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The Financial Ironmonger Blog No 49

The Financial Ironmonger Blog No 49

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 much awaited Autumn Statement promised little and delivered less, prompting the Chancellor to abolish it. It was introduced by Gordon Brown to give himself two opportunities to make headlines a year, rather than just one, in March. It will also reduce the number of mindless interventions, which always produce the opposite effect to the one intended.

Take letting fees on rented accommodation, which are now to be banned. Costs are incurred in establishing these leases at outset, and managing properties, which are not going to go away, so rents will therefore increase. In our fledgling property empire, we do not levy these charges, but since market rents will move upwards to compensate, ours will increase to match. Typically, charges will take up a month’s rent, so his actions have given us an 8% uplift, if we harvest it in full. Not bad when inflation is, for the moment, benign.

He also promised a white paper to examine the housing shortage, although a white flag would get to the same answer much quicker, more cheaply, and the outcome would be easily understood by all. No amount of construction can solve this problem, and there is not the physical capacity to build the number needed, so we have to think round corners, such as converting abandoned office blocks. Tesco are investigating whether they can build on top of their stores in London, thereby capitalizing on the value of their “air space”; I dimly recollect the same in Tokyo in the mid- eighties, and that did not end well.

In London, house prices have reached an unimaginable 14.2 times the average salary, and are now 86% above where they were in 2009. In Central London, they have not grown at all in the last year, but that is much more about Brexit and the increase in stamp duty, and is unlikely to remain static for long, given the depreciation in the currency. For the average worker, there are signs that businesses are starting to relocate, moving all but essential staff out of town. This is leading to price rises in places such as Oxford, Cambridge, Birmingham and Bristol, but persuading people to leave, once they have climbed on to the housing ladder, is no easy thing. How will we ever get back, etc.?

Moving parts of the BBC to some of the industrial wasteland that surrounds Manchester has greatly increased the profits of the local hoteliers, and Virgin Trains, which runs the west coast mainline; perhaps the luvies cannot bear to leave the tent.

The Brexit debate rumbles on, such that there will have to be some kind of self-imposed moratorium never to mention it again, but the ghosts of the past keep popping up, including one Tony Blair, who clearly thinks that , if only people were given another vote, they might see sense, he as their champion. Well, it has been a very odd year, and anything remains possible, but I cannot see his idea, and his redemption, on any of my tarot cards, which, truth be told, have burnished bright. Not enough, of course; I sat next to a young chap, at dinner two weeks ago, who was/is a master in spread betting. Apparently, if you had bet on Leicester winning the Premiership, (UK Football), reinvested in Brexit, and then Trump, you could have turned £5 in to £12.5mn. Hmm. All I know about the great game is that a lot of average people get grossly overpaid, in line, perhaps, with many other professions….

The French Republican primary delivered another trouncing for the pollsters, the victor Francois Fillon took 44% of the vote, whilst Alain Juppe came in second with 29%. Fillon had 22% in pre vote polls, and is favourite to win the run off, which will allow him to take on Marine Le Pen. Whatever the outcome, France is heading right. Much the same conclusion is likely in Italy, where Matteo Renzi, the prime minister, is likely to lose his referendum next Sunday, and resign. This would benefit the Five Star Movement, who want out of the euro, and the more right-wing Northern League, but neither have enough support for an overall majority.

Those yearning for some political stability should welcome Angela Merkel’s decision to stand again for another term next year, but her inability to face up to the big issues have allowed the problems in the Eurozone to get ever larger. Eventually, this will reach a tipping point. Either there needs to be a full fiscal arrangement, or the currency needs splitting up. Refusing to tackle this will make it all the harder when the day comes.

Meanwhile, the Democrats are refusing to accept the election result in America, and have filed for a recount in Wisconsin to be followed by further challenges in Michigan and Pennsylvania. In the unlikely event that all three were successful, Hillary Clinton would be the next President, which would top out this most remarkable year.

Perhaps that is the real reason why Theresa May is refusing to allow Nigel Farage on to the team.


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.