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The Financial Ironmonger Blog No 39/2017

The Financial Ironmonger Blog No 39/2017

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.


The election of the German chancellor, Angela Merkel, to serve for another four year term, (adding to the twelve already clocked up), was no surprise, but the devil, as ever, is in the detail. The truth is that she has been very badly damaged by the result, and if she manages to limp/ hold on until the next election in 2021, it will be as a passenger rather than a driver. Secure the legacy, (in so much as you can write history in real time), find a successor, and leave as soon as decently possible.

This might sound rather familiar to readers in the UK, except our PM lasted barely twelve months before pressing the self-destruct button; the issue, in both cases, is migration. Germany needs young workers to support an ageing population, much as the UK does, and many other developed countries, but it is the uncontrolled nature of the arrivals which upsets the voters.

Study the voting map in Germany; the support for the right wing AfD party is most pronounced in the east, where it was second overall, but top amongst males, at 35%. I won’t bore you with all the numbers, but the CDU, (her party) got some 27%, whilst the CSU, a Bavarian offshoot, got 6%, one third of the voters.

Her long-time partner, the SPD got 20%, an all-time low, and quickly said that re-joining the coalition was a non-starter. Turns out that being a junior partner in a coalition is not great for your political survival; now that the CSU have also made their apologies, she has to build a government from a base of just 27%. And yet she is slated as a winner.

For those of you thinking that this might be the most boring blog, ever, hang in there. Theresa May, the UK PM, who called an election in June, got 45.6% of the vote, and is now regarded as an irrelevant loser. Her Labour opponents got 42%, and are hunting her down. The only conclusion is that politics is becoming much more fluid; the haves verses the have nots, the old against the young. Those with capital, determined to preserve their position, merely alienate those who have none, and no realistic prospect of getting any.

Such conditions explain the rise of the left leaning party in the UK, the demise of the centre right in Germany, and the advance of both the hard left, and right wing, there. You could blame it on the internet, discourse is whatever you want to make it, and much is uninformed. For me, however, the common, and central theme, is that the young people have been saddled with unimaginable debt, and they are the “lucky” ones. Youth unemployment in southern Europe is a scandal that politicians refuse to acknowledge, putting people at a life changing disadvantage.

The implications of the German elections are many, not least for Brexit, where the hope was that a reinvigorated Merkel would bash some heads together. Now all her energy is going to be absorbed by trying to stitch together a coalition, unlikely to happen before Christmas, according to some reports.

The biggest loser, apart from Merkel, is French President, Emmanuel Macron. He has staked his term not only on reforming the economy, and employment laws, (good luck with that), but also overhauling EU institutions to ensure the future of the Eurozone, (likewise). Without getting in to the weeds, the later requires Berlin to underwrite the various projects involved, both politically, and financially, which is not going to happen.

The far right FDP, a possible coalition partner likely to be in charge of the finance ministry, stated “Providing money for French state spending or to compensate for Italy’s mistakes is inconceivable for us”. Which is pretty much the end of that one.

Next week, the governing Conservative party hold their annual conference, in Manchester. Having blown their first majority in 23 years, any pretence at unity is going to come unstuck quite quickly, and that before the extremist elements kick off. Across Europe, and indeed further afield, politics is changing, much more fluid, and less predictable. The dangerous thing is that the people who least understand this are the politicians themselves.


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.