Will Italy follow the current trend and vote no Sunday, 12/4, and essentially force Renzi into resignation? If i know my paisanos, which i believe i do, they will vote no --> give Renzi the boot -->M5S will provide a EU departure referendum, and Italy will once again go back on the Lira.
With the Trump rally and markets flying high, now is a good time to realize some profits and perhaps buy some tail protection.
I’m amused by these anti-EU movements, if Europeans know what is good for them, they will hug the EU tight forever. Without it, they’re a continent of fractious, piddling, inconsequential countries.
It wouldn’t be that big a surprise to see the 5 Star Movement in government next year (although that is by no means certain) but we are still a long way from the Euro breaking up.
It is certainly an increased risk of course. There is something like a 25%-33% chance of Le Pen winning I think. If you have Eurosceptics in charge of Italy and France simultaneously, with pressure also from Holland, Austria and elsewhere, then maybe we are looking at the break up of the EU.
The rise of populism is real and quite dangerous in my opinion. We are seeing the old institutions set up in the wake of WW2 being picked apart. Trump is cosying up to Russia and denigrating NATO and the UN does not seem to have much authority today. If the EU falls apart and demagogues like Trump, Le Pen, Putin etc are in power then we are all in trouble.
Still a long way to go from here to there of course. But political risk is very high now.
Knowing AF, I assumed that this thread would be about your success in another kind of “movement”. But anyway, as bchad would say, history tends to repeat itself. So I would not be surprised at all if the anti establishment sentiment results in a No vote, triggering Renzi’s resignation.
However, just like Greece, Italy will not leave the EU, as the bottom line is that they depend on the union for all sorts of financial aid. This is not like Brexit, where the case was made that the UK was a net contributor to the system, like itera is a net contributor to social security and medicaid. There was a rational reason why someone might have voted Leave, or even for Trump. There is no rational reason why Italy would decide to leave the EU.
Even if Italy goes to the verge of Italexit, the asset price decline will probably be temporary. Markets have recovered from Brexit, as it has become apparent that the new arrangement is becoming more and more similar to the old arrangement. The same will happen for Italy.
As for the Trump rally - the upside risks are just as material as the downside risks at this point. If Munchin really cuts these corporate tax rates to the 20% range, SPX will go to 2400 and you will be stuck with your dick in your hand. Vol is not expensive, so it might be ok to buy some puts or something. However, “because it just went up” has never been a good reason to sell the stock market.
Oh, … from the title I thought this thread was going to be about poop, like the perfect BM or something. My bad, carry on…
(I’m only kinda joking… you guys do talk about poop a lot)
^^jinx ohai! great minds think alike
If the wrong trend of the polls continues, we´ll see a “Yes” vote an Sunday. Joke aside, before the blackout period, appr. 25% of voters were still undecided.
Although a “No” is likely, Italy should stick to the EU and the Euro, with refinancing rates at all-time lows (10Y now under 2%, was 13% in 1995 and 3% in 2005 before GFC). They still lack productivity growth and rely heavily on low rates. With a (still rising) debt-to-GDP ratio of >130%, a reform seems necessary. And Pepe Grillo (M5S founder) not only announced a referendum on the Euro but also promised more fiscal spending to support the economy…
The US upside is a logical story (i thought corporate tax was going to be 15%) but italy remaining in the EU is very debatable. I come from the school of thought the EU has been a fairly bad proposition and should be disbanded.
Why is EU a bad arrangement? And even if it is, how is Italy leaving the EU a good idea? Here’s one reason why Italy should not leave EU:
They borrow at 1.9% for 10 years (or about 2% real rate). Let’s say their exit triggers a CDS surge and their new rate is 7%. Italy’s debt to GDP is about 140%, so they are now using an additional 7% of GDP to service debt; they will lose 7% of GDP per year, cannot service their debt, and are now bankrupt.
The benefit that Italy receives from EU is superlative. Italy is a loser, taker country, unlike UK, and is addicted to EU’s financial aid. Just like Greece, they have too much to lose by leaving, and they know it.
Haha, you love to be bearish.
Italy’s been a turd for years. The EU would be fine without them
Italy needs the EU and frankly it’s the admittance of countries like Italy that’s causing the EU problems now.
I’m expecting a No vote