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The Financial Ironmonger Blog no 47/2017

The Financial Ironmonger Blog no 47/2017

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.


Readers sometimes ask if I have difficulty finding enough content to fill a blog, and when I start to compose it, to which the answer is that it is a continuous process. There are always stories in the background, which can be included in a quiet week, such as the Brexit bill, but we seem to live in a time when there is an abundance of news to cover, as the world becomes more interconnected, and consequentially unpredictable.

The question at the start of the week was whether Robert Mugabe would survive longer as President of Zimbabwe than Angela Merkel as Chancellor of Germany. Technically, Mugabe was sacked as the head of Zanu PF, the ruling party on Sunday, whilst Merkel ceased to be Chancellor when she lost the election. That bit is important, as I will explain.

Suddenly, it begins to look like a version of the card game, Top Trumps, albeit in real time, trading heads of state, but for reasons not widely understood, the game seems to have lost its popularity. In to this heady mix, Gerry Adams, president of the Irish nationalist party Sinn Fein, announced his retirement next year. Whilst he has always denied any link with the IRA, (responsible for thousands of deaths during the Troubles), it seems odd that both he and Mugabe might pass away peacefully, unlike the victims. Such is the fate of freedom fighters.

Poor Angela does not have the luxury of resignation. Her coalition partners from 2013-2017, (SPD), got roundly defeated in the elections, so often the case with minority parties. And the views of the others are so diverse, with 20% voting for either hard left or right parties, that any sort of accommodation looks difficult. It is worth noting that she has never won a majority, despite holding power for twelve years.

There are three options, but the first of these looks unlikely, which is to stitch together a coalition. Secondly, try to run as a minority government, but the populace have no appetite for this, since the last time it happened, it lead to World War Two.

The third option is to call fresh elections, to be held next spring, but the polls indicate that the result would be much the same, or in the worst case the far right AfD would gain traction beyond the one in eight that voted for them last time. But here is the glitch. The only way that she can do this is to orchestrate a vote of no confidence, (actually two), but since she has not been elected Chancellor, this is beyond her powers, and it is down to the President to sort this mess out.

The implications of this are much wider. At a time when the EU wants “ever closer integration”, the voters don’t, and simply want the security of knowing that globalisation is not going to diminish their situation.

Those in the UK will not have got much reassurance from the Budget this week, predicting very slow growth in to the foreseeable future, hampered by poor productivity. I debated this with two managers of small cap portfolios on Thursday, who said that they are not having much difficulty finding companies growing at 25% per annum, and we concluded that these numbers probably just relate to manufacturing, which is in structural decline. After all, if we buy new computers for the office which are cheaper, bigger and quicker than the previous ones, (thereby increasing our productivity), how does this get measured?

These growth forecasts look even more dubious when you see the numbers coming out of America. Halfway through the fourth quarter, monthly data releases show real GDP growing at a 3%+ annual rate, which would make for three consecutive quarters of growth at that level. The last time that happened was in 2004.

Indeed, the rate has accelerated through the year, with the Atlanta Fed model showing 3.4% annual, and the New York Fed saying it is 3.8%. The Donald promised 4% annual during the election campaign, so cutting regulation and taxes together with the power of technological innovation is starting to bear fruit.

It is a bit of an ask to extrapolate what is happening in America to the situation in the UK, but if the world’s largest economy is powering along as described, it is unlikely that we are stuck in some Brexit induced swamp which the forecasts imply. In the highly unlikely event that they are correct, (since they never have been before), the premium attached to quality growth companies is only going to increase.


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.