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The Financial Ironmonger Blog No 50

The Financial Ironmonger Blog No 50

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 50–

Jaguar Land Rover, an Indian owned company, (lest we forget), have decided that they want to build their new range of electric cars in the UK. At the moment, these are subsidized by the Government, but as with any new consumer good, there comes a tipping point. Initial adopters are thought to be freak, paying a high price for an untested bit of kit, but the more that it is adopted, the more revenue flows round the system to improve the product.

It depends how old you are to prove this theory, but every consumer item you can think of has improved since it was invented, bar one, or maybe two. I will give you my thoughts on what those might be at the end of this blog.

Electric cars are the future; those who drive Tesla’s tell me the range is some 250 miles, and it is difficult to find charging stations. On top of that, they are expensive, and the punter wants the certainty that the car will do 500 miles, albeit that very few will ever undertake journeys of this length, certainly not in the UK. But continued investment will find a way to extend the range, and then it will become the default option.

The longer term implications for oil companies, and producers, hardly bear thinking about. Maybe this spurred the about turn made at the OPEC meeting last week, two years after trying to flood the market, and drive American shale producers out of business. It didn’t work. Now the plan is to reduce production by 1.2mn barrels a day, providing that non- members cut by 600/-. In total, this would reduce production by some 2%, which promptly took the price above $50.

This is going to be monitored by the somewhat unscientific method of counting tanker movements, and will last for six months. It is doubtful whether Iran, Iraq or Russia have any intention of complying, and in the case of Russia, most of the stuff moves by pipeline, anyway, oblivious to impartial observers. It also ignores the promise by The Donald to remove all restrictions on exploration as he seeks to make America energy self-sufficient.

By the time you read this blog, the results of the Italian referendum, and the Austrian presidential elections will be known; it will be interesting to see if the “popularism” that has swept the UK and USA marches on. Those who believe in the 80 year cycle of history should worry if the Austrians elect Norbert Hofer, leader of the far-right Freedom Party; it didn’t work out too well last time.

The Italian vote matters, in the short term, because the EU project has been so battered, recently, that it does not need further damage. They are being asked to vote on a quite complicated constitutional change, but really this will be about the state of the country; some 35% of the young are unemployed, unimaginable. You can see why migrants, coming from the south, do not wish to linger there.

The banking system is effectively bust, so it seems only a matter of time before they exit the Euro, whatever the outcome of this vote. GDP is down 8% since the start of 2008, whilst it has risen by 12% in America, and 8% in the UK, during that period. It has not exactly felt like boom time here, or in the States, so imagine what it is like in Italy. The EU could probably survive this disaster, but not another.

In this context, it was interesting to see that the existing French President, Hollande, has bowed out of the race, the first since the war not to stand again. The polls had him on 4%, and given that they have a probability of plus or minus 3%, his support might be close to nil. It is therefore a run off between the centre- right, and the far-right.

Oddly, this contest, and the future of the EU, might be decided in Albania, as pointed out by the Spectator. There, the 79 year old President, Abdelaziz Bouteflika, is gravely ill, and when he passes away, the Islamists will seize control, which could trigger between 10 and 15 million people trying to leave, destination France, given the historic links. Should this happen before the vote in April, Le Pen would emerge victorious, but whichever side wins, there is no way that France in particular, or Europe in general, could cope with these sorts of numbers on the move.

At which point, there is no EU to negotiate with, or to leave. Just a thought.

It is the policy of the blog to avoid any specific comment on companies, and the same applies to the loyal readers, but it would be remiss of me not to mention the pending return of Ian Storey to the UK, from Bird Island, South Georgia, where he has maintained the British Antarctic Survey base. Whilst we failed to get any beer sent to him, after they ran dry in September, Simon Theakston, of the eponymous brewery, is keen to make amends, and has invited him to visit. Hopefully, we will find out whether any Yorkshireman has ever been further south than Ian. Answers on a postcard, if they still have them.

Which brings me back to the original question; what has not been changed by technology? Umbrellas, mousetraps, and , now, postcards.

The Financial Ironmonger Blog No.50, 2016. Correction.

Such was my excitement about the Austrian election that I got Albania mixed up with Algeria.  Apologies.  To be clear, when the President of this North African country passes on, it is thought that the country will implode, and there are circa 40mn of them….

So, it is Algeria that we have to look out for.

05/12/2016

 

–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.