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The Financial Ironmonger Blog No 2/2017

The Financial Ironmonger Blog No 2/2017

Every week our guest blogger, David Oakes of Mosaic Money Management (aka The Financial Ironmonger), shares with us his take on some of the major UK and overseas macro and political events that shaped the previous week.

Please be reminded the value of investments, and the income from them, may fall or rise. The views expressed in this article are those of the author at the date of publication and not necessarily those of Chelverton Asset Management Limited or Mosaic Money Management. The contents of this article are not intended as investment or tax advice and will not be updated after publication unless otherwise stated.


Out in the North Sea, not a place you would want to be tonight, decommissioning work has started on the Brent oilfield. Over its 40 year life, it has produced some 3bn barrels of oil, and generated more than £20bn in tax revenue, but now three of the four platforms have ceased producing, and will be removed to Teesside for recycling. This is complicated, and expensive, work but thus a whole new industry is born. There are 470 such platforms that will eventually need this treatment.

The demise of North Sea oil has been hastened by the disastrous OPEC policy of the last couple of years, seeking to flood the market, and knock out American shale producers. A complete U turn has stabilised the price around $50, not enough for the Saudi’s, but ample encouragement for the frackers to ramp up production. Citigroup forecast that spending by exploration and production companies will increase by 36% this year, and in the unlikely event that the price rises to $65, then spending would double. This is before The Donald relaxes drilling constraints.

Clearing up the North Sea is, in part, tax deductible. In 2015, tax receipts were some £2bn, and will certainly be lower in 2016. This year, the tax credits are likely to be £1bn, and will only climb over a multi- year time frame, meaning that there will be little net income for the tax man. The Scottish National Party, who held out hopes of independence, financed by these revenues, (£11bn as recently as 2012), has peaked too late. Without this income, there would have to be cuts of 15%, or equivalent tax increases, not an easy sell on the campaign trail.

Across the pond, just as one hoped that electioneering had finished, The Donald held an extraordinary press conference, perhaps showing us how things are going to be handled in the future. Whatever your views on the President-elect, no serious journalist would publish a dossier that they could not “stand up”, and I suspect that there will be serious repercussions.

For investors, and indeed his supporters, what matters is what he does to ramp up the economy. Apart from encouraging further energy production, mentioned above, a combination of increased expenditure on the infrastructure, the military, and regulatory reform should boost growth. On top of this, cutting taxes will produce a further boost such that GDP might increase from a projected 1.8% to nearer 3%, with a feel good factor adding further fuel. The important trick is to make the growth sustainable, rather than just an asset bubble.

Equity markets clearly believe that this is possible, hitting all-time highs again this week. Admist all the euphoria, it is worth remembering that the FTSE 100 index is hardly above the previous peak achieved in 1999. Had you been invested in a tracker fund, you would have made no progress at all in the last sixteen years, not that the proponents of cheap, passive, investing will tell you that.

The Prime Minister will make a speech on Tuesday setting out her Brexit plans, apparently. I doubt it; there will be just enough for the media to claim fresh insight of the process, but her aim is to kick the can down the road until March, when Article 50, the EU exit option, should be triggered. Meanwhile, the Governor of the Bank of England has decided that the biggest threat of Brexit lies with the remaining members of the EU, rather than us. Awkward, given his dire predictions during the campaign.

We need somebody with a compass, rather than a wretched weather vane.

Perhaps he was finally forced in to this about-turn by the individual results of how retailers have fared over the Christmas period. The strongest growth seems to have been achieved by the clothes retailers, but all the major supermarkets are in positive territory, albeit that some 2% increase is hardly ground breaking. Next year will be a more difficult comparison, given the fall in the currency, which will bring price inflation.

 Meanwhile, this week saw the relaunch of Corbyn 2.0, which very quickly skidded off the road. The official opposition party has finally worked out that there is no way of getting rid of him, and no way of being in government whilst he is the leader. The evident angst of this position seemed to have died down since his re-election last year, but it is now becoming clear that the moderates have been at job interviews, understandably.

People, in their 40’s, are not going to hang around in opposition, when there is no realistic chance of them being in government in the foreseeable, beholden to someone who holds views that they do not share, and cannot promote. Expect more of this. Politics are going to dominate the outlook for this year, and beyond.


David joined Manchester stockbroker Henry Cooke, Lumsden in 1977 and after becoming a member of the London Stock Exchange in 1984 held a number of senior positions within the firm including Managing Director of the in-house fund management company and member of the Executive Committee.

After senior appointments at Cazenove Fund Management and latterly Mercater Capital Management, David joined Mosaic Money Management in 2013. He has successfully managed private client and fund portfolios for over thirty years and has particular expertise in providing a multi manager service to his loyal client base.

The Financial Ironmonger is a hat-tip to Ironmonger Lane, the location of Chelverton’s London office.