No hacemos más que hablar de Portugal y las dudas del Banco Espíritu Santo… Pero el otro día te hablé de Alemania y hoy te cuento cosas de Francia. Estos son temas mayores…
¿Refleja la bolsa francesa lo que le pasa a su economía? Completamente. Desde el año 2000 iban parejas la bolsa alemana (GDAXI) y la francesa (FCHI), hasta que se separaron en 2009. Y en ambas el sector bancario fue un lastre…
Y si cogemos más tiempo, las diferencias s e acrecientan. Han seguido dos caminos unidos, hasta un total divorcio fruto de cómo estaban sus fundamentales macro:
Distintas políticas macro, diferentes comportamientos, esa austeridad alemana, ese despilfarro francés… Al final, se marcan las diferencias, y estas son enormes.
Is France’s Stock Market Cracking?
Breaking From the Wedge
France is currently Europe's “sick man”, not least due to the destructive economic policies pursued by its socialist government. Halfhearted attempts at reform have so far not achieved any notable change, precisely because they are going nowhere near far enough. President Hollande seems to be waiting for the recovery in the rest of Europe to bail him out. His willingness to look beyond leftist dogma and display political courage seems rather limited, which we have always attributed to his fear of being challenged from elements even further to the left, both in his own party and outside of it. However, it is probably more than that: he is a true believer, and is suffering from the delusion that governments can suspend economic laws by fiat. This delusion is of course shared by central planners all across the so-called capitalist world, but it is especially pronounced in his case.
A friend just pointed out to us that France's stock market suddenly looks rather wobbly. French stocks rallied strongly along with other European stock markets once fears over the sovereign debt crisis receded. As we have discussed previously in these pages, year-on-year true money supply growth in the euro area surged strongly from its late 2011 low near 1%, to a high slightly above 8% in early 2013, and has since then begun to decline noticeably again (see our assessment of Europe's tepid economic recovery from mid May: Europe’s Recovery is Stuck in the Mud. A chart of the euro area's true money supply and its annualized growth rate can be seen here). The money supply growth rate is still fairly high at present, but the trend is down and one cannot tell in advance what level will be the threshold that triggers the next bust. However, it would certainly make sense if France's stock market were to lead other European markets at the turning point.
There is a chance that such a turning point may have arrived. Of course, this isn't the first time European stocks are correcting since their uptrend started, and one can never be certain whether short term moves really have significance for the larger degree trend. France's stock market is acting worse in the recent correction than other European markets, but we thank that may well be because it is leading them.
The character of the recent correction seems different from that of previous short term downturns, even though its extent is not yet unusual. Contrary to previous dips, the market has put in a second lower high on the daily chart. The move has moreover clearly violated the lower boundary of the preceding wedge-like advance. The last rebound attempt didn't even manage to move the CAC-40 index back to the broken trend line for a “good-bye kiss”, which we believe is a strong sign that something is amiss.
The CAC-40 breaks down from a wedge-like advance
It is also noteworthy that the CAC-40 actually made its all time high back in early 2000 – over 14 years ago. As can be seen on a long term monthly chart, the pattern since the peak is eerily reminiscent of the Nikkei's pattern after its 1989 top:
A long term chart of the CAC-40 (monthly candles). The market's behavior since its peak in 2000 is reminiscent of the post-bubble Nikkei
Of course, so far the recent decline is only a baby bear attack (h/t BC) and barely visible on the long term chart.
The Fundamental Backdrop
Below are several charts illustrating France's economic and public debt situation. Clearly, things have begun to move in the wrong direction again. It is also noteworthy that interest rates on government bonds have just dropped to an all time low. With worries over the likelihood of sovereign default off the table for now, other considerations are driving interest rates in the major European government bond markets. Evidently the markets are not convinced of the widely touted recovery story. The recent moves in government bond yields are also strongly reminiscent of Japan's post bubble era.
France's 10 year government bond yield has just dropped to an all time low
France's public debt-to-GDP ratio has meanwhile risen to above 90%, more than 50% above the EU's “fiscal pact” limit:
France's public debt-to-GDP ratio keeps climbing
The annual spending of France's government amounts to an astonishing 57.1% of GDP. In many respects it seems that France is moving closer and closer to becoming command economy (we have discussed the “Zwangswirtschaft” aspects of France's economy under Mr. Hollande's government previously). Incidentally, French government spending has soared again in late 2013.
France's government spending as a percentage of GDP is at a record high
The unemployment rate meanwhile remains stubbornly stuck above 10%, industrial production is declining sharply again, and business confidence has been waning since March.
France's “sticky” unemployment rate
French industrial production – nothing to write home about
Economic confidence is once again on the wane
Conclusion:
Something may be brewing in “risk asset” markets and France's stock market could be sending a warning signal. Keep also in mind that technical divergences, as well as astonishing extremes in bullish sentiment, positioning and leverage continue to be in evidence in many stock markets. Although money supply growth remains fairly brisk in the major currency areas, it is no longer as strong as it once used to be, and bubbles can ultimately only be sustained if it remains very strong or even accelerates. The possibility that a bigger financial accident is on its way can certainly not be ruled out.
Y algunos datos más de Francia:
Su comercio exterior se sigue debilitando:
Y su producción industrial por los suelos:
Las matriculaciones de coches por Europa siguen sin recuperar niveles… Incluso hay países que andan muy lejos de recuperarse todavía… Ese boom económico que tenemos… Lo malo es que nuestro principal negocio exportador es la venta de coches ensamblados en España que nos compran los europeos del Norte…
Lo bueno y lo malo que tiene Francia es que su deuda pública la tiene vendida fuera. Era tan parecida Francia a Alemania que muchos inversores pensaron que sacaban un diferencial interesante por comprar bonos franceses en vez de bunds…, cuando, ciertamente, no es lo mismo…
Que no les de a los inversores extranjeros quitarse un cacho de bonos franceses, ya que tendríamos un verdadero problema… Abrazos,
PD1: Cuando Keynes hizo sus predicciones sobre cómo el tiempo libre llenaría el día a día de los trabajadores en el futuro, no tuvo en cuenta lo que Thompsonmay denomina la “ironía de la abundancia”: “saber que hay diez programas en televisión que deberíamos ver, nueve libros importantes que leer, ocho destrezas indispensables que tu hijo no está adquiriendo, siete formas de ejercicio físico que deberías practicar, seis maneras de disfrutar tu ciudad que no has podido probar, etc., hace que desarrollemos una hipertrofia del deseo que conduce a la sensación de insatisfacción, y de que el tiempo no nos cunde”.
Quienes más capacidad de elección tienen, por sus ingresos, sienten más esta tiranía de la abundancia. Se produce un círculo vicioso: se trabaja más para tener más posibilidades de disfrute; como se tiene menos tiempo, se desarrolla la necesidad de aprovechar “a lo grande” ese poco tiempo, lo que muchas veces lleva a un modelo de disfrute basado en el consumismo.
