Bath/Head Office & Unquoted Equity Team:
London Office & Quoted Equity Team:
Edinburgh Office & European Quoted Equity Team:
The Financial Ironmonger Blog No 9/2018

The Financial Ironmonger Blog No 9/2018

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 early months of any new year can prove cruel; much of the UK is suffering from unusually cold weather which has crippled large parts of the infrastructure. We are simply not prepared for these conditions, and since they do not happen very often, there is no desire to invest in the kit required to deal with it. Which is probably the right call, apart from the airports where they have invested, but it seems to have made no difference.

Many of those who ignored dire warnings from the authorities not to travel got stuck, as if ownership of a 4x4 somehow exempts you from the law of physics, whereas your progress is actually dictated by the behaviour of the idiot driving in front of you. For those who sensibly stayed at home, another problem appeared in the form of a shortage of gas.

UK production has gradually wound down over the last decade, and since no progress has been made on development of shale, we have become more reliant on imports, either by pipeline from Norway and the Netherlands, or shipments of LNG, ironically shale gas from America. Turns out that the pipelines don’t like cold weather, and LNG can be diverted mid-voyage, to whoever is the highest bidder, usually the fast growing economies of south East Asia.

Inevitably, the price has spiked, but it has brought in to focus the stupidity of closing the Rough Field installation last year. This was a partially depleted gas field which accounted for 70% of UK capacity, (9 days’ supply), so a strategic reserve function. However, it had to compete with all other energy sources, and the cost of running it exceeded the excess profits that could be garnered on very cold days, of which there were not enough.

We could debate for ever whether the climate is changing, man-made or otherwise, but certainly the events seem to be getting more extreme. I am not a fan of the state being involved in anything much, but surely somebody should look at this in terms of a strategic national asset. Market forces work well in most cases, but the politicians cannot afford for the most basic services to fall over. We shall see.

The early months are also when you find out which retailers have managed to limp through Christmas trading with enough fat to get them to Easter, and which have not. Toys R Us and Maplin went down this week, together with Prezzo announcing the closure of some 100 restaurants, a quarter of their total. The role of private equity in all three may be a factor, but headlines such as “high street carnage” ignore some of the basics, such as Toys R Us operated in large, out of town, stores.

Maplin, meantime, sold electronic bits and gadgets, and in the case of both of these companies, their goods were much more easily available on the internet, via Amazon or eBay, and much cheaper, too. It is a source of considerable wonder that either survived so long. As to restaurants, home delivery is now the thing; what you want, delivered at the time of your choice, without any travel costs, or parking hassles.

Obviously, there will be times when you want to go out, meet family or friends, but in a time starved world, restaurants are going to have to be very good to prosper. Mid- market offerings, with no differentiation, are going to struggle. Expect more of this “carnage” going forward; it is the natural way of markets.

Meanwhile, the Donald has announced tariffs of 25% on imported steel, and 10% on aluminium, which has sent Wall Street in to a tail spin, and the FTSE to a fourteen month low. 140,000 work in steel mills and smelters, whilst 6.5mn work in industries using these metals, so it is an inflationary own goal, but he needs to deliver on as many promises as he can, with the mid-terms looming in November. Apparently,” trade wars are good, and easy to win”.

The European Commission president stated “The EU will react firmly to defend our interests. The Commission will bring forward in the next few days a proposal for countermeasures against the US to rebalance the situation”. Quite an aggressive response, given that there are no details of which countries, or trading blocks are caught by the sanctions. Methinks he rather overshowed his hand.

According to the International Steel Statistics Bureau, the UK produced 1,1OO thousand tons in 2015, down to 589 thousand tons in 2017. Given that the UK made 1.722mn cars in 2015, it would imply that little was sourced locally. The steel for our nuclear submarines comes from France, but don’t let on. Other people are better at doing some things; move on.

The eagerly awaited Brexit speech was duly delivered on Friday by Mrs. May, at best a work in progress. It reminded me of those ruinlessly expensive taster menus where you get seven small dishes and end up stopping for a hamburger on the way home. Given that the EU have already stated that her wishes are fantasy, it will be interesting to see their latest reaction. However, it is clear that everything is up for compromise, including our fish stocks, which the Daily Mail has yet to pick up on.

Well, everything bar Northern Ireland. It seems to me that if they opted to stay in the customs union, the country could become an entrepot between the EU, the UK and the rest of the world, which would bring them considerable wealth, much as it has done to Hong Kong in recent times, and Venice in the heyday, when it controlled 40% of world trade.

Now, I fully understand that this has no hope, given the historic divisions within that community. Indeed, they have been unable to form a government for more than a year. You could argue that geographical boundaries matter less than they used to, or you might think that they have never been more important, hence the rise of populism/nationalism. But what an opportunity it would be.


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.