Bath/Head Office & Unquoted Equity Team:
London Office & Quoted Equity Team:
The Financial Ironmonger No 5/2017

The Financial Ironmonger No 5/2017

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 5/2017–

In more normal times, I would give you my take on the meeting between Mrs. May and the Donald, but if a week in politics used to be thought of as a long time, a day is now utterly exhausting. Perhaps things will calm down now that more of his appointees climb on board, and moderate his views, but you would not bet on it.

The American commitment to NATO is to be welcomed, but it comes with the stipulation that the European countries, rightly, make the required contribution to the budget, which many have been shirking. This is very much what he said on the campaign.

His move to regulate the borders has caused outrage amongst some, but again this is what he promised to do. Perhaps the real surprise is a politician fulfilling his pledges, but no citizen of one country has an automatic right to visit, let alone live, in another. These are matters of agreement, and he is simply reviewing the terms of seven countries identified as high risk by the previous administration. And for those officials that don’t understand that he intends to drain the swamp, redundancy beckons. The polls indicate that the voters are very supportive, even amongst those who have recently immigrated.

Nevertheless, a trade deal will not be easy, however much goodwill exists.

The Prime Minister flew from Washington to Turkey, and was therefore unaware that the travel restrictions discussed above had come in to play. Apparently our new Air Force One lacks a basic communications system, which seems a major oversight in the era of 24/7 news, especially when much of it is dubious. Hence the slow reaction to the announcement. Whilst there, she managed to sell them fighter jets worth £100mn, although how that helps stabilize the region is beyond your humble scribe.

Some weeks ago, I mentioned that the problems within the EU largely stemmed from the German insistence on running a massive trade surplus, now 9% of GDP; the rule is that no country can exceed 6%, but the defence is that the Central Bank sets the policy, and this is just the unintended consequence. Any neutral observer would tell you that the bank is in thrall to the Germans. Other members of the euro currency union have been muttering about this for years, but earlier in the week the former vice-president of the German Bundesbank, (who served on the ECB’s executive board), broke cover.

His suggestion was that the currency needed splitting with Germany, France, Belgium, Luxembourg, the Netherlands, Austria and Finland forming a hard core, with others having some kind of associate membership. Those cast adrift, Italy, Spain etc. would devalue, but if their crippling debts remain in hard euros, it is not obvious how this helps, apart from paying for one last party.

The Donald has latched on to this, and whilst his actions will only make the Dollar stronger, he is after currency manipulators. Whether he got this from Jürgen Stark, the gentleman mentioned above, or from my blog, I know not. I can tell you that my credit card was hacked, in America, last Thursday, the home computer got taken out on Wednesday, and the stand by one some minutes later. Having been with the same supplier for 30 years, their system must have picked up that there was no way that I had spent $30 on health supplements.

It did not take long for the President to train his attention on Australia, which has a very simple policy on immigrants that they don’t want; they simply keep them on islands miles offshore. No one, so far as I can tell, has protested against this which is way more draconian than his temporary restrictions. The last administration had agreed to take in 1,250, and whilst upholding the agreement, he pointed out that it was very one sided.

When he gets round to focusing on the EU, things could get difficult, having identified that the whole construct is for the benefit of Germany. The French President said it was all about unity, at a meeting of the 28 states in Malta on Friday, but in the longer term, countries like Italy and Greece are going to question how this of benefit to them. And maybe it will not be that long; elections in key countries are looming.

Lord Lamont, a former UK chancellor, commented that the Donald should not “provoke, or promote, the disintegration of the euro”; it seems so fragile that it will not need his help.

Whilst markets swing around, everyone trying to predict the short-term future, the UK economy seems in good form with the Bank of England increasing growth forecasts. Having predicted devastation, should we vote for Brexit, this is some U-turn.

–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.