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The Financial Ironmonger Blog No 42

The Financial Ironmonger Blog No 42

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 referendum in Hungary, held on Sunday, produced the result desired by the anti-immigrant, nationalist, prime minister Viktor Orban. 98% of the voters rejected the idea of EU quotas for the resettlement of refugees as he sought to position himself as anything but Merkel. However, as any sore Remainer will tell you, canvassing the (ignorant) masses has pitfalls, and in this case, only 40% of the electorate turned out, rendering the result legally invalid.

Not that this seemed to bother the government much, which are likely to press on with its plans, anyway. Meanwhile, the Czech president, Milos Zeman, is not to be outdone, and has proposed that all economic migrants that have entered the EU should be deported to “uninhabited Greek islands”, particularly moderate Muslims who might be radicalised by extremists amongst them. Last time I checked, Greece was part of the EU, but things move quickly.

Sunday was also scheduled to be a re-run of the Austrian presidential elections, where the outcome on the day was thwarted by the postal voting result. This is now slated for December 4th, with the far-right candidate ahead, again, in the polls. Across the border in Germany, there has been a recovery in the share price of Deutsche Bank, the country’s largest, which might merge with Commerzbank, the No. 2. Whilst this is not the same as two drunks supporting each other in a bar, it has come to something when market participants start to question the longevity of these pillars of the European project.

Thus, no sooner had you returned from church on Sunday than the Prime Minister was on her feet, in toe-capped shoes, to say that Article 50 will be invoked before the end of March; hopefully she will avoid the 15th, which has not gone well in the past. The official policy has therefore moved from saying nothing at all to one of “we cannot say anything”, which might make sense to Alice exploring Wonderland, but leaves even the brightest political observers floundering.

The issues in the EU, outlined above, are just a snapshot of some of the things that have happened this week; one could add the collapse of PSOE, the Spanish centre-left opposition party, which has deposed the leader, Pedro Sanchez, which might sound rather familiar.

Once A 50 is triggered, there are two years to sort a new deal, or with the agreement of the 27 countries remaining, it could be extended, which brings up all these terms such as Brexit being hard, soft, clear, clean etc. And, of course, the government can’t say anything. Much as any sailor would check the shipping forecast before putting to sea, officials will have been taking informal soundings on how to progress, always to remember to expect the unexpected. 27 highly uncorrelated countries are never going to agree on anything more than that night follows day, and given the huge economic pressures in the EU, you would not bet more than pocket money on that, either.

The Germans, anyway, seem to have stiffened their resolve; there will be no open markets without free movement. Events are moving at such a pace that, maybe, this is irrelevant; there were reports, post Brexit, that the Polish were returning home in droves, not only because their economy is in reasonable shape, but mainly because they were disgusted by the weakness of sterling, which made their remittances much less valuable.

It might be, therefore, that the UK is not the destination of choice, although I doubt it, given the unlimited access to the NHS. Certainly, the very sharp depreciation of the currency presents both opportunities, and threats. Our exports are much more competitively priced, not that we are brilliant at that, but anything imported costs more. This has to be inflationary, although there is sharp disagreement on this point. Traditionally, the antidote was raising interest rates, but the consensus amongst people that I met this week, was that rates would not increase, here, before 2021, and may drop in the meantime.

The threat is that we have some sensational companies, that are world leaders, mostly internationally focused, whose products have not only got very much cheaper, but whose share prices, for an overseas buyer, will look like a bargain if you can borrow money for nothing in most major economies. It would be sad, in the long term, if such companies fell prey to this trend, logical, and reasonable, though it is.

Such is the rate of change, in politics, economics, and technology, to mention a few trends that it is very difficult to know what is coming next. So, I have hit on a low cost solution. I am going to sue my economics teacher, who never told me anything like this was going to happen. It is a win-win, except that he is probably not around anymore, having  bailed out of the City in the seventies, because he wanted to spend his afternoons indulging his wife.

I will revert with another plan.


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.