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The Financial Ironmonger Blog No 7/2018

The Financial Ironmonger Blog No 7/2018

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.


A couple of weeks ago, I wrote about the upcoming problem of distinguishing between EU citizens who will be here before Brexit day, and those who arrive afterwards, and since no system is in place, it seemed pointless to make the distinction in to a red line, as the Prime Minister has sought to do.

Imagine my surprise to see this story as the lead article on the front of Monday’s Times! “Government sources admitted that work on a separate registration scheme had barely begun, and almost certainly would not be ready in time”.

Jacob Rees-Mogg, leader of the right wing backbench group, helpfully added “if this were true, it would be a sad admission of incompetence at the Home Office and it would be hard to believe that someone as efficient as Amber Rudd, (Home Secretary), would accept such a sorry state of affairs”. Which is a very polite way of taking somebody out below the knees. At the time of writing, I don’t know where we are up to on this one.

The focus quickly turned to the only other story on that front page, allegations that the flagship overseas aid charity, Oxfam, had covered up allegations of misconduct by some of its workers in Haiti following the earthquake there in 2011. The aid operation in that country is widely seen as a textbook example of how not to solve a problem as multiple agencies piled in, often with conflicting objectives.

Things moved from bad to seriously worse as the week went by. As far back as 2011, a whistleblower had tried to warn the Charity Commission what was going on, but they refused to return her calls. Further allegations spilled out, showing that this was not an isolated incident, as previous supporters deserted in droves, including the Government, who pulled a direct grant of £32mn annually.

The first rule of crisis management is to ensure that you do not make the hole that you are in any bigger, and yet the Chief Executive had this to say: “The intensity and ferocity of the attack makes you wonder, what did we do? We murdered babies in their cots? Certainly the scale and intensity of the attacks feel out of proportion to the level of culpability”.

This tin-eared response is likely to cost him his job, and somebody needs to get on the case before the brand name is irretrievably damaged; it is unlikely to be an internal promotion. Maybe he should go anyway, having presided over an organisation where only 40% of the funds raised actually reach the front line. This is unlikely to be a one-off, and the whole sector is bound to come under intense scrutiny.

Wall Street, meanwhile, recovered its composure, posting the strongest week since 2013. Opinions remain sharply divided, and I have two papers in front of me, as I write. One says “This is just a correction”, whilst the other states that “A crisis is coming”, with the subheading “All the ingredients are in place for a catastrophic economic and financial market crisis”.

To focus on the negative one, it believes that asset price bubbles have been created in most classes, fuelled by cheap money, leading to a mispricing of credit. Secondly, stoking the American economy at this late stage will provoke inflation, leading to higher interest rates, the timing of which will be messed up by the Federal Reserve, and thus the whole pack of cards will fall over.

You can argue about valuation; shares are not cheap, nor are they that expensive. As to asset classes, mid-priced houses around London are already 20% below their peak, a trend that is expanding across the country. It is very rare to come across any investor who is genuinely bullish, so we are miles away from the euphoria which generally happens at the top of the market, but the siren calls are out there.

Such big picture thoughts are likely to be far from the minds of the Directors of the investment house, Standard Life Aberdeen, which lost a £109bn mandate this week, thought to be the largest loss of a single client in history. By way of background, Aberdeen bought Scottish Life Investment Partnership from Lloyds in 2014, for £500mn, but the deal only applied if Aberdeen did not merge with a rival to Lloyds, which it promptly did when it got together with Standard Life.

The assets represent some 17% of funds under management, producing £40mn of gross revenue a year, 5% of total income. So, the loss is more one of dented pride than serious financial damage, but you have to question the wisdom of paying £500mn for a management contract built on such flaky terms.


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.