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The Financial Ironmonger Blog No 36/2017

The Financial Ironmonger Blog No 36/2017

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 36/2017–

The problems surrounding the financial and political PR company Bell Pottinger have exploded this week, culminating in them being expelled from the Public Relations and Communications Association, (a self-important trade body), for bringing the industry in to disrepute. It is a very low point for Tim Bell, who virtually invented the genre, having house trained Margaret Thatcher, and has since gone on to spin for the likes of Pinochet, and the Assad family. Nice people.

Most impartial observers will therefore choke on the first glass of Sancerre at the idea that it was possible to bring the whole thing in to disrepute, but whatever your view, the clients are crawling under the nearest stone. These sorts of capital light businesses are fine on the way up, since the assets come up in the lift in the morning, and leave in the evening.

Maybe it is more complicated than that, since a good operation would have an empty office, with everyone out there pitching for new accounts, and spinning for the existing ones. In America, it is thought that there are nine PR people for every journalist, and that 60% of the content of a newspaper is taken from press releases. Such “lobbyists” can, and do, control the agenda, shaping legislation. It is a high margin, and very profitable, industry.

I will spare you the basic story of what Bell Pottinger got up to in South Africa, allegedly, but the account handlers would appear to have turned the spin button up too high. This was compounded by the Lord Bell giving a car crash of an interview, during which his phone rang three times, an error for which any of his trainees would have been fired. Except he is no longer there, having quit to form his own operation last year. But it proves the old adage that it takes thirty years to build a reputation, and thirty seconds to lose it.

It is too early to know how Hurricane Irma is going to pan out, but the storm is the size of France with constant winds of 185mph, gusting to 225mph. The only saving grace is that it is on the move, whereas Harvey just stopped over Texas, last week. Back in the early nineties, we spent many happy days at a beachfront house, in Antigua, in August. The locals reckoned, then, that there was little chance of storms before October; this year, the authorities closed the airport, and shut down the power systems on September 5th.

By the time you read this, it will have hit Florida, where a mass evacuation of people is taking place. Furthermore, there are another two storms queuing up behind it, so the idea that these are once in every five hundred year events, it is not panning out that way. You might also think that the enormous rebuilding exercise will pump up the economy, but a study I read earlier in the week indicated that it is largely displacement spending.

Money that would have been spent on other things gets diverted to rebuilding houses, which would still be there, bar the storm. As ever, the poor who live in the flimsy houses, with no insurance, suffer most, but equally the better off will suffer from higher insurance premiums, (if that is still available), and presumably a permanent diminution in the value of their properties. Obviously, out in the islands, it is a more rarefied market, but Florida is a very different proposition. Not a great time to be in real estate, either as an owner, or an agent.

Here in the UK, parliament has reconvened, albeit only for two weeks, before the party conference season begins. Whilst this is not a spectator sport, both of the main parties have leaders that are tolerated “for the moment”, at best. The journalists, back from a news free summer, will be looking to magnify any splits, particularly over Labour’s Brexit position.

Meanwhile, we are not too far away from the German Federal elections on September 24th, where the incumbent Merkel is likely to be returned, albeit that the right wing party, AfD, may get 10% of the vote. They are urging that the country should properly engage with the UK on Brexit talks, sidelining Brussels, which is how the thing is going to get to a resolution.

They should take some lessons from the Donald, who has made substantial changes to his team of mechanics over the summer, enabling him to engage second gear, if not third. At the beginning of the week, he rescinded the DACA program which allowed 800/- illegal immigrant children to remain in America, following up on his election promise. Then he said that it would not be enforced for six months, allowing a “window of opportunity “for Congress to reach a compromise.

He followed this up on Wednesday by reaching agreement with the Democrats to raise the debt ceiling, keep the government funded, and provide disaster relief, albeit that it lasts for three months. Given that few Republicans would vote for a government shutdown, (the alternative), it is a masterstroke, ensuring that his version of bipartisan politics returns, as he promised.

There is much else to be achieved, but he retains the support of 98% of people who voted for him, and maybe the grudging acceptance of some others that things needed to change, whatever your party affiliation.

–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.