Back in 2018, I recorded a video inside the European Parliament. I was smuggled in by a London trader known to me only as ‘Moose.’ Our pretext was to interview a Member of the European Parliament. But we also recorded a more important message to our readers…
My video predicted a ‘Populist Reformation.’ A wave of Trump-style political parties would seize control of Europe on the back of economic stagnation, immigration and a cost-of-living crisis.
We left the temple of Eurocracy before anyone could kick us out for heresy.
It’s taken a long time. But the culmination of those predictions is playing out now.
The sorts of parties I pointed to back then are leading polling in most of Europe’s major economies. Some are even in government.
In Germany, AfD leads.
In the UK, Reform UK leads comfortably.
In France, National Rally leads by a large enough margin to make even tactical voting fall short of keeping them out again.
In Italy, Brothers of Italy leads despite being in government for years. An impressive feat in Europe these days…
Throw in the US and Japan and six of the world’s eight largest economies are led by populists.
Out of developed economies, it’s all of the top six!
Within three years, populists could lead all major developed economies in the world. They’d thereby have control of the EU and all the other international institutions.
Policy and ideology would shift radically.
Can Australia dodge the same fate?
Not according to a private meeting I unwittingly attended with the people who hope to bring the Populist Reformation to our shores.
The secret meeting I didn’t
know I was walking into
Back in 2020, I launched a new daily investment newsletter with Nigel Farage.
Most people know him as Mr Brexit. But before entering politics to keep the UK out of the euro, Farage had a London metals futures trading business. He comes from a family of stockbrokers. So he knows finance.
In fact, I only knew of him because of the investment insights he provided during the European Sovereign Debt Crisis.
In 2021 I left the UK on the eve of the second COVID lockdown. In 2022, Nigel visited Australia on a speaking tour. At the Brisbane event, I was invited to sit in on the private dinner before the speech.
To my enormous surprise, the other attendees were seven of the big hitters of Australian politics. Past, present and future.
I’m not sure whether it’s ok to name names. But I’m still surprised I didn’t get screened rather carefully on the way in…
We sat down to dinner. The politicians peppered Nigel with questions about how to bring the Populist Reformation to Australia. At least, that’s how I thought of it.
To be honest, I don’t remember Nigel’s advice. I was in a state of shock to see these people ‘behind the scenes’ so unexpectedly.
No doubt a journalist would’ve cast the meeting as some sort of conspiracy to bring the alt-right to Australia. And I was sitting halfway down the table. It may have been the only time in my life that I was in stunned silence.
I was also surprised to see these characters get on reasonably well with each other. You’d never think it from the press coverage of their public battles.
It was equally shocking to discover what these politicians are like behind the scenes. I’ve always believed that such people are entirely different outside the public eye. That their political careers are just an act. They only blurt out what their supporters want to hear. They don’t believe what they say.
But it was the same as the day I met Jim Rickards and Marc Faber for the first time. And the first time I met Nigel Farage too. Everyone was the same behind the camera as in front.
The Australian political leaders around the table had the same annoying voice, the same short stature and the same passionate doggedness for the same opinions.
They just wanted to know how to advance the cause from a man who had led it in Europe. (Farage had been the official leader of the biggest Eurosceptic bloc in the European Parliament for many years. The politicians he ‘led’ are now the populists knocking on the door of government.)
Whatever advice Nigel did give the band that day, it seems to be working…
One Nation are now matching the LNP in the polls. And Labor’s position in government will only worsen its support over time.
Australia may be years behind Europe. But it’s on the same path.
We know what this means for investors
My job is to explain what geopolitical moves mean for Australian investors. You can make predictions galore, but if you don’t position your readers to make money, being right doesn’t help.
The good news is that we know what populism delivers to financial markets.
European stocks are finally having a good run. And America boomed under Trump, both times. The blip was the tariff tantrum in April last year. A big lesson that panics are buying opportunities when populists are in charge.
To be honest, I’m not convinced such booms are a good thing. I would’ve told you the 2006 housing boom in the US was bad, for example. What is pumped up must get dumped down. And populists love pumping.
They see the stock market as a measure of their success. And so they try to goose it higher by any means they can.
The bond market, however, is their weakness.
When a populist takes charge, or risks doing so soon, bond markets tank. Each country on the cusp of populist politicians being in government experiences a bond market rout. Greece in 2015, Italy in 2018, Trump after his recent election win and the UK under Liz Truss.
I don’t think the risk is as high in Australia. Our populists are starting from a far more favourable fiscal position. And we have vast resources available for those willing to permit digging them up. Which the populists favour doing, of course.
So, what can investors prepare for if populism continues to rise at home?
What I learned on the inside
The first thing to note is that the rise of populism is very real. Investors cannot dismiss it. Even in Australia.
It didn’t seem real in Germany, the UK or France not that long ago. There have always been fringe parties. But who’d vote for them?
Even Nigel Farage believed his political career to be over. That’s why he agreed to work with me.
But the casual dismissal of ‘it couldn’t happen here’ has cost unbelieving investors a lot of money since. Especially in the bond market, which doesn’t like unpredictable upstarts in government.
The reason for the inexorable rise of populists is that the consequences of poor policies are hitting hard. Foreign policy mistakes destroy other countries. Poor energy, housing and immigration policy have a very real impact on our day to day lives.
Lately, governments have been mismanaging the parts of our lives we feel a very direct impact in. So the voters’ response is more visceral.
The shift in Australia is a few years behind Europe and the US. But it is much the same. Don’t dismiss it. We have a prime opportunity to learn from how things played out elsewhere.
One reason that the establishment underestimates the populist right is that they presume it only steals votes from the centre-right. This wouldn’t upset the left-right see-saw of politics…if it were true. But it isn’t.
Populists know they have to target all parties to get into government. And they do so successfully because they have a lot in common with the old-style left.
The second lesson is that populists mellow the closer they get to government. The 2018 election winner in Italy called the euro ‘a crime against humanity.’ But no longer supports leaving it…
Of course voters responded to this betrayal by voting even further to the right. But Italy’s newest government has since become a lot less eurosceptic too. Perhaps because they’re waiting for their friends to get into government around them.
Often, the shift to the centre shows up in odd ways. France’s ‘far-right’ has the economic policies of the left. And Reform UK are welcoming some left-wing figures in too.
The point is that we needn’t fear their most bizarre policies.
But the third lesson is that populists can actually deliver some of their more bizarre policies.
Many analysts presume nobody is dumb enough to start a trade war, impose tariffs or kidnap a foreign government’s leader. But in the countries where populists have control, many of their unimaginable policies actually see the light of day.
By far the most important lesson for investors is that populists favour fossil fuels and mining. President Trump is delivering investors extraordinary gains in the commodities markets lately. Sometimes even directly by investing government money!
This is excellent news for Australians. Both investors and voters. Because here in Australia, all we need is a government that stops strangling investment in mining and fossil fuels. Then it would be off to the races for our economy and commodity investors.
So, if you are amongst those who see populist change coming to our shores too, click here.
Regards,
Nick Hubble,
Strategic Intelligence Australia
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