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The Financial Ironmonger Blog No 2/2018

The Financial Ironmonger Blog No 2/2018

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 2/2018–

Reshuffles are the most exciting thing to happen in the Westminster bubble, bar General Elections, which the voting public expect to happen every five years, and every four in the States. Underperforming ministers have to wait for such events, whilst the Donald just clears them out with the precision of a wrecking crew.

This, the first since the General Election last June, was to stamp her authority on the Government, and to give a very clear signal about domestic policy, currently dominated by Brexit. It has ended up being derided as one of the worst reshuffles in modern history, which I think is harsh. She has no majority overall, and certainly none within her party, so everything is going to be a compromise. It is true that you can choose your friends, but not your work colleagues, (mostly), but it is not clear that she has any sort of hinterland, in either place.

Rumours of this reshuffle emerged last September, which is a very long time in political terms, and these have only come from the centre, because they would have been slapped down otherwise, given how destructive such speculation is. So, you might think that they would have got some sort of plan together, but no. The speculation only increased when it was confirmed before Christmas that the reshuffle would be in early January, an epic timing error.

For the two weeks over Christmas, there is no news, but papers and tv broadcasts have to be filled , so news editors will have been pressurising correspondents to come up with something, anything, to fill empty spaces, hence all the wild speculation. We were even promised a Minister for No Deal, which is a bit like having a Health Minister sitting round the same table as a No Health Minister. In the end, the only part of the operation that worked was the coming and going of the official cars, a service that could surely be replaced by Uber.

Thus the ship of state sails on, the wheel disconnected from the rudder, and the compass spinning like a demented Catherine wheel. The latest command from the bridge is that single use plastics are to be banned in 25 years’ time, truly inspirational, given that only 2% of all plastics are recycled now. There is a company, in America, which converts them in to carpets and laminate flooring, and whilst it is the largest flooring manufacturer, globally, it has less than 2% market share.

The present capacity allows it to convert 14,000 plastic bottles a minute in to carpets etc., and whilst it won’t solve the problem, it shows what can be done. It is called Mohawk Industries, and it is worth checking out the website. This is not a share recommendation, (at the time of writing I have no personal interest), but it is definitely an industry of the future, and more grounded than the high tech stocks. I would imagine that the raw material is free, or they might get paid to accept it.

With a bit of imagination, there is no limit on where this might go. It should be possible to build houses from interlocking plastic bricks, for instance, which would surely be more durable than a wooden construction. Years ago, someone told me that 2% of American houses are eaten by termites every year, which I have never been able to verify, but you can see why this might be a better construction material where the climate is hostile. This does not solve the problem of what to do with the stuff, long term, but anything has to be better than chucking it in landfill, and pretending that it has gone away.

My copy of Fire and Fury, the inside story of the Trump White House, has finally turned up. I suspect that it is nothing more than Washington gossip, and had the great man ignored it, no one would have been any the wiser. Instead, his thin-skinned response has sent it to the top of the charts. It probably needs to enter reprint, given his latest thoughts on immigrants, and the siting of the new US Embassy in Battersea, London. Neither have impressed him much, and thus he will not be coming to the UK to open the new building. The old one has been sold to the camel racing friends for a knockdown price, albeit that particular option is not available, since it is now a listed building.

Meanwhile, Angela Merkel is reported to have reached agreement with her former, junior, coalition partner, the SPD, to engage in further talks on a new version of what went before. The SPD have to agree at a conference on January 21st, (hardly a given), the alternatives being a new election, or minority government. Parties of the far left, and far right, garnered 25% of the votes in the September election, so a re-run is to be avoided. Whatever the short term outcome, she is unlikely to last long; the superhuman Merkel, (12 months ago), outlasted by the spare part May. Curious game, politics.

Equity markets in the meantime power on, as these geopolitical tensions ease, both in Europe, and Korea. I have spent time this week with the global strategy team of J P Morgan, which I will cover in the next blog, but in summary, keep buying equities.

–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.

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