

The Battle to be Merkels lapdog

The French Election: Round Two of Europe’s Internal Leadership Battle
Part I

By Richard Matthews, London

Live Squawk News, 17 April 2017
After the relative calm election result from The Netherlands, the French presidential election — beset by political scandals and discontent over the state of its economy and the EU’s perceived role in it — will be the next major test of the European populist movement followed by German elections on 24th September. This presupposes that there won’t be Italian elections, which many would say is foolish considering Italy has had over 60 Governments since 1945. Regardless, the French elections are a key test of the European Project, given France was one of it founding members. Its outcome could make for interesting trading for both Euro and Sterling, and could affect European bourses, not to mention Brexit negotiations.
Marine Le Pen appears good to get to the second round, but looks like the outsider to win. However, after the surprises of Trump and Brexit, it would be foolhardy to discount such an outcome yet one senses the markets have done just that. Despite toning down her views, she is still committed to holding a referendum on France’s membership to the single currency. This uncertainty would weaken the Euro and stock indices, including London’s, while lifting sterling.
On Sunday 23rd April, French citizens from Paris to Basse-Terre in Guadeloupe will go to the polls for round one. Unless one of the candidates has polls in excess of 50%, exceedingly unlikely, the two candidates who have the largest number of votes will head for the final showdown two weeks later on 7th May.
The final showdown may be between two candidates whose parties are not only polar opposites, but have never held power: Le Pen of the far-right, anti-EU National Front, and Emmanuel Macron and his pro-EU movement party, En Marche! If this is the case , with Macron the likely winner , the Euro will strengthen against Sterling as the French commitment to the European project would remain unswerving. However with the polls so close it would be a brave person to rule out a Mélenchon , Le Pen run off in the second round . If this were to happen the Euro would come under intense pressure as both candidates are committed to referendums on France’s membership of the Euro and the terms of its European membership. The markets look jittery with large outflows of Euros to neighbouring countries in recent days so is the smart money seeing this as a real outcome ? It appears so.
French voters elect presidents every five years, and this year the incumbent Francois Hollande, the most unpopular President in living memory, is the first President who will not be standing for re-election. Under French law he could stand for another term, but he has appeared, and in reality has been, a sad shadow of the man who narrowly defeated Nicolas Sarkozy in in 2012. Each candidate for the presidency must have obtained at least 500 sponsoring signatures of elected officials from at least 30 departments or overseas territories.
In both rounds, polling booths are open around the country from 8:00 AM to 6:00 PM. Most French overseas departments and territories get to vote a day early, along with expatriates living in the Americas. This ruling was introduced several years back after it appeared that voters in time zones behind Europe showed a reluctance to cast votes once they knew the probable results.
Unlike many other democracies, France doesn’t allow any publication of results or estimates of polling from the day prior until the booths are closed in the cities. First-round campaigning must end by midnight the Friday before the election. Given most polls have been so inaccurate, this might be a blessing.
Once the new President is sworn in, 10 days after the second vote on 17th May, he, or she, will announce their team. A month later are two rounds of legislative or parliamentary elections to choose deputies for the National Assembly. The new President will then see how easy he or she will be able to govern and enact their promises.
France’s election is one of the most difficult to call for many years. Its campaign has seen support for its two traditional ruling parties, the Republicans and Socialists, drop. Yet, France is a conservative country, with many fundamental economic and social problems. This year may be the year the people seeks radical solutions, even if Le Pen doesn’t win. Far-left candidate Jean-Luc Melenchon, also anti-EU, has seen a rise in polls that suggest support for the status quo is further weakening in the final days of the campaign.
Richard Matthews, who began in career in 1973, is a former trader-broker in the London money, futures and foreign exchange markets. Twitter @dickiematthews5
This column is the opinion of the author and does not necessarily reflect the opinion of Live Squawk.


Thoughts on Sergio

In the end Sergio Garcia overcame the wobbles on the 15th to defeat Justin Rose in a thrilling climax to the USA Masters in Augusta last night. It’s hard to think of a more fitting way to commemorate what would have been the great Seve Ballesteros’ 60th birthday and on occasion it did seem that Seve was applying a bit of a heavenly puff as the ball teetered on the edge of holes. A pleasing end to a fantastic weekend of sport that featured a seemingly revitalised Formula 1 Grand Prix race in China ,which augurs well for the forthcoming season, an exciting Grand National from Aintree and thankfully an Arsenal free weekend of football.

