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The Financial Ironmonger Blog No 8/2018

The Financial Ironmonger Blog No 8/2018

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 FINANCIAL IRONMONGER BLOG NO 1/2018–

I love watching the Winter Olympics, daring tales of people who seem amateurs doing great things. They are not, of course, for the main part, enjoying serious funding, but they do not carry with them the exalted expectations of the summer heroes. Indeed, the womens’ UK bobsleigh team was crowdfunded towards the end. Wonderful!

It is even more remarkable when you consider that there are only some 20 ice rinks left in the UK, and no ice tracks for skeleton, bobsleigh etc., and no serious skiing facilities. Better that than the women’s Jamaican bobsleigh team, who fell out with their German coach a week ago. She left, claiming that she owned the sled itself, but the situation was saved by the intervention of the national brewer, Red Stripe, who stepped in to fund an alternative.

For those of you who have never seen the film Cool Runnings, it is a must. So, the games are a wonderful opportunity to ignore problems closer to home, not least Brexit negotiations, or the lack of them. Following a meeting of the cabinet sub-committee charged with sorting out the negotiating stance, they have come up with a line of “managed divergence”, a further take on the three baskets approach, where the first contains stuff we agree with, the second where we are partially in tandem, and the last where we totally disagree.

I cannot see that either definitions are any different to the cherry picking which the EU said, at the outset, was a non-starter. If the Prime Minister can get this past the full cabinet next week, she will make a major speech outlining the position. The European Council president, Donald Tusk, has described the approach as “pure illusion.”

Meanwhile, thoughts are turning to the next funding round, which runs from 2020 to 2027. Once we have left, there will be a hole of £10bn in the budget, which can be filled by increased contributions, (Germany, France), or reduced expenditure, (Poland, Hungary). 5% of Polish GDP comes from EU grants. There is no way that the contributors will pay more; equally, recipients are against any cuts. Merkel, (still trying to form a government), has said that only countries complying with EU immigration policies will be eligible for future payments which is not going to happen in Poland and Hungary. Indeed, the Hungarians want the EU to pay for the massive wall they have built on their border; so much for free movement.

The reality is that whilst the 27 remaining countries would like to cut deals with the UK to suit their particular interests, those paying in to the budget are likely to call the shots, and penalise those who step out of line. And they have got other stuff to worry about.

Italy is holding a general election next Sunday. There have been 65 governments since the end of WW2, and more recently, a string of unelected prime ministers. The polls suggest a three way political gridlock, since none of the parties are interested in working with each other. Or it could be that anti-establishment parties get marginalised, which would be good for the market. Talk of leaving the euro has diminished as the parties focus on immigration as the main issue.

Next Sunday, we will also find out if a poll of German Social Democratic party members, all 460/- of them, will approve a new coalition with Angela Merkel’s Christian Democrats, for which there seems little enthusiasm. The alternatives are for her to continue as a minority government, or hold fresh elections. However, the right-wing AfD party looks to be gaining in the polls, and are now ahead of the SDU, so they have a fairly unpalatable choice ahead of them.

It could well turn out to be a big day in the future of Europe.

–MORE ABOUT OUR GUEST BLOGGER, DAVID OAKES–

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.