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The Financial Ironmonger Blog No 14/2017

The Financial Ironmonger Blog No 14/2017

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.


No sooner had we hoisted our Brexit flag than I woke up to find, just four days later, that we are going to war with Spain. This, of course, is back to the Europe of the history textbooks, the Armada, the Treaty of Utrecht, (under which Spain ceded both Gibraltar and Menorca to the UK), and more recently the Spanish Civil War, which was a trial run for WW2. It was striking to note, doing the background research,that the whole of Europe had been at war for the thick end of five hundred years, off and on, before the formation of the EU.

Soon enough, the media was swamped with experts, retired Admirals and Commanders, to give their opinion, culminating in a former leader of the Conservative party suggesting that it was an exact replay of the Falklands War, some 35 years ago to the day, also perpetrated by “Spanish speaking people”. No doubt there was some poor person dispatched to run round Portsmouth Harbour to find out if we had any ships that we might be able to jump start.

At which point, having concluded that the world has gone mad, it is a simple choice between returning to the duvet, or heading for the pub, which is where I followed the Falklands conflict closely, long before the days of the internet.

For the record, Gibraltar is a British Overseas Territory, but is self-governing, raising its own taxes, and setting a budget. Defence, and foreign relations remain the responsibility of the UK, hence how it has got dragged in to Brexit. Under the 1972 Treaty of Accession, by which the UK joined the EU, some membership terms were qualified, so it is outside the customs union, escapes VAT, and the agriculture and fisheries policies.

It complies with the four central tenents, bar the free movement of goods, (hardly a concern), and so they seem to have been having cake and eating it. But it is worth noting that this is not a one way deal. The Cadiz province, which is on the other side of the border, is one of the poorest in Spain, with an unemployment rate of 35%. Some 10,000 people cross in to Gibraltar every day to work in the service industries, and together with the salaries generated, and the goods brought in from the mainland, some £550mn has been generated over the last four years. It seems to be in nobody’s interest to risk this, not least the Spanish.

Across the pond, the enthusiasm that followed the election of the Donald seems to be on the wane, as reality sets in. There has been a juggling of advisors, bringing with it more of an air of normality, but the reform of Obama Care, and the Budget lie in tatters, so it is critical that the changes to the tax system get through. Republicans, who control both houses, are proving just as difficult as the Democrats, which is a wasted opportunity.

Changes to regulations governing the energy and financial sectors could boost growth, as would investing in upgrading the nation’s infrastructure. The border-adjustment tax has all but disappeared from the rhetoric, whilst the Mexican wall might not be continuous, so many of the pledges on the campaign trail are being quietly dumped. In this context, it was interesting to see the response in Syria this week, which serves to heighten tensions, whilst getting no closer to providing solutions.

On both the domestic, and international stages, he needs to start winning some deals; otherwise his term in office will look more like Carter than Reagan.

Whilst the Donald is teetotal, the same cannot be said of the young, and newly enriched population of India, but the Supreme Court has banned the sale of alcohol within 500 metres of any national highway, in an attempt to cut deaths resulting from drink-driving. It is thought that the ban will reduce the market by 25%, some $10bn, and lead to the loss of nearly 1mn jobs in the hospitality industry. There are more than 100/-km of national highways across the country, and obviously the big cities are going to be badly affected. Ever resourceful, states such as Rajasthan and Uttar Pradesh have started to redesignate these highways as either district, or urban, roads, according to the FT. This gets round the ban, but it is a useful reminder that investing in emerging markets carries a degree of risk, some of which is totally unpredictable.

And this comes on the back of the overnight change to the currency last autumn, (to reduce tax evasion), which left many in a parlous state. To be then deprived of the right to buy a glass seems draconian, but I am sure that out Foreign Secretary, Boris, will be able to sort this out. Certainly, companies such as Diageo, which has bet big on this market, will be hoping so.


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.