Friday’s employment report came out a lower than expected level which raises questions to whether the US is now approaching near full employment. As Irwin Seltzer wrote in The Sunday Times it appears that something in excess of 7m Americans are forever trapped as either semi employed or unemployable. 5.6m of this number involuntarily working part time and 1.6m  aren’t even bothering to look for work .Tragically low levels of education is damaging America and it seems that “ We can’t find enough skilled workers “ is the oft heard refrain. With 45% of American work activities at risk of automation we can only hope that the wealth and leisure that this will create will trickle down to those at the lowest levels. I fear that this is a forlorn hope.

Earlier in the week both the Federal Reserve and the ECB started to discuss tapering of QE and in the view of many market participants not before time. At the moment it does feel that the markets are behaving like crack addicts and need the fix of cheap money. The sooner the markets are weaned off the better and one can only trust that Mark Carney at the Bank of England will shortly follow suit. However as of this morning Carney has another headache curtesy of BBC TV’s Panorama programme having found evidence of the Bank of England asking Barclays Bank to “lowball” LIBOR in 2008. At the time that they are accused of doing this the interbank deposit markets were paralysed with fear and the Bank appears to have been trying to lower the temperature of the markets as well as the price of 3 month money. They have done nothing illegal and this really is a non-story. With increasing question marks over the independence of the BBC this does look like another anti-establishment expression of bias.

Equity markets were seemingly unmoved by the waving of a large stick by Donald Trump in the direction of Assad and Putin which appears as a success on several levels, firstly the cynical may see Trump deflecting from his domestic problems secondly a lesson was being sent to North Korea as surely it was no coincidence that this action was taken whilst the Chinese premier was in town and thirdly anyone who thought that Trump was Putin’s puppet most have been given pause for thought. Will Assad, or any other despot, cross a red line drawn by America with such impunity again?

In domestic politics the British labour party seems intent on seeing how much ridicule it can attract with the latest contributor to this horror show being a “dancing and singing “extravaganza from Ed Milliband . The dismaying thing is really that Ed Milliband was seen by many as one of the more electable faces of the party, despite his effort at the 2015 election, and is now surely a laughing stock. A tragedy on many levels but whatever you political hue as serious opposition party id a prerequisite for any democracy.

Tonight Janet Yellen will speak at the University Of Michigan Ford School Of Public Policy and will take questions from the audience and Twitter. We may hear some more hints but with the start of a week of holidays across much of Europe it is hard to see many surprises or large swings in the markets unless Donald Trump feels the need to wave the big stick around again.

A day in the Liffe – a brokers memories

I read the news today, oh boy
About a lucky man who made the grade
And though the news was rather sad
Well, I just had to laugh


A day in the Liffe – a broker’s memories

Over the last weekend I watched a good, not great but good Gangster movie called Sexy Beast which features Ben Kingsley playing a foul mouthed London criminal called Don Logan . Don Logan has difficulty uttering a sentence without swearing often using multiple repetitions of words in dialogue such as  “Not this time, Gal. Not this time. Not this fucking time. No. No no no no no no no no no! No! No no no no no no no no no no no no no! No! Not this fucking time! No fucking way! No fucking way, no fucking way, no fucking way! You’ve made me look a right cunt!”. Oddly enough this dialogue transported me back to my days on the Financial Futures floor as a broker and in particular one client on one day .

The day in particular was the day that Britain was ushered out of the ERM in disgrace and the client in question was the Euro Dollar  Dealer at a British Clearing Bank . Peter , known to all and sundry as Nosher ,was a huge trader and afraid of no one and no institution in London , Chicago or Tokyo . .At the time the London clearing Banks were just starting to realise that their ability to dominate the London markets had come to end with the growing influence of the large American trading houses such as Salomans , Goldmans, Lehman .  Nosher didn’t care and  would get on the phone and scream a torrent of abuse at whoever had the misfortune to answer the phone, normally me , and growl a buy or sell order out . Somewhere I have an old cassette of him screaming a string of abuse at me . It may seem odd that I have kept this old recording for 25 odd years but it always reminds of what a day on the floor encompassed.

I would normally wake at 5.30 in the morning, amazingly I often still do , to catch up on the news . In 1992 it was a different world as there were no 24 hour news channels and so I would rely on the fax that our office in New York, with the closing rates, had sent over and listen to a BBC news programme called “Dawn Traders”. This would be followed by a call to the Tokyo office of the Prebon Yamane where a friend would give me a feel for the market. After digesting this and 3 cups of black coffee with the dog walked I would answer the knock on the door where the driver would be with my partner Bunker and off we would go. Now I should just explain the driver. At the time the Government were running a scheme called YTS (youth training scheme) to get kids off the dole queue and into work. My partner Bunker and I decided to employ one whose main job was to drive us into work and then take the car back and collect us at the end of the day. This served two purposes it got us to work  and more importantly avoided mini cabs and for me the embarrassment of the banter with the driver when occasionally  my partner would claim “ I’ve got suits in my wardrobe worth more than this car mate “.

