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.
–THE FINANCIAL IRONMONGER BLOG NO 43–
The oil price has now climbed back above $50, and seems to be holding, helped by the Russians indicating that they are sympathetic to the first cut in production in eight years, proposed by Opec last month. There are even predictions of a supply crunch, since investment has all but dried up after the price crashed in 2014. The major integrated companies need $70 a barrel to finance investment and dividends, funded now by selling assets and borrowing.
In effect, they are eating themselves, which might be quite a shrewd move. Germany announced earlier in the week that it wanted to eliminate all petrol and diesel cars by 2030, indicating a belief in the progress of battery technology which is probably not shared by Samsung, whose latest phones have been catching fire. Most unnerving.
Presumably, if they can get car battery range to 500 miles, then everyone would have one, which would have massive implications for the oil companies, and the countries that produce the stuff. Closer to home, the Treasury would have to rethink the revenue gained from fuel duties, since they will be unable to differentiate between the electricity used to light your house from that which powers your car. And in the background is shale gas, which has much potential.
The other major market which is beginning to show some recovery is shipping, where container rates collapsed in 2008, and all but the biggest operators have been shedding cash ever since. Capacity has been growing at 6% per annum, whilst trade has been growing at 2%. However, scrappage rates have hit an all-time high, and one industry expert I talked to last week reckoned that this, together with cancelation of new build orders, would lead to equilibrium this year, and an increase in rates next year. Given how operationally geared these companies are, it could be an interesting development. Mean reversion rings a bell.
The second presidential debate in America was pretty ugly, and not even a debate at all, leaving one to wonder just how low this contest can go. I would bet much lower. 47 years ago, they flew people to the moon, and successfully recovered them, albeit greatly helped by German scientists that they grabbed at the end of the war. You are left wondering how such a great nation of 319 million people are left with the marmite choice of either Trump or Clinton, neither of whom are remotely suitable for the post.
Certainly, the Trump campaign seems to have gone badly over the last couple of weeks, leaving Clinton ahead in the polls, albeit they have a wide margin of error. Reuters reported that a recent one showed that half of Clinton supporters were voting to keep Trump out, 36.5% because they like her policies, and just 12.6% because they like her personally. Not a great endorsement.
The danger, for her, is that the 50% who are motivated to keep Trump out, seeing Clinton comfortably ahead in the polls, stay home, and therefore he gets elected by the back door. The saving grace is that the system is designed to make sure that nothing much happens, as Obama discovered, so maybe we fret about it too much.
However, the only way to get any sort of handle on this is to go and see for yourself, so I am flying to Washington on Monday, and plan to post the next blog from the Trump hotel at 1100 Pennsylvania Avenue. Opening last month, it looks typically understated, and has been impacted by the brand association together with picket lines of those opposed to him. Those who inhabit the rarefied world of rooms costing $700 a night don’t want this hassle, so it is not full. A room next Friday is £373, reduced from £543, but I think we will stray no further than the bar.
Either this is as close as he gets to 1650, or he becomes the first billionaire to live in a council house, excluding the Queen.
–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.