Having arrived on the trading floor at about 7.30, after a delicious Bacon Bagel from Birleys next to the exchange , we would check our position for out-trades and errors and start working out where the market would open . How were the opening prices calculated back then? We would call the FRA (Forward Rate Agreement on interest rates ) and Swap desks of a money broker who would give us a run-down of the prices that they were trading  and we would then calculate where the markets would open taking into account whether the yield curve had changed and if so whether the spreads between months would have widened or tightened . Having done this we would hit the phones to our clients and tell them our views and try and pick their brains on how they saw the market opening. Our clients ranged from our overseas offices, to banks and finally locals (an independent trader) and other floor companies who may wish to disguise their orders by using us . After 25 years I can still see the dealing board and remember the codes for our clients. For example button 4 was Kop ….who was Kop? Kop was a Hedge Fund in Bermuda whose dealer was Jerry Peele and as any upstanding Brit knows the first police were formed by Robert Peele and known as Peelers but this of course may draw attention to who we had on the other end of the phone so we were amazingly inventive and change this to Kop which of course is modern slang for police!

By the time the first pits opened at 8.20 we had all our buy and sell orders ready and our pit trader knew them. Danny, (Danny The Rot, so called because at 18 he was as aggressive as a Rottweiler), was ready with his cards and the junior trader behind him was using his hands to communicate the pre-market orders . In the booth 3 of us were on two phones each to our biggest clients whilst a junior also had two phones one to our overseas offices and one to Prebons, the money broker. At the time a voice commentary was quicker than the screens and also could add in colour such as the size of the order and who was buying. I must say it was one of the most awful jobs going as the money brokers would be dealing off the prices and if he or she gave a wrong quote the would have a telephone launched at them . It sounds awful behaviour and it was but I still see my old yellow jacket (Junior traders and Runners had to wear a yellow jacket ), David , at Football matches and he holds no grudges. Well apart from the motorbike story which I may well expand on in the next column!

The market erupts as the bell goes into a cacophony of noise, numbers and colour with what seems likes bodies flying around as traders are physically pulled from the pit, hand signals flashed in and fills shouted back. As each fill or part fill is given as few words as possible were screamed down the clients squawk box often using cockney slang. The client would just hear something like “monkey at 48 done “which translated to “You’ve sold 500 lots at 8548”. Or possibly a part fill “Ayrton done working 90 “ meaning you’ve done 10 lots ( Ayrton short for Ayrton Senna meaning Tenner ) and I am still trying on the other 90 .

All day long this seemingly chaotic madness would go on and I can only liken it to music such as when the Beatles were at the most experimental or the primal noise and aggression of The Who, not being a great classical expert perhaps Shostakovich mirrors it as well. Whilst the noise was like The Who the colour was like Kandinsky at his wildest – just a blur of jackets with each colour representing a company and a role on the floor. Buying and Selling often multiple times for the same client within minutes as the news or rumours of news changed the feel of the market until at last the closing bells start chiming from 4.00 . No lunch breaks, no coffee breaks anything but standing shouting, gesturing and screaming for 8 and a bit hours. By the close of business you were too tired to eat and just want to make sure that all your trades match up and either get home or get to the Jam Pot for a few pints. At this point I must come back to why I still have a cassette after all the years.

It is not that I hold Nosher’s verbal garbage in particular high regard; although he could be a very funny man out of the market over dinner it is because it reminds me of what it took to be a floor broker. At the end of the day with Britain’s withdrawal still up in the air we were reading back to the clients what they had bought and sold to make sure that there had been no errors and no unwanted positions . All the phone calls were taped so that any dispute could be settled by the evidence that tape revealed. This particular tape had maybe 30 uses of a particular F word and a dozen or so where various people are described as useless C***s including myself , Norman Lamont and John Major and probably my father for fathering me!  During this string of expletives there is an order of “ Buy 50 at 48 “  and a couple of seconds later the response “filled” from me . Peter thought he had bought 50 lots when in fact I had heard only 50 at 48 which meant sell in our terminology. (We were very strict and a client had to say paid for and sold at).Having listened to the tape I was wheeled down to see the chief dealer to explain the error who, thank god, accepted that we were right and that the order had been given incorrectly. That was about £60,000 pounds saved.

By 9.00 we were still sorting and matching orders but it seemed clear that we had had a record day in terms of volumes traded and had only a few errors .Bunker and I got into the car and went home hardly able to speak just ready for a TV dinner and bed with prayers that our punt came good .